Zeroing in on zero tolerance in combatting insurance fraud



A popular TV series in the early 1950s was called “I Led Three Lives.” It featured a businessman who led a normal family life while secretly being an FBI informant against the Communist party in America. It was based on a true story.

I have had the good fortune to lead three lives since college. Life One was a husband and father. Life Two was in the U.S. Army. I spent four years as a counterintelligence officer. I also served 30 years in the Army Reserve until September 11, 2001. I was mobilized and spent four years back on active duty, retiring as a Major General.

Life Three was in the insurance industry, spanning everything from claims adjuster to executive vice president of a multi-national insurer.

In my Army and insurance careers, I developed a deep appreciation of the value of leadership for inspiring the success of any endeavor or organization.

This included fighting insurance fraud, and developing a culture of zero tolerance of fraud in both claims departments I led during my career.

You probably know the importance of combating fraud to reduce this crime’s high cost to your insurance company and policyholders. My motivation in this crusade was only partly driven by that staggering cost. My driving motivation was my firm believe that it is morally wrong to knowingly pay a fraudulent insurance claim. This belief is one of my personal values.

Values are the bedrock of any organization. Leadership is all about upholding those values. An organization without values has no soul. The Army’s values are:

• Loyalty,
• Duty,
• Respect,
• Selfless service,
• Honor,
• Integrity, and
• Courage.

The Army does an outstanding job of teaching, coaching, living and enforcing these values when needed. Every major U.S. business also has a values statement. If you don’t know your employer’s values statement, it is hardly your fault. Look to your leaders.

Character. The U.S. Army War College defines three elements of leadership: character, competence and the ability to encourage the heart. Character is by far the most important.

Leaders must have strong character. They also must ensure that the employees they lead reflect that character. An insurer that knowingly pays a fraudulent claim also violates its values statement. And certainly the insurer lacks character. The same is true of insurer employees — from the SIU director to claims personnel to adjusters.

Courage. Showing courage also is vital, including physical and moral courage.

Adjusters and special investigators can be physically threatened in the field. They must be trained to deal with threats. Leadership must create protocols for a proper response. It is important that employees know that their company has their back, and will defend them at all costs.

Leaders must provide as safe an environment as possible, whatever that takes.

Moral courage is more-challenging to inspire, yet is equally critical to effective fraud-fighting. Claims staff want to do the right thing. Leaders must support and reward risk-taking in combatting insurance fraud. A key part of risk-taking involves denying false claims, knowing the claimant may respond with a lawsuit.

Anti-fraud program. Leaders must establish an effective anti-fraud program after laying the corporate cultural foundations.

Start at the top. Make sure your CEO is fully aware of the program, and supports it wholeheartedly.

Also educate your board of directors. These leaders must know the program’s moral foundations, plus downside exposures and costs of an effective program.

Higher legal costs are a big part. Most claim denials for fraud result in a lawsuit against the company, no matter how solid your case. A strong anti-fraud position can earn your insurer a reputation within the criminal underworld for being an undesirable target to try and bilk.

This principled stance saves legal fees in the long run. That contention has merit, though I found it impossible to prove with hard metrics. Better to keep the board, which represents your stockholders, advised of known added costs you can measure.

The average paid claim, for example, will increase for lines of business most commonly targeted for fraud: auto physical damage and bodily injury, general liability, workers compensation and property. Why? Because bogus claims settle cheap.

Dishonest claimants accept smaller nuisance settlements and go away — or target their next victims. You must educate the board and everyone else that your average claim payouts have risen, yet real costs have decreased. This is because you paid no indemnity on fraudulent claims. Zero paid claims usually are excluded from average payment calculations.

Another cost includes increased open claims. It’s called a higher pending count, in claim-adjusting terms. False claims are easy to pay and close. Adjusters easily can lower pendings by settling them all. Here again, your traditional claim metric looks good, yet is economically and morally deficient in the insurer’s bigger picture.

Bad-faith exposures are most important from a board perspective. An adverse court decision can have severe economic impact on your company, no matter how just and correct your position. You can’t take those consequences lightly. You must expertly manage such exposures. The board also must accept that a zero-tolerance culture of denying false claims will generate bad-faith actions.

The Korean War Memorial in Washington D.C. has an eloquent quote: “Freedom is Not Free.”

That refers to the courage that made our nation great. An effective, values-based anti-fraud program means you will assume risks. And you will pay costs of having moral courage to make a positive difference for our communities and nation.

Encourage heart. Encouraging people’s hearts is the third leadership element when you present your zero-tolerance strategy to the board. Good leaders influence and encourage everyone around them, including their superiors. “I feel like I have just been through a religious revival,” one board member of my insurance company said after my first presentation on zero tolerance.

