Fraud News Weekly

Friday, March 16, 2018

The fraud hotbed of Kentucky is taking a big step forward by increasing penalties and civil-recovery options to counter scammers. The state House passed HB 323 by an 83-0 vote, reports Mark Treesh of the Insurance Institute of Kentucky. The Coalition supported the initiative, including a successful grassroots letter writing-campaign. The bill heads to the state Senate, where little opposition is expected. If all goes well and Gov. Matt Bevin signs in time, the Bluegrass state may have a new law just as fraud fighters gather for a Fraud Dialogue meeting in the state capital on March 28.

* The Florida legislature’s failure to block sleazy contractor takeovers of home-repair claims this year marked the 7th straight year that Tallahassee has left residents and insurers exposed to the cons, says the claims chief of the state-run home insurer, Citizens Property Insurance. Jay Adams gave a keynote at the Insurance Fraud Management conference this week in Amelia Island, Fla. Homeowners are being lured into signing over legal control of repair claims to dishonest contractors working in league with attorneys, who falsely sue insurers for inflated repairs. Fraud in “assignment of benefits” is spreading to other states, Adams warned. The cost of AOB claims in Florida has risen a staggering 85 percent in recent years, leading to double-digit premium hikes for Florida homeowners. Increases are likely to happen at the same or higher rates for years to come, Adams noted. So what’s fueling the premium rocket? Florida awards all attorneys fees in AOB claims, even if an insurer pays only $1 more on the claim. This bogs down the courts and leads to an average $40,727 of litigation expense for AOB claims, Adams said. Nearly 45 percent of claims in hurricane-prone southeast Florida involve attorneys. This compares to an 8.5-percent statewide average. The legislature shut down for 2018 without passing reforms.

* Illegal brokering of patients for kickbacks and questionable treatment in drug and alcohol rehab is widespread in several states. The abuse is especially common in states where opioid abuse is driving shady rehab facilities. They’re feasting off health plans and other insurers with inflated treatment and drug-testing claims. Legislators finally are waking up. The Coalition monitors and supports patient anti-brokering bills in 4 states. More legislation is expected this year and in 2019. Current initiatives include stricter anti-soliciting and kickback standards for patient referrals in ArizonaGeorgiaTennessee and Utah, where companion bills are pending in the Senate and House. While the bills relate to drug and alcohol treatment schemes, cash payouts for patient referrals also drain auto and workers-comp insurers. The measures thus could become valuable weapons to prosecute body-brokering in personal lines.

* “It’s all about fake whiplash, the golden gateway to insurance payouts,” the Coalition told the Charleston (S.C.) Post & Courier in a story about staged crashes infecting the area. “The cars may only suffer a small dent, but the crooks still make large and illegal claims for fake injuries and car damage against your auto insurance company, or their own. Often these accidents are staged by organized crime rings that bilk dozens of unsuspecting drivers.”

* Two cronies helped a family buy 2 vacant houses and burn them down for inflated insurance payouts. The first cracks in the charged family facade have appeared. Here’s what prosecutors say happened: James Edward “Punkin” Lester and his buddy Dudley Bledsoe allegedly bought a vacant house in Matoaka, W.Va. for about $38,000. They over-insured the place for more than $300,000 and set fire to it with cardboard and unscented candle oil. Bledsoe forged receipts for the possessions, then filed false claims for the house and its contents. He divided the insurance money with the Lesters. Ricky Dwayne Gleason later bought a house in Huntington, W.Va. for $100,000, and insured it for at least $400,000. The Lesters gave him the money to buy the place. Gleason went out of town for an alibi, and the others burned down the place, also with cardboard and unscented candle oil. Gleason collected more than $280,000 for the house and contents. They all divvied up the money. Bledsoe and Gleason pleaded guilty and will spend up to 10 years each in federal prison when sentenced May 30. Windel Lester, Punkin, Gregory A. Lester and Georgetta Lester are still charged. The family ring allegedly laundered the money through at least 2 banks — Windel served on the board of 1 bank.

