A survey of international scams

BLOG_messagebottleThe Coalition receives a lot of requests from organizations to share our knowledge about insurance fraud — and increasingly those requests are coming from outside the U.S. We’ll visit three continents this year and countries such as India, Singapore and Spain. A lot of what we have learned about finding and stopping fraud can be put to use in other countries. Similarly, cases that happen internationally may one day appear in our shores, so it’s wise to keep an eye out for patterns and schemes developing elsewhere in order to be prepared.

A few recent cases may be particularly relevant for us. This week, a man was arrested in Britain for claiming his iPhone was stolen, and then promptly calling his girlfriend with it. Fake cell-phone losses are getting harder and harder to achieve, with all the location data inside any phone worth insuring.

But the Brits are heading up a great initiative, launching a central database of all insurance fraudsters. Last year, 139,000 false claims were identified in the UK. Combining so much data has allowed them to uncover, for example, one family that made more than 100 false claims for damaged vehicles.

Fraud also is said to be spreading to Portugal, Greece and Italy, but skipping northern regions of Europe, one official says.

In Spain, false claims have spiked 30 percent, scaling down from professional fraudsters to ordinary citizens looking for a quick Euro. People who are unemployed or under age 25 pose the greatest risk for becoming new fraudsters. In a recent case, a man chopped off his arm to live a life of disability payout, but was caught in his lie. It seems too strange to be true, but even in the U.S. we recently had a few strange cases involving gruesome attempts at disability money.

In India, surgeons were discovered needlessly removing women’s uteruses en-masse to make false claims against the state’s medical program. The conditions were atrocious, unsanitary, and the women often weren’t informed about what was being done to them.

People abroad and in the U.S. often think they’ll never get caught if they’re clever enough, a message we try to address and discredit during social media conversations. For every ‘clever’ fraudster, we can provide a similar story leading to an arrest.

Insurers in Jordan are so sick of fraud that they went on strike last month, pressuring the government to take action against fraud groups. Even in the U.S., insurance fraud is not yet outlawed specifically in all states, but an insurer strike seems unlikely.

South Koreans have taken a different approach, they’re hiring more investigators. That wouldn’t be a bad idea.

While fraud fighters in America have their hands full keeping up with every-increasing caseload, it’s always a good idea to understand the fraud trends across the country and around the world.

About the author: Jennifer Tchinnosian is communications specialist for the Coalition Against Insurance Fraud.

What is justice?

BLOG_justiceThe desire for justice has accompanied us since the dawn of humanity. Reading insurance fraud headlines every day, I’m confronted with stories about arrests, convictions and sentences. Underlying these stories is often the pursuit of justice, a concept we instinctively understand but have difficulty articulating.

What does justice mean in the context of insurance fraud? I often see prosecutors saying that they are going to “bring that person to justice for what he did,” or families grieving that they just “want justice done” for the crime that was committed. What does that even mean? Is justice something that can be imposed on a situation? Can a single person, by their volition or power, “bring” justice forth? Should it be it in our hands to make justice play itself out? And, in the case of deadly fraud schemes, is justice alone going to heal everyone’s wounds?

Great thinkers might give us a deeper insight into what justice means.

In Plato’s Republic, Socrates debates with a friend. His friend contends that justice is the authority of stronger citizens in their own self-interest. Socrates counters that justice is an absolute ideal that exists beyond people’s individual opinions; that justice is the proper ordering of the soul and the city to serve the good. So justice, he says, is an ideal that has to be discovered, it can’t be invented.

I recently overheard a prosecutor complain that it was often difficult to get judges to care about insurance fraud, unless the crime is a deadly arson or a harmful medical scheme. Fake theft claims, for example, garnered little interest.

Eastern religions hold to the concept of karma, the universe will conspire to bring bad circumstances in response to bad deeds, and vice versa. But our government is not ruled by karma alone. Fraudsters are usually sentenced to return some of the money stolen, and spend time in jail. Some sentences are light, other times, like the recent case of George Dalyn Houser a fraudster gets the maximum sentence.

Following that train of thought, is a just punishment, then, tied to the harmful impact the crime has had on human beings? Or is there an absolute ideal of justice unrelated to harm done? Opinion surveys say people are more likely to commit insurance fraud if they think of an insurance company as a big, impersonal enterprise that is not providing adequate customer service. People for the most part understand that fraud is wrong, but they are more willing to lash out at insurance companies they feel have wronged them first.

Is justice retribution?

Sometimes it seems that the people crying for justice are really just out for revenge. Are we trying to punish the person so they won’t even think of erring again, or trying to help them find their human dignity within the fabric of all their mistakes? Pope John Paul II, in Caritas Veritate, said you can’t have justice without mercy.

