Life Insurance Fraud

Ha. These are the schemes that make great movies and great television show plots. Here are some of those we've seen.

1. Crooks will take out an insurance policy on themselves and then fake their own death. How does that happen? Most of them travel to another country and then support their death claim with fraudulent documents. Very few are successful because insurance companies routinely investigate all foreign death claims.

2. A somewhat recent case involved a man who wanted to disappear from the radar screen because he didn't want to go to jail. It seemed so much easier to die, at least on paper, so he and his wife went to a pauper's cemetery and dug up a recently buried body. They put the body into the husband's car, drenched the whole thing in gasoline, then pushed it over a cliff. The car and body was burned beyond recognition, and the widow said, "oh my, it was my dear husband because he never came home last night and that was our car ..." She promptly buried the charred remains of her husband and filed a life insurance claim. Relatives got suspicious when she quickly found a new boyfriend who looking strikingly similar to her dead husband. The Police launched an investigation and the scam was discovered. Both are currently serving well-deserved jail sentences.

3. Too often people really do die. Wives kill (or hire it out) husbands and husbands kill wives. Children kill parents and parents kill children. All for the proceeds of an insurance policy.


Dead or Alive?

Shortly after 911, insurance companies began receiving claims. Adjusters were trying to expedite payments to families that had lost loved ones. In one case, a claims representative drove to the deceased's house, hoping to assure the grieving widow that a check would be forthcoming. Imagine his surprise when the deceased answered the door.

Following any disaster, opportunists attempt frauds. People who are alive and insured see an opportunity to report themselves dead. The World Trade Center, the Tsunami or Katrina. Any excuse works for them.

Do YOU appreciate having to pay higher premiums to fund these people?


Viatical Fraud

Perhaps one of the most deadly of all, viatical fraud is shocking enough to be the subject of a Hollywood action movie. Because it's not been publicized, few people have any idea of what it is.
What is a viatical policy?

Think of it as a reverse home mortgage.

Let's say that Joe has a $500,000 life insurance policy. He is diagnosed with an inoperable brain tumor and given six months to live. If Joe wants to have a six month party, cruise around the world, or even seek alternative medical treatment in some far off country, he needs money. His life insurance policy is money.

Joe can sell his policy to a viatical company. They will give him a certain amount of cash, right now, and he will (in turn) make them the beneficiary. The amount of cash he is given depends upon how long he will live ... and the company can get their "return on investment."

The viatical marketplace got very big at the time that AIDS was killing so many people. Those who were dying of AIDS were selling their policies, enjoying the money, and then dying "on schedule." Business was booming.

But then extensive research gave way to many new drug cocktails, and AIDS patients were suddenly NOT dying. Companies (or individuals) who had purchased their life insurance policies as a financial investment were not getting their expected returns. Instead, they were out considerable sums of money, and had no relief in sight unless the owner of the life insurance policy dropped dead.

Where was the fraud? Murder. In too many cases, the alive and well victims were hastened to the grave via gunshot, car accident, fire or worse. Since they had not died "on schedule," they were helped along by a hired gun. Once dead, the viatical company could collect on the life insurance policy and the investors could get paid. Dirty business. Scary business.


Murder For Money

It's not unusual to see a story like the one that recently occurred in California. What was unusual, however, was the ages of the perpetrators and the uniqueness of their scam.

Two women, ages 75 and 73, found a way to supplement their social security retirement income. Murder.

Here's what they did:

First they'd find a homeless person. They'd befriend him and help him get on his feet. They'd buy him some new clothes, get him an apartment ... and INSURE HIM with themselves named as the beneficiaries. Then they'd run him over with a car and file the claim.

Both are in jail right now awaiting trial. Both are facing the death penalty for premeditated murder. Two men are dead as a result of their plot.

http://www.fightfraudamerica.com

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Insurers Also Do Wrong

Law firms Wiley Rein and Coughlin Duffy, two law firms and the insurer they represented, Zurich American Insurance Companies, have been assessed $1.25 million in sanctions by Southern District of New York Judge Alvin Hellerstein. The basis for the sanctions started when the judge learned that:

On the day of the terrorist attacks, Zurich’s chief underwriter for the United States, Mary Merkel, asked her assistant to print a copy of the then-existing primary policy from the computer system Zurich uses to generate its policies. She retained the print-out, a 62-page document (the "9/11 Document"), in her files in Schaumberg, Illinois. The 9/11 Document, and the specific wording of the endorsements that were part of the 9/11 Document, contradict Zurich’s contention that the Net Lessees, excepting Westfield, were not Named Insureds under the Policies. In particular, the 9/11 Document contained a "Broad Form Named Insured" endorsement that listed as named insureds:

World Trade Center Properties, LLC c/o Silverstein Properties, Inc. and any subsidiary company as now formed or constituted, and any other company over which the named insured has active control so long as the named insured or any subsidiary company has an ownership interest of more than 50% of such company.

Just four days after Brunner's instruction to destroy nothing was issued, Zurich underwriter Lynn Maier sent an e-mail to two assistants and her supervisor saying, " As per our conversation, please confirm ASAP, that the old version of the policy has been deleted from the Document Library and replaced with the final corrected policy. This information needs to be relayed to the ... home office."

In March 2003, Zurich’s attorneys took possession of the 9/11 Document, or a copy, from Mary Merkel’s office. The document was not produced until February 18, 2005, after depositions had been completed and following pointed inquiries by opposing counsel, following up trace references in other of Zurich’s productions.

By signing, filing, or otherwise representing to the Court that something is or is not so, the attorney certifies that he has complied with each of the foregoing obligations to the best of his knowledge, information, and belief, formed after an inquiry reasonable under the circumstances. If, after notice and an opportunity to respond, the court determines that an attorney has not complied with his obligations set forth in Rule 11(b), it may impose an appropriate sanction on the attorney, law firm, or party that violated or is responsible for the violation.

The court reasoned:

A baseless factual contention poses a greater threat to justice than a baseless legal contention. The evidentiary foundation upon which an attorney rests his assertions of fact is, for the most part, exclusively within the control of the attorney and his client. In order to function, the court must repose trust in the attorneys who come before it to make factual representations supported by evidence. The legal process contemplates and requires that when the time comes for a judge or jury to find facts, both sides will have legally sufficient evidence to present in support of those facts. In a complex case, baseless factual contentions can delay the time for presentation of evidence to the fact-finder for years, at an expense running into the millions of dollars. An attorney who abuses the trust of the court in this manner, and who causes such delay and needless expense thereby, should be penalized. In contrast, a misstatement of law is much more easily remedied, by the adverse party’s research, or the court’s own research.

* * *
Zurich denied that the Port Authority was entitled to Additional Insured status, arguing that because the only Named Insured on the policy binder was WTCP, and because the Port Authority did not lease the World Trade Center to WTCP, but rather to the Net Lessees, the endorsement providing additional insured coverage to the "lessor" did not extend coverage to the Port Authority.

* * *
Simply put, Zurich’s position made no sense, because the parties would not have agreed to insure a holding company with no operations and no direct holdings, without an understanding and intent to insure the subsidiary entities that would actually be exposed to premises liability. See Hametz Decl., Ex. 7 (deposition testimony of Zurich employee Mark Elias). Nor has Zurich offered any evidence to the contrary, arguing not that it was right, but that in the absence of evidence, the Port Authority could not prove it was wrong. This approach shielded Zurich from judgment on Port Authority’s motion for judgment on the pleadings, but it will not suffice under Rule 11. The Port Authority’s motion for sanctions pursuant to Rule 11, Fed. R. Civ. P., is GRANTED.

* * *
I impose Rule 37 sanctions in the amount of $500,000. Of this amount, $250,000 shall be payable to the Port Authority, and $250,000 to Westfield, to defray the costs they unreasonably incurred in the wasted discovery proceedings. The sanction is imposed jointly and severally against Zurich, Wiley Rein LLP, and Coughlin Duffy LLP, subject, as with the Rule 11 sanction, to review and re-allocation at the request of any of them. The sanction is additive of the sanction imposed pursuant to Rule 11, for a total sanction of $1,250,000.

It was "clearly important," and "not the type of document that becomes lost without a trace," Hellerstein wrote in In re September 11th Liability Insurance Coverage Cases, 03 Civ. 332. The discovery abuses also concealed that Westfield Corporation, a major retailer at the site, was one of the "additional insureds" that Zurich was obligated to cover under its policies with Silverstein.

"Zurich's 'culpable state of mind' is established by evidence that it intended to delete, and deleted, the electronic version of the 9/11 document, and by evidence that Zurich, or its attorneys, or both, had possession of the printed version of the 9/11 document, but failed to produce it," according to the order.

While the electronic version of the document was destroyed on Sept. 11, a paper version remained in a file cabinet in Illinois. "Wiley Rein attorneys obtained and copied the 9/11 document in March of 2003, but they left it buried in a box for nearly two years and failed timely to produce it. ...Counsel's failure to recognize the importance of this document, and to produce it timely, especially when alerted to its possible existence by opposing counsel, also constitutes a violation of discovery obligations."

Refusing to accept an explanation of inadvertence, the judge concluded: "The explanation is not apt," he said. "A finding of negligence or worse would appear to be a more appropriate characterization, and I so find."

"Clearly, Zurich's decision to assert and maintain its denials and defenses regarding the Port Authority's status as additional insured multiplied proceedings, caused substantial expense to the parties, caused substantial waste of court time, and insulted public and judicial expectations of the standard of conduct expected of attorneys and insurance carriers."

Barry Zalma
http://www.zalma.com

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Zalma's Insurance Fraud Letter

Zalma's Insurance Fraud Letter (ZIFL) is published 12 months a year by ClaimSchool. It is provided free to clients, friends of the Law Offices of Barry Zalma, Inc., clients of Zalma Insurance Consultants and anyone who sends me an E-Mail requesting a FREE subscription.

The comments made are for information only and are not intended as legal advice. If you need legal advice, Barry Zalma practices law as the Law Offices of Barry Zalma, Inc., 4441 Sepulveda Boulevard, CULVER CITY, CA 90230 or at 310-390-4455, fax at 310-391-5614, Cell Phone: 310-738-6818 or E-Mail at zalma@zalma.com. Zalma's Insurance Fraud Letter can also be read on the web at http//www.zalma.com.

Mr. Zalma serves as an expert witness or consultant in insurance coverage, claims handling, insurance bad faith and fraud. Mr. Zalma's law practice is limited to the representation of insurers and those in the business of insurance. He is available to provide advice and counsel concerning insurance fraud, first and third party insurance coverage issues, bad faith and first party insurance appraisals.

