• Guilty of Insurance Fraud by Claiming Loss that Happened Before Policy Inception
• A Kettle of Rotten Fish
• British Ban Insurance Broker for Seven Years
• Good News from the Coalition Against Insurance Fraud
• Health Insurance Fraud Convictions
• Other Insurance Fraud Convictions
• Excellence in Claims Handling Courses From Experfy.com

Insurance only applies to a fortuitous event that occurs while the insurance policy is in effect. If a policy is purchased after an accident causing damage to a vehicle a claim presented saying the loss occurred after the effective date of the policy, is a fraud.

In Mohamad Saleh Awad v. The State of Texas, NO. 14-18-00250-CR, State of Texas in the Fourteenth Court of Appeals (July 9, 2019) Mohamad Saleh Awad appealed his conviction for insurance fraud.

Awad owns a towing company, Hemo Towing Service. Awad insured some but not all of his trucks with an insurance company, Progressive.

On June 2, 2014, one of Awad’s tow trucks was severely damaged in a wreck. The truck was not insured under Awad’s policy at that time. Awad told one of his employees to tow the truck to an RV park where the employee lived. That same day, Awad added the truck and the driver to his insurance policy. On June 11, Awad called Progressive and told them the truck had been in a wreck on June 10. Progressive declared the truck a total loss and paid Awad for its value and other costs, totaling $30,483.

Approximately four months later, Progressive received a tip from the employee who originally towed the wrecked vehicle to the RV park. The employee told Progressive that the accident had occurred on June 2, not June 10. Progressive referred the investigation to the National Insurance Crime Bureau.

Awad was indicted, tried and convicted. The trial court sentenced Awad to ten years’ confinement but suspended his sentence and placed Awad on community supervision for seven years. The court also assessed a $10,000 fine and ordered Awad to pay approximately $5,000 restitution. Disregarding the kindness of the trial judge and avoiding jail, Awad appealed his conviction.

Awad argued that the trial court erred in denying his motion to quash the indictment, which Awad claimed was insufficiently specific regarding the complainant’s identity. Awad contends that there is a fatal variance between the indictment and the proof presented at trial, again regarding the complainant’s identity.

According to Awad, a search for “Progressive” on the Texas Secretary of State’s website yields 1,501 results for corporations with “Progressive” in their name, and even a search for “Progressive Insurance” yields nine results.

If the charging instrument is deficient, a defendant may move to quash it. A motion to quash should be granted only when the language describing the defendant’s conduct is so vague or indefinite that it denies the defendant effective notice of the acts he allegedly committed.

When a motion to quash is overruled, a defendant suffers no harm unless he did not, in fact, receive notice of the State’s theory against which he would have to defend.

Presuming that the State was required to specifically identify the complainant in an indictment alleging insurance and further presuming that this indictment fails in that regard, the appellate court concluded Awad suffered no harm. Awad had actual knowledge that the Progressive entity alleged in the indictment was in fact Awad’s company’s automobile insurer. Awad attached to his motion to quash a copy of the insurance policy declarations page, which identifies the insurance policy for Hemo Towing and includes an itemized list of insured vehicles, drivers, and coverages. Additionally, the State provided two discs of business records from “Progressive” to Awad and informed Awad that it would introduce the records at trial. During discovery, the State also disclosed a finding from “Progressive Special Investigator” Oscar Zambrano.

The State’s pre-trial disclosures and Awad’s copy of his company’s automobile policy’s declarations page demonstrate that Awad knew which insurance company the State alleged Awad defrauded.

In his second issue, Awad argued that a fatal variance exists between the indictment and the evidence adduced at trial, specifically as to the identity of the complainant, Progressive.

Variances are mistakes of one sort or another, and they can be either material or immaterial. Immaterial variances between the allegation and the proof are little mistakes, generally not likely to prejudice a defendant’s substantial rights, such as the right to be protected against double jeopardy.

Courts routinely hold that minor variations of a complainant’s name are immaterial variances, so long as there is no dispute that the person or entity who was injured or victimized is the same person or entity alleged in the indictment.