Or is justice perfect reciprocity, as in the ancient practice of an eye for an eye, a tooth for a tooth? One of the ideas in justice is proper proportion, the punishment should’t exceed the crime, but has to be related to the crime. Implicit in this idea is proportion and fairness.

Aristotle contends that hierarchy needs to be considered. For example, if an ordinary citizen punches an on-duty police officer, justice is not served if the officer just returns the blow. Nor is justice served if a regular citizen strikes back when struck by an officer trying to carry out his duties. So, Aristotle contends that when the relations between parties are hierarchical or unequal in some way, justice does not take the form of reciprocity.

Another definition of justice is when the action toward something is appropriate to the dignity of the thing.

In the context of determining punishment for insurance fraud, two key elements come into play: repairing the harm done, and correcting the reason for which the insurance fraud was committed. In human society we do what we can to make sure that justice is administered. And finally, what role does rehabilitation play in determining a just sentence? Is there a difference between justice for the perpetrator and justice for the victim?

About the author: Jennifer Tchinnosian is communications specialist for the Coalition Against Insurance Fraud.

Where PIP fraud and Obamacare converge

BlogPipObam

Gov. Rick Scott of Florida was a strong supporter of the recent efforts to enact meaningful reform of PIP auto insurance. In fact, the legislation probably would’ve died if he didn’t get behind it and actively encourage its passage. Time will tell whether this latest reform will help reduce fraud and put downward pressure on the state’s high auto premiums.

Gov. Scott also is a vocal foe of healthcare reform and has vowed not to expand Medicaid or create a health care exchange, as provided for by the federal law.

What do these two programs have in common?

Not much, except that the biggest argument for creating PIP was that lower-income people lacked health insurance, and they shouldn’t have to suffer for lack of care just because they’re hurt in an auto accident. This makes sense. Under the tort system, medical providers had a disincentive to serve lower-income people because they may have to wait years to get paid while claim disputes linger in court. With PIP, at least some dollars are automatically available to pay medical expenses.

Then along comes the Affordable Care Act. Health care for everyone, or something like that.

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It wasn’t long after passage that some insurers in Florida started thinking Obamacare would eliminate a major reason to keep PIP. Low-income accident victims would have access to health care. Under the law, almost everyone will be required to have insurance, whether directly through private insurers, through the exchanges, or by Medicare and Medicaid.

Some insurers that favor ending PIP coverage — even with the latest reform efforts — were eying the potential of universal health care as an incentive for politicians to axe the troubled system, and thus, stem the flow of fraud dollars to crooked clients.

But Gov. Scott has thrown a wrench into that idea. Without the expansion of Medicaid and a fully functioning insurance exchange, it’s highly unlikely legislators will consider getting rid of PIP anytime soon.

So, perhaps there’s even more reason to work together to make sure the recent state PIP reforms work as intended.

About the author: Dennis Jay is executive director for the Coalition Against Insurance Fraud.

JIFA reveals no-holds insight about fraud fight

liar.png An angry child calls his convicted fraudster dad a liar…An executive dismisses a job applicant after learning she has a fraud record…A wife is outraged that her hubby lied to their auto insurer that someone stole their car.

Sounds like the fraud version of a daytime soap ― “As the Stomach Turns.” But these are TV ads by an astute Pennsylvania anti-fraud agency. It uses science to create the ads, and measure results.

In fact, the ads show that public outreach can measurably convince people not to commit fraud. We need more science like this to get all of our anti-fraud messages right.

How measurably? Why is shame and humiliation such a good fraud deterrent? The secrets are amply detailed in lead article of the newest issue of the Journal of Insurance Fraud in America, or JIFA for short.

JIFA is the Coalition’s leadership quarterly. It’s a compelling read ― a no-holds arena with articles by many of the best minds in the anti-fraud business. JIFA doesn’t aim to please. It aims to enlighten and sharpen our grasp of trends and issues that affect the fraud fight for better or worse.

There’s better and worse for state fraud bureaus, another article reveals. Some budgets are taking their lumps. Many of these agencies must work harder to stay on top of schemes. But fraud bureaus still are churning out solid fraud-busting numbers. This shows a great deal of resilience despite dollar-squeezing pressure ― true pros at work.

Many forms of fraud still appear on the rise, these agencies also told the Coalition in a survey. Agent scams such as stealing client premiums are especially big, the fraud bureaus say. Fake health plans also may still be spreading, creating more victims who must pay hospital bills from their own pockets.

One possible upshot: The stagnant economy still may be hard at work, creating more fraud cheaters and victims.