Competence. Now let’s cover competence, another leadership element. You must train, equip and sustain a razor-sharp claims operation that can identify, investigate and prove fraud.

It is never enough just to suspect fraud. You must prove a scheme so any reasonably prudent person (especially a judge or juror) will be convinced the claim is false.

Most major carriers now deploy effective tools such as predictive analytics to detect scams. A leader must champion, lead and budget such efforts.

Those investments are well worth the costs, in my experience. It is part of equipping claim personnel with state-of-the-art tools so they can achieve their fraud-fighting goals.

Training adjusters is your best and most-critical investment. Your special investigations unit can provide most training. Nearly all SIUs are staffed with capable professionals and experts well able to provide excellent training.

Legal team. An experienced legal team is another vital resource. This includes the claim department and General Counsel’s office. The GC reports to the CEO, and manages legal exposures such as bad-faith accusations.

General Counsel personnel thus must be fully involved team members for you to succeed. Their partnership, advice and legal guidance were invaluable to me, especially on more-sophisticated fraudulent claims.

I also advocate ensuring that you obtain proper outside legal counsel to represent your company in court. Retain only lawyers who specialize in fighting bogus claims.

Most insurance claims settle. Zero tolerance means the plaintiff either will drop the claim, or pursue you in civil court. The defense attorney must understand that, and have the intestinal fortitude (guts is the Army term) to litigate and win these cases.

Responsibility. The unit Commander has the highest responsibility and authority in the military. “My fault boys, all my fault!” Robert E. Lee famously exclaimed after his forces were routed in the climactic Picket’s Charge at the Battle of Gettysburg.

That was my attitude as chief claims officer. Denying false claims ranks among the most-serious decisions a claim department makes. You accuse a person of a civil wrong, and a crime. So I always reserved the denial decision for me. It was too important to delegate. The buck stopped with me. My staff knew and appreciated that. It encouraged their hearts, and our success.

Goals, objectives. An effective organization also has well-defined goals and objectives. Clear metrics such as average paid claims help measure our success. Anti-fraud efforts are integral parts of the claim process. Thus fraud-fighting must be tracked and monitored, and corrective actions taken to improve results when necessary.

“Your goal . . . is zero tolerance for insurance fraud while paying every legitimate claim.”

I suggest that your metrics support your anti-fraud objectives, without ever denying legitimate claims for suspected fraud.

Every metric also may be discoverable. So assume all denials and metrics will be discovered in a civil suit, and you should set metrics accordingly.

Your goal, or Commander’s Intent in military parlance, is zero tolerance for insurance fraud while paying every legitimate claim.

Avoid having your goals, objectives or metrics misinterpreted to suggest you encourage wrongful denial of legitimate claims. Therefore, it is reasonable and logical to track the number of denials, and make best-guess estimates of how much money those efforts save your company.

What is unacceptable is any hint or suggestion that any employee is measured or rewarded by the number of fraud denials, or money those denials save. Police officers should not have quotas for speeding tickets. Nor should adjusters and SIUs be measured or rewarded for quotas on false claims. Ticket all speeders and deny all bogus claims.

Finally, a zero-tolerance culture will earn your company many positive results. The vast majority of your insureds support zero tolerance. They are honest, hard-working Americans. They know they are the ultimate bill payers. These are customers every company wants to insure. Making fair profits in insurance is about who you insure. This is more important than what you insure.

When you make customers aware of your anti-fraud efforts, they see it for themselves and usually stay with you for life.

Agents and brokers support zero tolerance as well. They are your business partners. They should share your moral commitment to ethical business practices.

All employees — not solely claims personnel — should know and pursue zero tolerance. SIUs should conduct training seminars for underwriters, risk-control personnel, human resource staff and operations personnel, in addition to training they provide the claims department. Such training further embeds zero tolerance into your corporate culture.

Judges also need educating. Most judges consider your fraudulent-claim suit as just another claim to be compromised in the usual and customary way. These judges will do whatever they can to convince or pressure you to compromise and settle. They will not believe your no-pay, zero-tolerance position at first. You will need courage to respectfully tell the judge that paying this claim is morally wrong and you will not settle. When you try the case to a verdict, convincing the judge that your are serious about zero tolerance gets easier the next time.

In conclusion, I always recommend using the Mirror Test. You simply look in the mirror before paying or denying questionable claims. Ask yourself, “Can I look at myself in the mirror, and be proud of what I see?”

Fraud of the Month: Home arsonists try to murder witness

Smoking_gunTyesha Towanda Roberts wanted to help her uncle torch a crony’s home for an insurance payday. Roberts was prepared to help make the insurance plot a grisly murder scene.