Here, the indictment identified “Progressive” as the complainant and the evidence at trial proved that Awad committed insurance fraud against “Progressive” or “Progressive County Mutual Ins Co.” The whistleblowing employee from Hemo Towing testified that he called “Progressive” and told “Progressive” that Awad’s insurance claim contained false information. Awad also testified, repeatedly referred to “Progressive” as the insurer at issue, and denied that he had “any type of intent to defraud Progressive.” The documents provided as proof of the insurance policy-including the changes Awad made adding the wrecked truck and the truck driver to the coverage-show that “Progressive County Mutual Ins Co.” underwrote the policy.

The variance, if it existed, was immaterial since he had the policy in his possession. There was no dispute at trial that “Progressive” and “Progressive County Mutual Ins Co.” were the same entity-the entity the State proved Awad defrauded.

Having overruled Awad’s two issues, the court affirmed the trial court’s judgment.

Insurance fraud criminals have unbelievable chutzpah to bring an appeal as stupid as this one where he claimed the state failed to advise him of the identity of the insurer who he defrauded when he attached the policy to one of his pleadings identifying the insurer he defrauded not to mention the detailed documents provided to him by the prosecutors. His probation should be revoked and he should be required to serve the seven years for bringing this frivolous appeal.

Life insurance agents get very large commission, often exceeding the first year’s premium paid by the insured. As a result the insurance producer is faced with the temptation to create fake insurance policies to defraud the life insurer by receiving a commission as great as or greater than the first premium paid. By financing the premium little money from the insured or the dishonest insurance producer is small compared to the commission received.

In State of New Jersey v. Evan Pescatore, Frank Pescatore, and Janice Pescatore, DOCKET NO. A-0472-18T2, Superior Court of New Jersey Appellate Division (June 26, 2019) New Jersey appealed from the Law Division’s dismissal of an indictment charging defendants Evan Pescatore, and his father, Frank Pescatore, with: (1) first-degree conspiracy to commit financial facilitation of a criminal activity; (2) second-degree conspiracy to commit theft by deception; (3) second-degree conspiracy to commit insurance; (4) second-degree financial facilitation of a criminal activity; (5) second-degree insurance fraud; and (6) second-degree theft by deception. In addition to the aforementioned charges, Evan was also charged with first-degree financial facilitation of a criminal activity. Finally, Janice Pescatore, Evan’s mother, was charged with first-degree conspiracy and second-degree financial facilitation of a criminal activity.

FACTS 

Evan is a licensed insurance intermediary in New Jersey. Between 2011 and 2015, he worked as a life insurance agent for numerous life insurance companies, including Allianz Life Insurance Company (Allianz). During that time period, Evan placed eighteen life insurance policies with eight insurance companies involving thirteen insureds.

The Division of Criminal Justice, Office of the Insurance Fraud Prosecutor investigated Evan, Frank, and Janice after receiving a referral from Allianz reporting that it believed a policy brokered by Evan was “rebated.” Rebating occurs when something of value is given in order to sell a policy that would not have been provided in the policy itself, such as cash, a gift, service, or employment.

Allianz alleged that an insured misrepresented that he was not offered “inducement in the form of free insurance,” by falsely informing Allianz on the application, as well as in a telephonic interview, that he would be paying the premium himself when, in fact, a third-party financing company had been arranged to pay the premium.

Seven other insurance companies that issued insurance policies originating with Evan also claimed he offered “rebated” policies. After speaking with representatives from the eight companies, the investigation revealed that Evan placed eighteen insurance policies that contained material misrepresentations regarding how the premiums were paid, similar to the false information contained on the Allianz application. The insurers advised the prosecution that had they known that the eighteen insureds did not intend to pay their own insurance premiums, the insurers would have declined to make effective any policies for any of the eighteen applications for life insurance.

“Frank and/or Evan” discussed the opportunity to obtain “free” insurance with the proposed insureds, and met with the individuals to fill out the life insurance applications. Most of the insureds reported that they never read the applications and merely signed the application where and when Frank and/or Evan instructed him or her to do so.

All of the insureds reported that they did not intend to pay the premiums themselves. The insureds also were ready to testify that they would not have applied for life insurance with Evan or Frank if they had to pay the premiums themselves.