In another trend…staged-crash gangs and medical mills increasingly are trying to recruit real crash victims into fake-injury scams. Recruiters are scarfing police crash reports and hounding often-bewildered crash victims to get treatment at shady clinics.

But fraud fighters are firing back with clever legislation in the latest rounds of cat-and-mouse, JIFA reveals. Even so, some very surprising opponents are trying to keep crash reports flowing despite their high value to swindlers.

There’s a lot of engaging reading in JIFA…because there’s a lot of fraud.
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About the author: James Quiggle is director of communications for the Coalition Against Insurance Fraud.

Set the prisoners free…and then what?

Prisoners

Fraud fighters funnel tremendous amounts of time and effort into detecting, investigating and helping to prosecute people who commit insurance crimes. That last step of the process — punishing people who defraud — is running up against a trend sweeping the nation: prison depopulation.

Grappling with crumbling budgets, state after state is facing the reality that they can no longer afford to incarcerate growing numbers of criminals, especially non-violent ones.

The number of prisoners in the U.S. is at an all-time high. The U.S. imprisons more people than even China, which has four times the number of citizens. Sooner or later, something has to give. That something, in part, is pressure to resist handing out prison sentences for white-collar crime, including insurance fraud.

Not only is there pressure on judges to resist incarcerating white-collar criminals, but sentences are becoming shorter. At least 19 states have taken action to cut their prison population by reducing sentences. Mississippi began allowing non-violent prisoners to be considered for parole 60% earlier than usual. New York, Rhode Island, Minnesota, Michigan, and New Jersey enacted similar sentence-cutting measures for low-risk inmates.

Budgets aren’t the only reason states are taking action. Overcrowding is another factor. California — under a Supreme Court order — will soon release at least 30,000 convicts to ease inhumane conditions. How many fraudsters currently locked up in California prisons will be let out to continue plying their trade?

This trend not only will put more white-collar criminals back on the streets, but likely will create a disincentive for prosecutors to take these cases in the first place. Plus, deterrence for committing fraud will diminish.

Michigan prosecutor Kym Worthy recently expressed her disappointment in Michigan’s prison system, pointing out that arsonists are keenly aware of the state’s lenient policies, and knowingly perpetrate these crimes because they “know they can get away with it.”

Fraud fighters and prosecutors need to meet this trend head on and come up with creative ideas as alternatives to long prison terms.

Out of necessity, some jurisdictions already are employing such measures. In Texas, one district attorney has cut plea bargains with auto giveup scammers to require them to appear in video PSAs talking about how dumb their crimes are and the impact on their lives. A prosecutor in Florida recently cut a deal with convicted clinic owners to fund a public outreach campaign about the cost of such crime and to alert citizens to report shady clinics.

Public service spots and public speaking mandates by remorseful fraudsters would further put a face on this crime, creating a lasting impression in the consumers’ experience, in a more direct way than reading about a conviction.

Public embarrassment is good, but much more thought needs to go into alternative sentencing. Increased fines on professionals who defraud would be a good start. Perhaps medical professionals who defraud should be sent to third-world countries for a couple years to provide free care. Convicted lawyers might be sentenced to long-term jobs at nonprofit legal centers providing services to the poor. Whatever alternatives, they must be sure, swift and somewhat painful to serve as deterrents.

If our criminal justice system fails to hand out effective punishment, deterrence will continue to diminish and fraud will continue to flourish.

IASIU recognizes excellence

award winnersThe International Association of Special Investigation Units honored a State Farm investigator, an ATF agent, an analyst and an NICB employee during their annual awards ceremony this morning. Each had a compelling story on how they are helping the fraud-fighting community advance our mission. Congratulations to all of them.

You can see a video of the presentation here.

Here’s the details on the award winners:

September 21, 2009, Palm Desert, Cal. – A successful investigation of a massive contractor fraud scheme arising from Midwest hail storms has landed top honors for an investigator with State Farm Insurance.

Tom Cockerill, a claims specialist in Indianapolis, Ind. Received the 2009 Investigator of the Year award by IASIU, the association’s highest award.

During an awards ceremony here today, delegates to IASIU’s 25th annual seminar heard about the successful investigation that lead to the honor. According to the awards presentation, the case developed after a major hail catastrophe hit the Midwest in 2006.

Cockerill was credited with digging into the background of the contractor who was a suspected “storm chaser” — going from one disaster to another to file inflated and fake claims.