Recipients of Zalma's Insurance Fraud Letter are authorized by ClaimSchool and Barry Zalma to make as many copies as needed to pass to your friends and staff as long as you do not copy for resale.

If this has been forwarded to you and you want to be on the FREE mailing list as a subscriber to ZIFL please send me an e-mail with your full name, your title, your company, your mailing address, your city, your state or province, you zip or postal code and your e-mail address to zalma@zalma.com or bzalma@earthlink.net and I will add you to the FREE e-mail list. If you want to be removed from the list please send me an e-mail and I will immediately remove you from the list.

It will be posted for a full month at http://www.zalma.com with graphics and can be read at your leisure.

Barry Zalma
http://www.zalma.com

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N.Y. Attorney Suspended for Funding More Than 200 Loans to Clients

Although not directly an insurance case the decision of the New York Appellate Division concerning attorney James J. Moran shows the depths to which a lawyer -- faced with the volume of money earned from legitimate and illegitimate personal injury claims -- will fall. Money, especially large sums of money, easily obtained caused a lawyer to violate the rules of professional conduct and loan money secretively to his clients to keep them as his clients. Because of his failure of judgment the lawyer is now suspended from the practice of law for 18 months because of 200-plus loans the attorney made to his own clients via intermediaries.

A unanimous New York Appellate Division, 4th Department, panel found that James J. Moran made more than 200 loans totaling more than $700,000. The panel said that the loans through third parties for non-litigation-related expenses did not "directly" violate the Code of Professional Responsibility, but that Moran's actions nonetheless "circumvented" the code, which in itself is a violation.

Moran conceded, according to the ruling [http://www.nycourts.gov/ad4/court/Decisions/2007/06-08-07/PDF/P-06-008.pdf], that he knew his conduct violated disciplinary rules, but "he stated that he provided the financial assistance so that his clients would not be required to borrow funds from lending companies at exorbitant rates of interest."

The panel found six other violations:

1. DR 1-102 (a) (2) (22 NYCRR 1200.3 [a] [2]) - circumventing a disciplinary rule through actions of another;

2. DR 1-102 (a) (4) (22 NYCRR 1200.3 [a] [4]) - engaging in conduct involving dishonesty, fraud, deceit or misrepresentation;

3. DR 1-102 (a) (5) (22 NYCRR 1200.3 [a] [5]) - engaging in conduct that is prejudicial to the administration of justice;

4. DR 1-102 (a) (7) (22 NYCRR 1200.3 [a] [7]) - engaging in conduct that adversely reflects on his fitness as a lawyer;

5. DR 1-104 (b) (22 NYCRR 1200.5 [b]) - failing to make reasonable efforts to ensure that a lawyer over whom he has direct supervisory authority conforms to the disciplinary rules;

6. DR 2-105 (c) (1) (22 NYCRR 1200.10 [c] [1]) - stating that he has been recognized or certified as a specialist in a particular area of law or law practice by a private organization without identifying the certifying private organization and including the required disclaimer; and

7. DR 5-101 (a) (22 NYCRR 1200.20 [a]) - accepting or continuing employment if the exercise of professional judgment on behalf of the client will be or reasonably may be affected by his own financial interests.

The lawyer was found to have, "with full knowledge of the prohibition, funded loans to clients for more than eight years and engaged in deceptive and deceitful conduct to conceal his role as lender. Respondent has expressed a shocking lack of remorse for his misconduct. He conceded that he loaned money through intermediaries in order to circumvent the disciplinary rules, and he continued to represent clients who had obtained loans funded by him until as late as the commencement of the hearing conducted by the Referee in this matter. Accordingly, after consideration of all of the factors in this matter, we conclude that respondent should be suspended ..."

Moran, 58, was admitted to the New York bar in 1973. His firm, Moran & Kufta, specialized in personal injury and medical malpractice. (Wednesday, the firm's Web site was out of commission, and a receptionist said the firm had recently changed its name to Valerio & Kufta.)

The panel also found that Moran violated disciplinary rules by failing to disclose the existence of one such loan during a client's bankruptcy proceeding and by failing to include a required disclaimer when referring to himself as a trial specialist on his Web site.

The panel however rejected the referee's findings that loaning money via intermediaries directly violated the disciplinary rules, that Moran loaned money directly to clients, that it was improper for Moran to compare the quality of his firm to others' on his Web site or that he engaged in "misleading" conduct by posting information about the rival firm.

Justices Robert G. Hurlbutt, Salvatore R. Martoche, Nancy E. Smith, John V. Centra, and Erin M. Peradotto sat on the panel.

Barry Zalma
http://www.zalma.com

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ClaimSchool and North American Training Group

Announce Formation of a Strategic Alliance

Because a thorough knowledge of insurance, insurance coverage and insurance claims handling are necessary to a successful anti-fraud program, North American Training Group, a national fraud training organization, announces the formation of a strategic alliance with ClaimSchool, a national provider of insurance claims training.

ClaimSchool for more than ten years has helped insurance professionals and insurance claims personnel meet state requirements by providing ongoing training paramount to the goals of effective claims handling and fraud reduction.

North American Training Group (NATG) exists to facilitate greater understanding and awareness of insurance fraud. NATG provides a high quality, engaging and user-friendly online curriculum that fosters greater success for all parties involved with the programs dedicated to fighting fraud.

Insurance and insurance claims handling are subjects that require continuous training and education. The law of insurance seems to change daily. The insurance claims professional needs to be familiar with new court decisions, laws, and regulations imposed upon them by the courts and by regulators from various states.

NATG includes a group of insurance and SIU professionals who saw a need within the insurance industry to standardize and make available training specifically targeted to insurance fraud issues. Industry professionals are experiencing greater and
greater demands upon their time and need quality resources to efficiently train claim professionals, underwriters, agents and other integral personnel to effectively recognize, identify, combat and deter fraud.

NATG’s courses provide professional license holders & other insurance professionals convenient, engaging and superior quality training that both enhance career development and increases productivity. NATG also offers courses designed specifically for private investigators who work in the insurance fraud arena, offering the IFC professional designation.

NATG offers On-Line Continuing Education (CE), Compliance Training and General Fraud Training courses on topics including insurance coverage, claims handling and fraud for the industry's adjusters, claims executives, SIUs, agents, underwriters and private investigators. NATG will provide clients with an individual branded and secured on-line "Training Center" for which the client will have access to all of NATG’s courses and provide the option for the client to add their own training materials to the site. NATG will customize state specific courses so all employees can obtain 100% of state compliance material in one course. Administrators have the ability to run compliance reports, track employee progress and print certificate of completions.

Details concerning course offerings and a sample of the computer based training, which will include ClaimsSchool, are available at http://fraudeducation.com/ or contact Fred Wharton, President of NATG Fwharton@fraudeducation.com

Barry Zalma
http://www.zalma.com

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State Farm Moves to Disqualify Scruggs

State Farm, on June 19, 2007 moved the court to remove Scruggs and his firm off a case for alleged ethical violations, including the use of "stolen" State Farm documents. The motion to disqualify Richard "Dickie" Scruggs, his Oxford, Miss. law firm and the Scruggs Katrina Group was filed in Mississippi three days after Judge Acker asked the U.S. attorney there to prosecute Mr. Scruggs for criminal contempt.

State Farm filed its motion in a case brought by a Biloxi, Miss., couple--Thomas and Pamela McIntosh--who are disputing the insurer’s engineering report concerning the amount of Hurricane Katrina damage to their home.

According to the insurer, Kerry Rigsby worked on the McIntosh claim, and the Rigsby sisters "stole thousands of State Farm’s confidential documents"--including an engineering report on the McIntosh case--and gave them to Mr. Scruggs.

Mr. Scruggs, "in turn, rewarded the sisters for their cooperation by paying them an annual salary of $150,000 each to serve as ‘litigation consultants’ for him and his associates at the Scruggs Katrina Group…"

The insurer also argued Mr. Scruggs is prevented from representing a party in a proceeding where he is likely to have to testify. In the McIntosh case, State Farm said he has knowledge of exculpatory facts that bear directly on that claim.

State Farm, in its papers, contends it did not make its move lightly, but deposition testimony, public statements and other evidence shows Mr. Scruggs committed "repeated ethical violations and traduced the Federal Rules," making State Farm’s attorney "duty bound to bring these issues to the attention of the court." We will report the results of this motion when we learn of it.

Barry Zalma
http://www.zalma.com

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Contemptible Behavior Suing Insurers

U.S. District Court Judge William Acker recommended that the U.S. Attorney for the Northern District of Alabama prosecute Richard Scruggs, the high-profile trial lawyer who has become famous for suing insurers, and his law firm, Scruggs Law Firm, P.A. for contempt. Judge Acker concluded that Mr. Scruggs violated a court order about the handling of documents in a case relating to insurance claims that flowed from the destructive power of Hurricane Katrina.

The case involves Cori Rigsby Moran and Kerri Rigsby, sisters who were employees of E.A. Renfroe & Co., an insurance-services company hired by State Farm Insurance Co. to evaluate Hurricane Katrina claims. According to court documents the Rigsbys photocopied documents that they thought contained evidence of misconduct by State Farm in its dealings with its policyholders. The Injunction stated:

[D]efendants, Cori Rigsby Moran and Kerri Rigsby, and their agents, servants, employees, attorneys, and other persons in active concert or participation with them who receive actual notice of this order by personal service or otherwise (with the express exception of law enforcement officials) are hereby MANDATORILY ENJOINED to deliver forthwith to counsel for plaintiffs all documents, whether originals or copies, of each document and tangible thing, in any form or medium, that either of the defendants or anyone acting in conjunction with or at the request or instruction of either of them, downloaded, copied took or transferred from the premises, files, records or systems of Renfroe or of any of its clients, including, but not limited to State Farm Insurance Company and which refer or relate to any insurance claims involving damages caused or alleged to have been caused by Hurricane Katrina in the State of Mississippi. [full order at [http://online.wsj.com/public/resources/documents/scruggs1.pdf]]

In February 2006, the sisters retained Scruggs, a family acquaintance, to act as their lawyer and provided him with State Farm documents. At the time, Scruggs was pursuing litigation against State Farm and other insurers for denying Katrina claims. The sisters, Cori Rigsby Moran and Kerri Rigsby, are now "consultants" for the Scruggs Katrina Group, to the tune of $150,000 a year.

Renfroe sued the Rigsbys in September 2006, alleging they violated their employment agreements and stole trade secrets. In December 2006, Judge Acker issued an injunction ordering that all documents be returned to Renfroe’s counsel.