The documentary evidence presented to the grand jurors included the insurance applications that Evan signed while Frank, who was not a licensed insurance producer, did not sign the applications, but he helped prepare all eighteen applications.

Once the insurance companies received an application, other necessary documentation, and the premium payment, they paid Evan a commission as the originating insurance agent. The eight insurance companies reported that agents, like Evan, are paid an initial commission payment of 70% to 120% of the policy’s first year premium.

By the time of the grand jury proceeding, only six of the eighteen insurance policies were still in effect, two of which were in a grace period due to non-payment of premiums owed on the policies.

Defendants successfully moved to dismiss the indictment claiming primarily that the State: (1) failed to inform the grand jurors that premium financing is legal in New Jersey; and (2) improperly referred to defendants collectively, rather than individually. After hearing oral arguments, the court granted the motion.

DISCUSSION 

The decision whether to dismiss an indictment lies within the discretion of the trial court, and that exercise of discretionary authority ordinarily will not be disturbed on appeal unless it has been clearly abused. However, if a trial court’s discretionary decision is based upon a misconception of the law, a reviewing court owes that decision no particular deference.

The grand jury’s role is not to weigh evidence presented by each party, but rather to investigate potential defendants and decide whether a criminal proceeding should be commenced. A prosecutor seeking an indictment is required to present a prima facie case that the accused has committed a crime. An indictment should not be dismissed “as long as ‘some evidence’ on each of the elements of the offenses is presented and there is nothing that detracted from the fairness of the grand jury proceeding. Additionally, grand jury proceedings carry a presumption of validity, as prosecutors enjoy broad discretion in presenting a matter to the grand jury.

Prosecutors have a limited duty to present exculpatory evidence to a grand jury. Further, in determining the sufficiency of the evidence to sustain the indictment, every reasonable inference is to be given to the State.

The appellate court agreed with the State that it was under no obligation to present the grand jury with information that third-party financing is legal in New Jersey, as such evidence is neither clearly exculpatory, nor does it directly negate any of the defendants’ guilt. Contrary to the motion court’s conclusion, the State’s theory of the Pescatores’ crimes was fairly simple. Essentially, the State presented a prima facie case, giving it all reasonable inferences, that Evan, with Frank’s and Janice’s knowledge and participation, placed the eighteen policies for one0 simple reason – to ensure the receipt of commissions that would not otherwise have been paid if the insurers had not been misled by false, material misstatements of fact concerning the policies.

Evan and/or Frank told certain insureds that they would be receiving “free insurance,” which Evan then falsely stated about when asked by the insurance companies in thirteen of the applications. In addition, the evidence before the grand jury showed that Evan and/or Frank arranged for third-party financing for each insured, lied about that fact, and further hid that the policies were being financed by taking secretive steps to funnel the third-party payments into the insureds’ bank accounts before having the insureds pay the premium.

As the State alleged that defendants were acting collectively to engage in a conspiracy to commit various offenses; the State’s references to defendants together with respect to their joint actions were appropriate, and not improper. Further, the State presented sufficient evidence to support each of the charges against Evan and Frank.

The State presented evidence at the grand jury proceeding that Evan, a licensed insurance broker, signed the eighteen insurance applications, certifying that the information represented therein was true and accurate. The State demonstrated that the applications contained material misrepresentations regarding whether the premiums would be paid by third-party financing, and whether the insureds were offered free insurance. The State further presented financial records showing that Evan received unwarranted commission payments from the insurance companies, and then reimbursed the third-party lenders for the premiums.

The decision of the motion court was reversed and remanded for entry of an order reinstating the indictment and for further proceedings consistent with our opinion.

ZIFL OPINION 

The appellate court cured a clear judicial error by reinstating the indictment since there is no question that defendants were engaged in rebating to gain commissions by creating false insurance policies, collecting large commission, and then financing the premiums that were not to be repaid or were repaid in part out of the commissions. Those facts were sufficient probable cause to allow the prosecution to go forward.

 British Ban Insurance Broker for Seven Years 

Ivor Jenkins, from the town of Widnes, Cheshire, U.K. was the sole director of Optimum Financial Solutions, which traded as an insurance agent, brokering various policies, and was approved by the financial regulators.

Jenkins was banned for seven years for negligence failings in administering a pension scheme.