“Many, many hours of reviewing hundreds of claims files, engineering reports and damage estimates painted a picture of a massive scam involving claim after claim where the purported loss was inconsistent with the severity of the hail storm,” according to the presentation

Digging deeper, Cockerill began the arduous task of assembling detailed evidence through statements taken from more than 20 adjusters, 10 engineers, several insureds, plus many neighbors and other witnesses. He also interviewed existing and former employees of this contracting firm, who were eager to lay out the details of this shady operation.

“Our investigator of the year confirmed that the owner not only intentionally damaged roofs but also taught employees how to create or even increase damage to simulate hail damage to roofs, roofing vents, siding and air conditioning units, according to the presentation.

Key to the case was a piece of damning evidence that our winner discovered — an e-mail message the owner sent to employees as the investigation heated up. He told them to lay low and stop causing intentional damage to avoid suspicion by insurance investigators.

As a result of Cockerill’s work, the state’s attorney general took civil action against this contractor, who now also faces a massive RICO suit filed by State Farm.

“Thanks to the dogged determination of this investigator, tens of thousands of dollars — and perhaps much more — have been saved not only by his company but by other insurers as well, said David Rioux, IASIU president. “The contractor had launched an efficient, savvy scam that likely would have milked insurers for years except for the detailed and professional investigation led by this year’s winner,” he added.

Other awards bestowed during the annual seminar included:

• Outstanding Service Award: Mike McGee of the National Insurance Crime Bureau, who was honored for his training of more than 2,000 investigator during the last two years and for his assistance in guiding three anti-fraud task forces,

• Analyst of the Year: Michelle Bergeron of Esurance, for setting up from scratch a fraud-detection program that helped to uncover a large organized staged-accident ring,

• Public Service Award: Michael Vergon of the U.S. Alcohol, Tobacco & Firearms agency for investigative work that led to the successful prosecution of on the largest arson rings in history in Indiana.

California’s top fraud cop retires

dale bandaOne of the top fraud-fighters in the West rode off into the sunset this week. Dale Banda, director extraordinaire of the California fraud bureau, retired Tuesday after a distinguished career in law enforcement.

Dale’s tenure at the nation’s largest fraud bureau and insurance department — as fraud investigator, supervisor, chief investigator, division chief and deputy commissioner — spanned the terms of five insurance commissioners. But his longevity tells only part of the story. Dale not only spurred his agency to be among the best, if not the best, but also shared his ideas and experience with fraud bureaus in states that aren’t as well resourced.

In states with elected commissioners, change in the party affiliation of the top regulator usually means the ouster of the fraud bureau chief. But Dale Banda was a deserving exception. When Commissioner Steve Poizner was elected, the new commissioner was astute enough to recognize the professionalism that Dale brought to fraud-fighting. Dale was retained and the following year, California reported the highest number of convictions ever for insurance fraud in a state — 1,700.

While California leads in most statistical categories in fraud-fighting — as it should, being the most populous state — there’s also a qualitative excellence associated with the California fraud bureau. I think that’s a direct reflection of Dale’s character and aptitude in forging solid relationships with insurers, prosecutors and colleagues in other states. Leading an agency of 300-plus staff, he was a stalwart advocate for his investigators, seeking more training opportunities and pushing for higher pay.

When asked this week about the best part of his career, Dale didn’t hesitate to say that his satisfaction came from taking on cases that clearly made a difference in the lives of his fellow Californians. Dale Banda did that and more. We wish him well in his retirement, but we have a feeling he’s not finished yet in seeking to improve the lives of others.

Fraud in the U.S.A. — and beyond

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When it comes to insurance fraud, the United States is a world leader. We arguably have the most severe problem on the planet. But we also have the most sophisticated means of combatting fraud. Our systems for detecting and investigating fraud are mature and much more robust than those in other developed nations.

But that doesn’t mean we can’t learn from other fraud-fighters around the globe. Last week I had the opportunity to travel to Bogota, Colombia and learn how this South American country tackles fraud. I was pleasantly surprised to see the progress fraud-fighters had made in just a few short years.

The country has its own version of the National Insurance Crime Bureau to work with insurers to detect and investigate fraud across most property/casualty lines of insurance. They use sophisticated technology to identify patterns of criminal activity, and they have conducted consumer-tolerance studies that rival anything in the U.S.

During a fraud summit at one of the country’s premier law schools, representatives of other countries also reported progress in detecting and investigating fraud. The delegate from Argentina, a country more associated with fine beef and spectacular glaciers than with insurance fraud, detailed a campaign to unite insurers and law enforcement against that country’s organized rings.

Britain’s top fraud-fighter also attended the summit and recounted impressive gains in the U.K. in the just two years since insurers formed the nation’s first fraud bureau. The technology employed in the U.K. easily equals, if not surpasses, that employed in the U.S. Additionally, insurers in the U.K. have established benchmarks across the industry that enable insurers to measure their anti-fraud results — something sadly lacking in the U.S.