In his ruling June 15, 2007 Judge Acker said that Scruggs shared the State Farm documents with the Mississippi Attorney General in violation of the court’s order. "Scruggs is an experienced attorney and an officer of the court," Judge Acker wrote in a court order. "His brazen disregard of the court’s preliminary injunction is precisely the type of conduct that criminal contempt sanctions were designed to address."

In addition, Judge Acker stated: "Taking Scruggs’s word for it, he was arrogating to himself the right to substitute his judgment for the court’s judgment. That spells "defiance.""

Judge Acker, perhaps recognizing the political situation also said: "If the government declines this request," Judge Acker warned, "the court will appoint another attorney to prosecute the contempt."

It has been alleged that instead of complying with the court's order Mr. Scruggs shipped the documents to Mississippi Attorney General Jim Hood, who was pursuing a criminal probe of State Farm. The documents were intended to help Mr. Hood make the criminal case against State Farm and Mr. Hood in turn, it is alleged, worked to convince State Farm to settle with Mr. Scruggs. The Wall Street Journal described the situation as "a sort of tag-team mugging. State Farm eventually settled for more than $130 million, and only afterward were the documents returned."

Judge Acker noted that the essential elements of criminal contempt are that the court:

entered a lawful order of reasonable specificity, it was violated, and the violation was willful. Whether the order is reasonably specific is a question of fact and must be evaluated in the context in which it is entered and the audience to which it is addressed. In criminal contempt, willfulness means a deliberate or intended violation, as distinguished from an accidental, inadvertent, or negligent violation of an order. Each of these elements must be proven beyond a reasonable doubt in order to determine guilt and impose punishment. [In re McDonald, 819 F.2d 1020, 1023-24 (11th Cir. 1987)]

Judge Acker found that the injunction required Scruggs, as an attorney or agent of defendants, to deliver forthwith to Renfroe’s counsel "all documents . . . that either of the defendants . . . downloaded, copied took or transferred from the premises, files, records or systems of Renfroe or of any of its clients . . . which refer or relate to any insurance claims involving damages caused or alleged to have been caused by Hurricane Katrina in the State of Mississippi." Judge Acker also found that "It is undisputed that Scruggs had in his possession the exact documents that fell within the scope of the injunction and that were and are the whole subject of the controversy. Instead of complying, Scruggs promptly sent the documents to Hood for the calculated purpose of ensuring noncompliance with or avoidance of the injunction’s clear first paragraph. Scruggs’s motive seems clear from the undisputed facts."

Even after Hood "voluntarily" sent the documents to counsel for Renfroe at Scruggs’s request, Scruggs wrote to Hood requesting another copy of the same documents for himself and ostensibly for the Scruggs Katrina Group.described Mr. Scruggs' explanation that he was doing his duty to help a prosecutor as "such a strained construction and so contrary to the injunction's clear terms as to lack any credibility whatsoever." Judge Acker indicates that Mr. Scruggs and Mr. Hood teamed up to bully State Farm into civil and criminal settlements.

Mr. Scruggs sent the documents to Mr. Hood, Judge Acker writes, "for the calculated purpose of ensuring noncompliance with or avoidance of the injunction's clear first paragraph."

The court concluded its order:

In accordance with Rule 42(a), Fed. R. Crim. P., the court will formally request that an attorney for the government prosecute Scruggs’s contempt. If the government declines this request, the court will appoint another attorney to prosecute the contempt. Because in the context of criminal contempt proceedings the undersigned has acted as the functional equivalent of a grand jury for finding probable cause, he will have the criminal contempt proceedings against Scruggs reassigned to another judge.

Barry Zalma
http://www.zalma.com

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Insurance Fraud

It probably doesn't matter where you live; your state (and your lien holder) require you to have auto insurance. If you own a home, your lender requires you also have coverage. Your employer and you both contribute to pay the premium for your health insurance. And your work comp coverage. If you have a spouse or children, you most likely have life insurance (some employers also contribute to this coverage). Businesses are required to also carry liability coverage, as well as inventory and building insurance, among others. Then, of course, there's optional insurance you can purchase, in addition, to all that is required. Consider trip insurance, pet insurance, dental, earthquake, jewelry, collectibles, boat, long term disability, road service, umbrella coverage, disability, and even on specific parts of your body. (One famous dancer insured her legs for an astronomical - at the time - amount. And a Colorado dentist insured his fingers for enough money to assure him a carefree retirement, then promptly cut one off "accidentally on purpose" and filed a claim. The good doctor, minus his right hand Peter Pointer, did NOT pass Go, did NOT collect $2 million and DID go directly to jail!)

Let's face it, insurance is something we all have a stake in. If you add up all the premiums you pay over the course of a year, you'll find it's a pretty good chunk of change for all this protection.

When an accident strikes, it's not uncommon to think, "Wow, I've paid all this money all these years, and now, it's time for ME TO COLLECT!"

But, before you go running off to your claims office, let's think about this for just a minute.

The purpose of insurance to to "share the risk" - many people pay into the pot each year to cover their RISK PERIOD, which is usually 6 months for a car or 1 year for a house. As claims occur, the money in the pot is used to put the person who had the claim back to the position they were in just prior to the claim. This means if you had a 2000 Ford Mustang, that you get the value of a 2000 Ford Mustang (assuming it was totaled), not the value of a 2006 Ford Mustang. Sounds reasonable, doesn't it?

It works the same way for any type of claim. The objective is to put you back where you were just prior to the loss. Of course, sometimes very serious accidents occur causing death or irreversible injuries and the only thing that can be done, it to monetarily make the injured person "whole."

Most of us understand this concept and play by the rules.

Fraudsters, however, don't care about this concept. All they want to do is reap the rewards.

There are two types of fraud within the industry: Soft fraud and hard fraud.

Soft fraud is opportunist fraud involving things like:

* The body shop "covering" the deductible.
* Claiming damage that wasn't caused in the accident.
* Or, in the case of a homeowner's claim, claiming something that wasn't really stolen.

Claiming or enhancing an injury (treating longer than necessary, taking off work when you could have worked, etc.) in order to receive a larger settlement.

Hard fraud is a deliberate act to or attempt to steal money from that pot where YOU put your money.

The pages in our auto section primarily deal with hard fraud. We hope they provide you with the information to recognize and protect yourself from these crooks.

And every time someone steals money, either by hard or soft fraud, from your pot, remember, it causes the risk to go up and when the risk goes up, so does your premium.

It's NOT the insurance company's money they're taking, it's YOURS!

Get mad. Fight back America!

http://www.fightfraudamerica.com

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Insurance fraud: Counting the cost
Adrian Lowery

INSURANCE fraud is undergoing something of a sea-change – in both its character and also in the public's perception.

Organised gangs are becoming more sophisticated, while the average punter is becoming less tempted to have a go at what it sometimes seen as victimless crime. But as the costs land on the premium-payers, insurance fraud should be something to worry us all.

Figures out this week show a huge increase in the detection of all sorts of insurance claim cheats, from the average opportunist punter to criminal rings. Companies are now exposing £3.5m a week in dishonest claims, according to the report from the Association of British Insurers.

Its insurers, who cover two-thirds of the general insurance market, uncovered fraudulent claims valued at £200m in 2004, a 95% rise on 2002.

But is insurance fraud a booming enterprise, or are insurers just uncovering more of it? 'It's like looking at the tip of an iceberg,' says Malcolm Tarling, ABI spokesman. 'There's obviously a lot more underneath, but it's very difficult to say how much.'

'What we are seeing is a higher rate of detection of the opportunistic fraudster – the customer who probably would not break most other laws, but thinks 'everyone else is doing it, why shouldn't I',' explains Tarling. 'There's no obvious evidence of a significant increase in the underlying level of this sort of fraud.'

The ABI claims this reflects the increase in resources dedicated to fraud-detection and the adoption of new techniques: more and better-trained staff; more sophisticated and comprehensive data-sharing systems and co-operation among companies; and specific measures such as voice-stress analysis and the Cheat Line, which people can use to report suspected fraud.

But also it seems that punters are becoming more reluctant to send in a dodgy insurance claim. The results of an ABI survey show that 7% of respondents had at some time made a fraudulent claim. Of those:

• 23% did it because 'everyone else does'

• 22% because it they saw it as a 'victimless crime'

• 20% because 'the companies can afford it'

• 14% because 'there's not much chance of getting caught'

The gravity of individual frauds vary from the inflating of a legitimate claim to determined criminals who concoct false scenarios – premeditative fraud.

But Tarling reckons the increased detection is having the desired deterrent effect, at least among the former group, with people realising it's a crime like any other: 'Any fraudulent claim is a crime, and just because it isn't an organised gang, doesn't mean it isn't a serious offence. In the end insurers want to get on with serving honest customers – but to do this they need to separate out the fraudulent ones.'

But is the same occurring with the criminal gangs? There has been a considerable increase in the detection of organised scams and it also appears that the hidden bit of the iceberg may be growing. In common with credit card, internet and identity fraud, as the sectors' preventative measures get more sophisticated, so do the tactics of the criminals.

Common frauds detected include staged motor accidents involving gangs who deliberately stage collisions with innocent motorists, and then claim for damage to the vehicle and whiplash neck injuries, backed up by witnesses, who turn out to be part of the scam.


Motor insurance is the most fraud-ridden sector of the industry. The ABI recently set up a database to replace the Motor Insurance Anti Fraud and Theft Register, which they estimate is saving an estimated £20,000 a day in detecting and deterring fraudulent motor claims.

But as the sector discovers or cracks down on one particular scam, the gangs devise others, and Tarling says it's difficult to know who's winning the battle.

The ABI is also reluctant to put even a ballpark figure on the total cost to the punter of fraud in terms of increased premiums.

What they are sure of is the necessity and benefit of the ongoing fraud crackdown, particularly in terms of the message it gives out: 'The costs of anti-fraud measures are undoubtedly outweighed by the benefits to the companies and to honest customers - they expect us to tackle fraud as thoroughly as possibly and we believe they benefit from this.' As do the profits on insurance firms' balance sheets, of course.

As for the future, now that the companies feel they have systems in place to root out or deter the casual fraudster, it looks as though the sectors' energies will be increasingly trying to shed light on the shadowy-world of the fraud gangs.

The Cheat Line telephone number is 0800 328 2550.

http://www.thisismoney.co.uk

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Why should Senior Citizens be concerned?

It has been the experience of the FBI that the elderly are targeted for fraud for several reasons:

1) Older American citizens are most likely to have a "nest egg," own their home and/or have excellent credit all of which the con-man will try to tap into. The fraudster will focus his/her efforts on the segment of the population most likely to be in a financial position to buy something.