The Baltimore woman agreed to provide a false alibi, and help rub out an inconvenient witness.

Bad moves. The Baltimore-area woman will have 20 years to rethink how she unknowingly spilled the murderous insurance plot to a federal informant in a clever setup.

The case shines a light on something that should challenge many people’s belief that insurance fraud is a harmless white-collar prank.

Violence …

Against witnesses … investigators … judges … and other hardworking folks just trying to do fair justice.

Wanted witness shot

Here’s how adroit federal sleuthing thwarted Roberts ….

Her uncle Greg Ramsey agreed to torch a cohort’s home and two vehicles for insurance payouts, the feds say. The home fire seriously damaged the building — and tenants were inside. The fire then spread to neighboring homes. The two vehicles were wrecked, and those fires spread to a nearby church.

As the feds frame what happened next: The arson plot was broken up. The cornered plotters grew desperate. Ramsay would have a prosecution witness shot, he told the home and car owner (known only as “J.R.”).

He also offered to have Roberts lie in court that J.R. was visiting her when the fires broke out.

The trio met to iron out the details. Roberts and Ramsey were doomed.

“J.R.” had secretly pleaded guilty and was stringing them along. Every step now was a trap.

Roberts said she knew people who could finish off the witness. So she was enlisted to procure the hitman. Roberts met with someone she thought was a middleman. The guy was an informant working for the feds. He introduced Roberts to the presumed hitman. He was a federal undercover officer.

The clueless Roberts hooked up the equally clueless Ramsey with the seeming hitman. Ramsay paid the informant $2,000 toward the $10,000 murder fee, and a loaded .357 revolver to finish the job.

Roberts was trapped, and the walls quickly closed in. She pleaded guilty and will receive up to 20 years in federal prison when sentenced in August 2016. “J.R” pleaded guilty to insurance-fraud and arson. Ramsay faces a slew of charges that could lock him away for decades if he’s convicted.

Federal detective work kept the witness alive. Several fraud investigators weren’t so lucky in other insurance schemes.

An unhinged insurance agent doing her duty as well. She was an auditor with the North Carolina insurance department. A troubled agent clubbed her to death with a chair while she was in his office looking into possible theft of client premiums.

Nightclub insurer mogul Jeffrey Cohen plotted to rub out the judge overseeing the insurer’s liquidation. Like fellow Baltimore-area plotter Roberts, Cohen was thwarted just in time.

Cohen deceived regulators into thinking his fizzling insurance empire was financially solid.

A former nightclub bouncer, Cohen drew up a hit list of Maryland and Delaware officials involved with his case. And driving directions to the home of the judge overseeing the insurer’s liquidation.

Seven assault weapons were seized at Cohen’s home. “Society needs to look at the fact that killing isn’t wrong in certain circumstances, and killing culls the weak,” he said in the recording. Cohen was handed 37 years in federal prison.

So when you think of insurance fraud as a soft and forgettable crime … just visit Sallie Rohrbach’s grave. She’s buried in Raleigh Memorial Park in Fuquay-Varina, N.C.

Getting riled up for fraud in Twittersphere


Useful for egging on scams, teaching about dumb choices

Tag team is winning formula for fraud bills


Investigators wield impact as expert constituent voices

A couple of years ago I blogged about how fraud investigators can be key to enacting strong fraud laws.The state legislative season is heating up, so let’s revisit. We need to think of how to mobilize for action.

Lobbying legislators can be top-down and bottom-up.

Top-down involves national groups like the Coalition or insurers raising the issues with legislators. Often we testify before committees or the full chamber. That carries weight. We discuss the big picture, and how a state bill is good (or bad) for combating fraud from a larger viewpoint.

The bottom-up approach is the grassroots level. Investigators and other frontliners can take a lead role.

Investigators can wield great influence. State lawmakers listen to constituents. Local people put a local face on fraud bills. Investigators also are respected crime-fighting experts. That voice speaks convincingly to lawmakers. They may know little about a fraud bill — or the crime it combats.

A tag team is the best formula for rallying support for fraud laws: Local investigators work with national groups like the Coalition. We all bring vital strengths to the table.

State legislators usually don’t receive letters or messages about fraud issues. So when an investigator writes a letter, that could be the first time a legislator hears about the fraud bill, and why it’s good for the state.

This leads to my Rule of Five. One constituent letter raises few eyebrows in a legislator’s office. Five letters, and the legislator thinks about the issue. And 25 letters signals a groundswell of support. That can convince a legislator to support a fraud bill.

