Fraud statistics and other lies

Exaggerating the numbers does a disservice to our cause

liesEstimates of insurance fraud usually make me cringe because most are guesstimates at best. They’re based on little if any good science.

Wild-eyed estimates can backfire unless you can back them up. Just ask North Carolina Governor Pat McCrory. This week he said 40 percent of state workers-comp claims involve fraud and abuse.

40 percent!

Eyebrows across the land were raised and soon the critics came out en masse.

Part of the problem here, of course, is that it’s nearly impossible to disprove McCrory’s statement because of the “…and abuse” part.

Fraud is fraud, but abuse often is in the eye of the beholder. It’s a slippery concept. What is abuse to some may just be thorough treatment to others. Are three chiro treatments too few and five too many? Opinions differ greatly.

This is not to excuse workers who malinger after a real injury.But such estimates shift the focus from preventing fraud, and questions the credibility of those who toss around unsubstantiated estimates. This should be a lesson to the entire fraud-fighting community — including the Coalition.

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

Eight worst cons reveal fraud’s true costs

People remember true-life crime stories better than stats



A driver rockets his $1-million Bugatti into a salty lagoon … Two kids perish in a home arson fire their own mother set … A cancer doctor pumps healthy patients with toxic chemotherapy in a $125-million insurance plot.

These masters of disaster are among the eight worst insurance criminals of 2014. The extreme schemers were chosen by the Coalition. Their names and crimes were released today as the newest members of the Insurance Fraud Hall of Shame. 

The No-Class of 2014 reveals the year’s most brazen, bungling or vicious convicted insurance swindlers. All commanders in thief were convicted or had other legal closure last year.

One of America’s largest financial crimes, insurance fraud steals at least $80 billion annually. The Hall of Shame serves a useful anti-crime purpose. Sharing true-life crimes is a form of story-telling. Science shows that people retain more details and understand stories far better than raw data alone.

So it’s nice to say fraud is an $80-billion annual crime — the Coalition’s conservative estimate.

But people sit up when they hear how Andy House blasted that rare Bugatti Veyron into the lagoon for a $1-million insurance score. It’s also worth a chuckle or two. Same with punk rocker Christopher Inserra’s wild fist-pumping on stage while telling his comp insurer the arm was hurt and useless.

Then get more serious and learn how how Angela Garcia left her infant girls to die in a house fire she set for insurance money.

Or see how Suzanne Basso tortured her retarded husband Buddy Musso for weeks to steal a life-insurance payout, and you’ll never view insurance fraud the same way again.

Putting a human face on insurance crime moves fraud from a stat to a crime against all of us. That’s why we can all rally to fight insurance fraud simply by staying honest, being alert to scams and reporting crimes in action. Together, we can turn the corner on this crime.

About the author: Jim Quiggle is director of communications for the Coalition Against Insurance Fraud.

Subsidies with fake IDs prompt premature howling

Fraud a needless political football, give Obamacare time to succeed or fail

Critics of Obamacare were handed another case of ammunition with the revelation that undercover federal investigators used fake identities to obtain taxpayer-subsidized health coverage.

Operatives slipped through the system in 11 of 18 tries, the nonpartisan Government Accountability Office says.

Republicans jumped all over the findings, contending this is more evidence that Obamacare is a mismanaged boondoggle that’s wide open to fraud and abuse.

Six of the GAO’s fake online applications were blocked by eligibility checks built into computer systems at But the GAO says its undercover agents evaded that and enrolled anyway.

GAO investigators created fake identities using invalid Social Security numbers and falsely claiming citizenship or legal residence. Some operatives invented income levels that should’ve disqualified them from obtaining subsidies.

Some contractors handling the applications told the GAO that they weren’t hired  to root out fraud, the GAO found.

In the bigger picture of things, Republicans and Democrats are trading blows over whether nearly 3 million inconsistencies found in consumers coverage applications suggest rampant fraud.

Republicans are predictably squealing with apocalyptic rhetoric. Yet nobody knows how deeply the revelations about Obamacare subsidies and application inconsistencies suggest deeply rooted and possibly fatal fraud. These are initial findings, not wrote truths.

Yes, football season is approaching, but let’s not make fraud such a political football. Obamacare is a new program. Any program of this size and complexity will leak some water at first. America itself was an experiment after the Civil War. The nation was untidy and full of deep structural problems as it rebuilt during the Reconstruction period. Critics could’ve easily howled that the America was a doomed train wreck of a nation.

Let’s allow the followup findings to paint a more-accurate picture of fraud in Obamacare. If there’s a lot, then work to fix the system at its leakage points. Obamacare and consumers are better-served by intent problem solvers. Give it a chance to succeed or fail on its merits, not on premature and single-minded badmouthing for political gain.

About the author: Jim Quiggle is director of communications for the Coalition Against Insurance Fraud.

Unchaining fraud from dentistry

Abuses of kids raise issues of corporate dental clinic ownership

Four years ago this space carried a sad story about a national dental chain whose dentists abused kids with unneeded and painful treatments to enrich themselves at the expense of federal taxpayers.

The Justice Department sued the chain’s owners and threatened to ban the chain’s 61 clinics from billing federal health programs. Earlier this month, the feds made good on the threat and issued a five-year ban against the chain owned by CSHM and its corporate successor, Forba Holdings. The chain owns pediatric clinics in 23 states under various “Smiles” names — All Smiles, Small Smiles, Healthy Smiles and Kool Smiles. They mostly target low-income communities and rake in big bucks from billing Medicaid.

One dilemma of such a ban is that it will leave some communities — and kids — without a source of dental care. So to ease the transition, the ban won’t go into effect until September.

Two questions remain from this case. The first deals with the lag time from when this case first broke when a local TV station in Washington, D.C. aired an investigative report after a child died from dental treatment in one of the chain’s facilities. That was in March of 2008 — more than six years ago. The wheels of justice often roll slowly, but six years is far too long when kids’ health and taxpayer dollars are at stake.

The second issue deals with corporate ownership of medical facilities. A pattern has emerged where chains wittingly or unwillingly create a culture for fraud to thrive. Targeting vulnerable people who are less likely to complain combined with lack of oversight by many state Medicaid programs and state dental boards is a recipe for fraud.

Evidence suggests that corporate owners demand such high productivity out of their clinics that unnecessary treatments become the norm. Focusing mostly on the bottom line also encourages clinics to hire marginally competent workers.

Ownership of medical facilities by non-medical people is outlawed in several states. Unless government can provide better oversight, perhaps more states should consider such a prohibition.

Note: Thanks for Dr. Stephen Barrett and Dental Watch for the excellent coverage of this and other scams involving dentistry.

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

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


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.


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.
About the author: James Quiggle is director of communications for the Coalition Against Insurance Fraud.

Set the prisoners free…and then what?


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.