2) Individuals who grew up in the 1930s, 1940s, and 1950s were generally raised to be polite and trusting. Two very important and positive personality traits, except when it comes to dealing with a con-man. The con-man will exploit these traits knowing that it is difficult or impossible for these individuals to say "no" or just hang up the phone.

3) Older Americans are less likely to report a fraud because they don't know who to report it to, are too ashamed at having been scammed, or do not know they have been scammed. In some cases, an elderly victim may not report the crime because he or she is concerned that relatives may come to the conclusion that the victim no longer has the mental capacity to take care of his or her own financial affairs.

4) When an elderly victim does report the crime, they often make poor witnesses. The con-man knows the effects of age on memory and he/she is counting on the fact that the elderly victim will not be able to supply enough detailed information to investigators such as: How many times did the fraudster call? What time of day did he/she call? Did he provide a call back number or address? Was it always the same person? Did you meet in person? What did the fraudster look like? Did he/she have any recognizable accent? Where did you send the money? What did you receive if anything and how was it delivered? What promises were made and when? Did you keep any notes of your conversations?

The victims' realization that they have been victimized may take weeks or, more likely, months after contact with the con-man. This extended time frame will test the memory of almost anyone.

5) Lastly, when it comes to products that promise increased cognitive function, virility, physical conditioning, anti-cancer properties and so on, older Americans make up the segment of the population most concerned about these issues. In a country where new cures and vaccinations for old diseases have given every American hope for a long and fruitful life, it is not so unbelievable that the products offered by these con-men can do what they say they can do.

Health Insurance Frauds:

Medical Equipment Fraud:

Equipment manufacturers offer "free" products to individuals. Insurers are then charged for products that were not needed and/or may not have been delivered.

"Rolling Lab" Schemes:

Unnecessary and sometimes fake tests are given to individuals at health clubs, retirement homes, or shopping malls and billed to insurance companies or Medicare.

Services Not Performed:

Customers or providers bill insurers for services never rendered by changing bills or submitting fake ones.

Medicare Fraud:

Medicare fraud can take the form of any of the health insurance frauds described above. Senior citizens are frequent targets of Medicare schemes, especially by medical equipment manufacturers who offer seniors free medical products in exchange for their Medicare numbers. Because a physician has to sign a form certifying that equipment or testing is needed before Medicare pays for it, con-artists fake signatures or bribe corrupt doctors to sign the forms. Once a signature is in place, the manufacturers bill Medicare for merchandise or service that was not needed or was not ordered.

Some Tips to Avoiding Health Insurance Frauds

*
Never sign blank insurance claim forms.
*
Never give blanket authorization to a medical provider to bill for services rendered.
*
Ask your medical providers what they will charge and what you will be expected to pay out-of-pocket.
*
Carefully review your insurer's explanation of the benefits statement. Call your insurer and provider if you have questions.
*
Do not do business with door-to-door or telephone salespeople who tell you that services of medical equipment are free.
*
Give your insurance/Medicare identification only to those who have provided you with medical services.
*
Keep accurate records of all health care appointments.
*
Know if your physician ordered equipment for you.

Counterfeit Prescription Drugs

Some Tips to Avoiding Counterfeit Prescription Drugs

* Be mindful of appearance. Closely examine the packaging and lot numbers of prescription drugs and be alert of any changes from one prescription to the next.
* Consult your pharmacist or physician if your prescription drug looks suspicious.
* Alert your pharmacist and physician immediately if your medication causes adverse side effects or if your condition does not improve.
* Use caution when purchasing drugs on the Internet. Do not purchase medications from unlicensed online distributors or those who sell medications without a prescription. Reputable online pharmacies will have a seal of approval called the Verified Internet Pharmacy Practice Site (VIPPS), provided by the Association of Boards of Pharmacy in the United States.
* Product promotions or cost reductions and other "special deals" may be associated with counterfeit product promotion.

http://www.fbi.gov

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Medicare Fraud
Detection and Prevention Tips


What is Fraud?

Medicare fraud is purposely billing Medicare for services that were never provided or received.

Some examples of Medicare fraud include:

* Billling Medicare or another insurer for services or items you never got.

* Billing Medicare for services or equipment which are different from what you got.

* Use of another person’s Medicare card to get medical care, supplies, or equipment.

* Billing Medicare for home medical equipment after it has been returned.

Detection Tips

You should be suspicious if the provider tells you that:

* The test is free; he only needs your Medicare number for his records. NOTE: For clinical laboratory tests, there is no co-payment and a provider may in good faith state that the test is free, since there is not cost to the person with Medicare.

* Medicare wants you to have the item or service.

* They know how to get Medicare to pay for it.

* The more tests they provide the cheaper they are.

* The equipment or service is free; it won't cost you anything.

Be suspicious of providers that:

* Charge co-payments on clinical laboratory tests, and on Medicare covered preventive services such as PAP smears, prostate specific antigen (PSA) tests, or flu and pneumonia shots.

* Routinely waive co-payments on any services, other than those previously mentioned, without checking your ability to pay.

* Advertise "free" consultations to People with Medicare.

* Claim they represent Medicare.

* Use pressure or scare tactics to sell you high priced medical services or diagnostic tests.

* Bill Medicare for services you did not receive.

* Use telemarketing and door-to-door selling as marketing tools.

Prevention Tips

To help prevent Medicare fraud, you should report suspected instances of fraud. Whenever you receive a payment notice from Medicare, review it for errors. The payment notice shows what Medicare was billed for, what Medicare paid and what you owe. Make sure Medicare was not billed for health care services or medical supplies and equipment you did not receive.

The following is a list of tips to prevent fraud:

* Don't ever give out your Medicare Health Insurance Claim Number (on your Medicare card) except to your physician or other Medicare provider.

* Don't allow anyone, except appropriate medical professionals, to review your medical records or recommend services.

* Don't contact your physician to request a service that you do not need.

* Do be careful in accepting Medicare services that are represented as being free.

* Do be cautious when you are offered free testing or screening in exchange for your Medicare card number.

* Do be cautious of any provider who maintains they have been endorsed by the Federal government or by Medicare.

* Do avoid a provider of health care items or services who tells you that the item or service is not usually covered, but they know how to bill Medicare to get it paid.

It is in your best interest and that of all citizens to report suspected fraud. Health care fraud, whether against Medicare or private insurers, increases everyone's health care costs, much the same as shoplifting increases the costs of the food we eat and the clothes we wear. If we are to maintain and sustain our current health care system, we must work together to reduce costs.

Correction to previous information concerning ambulance services:
In a previous fraud flyer intended to assist beneficiaries in recognizing fraudulent practices in the Medicare program, we advised beneficiaries to be suspicious of ambulance companies that bill for trips that are not emergency in nature. That statement is misleading. Non-emergency ambulance services are covered by the Medicare program when reasonable and necessary. We apologize for any misunderstandings or confusion that may have resulted from this statement.

http://www.medicare.gov

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Chiropractor Charged
with Faking Disability


On October 2, 1998, New York State Superintendent of Insurance Neil D. Levin announced that Robert A. Strange, 45, of 749 Route 82 in Hopewell Junction, New York, was arrested September 28 and charged with four counts of insurance fraud in the third degree, two counts grand larceny in the third degree, and five counts of insurance fraud in the second degree.

Strange, a self-employed chiropractor, allegedly collected $38,000 fraudulently from insurance companies claiming that he was disabled and could not work. However, an Insurance Department investigation revealed that Strange treated numerous patients during the period he claimed he was not working. Insurance fraud in the third degree and grand larceny in the third degree are punishable by up to seven years in prison. Insurance fraud in the second degree is punishable by up to four years in prison. Strange was arraigned in Dutchess County Court and released on his own recognizance.

Source: New York State Insurance Department news release.

http://www.chirobase.org

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Chiropractor and Massage Therapist Wife Indicted
for $181,800 in Workers' Compensation Fraud


On December 15, 1996, following an 18-month probe by investigators from the Bureau of Workers' Compensation (BWC), prosecutors from Attorney General Betty Montgomery's Office obtained indictments against a Cleveland Heights chiropractor and his wife, who allegedly billed BWC more than $177,000 for services they did not perform.

"This is the largest case of workers' compensation fraud by a medical provider we have ever prosecuted," said Attorney General Betty Montgomery. "We are committed to rooting out workers' compensation fraud across the state, whether it's committed by workers, employers, or health care providers."

"We take stealing from Ohio's injured workers and employers as a serious affront," said BWC Administrator James Conrad. "Regardless if you are a medical provider or an injured worker, we will find you and we will catch you."

The alleged fraud committed by Frank Andosca, 34, a Cleveland Heights chiropractor and his wife Karyl, 44, a massage therapist, was uncovered during an unrelated review of the couple's billing practices by BWC. As a result of that review, a more extensive fraud investigation was launched against the couple in January 1994.

Frank Andosca was indicted by a Franklin County special grand jury investigating workers' compensation fraud on one count of theft, a second-degree felony; one count of workers' compensation fraud, a third-degree felony; and a second-degree count of receiving stolen property. Prosecutors allege he fraudulently billed BWC for $114,596.

The chiropractor faces up to 15 years imprisonment on each of the theft and receiving stolen property charges, and up to two years imprisonment on the workers' compensation charge. Karyl Andosca was indicted on one count of grand theft, a third-degree felony, one third-degree count of workers' compensation fraud, and one count of receiving stolen property, a third degree felony. Prosecutors allege she billed BWC $67,204 for services which she did not provide. The massage therapist faces up to two years in prison on each of the three felony charges.

The cases will be prosecuted by attorneys from the Workers' Compensation Fraud Unit of Attorney General Betty Montgomery's Office. The BWC and the Attorney General's Office have made the detection and prosecution of workers' compensation fraud a priority.

In a separate action, Dr. Bruce Holaday, a chiropractor from Cincinnati, pleaded guilty to a fourth-degree felony charge of workers' compensation fraud on December 6th. Holaday, 32, of 613 Legend Hills Dr., Cincinnati, faces up to 18 months in jail and a fine of up to $2,500 for billing BWC for $13,006 in services that he did not provide. Complaints to BWC by former employees and customers led to the investigation of the proprietor of Advantage Care Chiropractic, Inc. Holaday is expected to be sentenced in January 1997.