According to the U.K. Insolvency Service, when in 2015 the company started to struggle, to bring in a new source of income Jenkins agreed for Optimum Financial Solutions to administer a pension scheme called Optimum Retirement Benefits Plan, which was promoted to clients.

Following this the company moved offices from Widnes to Skelmersdale, while also renting an office in Manchester, where the pension schemes were promoted.
Jenkins received financial incentives, such as a lump sum payment of £50,000 and monthly payments of £5,000 for the work.

But complaints led to the Insolvency Service carrying out an investigation into Optimum Financial Solutions in 2016, which resulted in the company being wound up in court in February 2018. Further investigations by the official receiver found that the company had failed to keep adequate records, didn’t provide information to the tax authorities about the pensions and didn’t provide the scheme members with up to date information, such as personal statements.

When questioned, Jenkins claimed that he was not personally involved in the promotion of the pension scheme. However, The Pensions Regulator published a report in June 2018 that proved otherwise. Despite being regulated to deal with insurances and mortgages, Jenkins confirmed that neither he nor anyone else at Optimum Financial Solutions had permission to talk to potential clients about pension schemes. He also revealed that neither he nor anyone else at Optimum Financial Solutions had permission to talk to clients about pension schemes.

The TPR report also highlighted that the scheme hadn’t been run appropriately and there were serious concerns over the status of members’ funds, believed to be more than £13m.

The independent trustee of the pension scheme, appointed in February 2018 before Optimum Financial Solutions was wound up, has been unable to reconcile member accounts and identify assets, largely due to the inadequate record keeping. Jenkins voluntarily disqualified himself to end the court action against him.

Ivor Jenkins provided a disqualification undertaking, which was accepted by the Secretary of State on June 7 this year.

Effective from June 28, 2019, he is banned from directly or indirectly becoming involved, without the permission of the court, in the promotion, formation or management of a company.

In the U.K. a “scheme” is not a pejorative term but simply a way to identify a business relationship or organization.

Health Insurance Fraud Convictions  

Angela Breitweiser Keith, age 53, and Ann Davis Eldridge, age 58, both of Sumter, South Carolina were sentenced after pleading guilty to one count of making false statements to defraud Medicaid. United States Magistrate Judge Paige J. Gossett of Columbia sentenced Keith to 12 months in federal prison and Eldridge to 6 months.

Facts presented during the hearing showed that Keith and Eldridge were executives of the South Carolina Early Autism Project (SCEAP). SCEAP provided behavioral health and education solutions for children and young adults, particularly those diagnosed with autism. SCEAP began providing Applied Behavior Analysis (ABA) services for children with autism in 2003, becoming the number one biller in the country for ABA services by 2015. SCEAP overcharged Medicaid and Tricare (military-affiliated insurance) millions of dollars by inflating billing records and charging the government for services it did not provide to clients. SCEAP employees reported to the government that they were pressured to exaggerate the amount of time they spent delivering services to the clients. Company emails indicated that SCEAP encouraged employees to unlawfully bill for time while waiting in driveways, traveling to and from servicing the clients, and even while sitting in restaurants. The employees also indicated that they had required billing goals they had to meet to qualify for job benefits and/or bonuses. These bonuses included gift cards and company-expensed vacations.

Ann Eldridge was a co-founder of SCEAP and Angela Breitweiser Keith worked at the SCEAP since its inception. In December 2012, Eldridge and her partner sold SCEAP to a company called Chancelight for over $18 million. Eldridge and Keith remained with the company, continuing in leadership roles in South Carolina. Chancelight engaged Eldridge to promote the SCEAP system to other Chancelight franchises in the Southeast and promoted Keith to Senior Vice President of Data Reporting and Analysis. In 2018, SCEAP/Chancelight repaid the government nearly $9 million for overbilling Medicaid and Tricare in a civil settlement.

Kyle Ryan Marcotte, 36, of Jacksonville Beach, Florida, pleaded guilty before U.S. Magistrate Judge Joel Toomey of the Middle District of Florida to a one-count information charging him with conspiracy to commit money laundering.  As part of his guilty plea, Marcotte agreed to a forfeiture judgment of $10,220,281.42.  Sentencing before U.S. District Judge Timothy Corrigan of the Middle District of Florida has not yet been scheduled.