Enacting strong fraud laws has four positive goals. 1) Create an infrastructure for insurers to investigate and report scams; 2) Give fraud fighters laws and regs that are pillars for chasing down swindlers; 3) Oppose weak bills that undermine the fraud fight; and 4) Educate lawmakers about the benefits of strong fraud laws.

Together, our influence can place more fraud laws onto the books. We will educate lawmakers about how strong fraud laws benefit consumers throughout a state.

So let’s add a fifth goal for fraud laws: Empower consumers and insurers to better fight back against insurance fraud.

About the author: Howard Goldblatt is director of government affairs for the Coalition Against Insurance Fraud.

Fraud of the Month: Innocent patients die from Medicare, Medicaid looting

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by James Quiggle

Rafael Chikvashvili holds a PhD in math. He thought he was smart enough to steal $7.5 million from Medicare and Medicaid. Yet the numbers whiz sorely miscalculated. His con killed two patients, sending him to federal prison possibly for life.

The Baltimore-area brainiac ran an imaging firm called Alpha Diagnostics. He did X-rays, ultrasounds, heart exams and other medical tests. Most of his patients were seniors in nursing homes. He brought portable equipment and did the tests at the homes as a convenience to residents.

Doctors are required to interpret the tests. Correct diagnoses can save lives. Especially for frail seniors, who have less margin of medical error.

Yet Chikvashvili had untrained staff make the diagnoses and write up bogus medical reports. He then billed Medicare steep fees as if doctors had done the work. Chikvashvili even forged doctor signatures to the reports.

His death-dealing scam opened wider the door on rampant bilking of Medicare, the federal insurer for seniors. Medicaid, the state-federal insurer for the poor, bolted to the forefront with the horrifying abuse of a homebound cerebral palsy patient. Makayla Norman died at the hands of caergiver Mollie Parsons. The registered nurse rifled Medicaid while Makayla starved.

Medicare and Medicaid cons steal tens of billions of taxpayer dollars a year — arguably the largest form of insurance fraud in the U.S. Innocent patients also pay a frightening price for the so-called “victimless” crime.

Staff missed heart problems

Chikvashvili’s inept employees missed congestive heart failure that showed up on a woman’s X-ray. A qualified radiologist doctor should’ve reviewed the test results. The patient would’ve been transferred to an acute-care facility for treatment. Instead she stayed in a rehab nursing home, with a lower standard of care for her condition. She died four days after the mis-read chest X-ray.

An unqualified Chikvashvili staffer never saw another surgery patient’s mild congestive heart failure on a pre-op chest X-ray. She was cleared for surgery. She bled profusely during and after the operation. The patient died six days later.

An X-ray technician was vacationing in Jamaica. Chikvashvili ordered him to view other patients’ medical images using his personal laptop in his hotel room, then forge test reports as if he was a doctor. Alpha Diagnostics used the reports to make false Medicare claims.

Teen starved in bed

Then there’s the tragic death of Makayla Norman in a separate Medicaid scheme. The 14-year-old had cerebral palsy. Bedridden, the 14-year-old was confined to her home in Dayton, Ohio. Makayla couldn’t speak or move. She needed constant nursing care, including bathing and eating.

Her family was low income, so Medicaid paid home nurse Mollie Parsons to care for her six days a week, eight hours a day. Yet Parsons only showed up three or four times per month. Sometimes she didn’t even go inside. Instead she honked the horn so Makayla’s mother would come out and join her in shopping trips.

Parsons let the helpless teen die a horrifying death. All the while, she milked Medicaid with false medical reports. Makayla was healthy, Parsons lied. She was on duty, caring for Makayla and making her as comfortable as possible.

“Makayla “was a skeleton with skin draped over it. It was horrific,” a homicide detective said at Parsons’ trial on state healthcare fraud and other charges.Parsons let Makayla starve for a year, and ignored her medical care. Makayla’s body shrank to just 28 lbs. She was covered in filth and open bed sores. Her diaper hadn’t been changed. Her colon was so full with fecal matter that she had a noticeable bulge. Her hair and eyebrow were infested with lice.

Yet Makayla was in good health and and well-fed when Parsons left at 10 p.m., the nurse’s daily records said the day Makayla died.

Her mother called 911 just two minutes later. Makayla was having a hard time breathing. She was rushed to the hospital. It was too late, and she quickly died.

Makayla “was a skeleton with skin draped over it. It was horrific,” a homicide detective said at Parsons’ trial on state healthcare fraud and other charges. Parsons received 10 years in Ohio state prison, and will serve up to five more years in federal prison afterward.

“She was the worst malnourished child I think we’ve ever seen,” said Ken Betz, head of the coroner’s office.