To report workers' compensation fraud, call BWC's nationwide, toll-free hotline at (800) 837-1554. Callers may remain anonymous.

http://www.chirobase.org

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Chiropractor Admits to
Workers' Compensation Fraud
News Release, February 27, 1996


Following a joint inquiry by investigators from the Bureau of Workers' Compensation (BWC), Ohio Attorney General Betty Montgomery's Workers' Compensation Fraud Unit, and Cuyahoga County Prosecutor Stephanie Tubbs Jones, a Garfield Heights chiropractor has admitted stealing $142,659 in workers' compensation funds over a three-and-one-half year period.

The investigation was triggered by inquiries from two Cleveland-area employers, Woodhill Plating, 9114 Reno Ave., and Rupp Forge Co., 10410 Meech Ave., who contacted BWC after noticing that their workers' compensation premiums reflected ongoing medical claims for employees whose treatment was known to have ceased. Following the employers' inquires in late 1993 and 1994, BWC began investigating Thomas Campana, 37, of Garfield Heights.

Prosecutors filed a bill of information -- a plea agreement in which the accused waives his right to a grand jury hearing -- against Campana in Cuyahoga County Common Pleas Court. He was charged with one count of workers' compensation fraud, a second-degree felony.

The Garfield Heights chiropractor allegedly billed BWC for services he did not perform on more than a dozen patients whose treatments had either been completed or discontinued. He faces two to 15 years in prison and/or up to a $7,500 fine when he is sentenced, following a presentencing investigation.

The BWC and the Attorney General's Office have made the detection and prosecution of workers' compensation fraud a priority. To report workers' compensation fraud, call BWC's nationwide, toll-free hotline at (800) 837-1554. Callers may remain anonymous.

http://www.chirobase.org

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Allstate Sues to Recover
Many More Millions
Stephen Barrett, M.D.


On October 19, 1999, Allstate Insurance Company filed two suits against 258 individuals suspected of participating in two staged accident rings in Camden and Perth Amboy, New Jersey. A third suit targeted chiropractors, medical doctors, and related medical and business corporations who allegedly created a dummy medical corporation to misrepresent a chiropractic facility as a physician-owned medical center. The scheme is connected to a seminar run by a California chiropractor and advertised on the World Wide Web.

The most complex of the three suits was filed in Morris County Superior Court. Allstate accuses Atlantic County chiropractor J. Scott Neuner of setting up a phony medical corporation, Northfield Medical Center, PC, in order to circumvent a New Jersey health-care regulation that limits chiropractors' scope of practice and regulations designed to reduce health care costs. Neuner entered into the alleged illegal arrangement with Robban A. Sica M.D., a Connecticut physician, to create the appearance that Northfield was owned by Sica. Sica has or had suspected ownership interests in at least 14 other similar corporations in New Jersey. Neuner was introduced to Sica through a seminar run by a California chiropractor named Daniel Dahan. Dahan runs a medical management consulting firm called "Practice Perfect," advertised on Dahan's website. Dahan located Neuner's MD-for-hire and also supplied the instructions and paperwork to set up the bogus corporation. In testimony to Allstate, Neuner admitted he never personally met Dr. Sica nor had she ever visited the facility, invested in the corporation, or treated or supervised patients. Allstate expects to name additional parties involved in similar dummy operations.

The second suit, filed in Camden County Superior Court, named Iris Salkauski of Camden County as the ringleader of a staged-accident-fraud ring believed to have been involved in more than 100 claims over a two-year period. Also named are three "runners" and 169 individuals accused of staging 25 automobile accidents in Camden. In a stunning series of confessions to Allstate investigators, several of the staged-accident participants identified Salkauski as the point person who had recruited participants, staged accidents, and provided instruction on feigning injuries. Allstate alleges that she also arranged for participants to meet with attorneys and medical providers who paid her "referral fees" and were willing accomplices in the scam. Sixty medical providers are named as defendant providers, and 51 are named as defendants in interest.

The third suit was filed in Morris County Superior Court against 89 individual participants in a staged accidents ring in Perth Amboy. Allstate filed related complaints earlier this year against medical providers and the alleged ringleaders of the Perth Amboy ring, believed to involve more than 6,724 claimants and $14 million in paid claims. In July, the Office of Insurance Fraud Prosecutor arrested nine people in connection with their ongoing criminal investigation of this case.

With the three actions, Allstate New Jersey, Allstate, and the Allstate Indemnity Company are seeking restitution of paid claims, plus treble damages and an injunction to stop certain defendants from engaging in these allegedly unlawful, fraudulent and deceptive acts. Allstate is also seeking to block and recoup any payments pending or already made to the defendants in PIP arbitration proceedings, and has named the American Arbitration Association (AAA) as a defendant in interest in the complaint.

The actions are the result of over two years of investigation by Allstate New Jersey's Special Investigative Unit (SIU) in cooperation with the Office of the Insurance Fraud Prosecutor. Allstate works closely with law enforcement officials to facilitate the criminal prosecution of those accused of automobile insurance fraud. Commenting on these cases, an Allstate official noted that "the runner is the linchpin in the scheme" and that New Jersey recently enacted a law to deal with this exact problem.

http://www.chirobase.org

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Chiropractor, Caught in FBI Undercover Sting,
Admits Scheme to Defraud Insurance Companies
December 2, 1998


A Greenbrook chiropractor today pleaded guilty to a scheme to defraud insurance companies by submitting claims for services not performed, U.S. Attorney Faith S. Hochberg announced.

Frank Marinaro, DC, who operated the Marinaro Chiropractic in Greenbrook, pleaded guilty to a one-count Information charging him with mail fraud. When he is sentenced March 5, 1999, by U.S. District Judge Mary L. Cooper, he faces a maximum of five years in prison and a $250,000 fine, according to Assistant U.S. Attorney John J. Carney. Marinaro also may have his chiropractic license suspended or revoked by the New Jersey State Board of Chiropractic Examiners and be fined by the New Jersey State Department of Insurance.

According to the Information, between 1994 and early 1995, Marinaro was a licensed chiropractor operating the Marinaro Chiropractic Center, where he treated patients involved in vehicular accidents and billed insurance companies for services that he never performed.

From in or about late 1994 to in or about early 1995, the FBI conducted an undercover operation into false billing practices by chiropractors, using cooperating witnesses to pose as patients injured in minor car accidents, when in fact there were never any injuries or accidents.

The cooperating witnesses, after establishing the appearance of a minor accident, sought treatment from Marinaro. On several dates when one of the FBI's cooperating witnesses was out of state or otherwise not receiving treatments, Marinaro caused bills to be submitted to insurance companies for services that were purportedly performed by him on these dates. Marinaro performed no such services, according to the Information.

Marinaro attempted to conceal his fraud by causing progress notes falsely stating that he had examined or treated the patient on a particular day to be submitted to insurance companies; he had not examined or treated the patient on that day, according to the Information.

Hochberg credited special agents of the FBI, under the direction of William C. Megary, special agent in charge of the FBI's Newark office, with developing the case against Marinaro. The Government is represented by Assistant U.S. Attorney Carney of the U.S. Attorney's Fraud and Public Protection Division in Newark.

http://www.chirobase.org

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Two Chiropractors and Five Others
Charged with Insurance Fraud


On April 21, 1999, New Jersey Attorney General Peter Verniero announced that two chiropractors, the operator of a physical therapy business above one of the chiropractic offices, and three alleged "runners" were indicted for alleged roles in separate insurance fraud schemes involving computerized accident records illegally obtained from the Newark and North Bergen Police Departments,

The chiropractors and the operator of the physical therapy business were charged in one indictment, and the three alleged runners were charged in three separate indictments. The chiropractors' indictment, if proven, "is a schematic for an insurance fraud mill," Verniero said, "a doctor-controlled, top-to-bottom scheme using a corrupted police employee to purloin internal police data, a third party to make bribe payments and runners who exploited the stolen data to snare chiropractic patients." Named in the four-count indictment were:

* Robert Matturro, D.C., 38, of Fox Run, North Caldwell, who owns Matturro Chiropractic in Bloomfield and West New York Chiropractic Center in Union City
* Nicholas Rosania, D.C., 30, of Daniel Street, Rockaway, operator of Matturro's Union City office
* Annette Licea, 31, of Colombia Ave., North Bergen, who operates a physical therapy business above Matturro's Union City office.

The trio were charged with conspiracy in the second degree, computer theft in the third-degree, official misconduct in the second degree, and bribery in official matters in the second degree. The indictment states that between March 1 and Sept. 24, 1997, Rosania and Matturro conspired with Licea to give money to Licea to bribe an unnamed communications supervisor in the North Bergen Police Department. Licea paid the supervisor on four or more occasions to obtain the accident reports.

To carry out the scheme, Matturro instructed an unnamed unindicted conspirator to get "paperwork" from Rosania to use as leads to solicit patients for the West New York Chiropractic Center, according to the indictment. Rosania gave North Bergen Police Department accident reports to an unindicted conspirator twice in 1997, then gave money to Licea to pay the communications supervisor who supplied the computer records, the indictment states.

"We're targeting health care providers at the top of the fraud chain who pay public officials and police officers for patients with insurance coverage and all the schemers that help them," Assistant Attorney General and Insurance Fraud Prosecutor Edward M. Neafsey said. "This is the mandate we received from the legislature to clean up insurance fraud."

Three individual indictments related to 1998 activities were returned in the second alleged scheme:

* Cyrano Green, 39, of Mountain Way, West Orange is charged with one count of conspiracy in the second degree, one count of second-degree bribery in official matters, and six counts of third-degree bribery in official matters. Green is charged with conspiring to pay cash bribes to an unnamed City of Newark Police officer who, unbeknownst to Green, was working undercover with investigators now assigned to the Office of Insurance Fraud Prosecutor. The officer received seven cash bribes totaling approximately $1,600 in return for turning over accident reports to Green on 17 occasions.
* Abagail Romero, 36, of New Street, Newark, is charged with one count of conspiracy in the second degree, one count of second-degree bribery in official matters, and four counts of third-degree bribery in official matters. Romero is charged with conspiring to pay five cash bribes to the undercover City of Newark Police officer in return for accident reports on 12 occasions and paying bribes totaling approximately $1,800 for them.
* James Lee Campbell, 46, of Lawrence Avenue, West Orange is charged in four counts with conspiracy in the second degree, and three counts of bribery in official matters the second degree. Campbell paid a total of $1,200 in cash to the undercover officer in return for accident reports on 15 occasions.