* Jean Mythro Davilmar and 5 cohorts created fake business partnerships, using false documents, to buy lower-priced commercial vehicle insurance. The Brooklyn man fabricated at least a dozen bogus partnerships, and bought more than $250,000 in commercial policies plus registrations. To reduce their premiums, ring members lied that the vehicles were driven for lower-risk work such as delivering packages, or doing carpentry or photography. They also falsified locales where the vehicles were operated and garaged, and misrepresented the vehicle operators. And they used the fraudulently obtained insurance cards as proof of coverage to register the vehicles. When insurers started asking nosy questions about policies, gang members quickly opened another policy under a fake partnership and transferred the vehicles onto the new policy. The plot lasted 8 years. Davilmar was given up to 14 years in state prison.

* A firefighter was let go after claiming a fake theft of his truck for an insurance payout. Emilio Montes Montes worked for the San Antonio fire department. Someone wanted to swap trucks while he was down along the Texas coast, he claimed. The crony then surprised him and got the truck fixed in Mexico where it then was stolen, Montes told his insurer. In fact Montes had the truck driven to Mexico to make it disappear. He pleaded no contest, received an unnamed probation period, and the fire department terminated him.

* Three fraudsters were nailed by investigations of the Washington state insurance department. Hashim Makawi (Everett) bought renter insurance. He filed a water-damage claim the next day after a garbage-can fire in his apartment. The fire happened the day before he bought the policy. Makawi received 80 hours of community service and must repay $10,858. He’s on the run and listed as a fugitive. … Charles Bjork (formerly of Everett) had a morning collision on a freeway. He then bought an auto policy and filed a $6,475 claim for total loss that evening. Bjork was handed 80 hours of community service. … Jasmine McQuiston (Federal Way) filed a vehicle-claim with Geico. Her 2010 GMC Terrain rolled backwards into a concrete barrier and was damaged by a hit-and-run driver while it was parked overnight. McQuiston renewed her expired policy after discovering her vehicle was damaged, and she faked the damage date. Yet police already had impounded the Terrain. McQuiston will serve 40 hours of community service.

* Time stamps left an imprint on Nessa Sullivan’s car con. The Fernwood, Idaho woman struck a deer. She then bought a Geico policy and claimed a false damage date. Photos she provided to Geico were time-stamped with the real crash date, so Geico denied the claim. Sullivan was given 3 years in state prison, suspended to 2 years of probation and 200 hours of community service. The Idaho insurance department led the investigation, and the state AG landed the conviction.

* The co-owner of a sober-home chain foisted a $175-million billing scheme. Kirsten Wallace helped run an outfit called Community Recovery, in Southern California. She stole IDs of drug- and alcohol-addicted people, bought health policies without their knowledge, and submitted millions of dollars worth of phony bills. Many people were former patients who’d finished treatment. Community Recovery — now called Commonwealth Global — operates more than a dozen sober-living homes around Los Angeles. Wallace received 11 years in state prison after pleading guilty. Her co-owner Christopher Bathum styled himself as a “rehab mogul.” He helped run 19 sober homes in Southern California and Colorado. At least 5 patients of Community Recovery have died in Colorado. He also sexually assaulted more than a dozen female residents. Bathum was convicted of assault, and awaits trial on many of the same charges as Wallace. America’s opioid epidemic is fueling a surge in treatment facilities. As many as 14,000 facilities operate in the U.S. and pull down $35 billion in profits annually, federal estimates say. Many facilities are lightly or unregulated. They attract shady profiteers drawn to steal insurance money, and who have little interest in helping addicted residents recover.