Marcotte, the owner of a Jacksonville, Florida-area substance abuse treatment center pleaded guilty today for his role in a $57 million money laundering conspiracy associated with a pass-through billing scheme involving laboratory testing services.
According to admissions made as part of his guilty plea, Marcotte was the owner of a substance abuse treatment facility in Jacksonville Beach, Florida.  In approximately 2015, Marcotte entered into an arrangement with a laboratory owner to send urine samples for the facility’s patients to the owner’s lab for urine drug testing (UDT), in exchange for receiving 40 percent of the insurance reimbursements.  The lab owner, in turn, arranged with the managers of Campbellton-Graceville Hospital (CGH) and Regional General Hospital Williston (RGH), rural hospitals in Florida, to have the testing billed to private insurers through CGH and RGH and reimbursed at favorable rates under the hospitals’ in-network contracts with insurers.  Marcotte also admitted that he brokered deals with other substance abuse treatment centers to have their UDTs billed through CGH and RGH in exchange for Marcotte receiving 10 percent of the insurance reimbursements, while the other substance abuse facilities would receive 30 percent of the insurance reimbursements.

The lab owner subsequently acquired Chestatee Hospital, in Dahlonega, Georgia, and other rural hospitals.  Marcotte admitted that he continued to supply samples from his substance abuse treatment facility and continued to broker deals with other substance abuse treatment centers to have UDTs tested at the lab and billed to insurers through Chestatee and the other hospitals, all in exchange for a percentage of the insurance reimbursements.  The reimbursements were transmitted from the hospitals to the lab, which then transmitted them to two companies Marcotte controlled, North Florida Labs and KTL Labs using financial transactions and bank accounts that Marcotte had established to facilitate the payments.  Marcotte arranged to transfer a portion of the reimbursements from KTL Labs as kickbacks to the individuals and companies that controlled the substance abuse treatment centers in order to further the fraudulent scheme.  Marcotte also transferred a portion of the reimbursements to himself and to purchase real estate and items of real property, he admitted.

Marcotte caused $50 million in payments to be made from KTL Labs’ bank accounts to at least 88 companies and individuals associated with substance abuse treatment centers that supplied urine samples for testing.  The total amount of money that was part of the money laundering  scheme was $57.3 million, Marcotte admitted. 

  

Other Insurance Fraud Convictions  

Roslyn Pilmar, 61, and Evan Wald, 45, hacked to death Howard Pilmar in 1996. At the time of his murder, Howard Pilmar, 40, owned a profitable Manhattan office-supply store and two cafes – named Philip’s Coffee Shop after his only child.
His slaying became known as “the Coffee Bar Case.” Philip Pilmar, while acknowledging that his father’s death was an “unimaginable horror,” insisted that his convicted-killer mom, Roslyn Pilmar, 61, “was kind. As for his murderous uncle, Evan Wald, 45, Philip Pilmar added that he also “has been a good and kind person to me. He always showed me love.

Calling the crime “exceptionally brutal and violent” the judge slammed the defendants with the maximum sentence: 25 years to life behind bars. Over 40 stab wounds to the neck, chest, back and forearm and torso Howard Pilmar was ambushed and slaughtered.
The judge dismissed the defense’s assertion that the prison time amounted to a life sentence for Roslyn Pilmar and Wald – noting that the pair lived nearly 20 years in freedom before being nabbed for the murder.

Roslyn owed nearly $200,000 after embezzling the dough from her dentist employer, and was the beneficiary of two of her hubby’s life-insurance policies. Wald’s blood also had been found at the crime scene. The grandfather added after court that he had brought along his dead son’s soft-leather briefcase in the hopes of giving it to his grandson, but the prosecutor did not stick around long enough to accept it. Manhattan DA Cy Vance was in the packed courtroom for the proceeding.

Asons Solicitors, a British law firm – which was shut down by the Solicitors Regulation Authority earlier this year – was described as “improper, unreasonable and negligent” after a judge heard the firm had handled a claim made to insurer LV= without verifying the claimant was genuinely providing instructions (that is, without being actually retained).