Each second-degree offense for which a defendant is convicted carries a maximum of 10 years in State prison and a fine of $100,000 to $150,000. Each third-degree offense for which a defendant is convicted carries a maximum of five years in State prison and a $15,000 fine. If convicted, each defendant's actual sentence would be based upon a variety of factors, including the severity of the crime as well as any aggravating and mitigating factors.

http://www.chirobase.org

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Manager of North Jersey Chiropractic Center
Indicted on Eight Counts of Insurance Fraud


A state grand jury has indicted the manager of a chiropractic center in Passaic, New Jersey, for allegedly submitting fraudulent claims for chiropractic treatments that were not actually rendered to patients who had been in automobile accidents. On February 18, 1999, New Jersey Attorney General Peter Verniero and state Insurance Fraud Prosecutor Edward Neafsey announced that Esther DelPino, 51, of 267 Main Ave., Hackensack, has been with second degree conspiracy, second degree theft by deception, three counts of fourth degree falsifying records, and three counts of fourth degree falsifying medical records.

"Insurance fraud costs New Jersey residents an untold amount of money each year," Verniero said. "Combating insurance fraud is a high priority of this office. Anyone who defrauds the insurance industry, thereby cheating the citizens of this state, will be prosecuted to the full extent of the law."

According to Neafsey, DelPino was the manager of Lexington Chiropractic Center in Passaic. The indictment alleges that three State Investigators went to Lexington Chiropractic, posing undercover as automobile accident victims. Neafsey said that the investigators received some treatment, but that when the bills were submitted to the insurance carriers, they included claims for additional treatments the investigators had not received. Those bills included claims for treatments purportedly given on approximately 80 days when the investigators were not even at Lexington Chiropractic, Neafsey explained.

In addition to the instances involving the undercover investigators, the indictment alleges that between Jan. 1, 1993 and July 31, 1996, DelPino directed employees of Lexington Chiropractic to prepare other false and inflated bills that included claims for chiropractic treatments that were not actually rendered. Those bills were submitted to two dozen insurance companies. Of the $342,000 in false insurance claims allegedly submitted by DelPino, Lexington Chiropractic collected $245,000 from the insurance companies. The claims were paid under the personal injury protection (PIP) portion of automobile insurance policies.

The indictment also alleges that DelPino paid cash referral fees to people who referred patients to the center. In one case, Neafsey said, DelPino paid $500 to an undercover investigator for referring a "patient" who was another undercover state investigator.

The insurance carriers allegedly defrauded include:

AIG Claim Services, Inc; Allstate Insurance Company; AMGRO; C.N.A. Insurance Companies; Colonial Penn Insurance Company; Continental Insurance Companies; First Trenton Indemnity Company; General Accident Insurance Company; Hanover Insurance Company; Hertz Claim Management Corp.; Liberty Mutual Insurance Company; Market Transition Facility; Material Damage Adjustment; Motor Club of America Insurance Company; National Consumer Insurance Company; Ohio Casualty Group; Preferred Dealer Insurance; Progressive Compensation; Prudential Property and Casualty Insurance Company; St. Paul Fire and Marine Insurance Company; State farm Insurance Companies; USAA Casualty Insurance Company; United States Fidelity and Guaranty Company, and Warner Insurance Services, Inc.

The case is being prosecuted by the Office of Insurance Fraud Prosecutor, Division of Criminal Justice, Department of Law and Public Safety. Deputy Attorney General Steven B. Farman presented the case to the grand jury and will represent the state at trial. No trial date has been set. If convicted on all counts, DelPino faces a maximum penalty of $245,000 and 39 years in prison.

http://www.chirobase.org

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Las Vegas chiropractor convicted of mail fraud
Glenn Puit

A Las Vegas chiropractor has been convicted of mail fraud in federal court in what authorities alleged was a scheme to illegally collect insurance money.
Thomas Mark Shleifer was convicted of one count of mail fraud early Thursday afternoon, according to federal authorities. Several other related counts were dismissed after a jury could not reach a decision on the charges.
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Shleifer was retried by prosecutors after a 1996 trial that resulted in a hung jury. The government claimed that in 1990, Shleifer participated in a scam in which he claimed to treat five people who rammed their car into a telephone pole on Lake Mead Boulevard.
Prosecutors argued that as a result of the accident, an insurance company paid $38,000 in false medical bills.
Shleifer's attorneys countered that the witnesses who testified were liars and cheats who stood to benefit from taking the stand against the chiropractor.

http://www.reviewjournal.com

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Boston Area Chiropractor and Wife
Sentenced in Fraud Case
September 7, 1995

A Boston-area chiropractor and his wife, the executive director of his chiropractic business, were sentenced in federal court today following their pleas in April to participating in a scheme to defraud several Massachusetts automobile and workers' compensation insurance providers between 1989 and 1993.

United States Attorney Donald K. Stern and FBI Special Agent-In-Charge Richard Swenson announced that Alan S. Rosenthal, DC, 38, of 280 Wellesley Avenue, Wellesley, Massachusetts, was sentenced this afternoon by United States District Court Judge Richard G. Stearns to 15 months in prison. In addition, Judge Stearns departed upwards from the Federal Sentencing Guidelines to impose a criminal fine of $300,906.61 to be paid by December 31, 1995. Counsel for Dr. Rosenthal informed the Court that the criminal fine would be paid out of proceeds of the sale of the Rosenthals' Wellesley home, which is scheduled to take place on October 31. Judge Stearns further ordered Rosenthal to pay to the Clerk of the United States District Court $129,093.39 in restitution, which the Clerk will disburse to several area insurance companies that Rosenthal defrauded. Finally, Judge Stearns imposed a two-year term of supervised release to follow Rosenthal's incarceration, and imposed as a special condition of his supervised release that Rosenthal not obtain a license to practice chiropractic in Massachusetts until at least October 18, 1997. On August 23, 1995, the Board of Registration of Chiropractors for the Commonwealth of Massachusetts revoked Rosenthal's license to practice in Massachusetts following his conviction on 30 counts of fraud in April.

Judge Stearns sentenced Caterina A. Rosenthal, 37, to a two-year term of probation. As part of the plea agreement with the government, she also relinquished her interest in assets jointly held with her husband to enable him to pay the criminal fine and restitution.

As outlined by prosecutors at the Rosenthals' April 18, 1995, plea hearing, the Rosenthals defrauded automobile and workers' compensation insurers by overstating patients' injuries and by running up patients' bills with unnecessary tests and treatments. The Rosenthals' business, which at its peak employed as many as six "associate" chiropractors and many clerical employees, was almost entirely dependent on referrals from personal injury lawyers.

To build and sustain the business, the Rosenthals prepared reports for use by lawyers negotiating insurance settlements in which virtually all automobile and workers' compensation patients were stated to suffer periods of total or partial disability, regardless of whether the patients' medical records supported such findings. In addition, the Rosenthals made sure that virtually every automobile accident patient who came to their clinic received a high enough bill to get over the $2,000 "no-fault" lawsuit threshold. (Under Massachusetts' "no-fault" auto insurance laws, persons who claim to have been injured in car accidents are entitled to have their medical bills paid, but those who claim so-called "soft-tissue" injuries, such as "whiplash," cannot bring lawsuits for "pain and suffering" damages unless their medical bills exceed $2,000.)

The Rosenthals' false reports helped lawyers obtain larger settlements than they could have if patient's true medical condition had been reported; and the excessive testing and treatment enabled lawyers to bring suits that would have been barred is their bills were not over $2,000. The Rosenthals profited both directly, by getting paid for services that were not medically reasonable and necessary, and indirectly, by encouraging attorneys to refer their patients to the clinics.

A portion of the recommended restitution order in this case is intended to repay insurance companies for payments they made to the Rosenthals for 46 cases in which Dr. Rosenthal exaggerated the patients' disabilities. In actuality, the associate chiropractors who actually examined and treated the patients had found that the patients had no such periods of total disability, or shorter periods of disability than indicated. Both Rosenthals directed associate chiropractors to report total and partial disability, regardless of their actual findings, and threatened to fire those who refused to do so.

In order to run up patients' bills, Alan Rosenthal instituted policies designed to ensure unnecessary and excessive testing and treatment of patients. During the early 1990s, all automobile accident and workers' compensation patients at the Rosenthal clinics were subjected to a battery of high-technology tests including "Dynatron" (a strength impairment test), surface EMG (an electronic test for muscle spasm), X-ray digitization (preparation of computerized images from routine X-rays), and thermography (infra-red photography of patients' backs). These tests were not provided to so-called "private" patients (that is, patients whose bills were not being paid by automobile or workers' compensation insurers). The prosecutors stated that the associate chiropractors who actually saw the patients did not use these test results to guide their diagnosis or treatment.

To further ensure that automobile patients met the no-fault "threshold," Alan Rosenthal enforced a rule -- which did not apply to "private" patients -- that all automobile accident and workers' compensation patients must undergo at least 25 office visits, regardless of the patients' injuries or needs. Associate chiropractors at Rosenthal Chiropractic who failed to abide by this policy were reprimanded and threatened with termination.

The prosecutors asserted that the Rosenthals' policy of requiring excessive testing and treatment was largely responsible for the huge volume of patients at the clinic. Associate chiropractors treated as many as 100 patients each per day, with a typical fee of $60 per visit -- not including charges for tests.

The case was investigated by Special Agents of the FBI and the Internal Revenue Service, Criminal Investigative Division, with the assistance of Investigators of the Massachusetts Insurance Fraud Bureau. It was prosecuted by Assistant U.S. Attorneys Brien T. O'Connor and Paul G. Levenson from Stern's Criminal Division, with the assistance of Assistant U.S. Attorney Patrick Hamilton, of the Asset Forfeiture Unit of Stern's Criminal Division. According to Stern, the investigation of others involved in the scheme is continuing.

http://www.chirobase.org

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Allstate Alleges Chicago Businessman
Operated Unlicensed Chiropractic Clinics
Stephen Barrett, M.D.

On August 19, 1999, Allstate Insurance Company filed suit in Cook County Circuit Court against Richard Burton and his corporation, Mandella Business Services, Inc, accusing them of providing medical services without a license through two Chicago-area chiropractic clinics they owned: Oak Park Medical Center a/k/a Oak Park Chiropractic Clinic, and Spellmate Medical Center a/k/a Universal Chiropractic Clinic. Allstate also accuses Burton of permitting unlicensed individuals to provide treatment to the clinics' patients without the necessary supervision from a licensed health care professional, and of rubber-stamping medical reports with the signatures of licensed chiropractors to mislead Allstate into believing that a licensed professional prepared the reports and provided treatment. The company is seeking $700,000 in statutory and compensatory damages [1].

The suit describes how Burton and his companies employed Burton's lay relatives to regularly perform treatment and therapeutic procedures such as electrical stimulation, intersegmental traction, hot packs and other treatments upon the clinics' patients. These laypersons performed these treatments without the required license(s) from the Illinois Department of Professional Regulation, and without being supervised by licensed health care providers.