* A father-son duo from Dallas ran a $27-million scam to falsely convince American Airlines employees they suffered from hearing loss. Anderson Optical & Hearing Aids Center marketed hearing tests with the lure of free luxury eyewear and $100 gift cards. Tests lasted no more than 5 minutes. Terry Lynn Anderson and his son Rocky told employees they needed hearing aids — which the Andersons promised they’d provide for free. The hearing aids often never arrived. The scheme targeted workers insured by Blue Cross and Blue Shield of Texas. The duo eventually even marketed at American’s airport facilities. They attracted long lines of mechanics and other employees who worked on noisy airport tarmacs. The Andersons billed insurers $27 million and landed $16.7 million. Each could spend up to 90 years in federal prison when sentenced.

* A woman exploited the deadly apartment-building blaze in London for an insurance payout, officials charge in the UK. Joyce Msokeri said she was grief-stricken after escaping the fire and losing her husband in the tragic blaze, which gutted the building and killed 71 people last June. Msokeri doesn’t have a hubby, nor did she live in the building. She lived miles away. Investigators started poking holes in her story, then Msokeri shifted and said her hubby had miraculously survived. She created 3 different personas for her phony husband to try and claim compensation. She persuaded a man with a history of mental-health problems to pose as her spouse so she could claim he was miraculously found weeks after the fire. He was living in a cave where tourists fed him, she told investigators. It’s unclear exactly what insurance she sought. Msokeri also was housed in a Hilton Hotel room while posing as a victim. And she filled 10 suitcases with new goods a store donated to help survivors. Msokeri’s story was questioned when she couldn’t give the phone number of her flat in the tower. She also claimed her missing husband appeared in footage recovered from the blaze showing the final moments of 2 men and 2 women, even though both men’s real families identified them. Msokeri was convicted and awaits sentencing.

* Eddie R. Trapiani called police just before noon to report his gold Nissan Xterra was stolen from a Walmart parking lot. The Picayune, La. man allegedly tried to falsely report his vehicle stolen so he could steal insurance money. Prosecutors believe: Trapiani said he arrived at the store about 30 minutes prior, parked in a specific row, and found the vehicle gone when he left the store. He filed a theft claim just hours later. Investigators reviewed store surveillance footage. Trapiani didn’t arrive in a gold Xterra. A crony driving a silver SUV dropped him off and left. Trapiani faces varied charges.

* A driver struck and killed a pedestrian, then sped off and lied to his insurer about the damage, prosecutors charge in the Philadelphia area. Fred Gitterman was hit while walking to his car after dining at a nearby restaurant. As prosecutors allege: Kevin Gaughan slowed down after hitting Gitterman, but was then seen driving off. He then called his insurer and said a stop sign blew into his vehicle, causing serious damage. Investigators quickly built a case using surveillance cameras in the area. Vehicle parts at the scene also were specific to a late-model white GMC Yukon. Police received a tip about a damaged vehicle at a bodyshop that matched the SUV. Gaughan was identified as the SUV’s owner. Gaughan could spend up to 20 years in jail if convicted.

* Indigent people were peddled fake health coverage in a suspected $8-million kickback con, prosecutors charge in Riverside, Calif. The charges: The head of the Riverside Regional Surgery Center allegedly provided policies for fraudulently claiming 333 “employees” of shell firms with no staff. In fact the “employees” were indigent people, and many never ended up with health policies. Dr. Babar Iqbal told them that Medi-Cal wouldn’t cover their treatment, and had them sign papers for a free health policy. Bank records show $500,000 in checks from Riverside Regional Surgery Center — kickbacks often disguised as charity donations — went to a business or unlicensed charity controlled by 2 defendants. Riverside Regional Surgery Center drew the attention of the DA and California insurance department when 22 of 23 claimed employees were treated at Iqbal’s center within 5 weeks of getting health coverage — with initial claims totaling $4 million. Riverside Regional is part of a larger $8-million kickback scheme with false treatment claims, officials say.

