Insurance Fraud Weekly ePort: Week Ending July 11

Jul 14, 2008


Insurance Fraud Weekly ePort
Week Ending July 11, 2008



  • The New Hampshire legislature ended 2008 with a mixed bag. The lawmakers passed a bill (SB 500) creating a task force to study misclassification of employees by businesses. One way to illegally avoid paying full workers comp premiums is for an employer to lie that employees perform safer jobs than they really do. Roofers are reported as clerks, for example. But the legislature failed to pass HB 1578, which would’ve let the insurance commissioner fine insurers up to $2,500 for failing to provide the insurance department with state-required reports of suspected scams. The bill passed both chambers but a conference committee failed to reach agreement.

Note: Texts of anti-fraud bills are available on the coalition’s website here.



  • “Home arsons follow foreclosures, with a lag. We’re facing a potential spike in arsons like we’ve never seen before,” the coalition’s Jim Quiggle told national Bloomberg  financial news service in an article on early-warning signs a possible spread of arsons by desperate homeowners who torch their houses for an insurance bailout in this troubled economy. “It takes a lot of chutzpah to set fire to a house when you’re the policyholder and would be first on any suspect list.”
  • “Steady Leadership in Unsteady Times.” That’s the inspiring theme of the coalition’s latest annual report, which recounts a year of achievements in 2007. The report also recounts the state of the fraud fight in detail. “Economic hard times – and how we respond – could rank among our defining issues for the next couple of years,” the coalition warns. “Many more Americans are worried, and feeling financial pain. Some may seek the easy way out by torching their homes, businesses or vehicles for insurance money.” You can download the annual report online or request a hard copy from the coalition.


  • A former VFW commander burned down the VFW building to hide his illegal gambling, then lied about the cause to his insurer and even stole the insurance payout. Donald Mudd headed up VFW Post 1298 in Bowling Green, Ky. He and some cronies ran illegal gambling operations at the post, and torched the building to cover up his activities when they were discovered. Mudd lied about the fire’s cause when making the claim, then diverted more than $260,000 in insurance money to an account he set up for “Lt. Harold R. Cornwell VFW Post 1298.” He used the money to buy a John Deere riding mower, a Browning gun safe and 42-inch plasma TV. Mudd also bought a house and a variety of cars. He received 10 years in federal prison.
  • Turning his house into a home-made bomb earned Robert Schecter a jail term. The Bensalem Township, Pa. man used gasoline to set his place on fire for $275,000 in insurance money. But the blaze exploded. It leveled the house, blew off the roof and shot bricks across the street. Several of the 100 firefighters were injured, mostly from slipping and getting cut on broken glass. Investigators finally cracked the case when Schecter’s 15-year-old son turned in his father after witnessing the arson. Schecter received two to five years Tuesday, and must repay The Hartford.
  • Prosecutors stopped counting the felonies with which to charge agent Philip Timothy when they reached 156 counts. The Salt Lake City man stole more than $300,000 in premiums from at least 60 clients without buying them coverage. Timothy used premium refunds owed to clients to buy two trailers and a $30,000 Harley Davidson motorcycle. He also failed to return $44,000 in premium refunds to an oil-field service company after it canceled its policy. More clients who may have been bilked call the AG’s office every week. Timothy received 11 prison terms of up to 15 years each last month, but a higher court reduced his term to merely six months even though he tried to stonewall the investigation.
  • A former California agent received seven years in state prison this week for stealing more than $646,000 from client businesses in a four-year scam. Basilio Vizmonte Reyes Jr. peddled fake commercial liability and workers comp coverage to small businesses, including nursing and assisted-living facilities. The Northridge man pocketed their premiums for personal use. The state insurance department led the investigation.
  • Mark Lorimer told his insurer someone stole $36,146 in automotive tools from his body shop in Indianola, Neb. But there were no signs of forced entry, and an anonymous caller said Lorimer had removed the tools himself for insurance money. Then his girlfriend confessed that Lorimer had stashed the tools at a friend’s place. He wanted the insurance money for a down payment for a bar. Lorimer received two years of probation Monday, and must complete a GED program.
  • Joyce Sarte Fuller went on an expensive theft spree. The Mount Laurel, N.J. woman told USAA that a burglar had stolen $137,250 in possessions, including artwork, porcelain figurines and other goods. She submitted a fabricated “Itemized Statement of Loss” to back up losses that never happened. Fuller also stole prescription pads from physicians’ offices. She then wrote fraudulent prescriptions for addictive drugs that she obtained from several local pharmacies. Fuller pleaded guilty and the state will recommend 10 years in prison, according to the New Jersey Office Insurance Fraud Prosecutor.
  • Bogus rehab services earned Robert Lee Prince III a small fortune in stolen insurance money. Prince ran two Memphis physical therapy clinics that billed Medicare $3.5 million for services that no one ever received. He and family members faked patient medical charts and treatment plans to create the illusion of valid claims by Brittsen Rehabilitation Services and Tender Loving Rehabilitation. Prince has pleaded guilty and awaits sentencing.