I left South America with a host of good ideas that I plan to pass on to the fraud-fighting community in the U.S. I thought about my experience Monday, while attending the opening session of the IASIU annual seminar. President Dave Rioux asked everyone in the audience to look at the persons to the right and to the left. Each of them has ideas that can help you become a better fraud-fighter, he said. He implored conference delegates to engage one another, learn from one another and enhance the overall professionalism of insurance investigators.

Insurance fraud is a complex, multi-faceted problem. No one person or organization or country has cornered all the good solutions. If we embrace the concept that we can learn from anyone, we will all be better fraud-fighters for it.
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P.S. As we head into the weekend, please keep the people of the Houston area in your thoughts as Hurricane Ike approaches. We hope the many claims people and insurance investigators who are making their way to Texas to aid storm victims remain safe as well. Consider a donation to the Red Cross to aid the many whose homes and businesses likely will be lost.

Fraud-fighting community loses a leader

Bear BryantToday marks the first day of a new era for the National Insurance Crime Bureau. It’s the first day in many years that the steady hand of Bob “Bear” Bryant isn’t steering the organization. After nine years at the helm, and with almost no fanfare, Bear retired yesterday. No big retirement bash. No long-announced departure date. He eased into retirement quietly. That says a lot about a guy who was a key leader in the fraud-fighting community.

There was no over-sized ego to get in the way of getting things done. Just competence and a ton of integrity focused on the difficult job of detecting and investigating fraud while dealing with the demands of a thousand or so property-casualty insurance company members.

Bear came to lead NICB after a long and storied career with the FBI during which he rose to the highest levels of the federal agency. He brought his organizational experience to NICB and enhanced systems and the level of professionalism throughout the organization. He restructured NICB, making it less an extension of company SIUs fighting one fraud at a time and more of an analytical entity to uncover broader patterns of criminal activity. He was an early adopter of technology to prevent and recover stolen vehicles that led to the downward trend of car thefts across the country.

He created NICB’s successful medical task forces that now operate in key cities around the country, focusing on medical provider fraud. Working with insurers and law enforcement, the task forces have put a long string of crooked doctors and clinics out of business.

During the last year, Bear implemented a new strategic business plan that’s likely to take NICB and fraud fighting to the next level. He often said his goal was to leave the organization in better shape than he found it. He certainly did that and much more. The fraud-fighting community is a better place because of Bear’s leadership. We wish him a long and fun retirement.

Prosecutorial innovation

Al MacKenzieProsecutorial innovation

Few aspects of insurance fraud are simple. Sophisticated techniques such as predictive modeling are used to detect it. Forensic science, often involving voluminous paper trails, is used to investigate it. Complex strategies are employed to prosecute it.

So when something simple comes along that’s effective, we take notice.

That’s a good description of the Fraud Interdiction Program established by the Los Angeles District Attorney’s office. It’s the kind of idea that leaves you scratching your head, wondering why no one thought of it before.

The idea arose when someone surmised that medical providers who steal from insurance companies probably cheat on their taxes, too. It was a theory easily validated: Just find out how much insurers have paid individual providers and compare that with the providers’ tax returns.

That’s what Asst. District Attorney Al MacKenzie began doing in 2004, launching a long line of successful prosecutions of crooked doctors and lawyers. Tax cases are a slam dunk compared to the many fraud cases that require proof of intent and documentation of medical procedures. Confronted with simple facts involving tax evasion, many defendants quickly cop a plea and go straight to jail. Plus, prosecutors don’t have to convince juries that insurance companies are victims and that doctors — often seen as pillars in the community — are criminals.

Al’s program earned him the first “Prosecutor of the Year” award conferred by the coalition this week.

His track record with this novel program is impressive. In the last year, he’s landed 15 convictions entailing more than $20 million in stolen money. What’s more, the program has identified some 200 suspects who may have defrauded as much as $300 million. So, expect similar cases rolling out of this pipeline for many years to come.

In accepting his award, Al explained that suspicion of tax evasion permits prosecutors to obtain search warrants more quickly, which helps them gather evidence of insurance fraud that they may not have discovered otherwise.

Al’s program is now being emulated elsewhere around the country. And, to his credit, he is enthusiastically assisting other jurisdiction in setting up their own fraud interdiction programs.

We’re thrilled to recognize such a deserving public servant.

And as a side note, Al’s boss, District Attorney Steve Cooley, deserves praise as well for backing a new program and supporting Al’s efforts. As an elected official, it takes courage to embrace unconventional ideas that potentially could backfire. Kudos to both.