Allstate's Special Investigative Unit has 600 members who detect, investigate, prosecute and deter insurance fraud. Commenting on this case, Edward J. Moran, the unit's assistant vice president, stated:

Insurance fraud affects all of us. We are serving notice that we will use every legal means at our disposal to stop anyone no matter what his or her profession, who through fraud is hampering our ability to deliver lower rates to our policyholders [1].

In 1997, Allstate sued over 1,000 people involved in an auto insurance fraud ring in New Jersey. In 1998, Allstate filed a $107 million lawsuit against several lawyers, doctors and chiropractors for filing false auto insurance claims in California [2]. On October 19, 1999, the company filed three more suits in New Jersey that charged 258 individuals with operating a fraudulent auto accident ring that collected more than$14 million [3].

http://www.chirobase.org

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Three Chiropractors Among 14
Arrested for Staged Accident Scheme

In June 1998, Charles G. LaBella, United States Attorney Southern District of California; William D. Gore, Special Agent in Charge, San Diego Division of the Federal Bureau of Investigation; and Chuck Quackenbush, Insurance Commissioner, California Department of Insurance; announced the culmination of a three-year investigation code-named "Twisted Metal." Eleven individuals in San Diego and 3 individuals in the Los Angeles area were arrested:

  • Bruce Edward Ankrom, DC, 43, chiropractor
  • Viatcheslav M. Borokhov, 52 , "stuffed passenger"
  • Inna Elana Gofman, 37, attorney
  • Dmitry Goldman, 46, "stuffed passenger"
  • Gavriyel Kaziyev, 50 , "stuffed passenger"
  • Irma Elizabeth Palacios, 53 , paralegal/office administrator
  • Igor Pruchanskiy, 22 , "stuffed passenger"
  • Mikhail Rozenberg, 53 , paralegal/office administrator
  • Paul G. Shvartsburd, 47 , physical therapist
  • Igor Snarsky, 39 , capper/recruiter
  • Marvin Charles Spatz, DC, 68 , chiropractor;
  • Kenneth Howard Stern, DC, 31 , chiropractor
  • Regina S. Vartanova, 37, "stuffed passenger"
  • Anatoliy I. Zakinov, 46, "stuffed passenger"

The California Department of Insurance and the FBI, in partnership with the National Insurance Crime Bureau, the Immigration and Naturalization Service, and the San Diego Police Department, have successfully penetrated a large-scale staged auto accident ring operating out of San Diego. Evidence has been gathered throughout the State of California regarding 11 staged automobile accidents.

Background History

Insurance premiums are higher than they would otherwise be as a result of unscrupulous healthcare providers, personal injury attorneys, and other individuals who participate in schemes to defraud insurance companies by staging fraudulent automobile accidents. The Chicago-based National Insurance Crime Bureau estimates that property/casualty insurance fraud cost U.S. insurance companies and ultimately those who pay the premiums a total of $20 billion a year. A substantial portion of this amount is from staged automobile accident schemes. The biggest beneficiaries of this illegal business are dishonest attorneys, medical professionals, and "cappers." The cooperating passengers also receive a portion of the illegal proceeds. NICB further estimates that all forms of insurance fraud cost the U.S. insurance industry between $30 billion and $50 billion a year. The average homeowner will pay an extra $200 per year, and an extra $100 per year for each vehicle owned, as a result of insurance fraud.

Since 1995, the California Department of Insurance (CDI) Fraud Division, the FBI, the San Diego Police Department, the Immigration and Naturalization Service (INS) and the National Insurance Crime Bureau (NICB) have worked jointly on an undercover scenario to penetrate an organization involved in staging automobile collisions. The primary undercover agent was a California Department of Insurance investigator. Others were from the San Diego Police Department, the California Department of Health Services, the Bureau of Narcotics Enforcement, as well as other Department of Insurance investigators.

The undercover agents worked closely with the subjects of the investigation who planned and executed 11 staged accidents and two staged auto thefts. The subjects were tape-recorded describing the manner in which they staged the collisions, how the scheme was conducted with the participating attorneys and doctors, and how the participants divided the proceeds. During the the investigation, over 500 undercover contacts were made in a 22-month period. Over 40 separate fraudulent claims were made to private insurance carriers based on the 11 staged collisions.

On May 13, 1998, 14 subjects were indicted in the Southern District of California (San Diego). The subjects included "cappers," attorneys, administrators, chiropractors and "stuffed passengers". These defendants were each charged with one count of conspiracy to commit mail fraud, and up to 27 counts of mail fraud and aiding and abetting.

On June 23, 1998, the California Department of Insurance, the FBI, the San Diego Police Department and members of the Regional Auto Theft Task Force (RATT) executed search warrants on nine locations, seven of which were in San Diego and two of which were in the Los Angeles area. Arrest warrants for 14 individuals were also executed, 11 in San Diego and three in Los Angeles. In all, over 150 federal and state agents were involved in the searches and arrests conducted on June 23, 1998.

Terminology

  • "Cappers" - Individuals typically involved in recruiting "stuffed passengers" who will be used to submit fraudulent claims to the insurance companies. "Cappers" are typically paid a percentage of the total receipts from the false claims. They supply cooperating passengers for the participating attorneys and medical providers.
  • "Stuffed passengers" - Individuals recruited to make false claims regarding their involvement in automobile accidents. They are typically coached as to the details of the fictitious collisions and resulting fictitious injuries.
  • "Nail car" - The "victim" vehicle involved in the staged accident that is hit by the "hammer car." The vehicle is often "stuffed" with passengers, who then file the fraudulent claims with the assistance of legal professionals.
  • "Hammer car" - The "at fault" vehicle in a staged accident that hits the "nail car." This car is typically insured, and the insurer is often defrauded of an average of $6,000 per claimant per accident.
  • Kickbacks - Fees paid to "cappers" by unethical attorneys and medical providers for the referral of accidents. These payments are often made in cash to conceal them from investigators.

Law Enforcement Participants

  • California Department of Insurance
  • Federal Bureau of Investigation
  • U.S. Attorney's Office, Southern District
  • District Attorney's Office, San Diego County
  • San Diego Police Department
  • Regional Auto Theft Task Force;
  • Immigration and Naturalization Service
  • The National Insurance Crime Bureau

Private Industry Participants

  • Farmers Insurance Company
  • 20th Century Insurance
  • Liberty Mutual Insurance
  • Geico Insurance
  • State Farm Insurance
  • Wawanesa Insurance
  • Prudential Insurance

For Further Information

  • FBI Special Agent Jan Caldwell: (619) 514-5915
  • Dana Spurrier at California Department of Insurance: (916) 492-3301
  • Assistant United States Attorney Lawrence Spong: (619) 557-5815
http://www.chirobase.org

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Allstate Suing 21 for Insurance Fraud

On August 24, 1998, Allstate Insurance Company served summons and complaints accusing 13 physicians, chiropractors, health care providers and others, of taking part in an elaborate scheme to defraud the company of millions of dollars. Allstate seeks to recover approximately $25 million in statutory damages, attorneys' fees, and costs from the defendants.

The two suits, filed in Los Angeles County and San Bernardino County, detail how the named medical professionals had allegedly engaged in insurance fraud, ranging from "upcoding" to charging for services that were never rendered. Upcoding involves submitting invoices for more expensive services than the injured person actually received, in an attempt to obtain a larger fee from the insurance company.

Allstate first suspected that it had been victimized by these individuals and entities in November 1997. The company's Special Investigative Unit immediately initiated an inquiry that led to these lawsuits. To date, Allstate has identified 331 potentially fraudulent claims. That number is expected to grow with additional defendants facing legal action.

Recently, Allstate was awarded $10 million in California after it successfully used the Racketeer Influenced Corrupt Organizations (RICO) act to sue several lawyers and chiropractors for filing false auto insurance claims.

Allstate's Special Investigative Unit is made up of 600 analysts and investigators who are specially trained to identify suspicious claims and prepare cases for legal and criminal prosecution

http://www.chirobase.org

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Insurance Fraud and Abuse : A Very Serious Problem.

Fraud and abuse are widespread and very costly to America's health-care system. Fraud involves intentional deception or misrepresentation intended to result in an unauthorized benefit. An example would be billing for services that are not rendered. Abuse involves charging for services that are not medically necessary, do not conform to professionally recognized standards, or are unfairly priced. An example would be performing a laboratory test on large numbers of patients when only a few should have it. Abuse may be similar to fraud except that it is not possible to establish that the abusive acts were done with an intent to deceive the insurer.

Although no precise dollar amount can be determined, some authorities contend that insurance fraud constitutes a $100-billion-a-year problem. The United States Goverment Accountability Office (GAO) estimates that $1 out of every $7 spent on Medicare is lost to fraud and abuse and that in 1998 alone, Medicare lost nearly $12 billion to fraudulent or unnecessary claims [1].


Type of Fraud and Abuse

False claim schemes are the most common type of health insurance fraud. The goal in these schemes is to obtain undeserved payment for a claim or series of claims [2]. Such schemes include any of the following when done deliberately for financial gain:


  • Billing for services, procedures, and/or supplies that were not provided.

  • Misrepresentation of what was provided; when it was provided; the condition or diagnosis; the charges involved; and/or the identity of the provider recipient.

  • Providing unnecessary services or ordering unnecessary tests [3].

Many insurance policies cover a percentage of the physician's "usual" fee. Some physicians charge insured patients more than uninsured ones but represent to the insurance companies that the higher fee is the usual one. This practice is illegal. It is also illegal to routinely excuse patients from copayments and deductibles. (A copayment is a fixed dollar amount paid whenever an insured person receives specified health-care services. A deductible is the amount that must be paid before the insurance company starts paying.) It is legal to waive a fee for people with a genuine financial hardship, but it is not legal to provide completely free care or discounts to all patients or to collect only from those who have insurance. Studies have shown that if patients are required to pay for even a small portion of their care they will be better consumers and select items or services because they are medically needed rather than because they are free. Routine waivers thus raise overall health costs. They are considered fraudulent because averaging them with the doctor's full fees would make the "usual" fees lower than the amounts actually billed for.

Other illegal procedures include:

  • Charging for a service that was not performed.

  • Unbundling of claims: Billing separately for procedures that normally are covered by a single fee. An example would be a podiatrist who operates on three toes and submits claims for three separate operations.

  • Double billing: Charging more than once for the same service.

  • Upcoding: Charging for a more complex service than was performed. This usually involves billing for longer or more complex office visits (for example, charging for a comprehensive visit when the patient was seen only briefly), but it also can involve charging for a more complex procedure than was performed or for more expensive equipment than was delivered. Medicare documentation guidelines describe what the various levels of service should involve [4].