  • Daniel Applegate’s so-called pleasure vehicles only caused him more pain. The Johnstown, Pa. man got into an accident with his 1993 GEO Metro and made an insurance claim. Investigators discovered he’d bought coverage on the Metro and other cars as pleasure vehicles but actually used them for an illegal taxi service that would’ve increased his premiums, prosecutors say. An investigator called Applegate at a phone number advertised on his cars, seeking a drive to the airport. When they arrived at the airport, the investigator asked if $20 was enough. Applegate allegedly told him to leave the money on the seat. Applegate allegedly said he never takes money hand-to-hand, “but if they leave money on the car seat, that’s up to them.”
  • Pain management specialist Dr. Bernard Bass doled out more than 400 prescriptions for addictive painkillers in just two months despite losing his license, California prosecutors charged this week. The North Hollywood man also backdated prescriptions to before the date his license was suspended by the state medical board in connection with the pending charges, officials say. Bass allegedly wrote the same prescriptions for all patients, usually without giving physical exams. He also allegedly lied to a pharmacy that his license had been restored. Bass also is being investigated in the overdose deaths of six patients.


  • Anthem Blue Cross of California is fighting a $1-million fine for rescinding health insurance policies. But with legal wheels promising to grind slowly, the insurer may not have to pay the penalty. California regulators have been trying to collect on the fine for a year now, but with no luck. Blue Cross could contest each of 1,770 rescission cases one-by one. “That could tie us up in court forever,” says Cindy Ehnes, director of the California Department of Managed Health Care. The agency already has gone one round with Blue Cross, issuing a $200,000 fine for a single rescission case in 2006. But the case dragged on so long that the agency figured contesting a large number of rescissions in court wasn’t worth the trouble.
  • Oakland County, Mich. says Blue Cross is hiding fees. Blue Cross says Oakland County officials don’t know how to read their own policy. The truth? For now, it’s up in the air until a lawsuit by the county is resolved. The county says Blue Cross has saddled policyholders with $16.9 million in fraudulent fees since 1994. The insurer also allegedly trained its sales staff to hide extra cash added to the county’s health insurance services bill. The county says it has produced one internal memo from Blue Cross saying any fee changes will “no longer be visible to the customer.” Blue Cross says that, contractually, the insurer can charge so-called “non-group” fees to make sure emergency funds are available. “They are asking the court to be excluded from helping Oakland County residents to buy health insurance,” says Blue Cross.


  • Carolyn H. Henneman has been named associate commissioner for insurance fraud for Maryland’s insurance department, effective Aug. 13. Henneman will oversee the agency’s Insurance Fraud Division, which goes after cases in cooperation with the Maryland Office of the Attorney General and the Maryland State Police. Henneman, a former Maryland assistant attorney general, has been serving as an international prosecutor with the United Nations Mission in Kosovo. She specialized in corruption, financial crimes and human trafficking issues. She replaces longtime fraud chief Ron Sallow, who recently retired.
  • California’s AG is trying to raise $3.5 million for an online database to help doctors and pharmacies monitor for prescription drug abuse by patients. As many as 10 percent of patients con their docs into giving out unneeded prescriptions for addictive drugs, a narcotics detective told the Ventura County Star, which cited the coalition’s landmark report Prescription for Peril. California already has a database in place, but information requests take up to three weeks to answer. The new online system would give instant access to prescription info, thus allowing docs and pharmacists to spot suspected doctor-shopping and drug abuse before handing over the drugs. The $3.5-million funding would come from private sources because the state is running a $15-billion deficit.
  • Medical equipment suppliers used the names of dead doctors to fraudulently charge Medicare up to $92 million in unneeded items such as wheelchairs and oxygen equipment. But the scam was discovered in 2001 — and nothing has been done to stop it. Overall, the names of 1,500 doctors were used between 2000 and 2007, with one deceased doctor’s name used 484 times, a recent U.S. congressional report says. That doctor’s name led to $545,000 in fraudulent payouts. An effort by Medicare to purge its database of deceased doctors was launched in 2001, but still hasn’t been completed. Medicare blames a faulty doctor ID system for the screwup.
  • Toyota — that preeminent car maker that ran TV ads six months ago encouraging people to dump their cars — has been named the most reputable company in the world, according to a poll by the Reputation Institute. Eight insurers also made the list of the top 75 U.S. firms. For details, visit FraudBlog.
  • Bogus auto claims have risen 70 percent in the UK over the last three years, the Association of British Insurers says. Insurers uncovered 24,000 fake claims worth GBP 260 million in 2007. That’s GBP 5,000 a week. One driver pushed his car off a cliff and claimed it was stolen. But he was nailed because a newspaper had carried a photo of wreck three days before the alleged theft happened.


“Any good doctor is going to get duped a fair percentage of time…It’s when they have a blind indifference to what’s going on in their practice and they become known as a source of supply for drug dealers in the street, that’s when we get involved.”

— Calif. detective Victor Fazio commenting on doctors being conned by patients into providing addictive prescription drugs such as OxyContin. 



  • Miami clinic manager sentenced to 30 months in prison
  • N.Y. man accused of fraudulently insuring immigrants
  • Five years in prison for Pennsylvania pharmacist
  • N.Y. couple charged with home arson and fraud
  • Tex. clinic worker arrested for stealing from poor

Details at



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