In addition, the judge found evidence that Asons were guilty of backdating correspondence. At the trial, which was heard over five days between 19-26 July and 11 September 2017 at Nottingham County Court, Judge Godsmark QC also ruled that Haroon Karim, Director of the claims management company that had referred the claim to Asons, was guilty of deliberately forging the claimant’s signature on a number of documents.

As a result, the judge ruled both parties were jointly liable to pay LV=’s costs of defending the action, which are estimated to be in the region of £40,000.
The action arose out of a £3,000 claim for whiplash made by Mr Nitin Trehan, following an accident in Nottingham in July 2012. After Mr Trehan took his vehicle in for repairs, he contacted Mr Adeel Karim, an individual who had assisted him in relation to an earlier accident. Adeel Karim passed on details of the accident to his brother, Mr Haroon Karim, a Director of Nottingham-based Accident Claims Assistant Ltd (ACA). Haroon Karim sold the claim to Asons Solicitors, who subsequently submitted a claim to LV=.
The matter reached trial on 19 September 2014, however, with the claimant failing to attend court the claim was dismissed and Mr Trehan was ordered to pay LV=’s costs of £7,744.48. When the insurer sought to enforce the costs order against Mr Trehan, he professed to know nothing about the claim brought in his name.

Examination by a handwriting expert of documents including the Claim Form, the Particulars of Claim and an authority to release medical records concluded there was strong evidence Mr Trehan’s signatures had been forged.

The judge found: –

*    no signed funding agreement; and
*    no evidence that Asons had taken any steps to confirm the identity of their supposed client, in breach of anti-money laundering regulations.

In court Mr Karim revealed he referred up to 24 claims a month to various solicitors, being paid £500 + VAT for each one. The court also heard that Karim had been involved in a dozen claims-related companies which had been liquidated between 2013-16.
In his judgment, Judge Godsmark described Karim as an “evasive” and “unsatisfactory” witness and said that “there were aspects of his evidence which were not credible”. The court concluded that Haroon Karim had forged Mr Trehan’s signatures on the Claim Form, Particulars of Claim and Schedule of Special Damage.

Although Judge Godsmark found Asons had been deceived by Haroon Karim, he condemned the firm for their “gross failure” to carry out basic identity checks on their client, and failing to have any direct contact with him.

The judge ruled that Asons and Mr Karim were jointly liable to pay LV=’s costs.
Imprisoned in $20 Million Insurance Financing Fraud

Stuart A. Starr was sentenced to more than eight years and ordered to pay $20,056,055 in restitution for defrauding lenders that financed insurance liability and cargo insurance policies to independent truckers and small trucking companies for coverage of trucks, tractor-trailers and heavy equipment, court records show.

His brother, Glen Starr, pleaded guilty to one count of conspiracy to commit wire fraud last August and received the same sentence as Stuart Starr.

According to court records, the brothers operated One Stop Insurance Co. of North Miami Beach and were licensed agents authorized to write policies underwritten by Progressive Insurance Co., CastlePoint National Insurance Co. and Lloyd’s.
When heavy equipment operators needed insurance coverage, they would turn to three area finance companies for loans to finance the premiums, they said.

Beginning around July 2014, One Stop submitted more than 300 fraudulent application packages to the lenders, including Pro Premium Finance Co., Orshan’s office said.
Using the names of real and fictitious companies, the Starrs told the lenders the purported customers had made the required down payments on their premiums, it said. Pro Premium would approve the financing for the loans and the Starrs would write checks to One Stop, deposit the checks into one of its bank accounts, then use those funds for personal items, it said.

When the fraud was about to be uncovered by Pro Premium in August 2015, the Starr brothers closed their office and fled the country to Israel, court records show. They were apprehended in Colombia in 2018.

After pleading guilty, Stuart Starr asked the court for a more lenient sentence, saying he was not a corporate officer and did not deposit any of the ill-gotten funds, court records show.

Judge Cecilia M. Altonaga, however, was unmoved and handed down the sentence, which includes three years of supervised release after imprisonment.
The loss caused by the fraud forced Pro Premium, which had been in operation since 1988, to close its door.

Hopefully the government has access to property owned by the Starrs since restitution will never be paid from the prison earnings.