  • Miscoding: Using a code number that does not apply to the procedure.

  • Kickbacks: Receiving payment or other benefit for making a referral. Indirect kickbacks can involve overpayment for something of value. For example, a supplier whose business depends on physician referrals may pay excessive rent to physicians who own the premises and refer patients. Another example would be a mobile testing service that performs diagnostic tests in a doctor's office. Kickbacks can distort medical decision-making, cause overutilization, increase costs, and result in unfair competition by freezing out competitors who are unwilling to pay kickbacks. They can also adversely affect the quality of patient care by encouraging physicians to order services or recommend supplies based on profit rather than the patients' best medical interests. In 2000, the Office of the Inspector General issued a fraud alert warning against kickbacks disguised as rental payments [5].

Criminals sometimes obtain Medicare numbers for fraudulent billing by conducting a health survey, offering a free "health screening" test, paying beneficiaries for their number, obtaining beneficiary lists from nursing homes or boarding facilities, or offering "free" services, food, or supplies to beneficiaries.

Excessive or Inappropriate Testing

Many standard tests can be useful in some situations but not in others. The key question in judging whether a diagnostic test is necessary is whether the results will influence the management of the patient. Billing for inappropriate tests—both standard and nonstandard—appears to be much more common among chiropractors and joint chiropractic/medical practices than among other health-care providers. The commonly abused tests include:


  • Computerized inclinometry: Inclinometry is a procedure that measures joint flexibility. Inclinometer testing may be useful if precise range-of-motion measurements are needed for a disability evaluation, but routine or repeated measurements "to gauge a patient's progress" are not appropriate [6].

  • Nerve conduction studies: These tests can provide valuable information about the status of nerve function in various degenerative diseases and in some cases of injury [7]. However, "personal injury mills" often use them inappropriately "to "follow the progress" of their patients.

  • Surface electromyography: This test, which measures the electrical activity of muscles, can be useful for analyzing certain types of performance in the workplace. However, some chiropractors claim that the test enables them to screen patients for "subluxations" and to follow their progress. This usage is invalid [6].

  • Thermography: Thermographic devices portray small temperature differences between sides of the body as images. Chiropractors who use thermography typically claim that it can detect nerve impingements or "nerve irritation" and is useful for monitoring the effect of chiropractic adjustments on subluxations. These uses are not appropriate [6].

  • Ultrasound screening: Diagnostic ultrasound procedures have many legitimate uses. However, ultrasonography is not appropriate for "diagnosing muscle spasm or inflammation" or for following the progress of patients treated for back pain [6].

  • Unnecessary x-rays: X-rays examinations can be important to look for conditions that require medical referral. However, it is not appropriate for chiropractors to routinely x-ray every patient to look for "subluxations" or to "measure the progress" of patients who undergo spinal manipulation [6].

  • Spinal videofluoroscopy: This procedure produces and records x-ray pictures of the spinal joints that show the extent to which joint motion is restricted. For practical purposes, however, simply physical examination procedures (such as asking the patient to bend) provide enough information to guide the patient's treatment [6].

Many insurance administrators are concerned about chiropractic claims for "maintenance care" (periodic examination and "spinal adjustment" of symptom-free patients) , which is not a covered service. To detect such care, many companies automatically review claims for more than 12 visits. In 1999, the U.S. Inspector General recommended automatic review after no more than 12 visits for Medicare recipients [8]. Some chiropractors attempt to avoid review by issuing a new diagnosis after the 12th visit.

Personal Injury Mills

Many instances have been discovered in which corrupt attorneys and health-care providers (usually chiropractors or chiropractic/medical clinics) combine to bill insurance companies for nonexistent or minor injuries. The typical scam includes "cappers" or "runners" who are paid to recruit legitimate or fake auto accident victims or worker's compensation claimants. Victims are commonly told they need multiple visits. The providers fabricate diagnoses and reports and commonly provide expensive but unnecessary services. The lawyers then initiate negotiations on settlements based upon these fraudulent or exaggerated medical claims. The claimants may be unwitting victims or knowing participants who receive payment for their involvement [9]. Mill activity can be suspected when claims are submitted for many unrelated individuals who receive similar treatment from a small number of providers.

Quackery-Related Miscoding

In processing claims, insurance companies rely mainly on diagnostic and procedural codes recorded on the claim forms. Their computers are programmed to detect services that are not covered. Most insurance policies exclude nonstandard or experimental methods. To help boost their income, many nonstandard practitioners misrepresent what they do. They may also misrepresent their diagnosis. For example:


  • Brief or intermediate-length visits may be coded as lengthy or comprehensive visits.

  • Patients receiving chelation therapy may be falsely diagnosed as suffering from lead poisoning; and the chelation may be billed as "infusion therapy" or simply an office visit [10].

  • The administration of quack cancer remedies may be billed as "chemotherapy."

  • Live-cell analysis may be billed as one or more tests for vitamin deficiency.

  • Nonstandard allergy tests may be represented as standard ones.

  • Services not covered because they were performed outside of the United States may be billed as though they were performed within the United States.

Viatical Fraud

In a viatical settlement transactions, people with terminal illnesses assign their life insurance policies to viatical settlement companies in exchange for a percentage of the policy's face value [11]. The company, in turn, may sell the policy to a third-party investor. The company or the investor then becomes the beneficiary to the policy, pays the premiums, and collects the face value of the policy after the original policyholder dies. Fraud occurs when agents recruit terminally ill people to apply for multiple policies. They misrepresent the truth and answer "no" to all of the medical questions. Healthy impostors then undergo the medical evaluation. In many cases, the insurance agent who issues the policy is a party to the scheme. The agent or one applicant may even submit the same application to many insurance companies. Viatical settlement companies then purchase the policies and sell them to unsuspecting third-party investors. The insurance industry is the biggest victim of this fraud and could incur huge losses (conservatively estimated at $1 billion+) within the next few years [12]. Some investors receive nothing in return for their "guaranteed" investment.

Bogus Health Insurance Companies

The General Accounting Office has issued two reports concerning the sale of health insurance plans that lack legal authorization. These plans place the buyer at risk for financial disaster if serious illness strikes. One report focuses on consumer vulnerability [13]. The other notes that from 2000 to 2002, 144 unauthorized entities enrolled at least 15,000 employers and more than 200,000 policyholders who got stuck for over $200 million in unpaid claims [14]. The investigatirs found that many of the entitles bore names similar to those of legitimate companies. In response to the report, the Health Insurance Institute of America is again urging the National Association of Insurance Commissioners to create an online database of licensed health insurance companies so that anyone can easily check the legitimacy of companies offering health insurance products. Meanwhile, the Coalition Against Insurance Fraud offers ten warning signs of a possible swindle:


  • The coverage costs 25 percent or more below the norm, yet promises generous benefits and a large provider network.

  • The plan readily accepts people with serious illnesses and other medical conditions that other plans normally reject.

  • The insurance has few or no underwriting guidelines—the agent or rep appears almost too eager to sign you up.

  • You're approached by an insurance agent, phone or direct mail. Honest group plans normally are sponsored by your employer—and aren't sold directly to individuals.

  • The plan isn't licensed in your state, and the agent (falsely) assures you the federal ERISA law exempts the plan from state licensing.

  • The plan seems like insurance, but the agent or rep avoids calling "insurance," and instead uses evasive terms such as "benefits."

  • The agent or rep doesn't have clear answers to your questions, seems ill-informed, or avoids sharing information.

  • You've never heard of that health insurance company—and nobody else has, either.

  • You have to join an "association" or "union" to obtain the health coverage. But you get no voting rights, receive no bylaws or other material, and aren't involved in the group's activities.

  • Your hospital keeps calling you to complain that your health plan isn't paying your medical bills. Often the plan's reps keep making flimsy excuses, or stop returning phone calls altogether [15].

Anti-Fraud Programs

Several large insurance companies have joined forces through the National Health Care Anti-Fraud AssociationFederal Bureau of Investigation (FBI) and the Office of the Inspector General (OIG) each have assigned hundreds of special agents to health-fraud projects. The Coalition Against Insurance Fraud, a public advocacy and educational organization founded in 1993, includes consumers as well as government agencies and insurers. to develop sophisticated computer systems to detect suspicious billing patterns. The

The Omnibus Consolidated Appropriation Act of 1997 authorized a Health Care Anti-Fraud, Waste, and Abuse Community Volunteer Demonstration Program to further reduce fraud and abuse in the Medicare and Medicaid programs. The program enrolled thousands of retired accountants, health professionals, investigators, teachers, and other community volunteers to help Medicare beneficiaries and others to detect and report fraud, waste, and abuse. The Health Insurance Portability and Accountability Act of 1996 funded a similar program that trained community agency workers [16]. This act also gave the U.S. Inspector General jurisdiction over private insurance plans as well as public ones.

The Inspector General's office has recovered over a billion dollars through fines and settlements. Its Operation Restore Trust, which began in 1995, was a joint federal-state program aimed at fraud, waste, and abuse in three high-growth areas of Medicare and Medicaid: home health agencies, nursing homes, and durable medical equipment suppliers. The questionable activities included:


  • Billing for advanced life support services when basic life support was provided. Documentation may be falsified to indicate a patient needed oxygen—which is a key indicator in establishing medical necessity for advanced life support.

  • Billing for larger amounts of drugs than are dispensed; or billing for brand-name drugs when less expensive generic versions are dispensed.

  • Billing for more miles than traveled for transportation.

  • Falsification of documentation to substantiate the need for a transport from a hospital back to the patient's home. Medicare will only cover transport from hospital to home if the patient could not go by any other means.

Allstate Insurance Company has announced that during 2004, judges and juries around the country awarded the company more than $30 million in damages resulting from insurance fraud schemes against the company—the result of a campaign Allstate began in 2001 to go after the pocketbooks of fraud perpetrators in court. Since that time, the company has gotten more than $55 million in judgments against criminals that range from individuals to sophisticated organized crime syndicates. Unfortunately, bankruptcies and money laundering make it difficult to collect such awards. In February 2005, Allstate reported that only $5.24 million out of the $30.81 million awarded in 2004 had been recovered [17].

What You Can Do

Many frauds can be detected by examining insurance payment reports to see whether they accurately reflect the services rendered. Suspicious reports involving a private insurer claim should be reported to the company's fraud department. Suspicious practices involving Medicare or other federal programs should be reported to the OIG Hotline by phone (1-800-368-5779) or e-mail.

Thanks to : Stephen Barrett, M.D.

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