* An insurer alleges it paid a North Carolina woman nearly $390,000 to treat a painful chronic disease, only to learn she freely travels and frolics. Cynthia McCullough allegedly said she had a rare and chronic nervous-system disorder. Severe pain left her unable bathe and dress, and needing constant homecare. New York Life says it found church Facebook photos of her playing Skee-Ball, zooming down an inflatable slide and frolicking with her kids at an arcade. The lawsuit says McCullough freely moved around, and easily lifted objects into her SUV. The insurer alleges McCullough also was spotted during a 15-day surveillance period driving herself to various locations, including a doctor’s office, bank, restaurants and gas station — where she pumped her own gas. Two independent doctors reviewed McCullough’s claim and said she doesn’t require the reimbursed assistance. Nor was a caregiver present at McCullough’s house on many of the days for which she sought insurance money, the insurer alleges.

* Insurers in New York are launching a $1-million awareness campaign to alert the public about the dangers of opioid abuse. The multi-media campaign — “Painkiller Fraud: A Prescription for Tragedy” — focuses on the fraud committed by physicians and pharmacies who illegally profit from plying patients with addictive painkillers. Television, radio, billboards and social media will carry the consumer messages beginning later this spring. The campaign was announced at today’s annual meeting of the New York Alliance Against Insurance Fraud. Former Coalition government affairs chief Howard Goldblatt also was honored with the group’s annual fraud-fighter of the year award for his 24-plus years of service to the fraud-fighting community.

* Growing numbers of drivers are being pulled over for fake collisions in South Carolina. Staged crashers in Dillon and Florence counties struck each other with boards and threw each other into trees to create crash injuries. Two men in Allendale County parked their car on railroad tracks so a train would hit it, then returned to the scene and faked injuries. Scammers in Anderson County messed up a staged crash and went to the ER. South Carolina had 223 claims suspected of being staged accidents in 2014. That’s nearly triple the total of 4 years earlier. The problem continued when 118 questionable crash claims were recorded in the first 6 months of 2015, NICB says. Four full-time investigators were assigned to chase down insurance fraud last year. That’s double the previous year. But the fraud bureau’s $354,000 budget pales next to North Carolina ($2.8 million) and Virginia ($5.3 million). The Tar Heel State also has 20 insurance-fraud investigators, news reports say.

* Scammers are calling seniors in California. They advise them that their new Medicare card will arrive between April and June, which is true. But the callers say the seniors first must buy a temporary card for $5-$50, and provide personal info before they receive their new Medicare card, which is not true. The new card won’t include SSNs. Beneficiaries are getting a new number and Medicare card with the same benefits. Seniors should shred their old card once the new one arrives. The cards are free, and Medicare won’t call beneficiaries about the card or number. The new cards also will be mailed directly to beneficiaries. Seniors can update their mailing address online or by calling 800-772-1213.

* A U.S. Senator is giving away money a convicted eye doc donated to his election campaign. Dr. Salomon Melgen stuck needles and lasers into patients’ eyeballs in a bid to steal more than $130 million of insurance money. Melgen was federally convicted in February. The South Florida doc also was a close buddy and campaign contributor to New Jersey Sen. Robert Menendez. A reporter asked Menendez what he planned to do with Melgen’s $19,700 campaign donation. The Senator decided $10,000 will go to the New Jersey chapter of the Alzheimer’s Association, and $9,700 to the state chapter of Autism Speaks. Menendez has yet to say if he’ll give away Melgen’s prior donations.

A Pennsylvania driver allegedly lies about damage after killing a pedestrian .… Photo timestamps exposed an Idaho driver’s auto-premium scam. … The co-owner of a California sober-home chain tried to steal $175 million. Read about these and mores by clicking the map.

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Fraud News Weekly is published each Friday except for Thanksgiving week and the week between Christmas and New Years. Copies of previous issues are available in the members-only section of Employees of member organizations may share this newsletter freely internally. Sharing by non-members strictly prohibited.