8 worst scammers of 2016 chosen

A home explodes … hundreds of setup car crashes churn fake whiplash claims … a helpless cerebral palsy patient starves to death.

All to steal insurance money.

The year’s extreme schemers are among the eight worst insurance criminals of 2016. They were elected to the Insurance Fraud Hall of Shame by the Coalition Against Insurance Fraud.

The Shamers reveal the year’s most brazen, bungling or vicious convicted insurance swindlers.

Insurance fraud is one of America’s largest financial crimes. Scams steal at least $80 billion annually, and many insurers say fraud is growing. Many consumers believe it’s ok to inflate claims, and they’re at risk of committing this crime, research reveals.

Victims are traumatized, maimed, lose their savings and have their credit ruined. Some die.

Exploding home. Two neighbors were incinerated and an Indianapolis subdivision nearly leveled when Bob Leonard helped accidentally blow up a house in a botched $300,000 home arson. “Oh well, they died,” Leonard said of the next-door couple. Sentence: life without parole.

Faulty no-fault con. Michael Danilovich masterminded a $279-million attempted looting of auto insurers with hundreds of staged car crashes in the New York City area. It was the largest no-fault auto scam in U.S. history. Crooked medical providers deluged insurers with fake whiplash claims. Sentence: 25 years.

Deer deception. Mob associate Ron Galati used deer parts and blood to gore up cars and claim the vehicles crashed into deer. Galati’s Philadelphia body shop made $5 million of inflated damage claims from phantom deer and other collisions. He even took a sledgehammer to cars, and plotted to have a witness shot. Sentence: up to 29 years.

Lawless libido. John Alfonzo Smiley was shot and paralyzed while arguing with a couple after he and his wife swapped sex with them at a San Francisco swingers club. Smiley claimed $4 million of workers comp money. The corrections officer contended — with a straight face — that a former inmate with a grudge shot him. Sentence: eight months.

Samaritan scam. Shannon Egeland had his son shotgun him in the legs to scam his disability policy. Egeland’s legs were shattered and a foot amputated. He claimed he was ambushed after stopping to help a stranded pregnant motorist near Caldwell, Idaho late one night. Sentence: awaiting jail term.

Killer caregiver. Makayla Norman was a cheerful 14-year old — and bedridden with cerebral palsy. The Dayton teen’s home caregiver Mollie Parsons starved her to death while making large Medicaid claims for supposedly steady care. Makayla weighed 28 pounds. Sentence: 10 years.

Baby murdered. Moussa Sissoko shook his infant son Shane to death for $750,000 of life insurance he took out on the baby. The Washington, D.C.-area man seemed like a caring father, yet plotted Shane’s death from the start. Sentence: 50 years.

Mental error. Dr. Fernando Mendez-Villamil made $60 million in false Medicare and Medicaid claims for mental-illness drugs. The Miami physician plied patients with powerful drugs whether or not they needed the meds. Insurance fraud bought him a mansion and art collection. Sentence: 12 years.

Fortunately, a small army of fraud fighters is committed to turning the corner on this crime. Most insurers have agile investigators, and so do most states. Technology even can predict some scams. And most Americans are honest.

Progress is being made. Yet the insurance money’s too good and attracts too many scammers for easy answers. As the Shamers show us, sometimes a cold jail cell is the best deterrent.

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

Insurers urged to report cases

shane-guyant_09-16Hello from Venus. To my neighbors from Mars, the NAIC’s Anti-Fraud Task Force discussed last week how we all have noticed a decline in referrals state fraud bureaus are receiving from insurer victims. Howard Goldblatt’s followup FraudBlog pursued that theme constructively.

Notice I used the word victim. We consider insurers just that, a victim.

Now we agree with SIU directors that the “black hole” still exists in some instances.  We find ourselves concentrating so hard on cases that make the cut that we often forget to give you feedback. We really don’t want you to stop reporting because you are weary of the “black hole.”

State fraud bureaus also hope you remember your obligation to report cases to us. Some states even have made it a crime not to report. Let me stress that reporting to us should not feel like an obligation. You should have faith that we will do the best we can to fight insurance fraud and make sure that every state’s residents are protected from paying for those who break the law.

We have really tried hard over the past few years to give you options to report to us in a convenient manner. Many of you have offered excellent and appreciated suggestions. We have listened to your input, and have implemented many of your ideas. We know the process is not always perfect, though it is getting better.

We have partnered with organizations such as the Coalition to educate you on how to report insurance fraud to us. We certainly welcome any dialogue that can put this issue to rest. I actually asked Howard this week for help in reaching out to you. We want to be the first to step up and ask that you join us in a dialogue that can help us serve all states’ residents while preserving your business interests.

I must say that we have a strong group of fraud directors across this great country. We are committed to eliminating insurance fraud. We are meeting in Seattle, Wash. in a few weeks. I am sure this issue will be discussed at length. We really seek your help. We are all in, over here in Venus.

About the author: Shane Guyant is director of the Criminal Investigations Division of the North Carolina Department of Insurance. He also chairs the NAIC’s Antifraud Task Force.

Insurers from Mars, fraud bureaus Venus?

Fraud_bureaus_SIU_blogI just returned from the NAIC’s summer meeting. It included the antifraud task force meeting, attended mostly by directors of state insurance fraud bureaus. I also met with insurer SIU directors before the NAIC event.

I felt as if I’d entered a time warp. Discussions at both meetings reminded me of a breakout session I chaired at a Coalition summit more than a decade ago on the status of insurance fraud fighting. SIU directors and fraud bureau directors both attended.

The main discussion by insurers then was about the “black hole” of information sharing. Insurers said they send cases to fraud bureaus for investigation, and never hear a word back. The fraud bureaus contend insurers send them weak cases, or ones not well-vetted.

That’s what I heard last week as well. Insurers seemed at a loss about what happens to their cases they refer to fraud bureaus. And, several fraud bureaus grumbled about the lack of good referrals from insurers.

Insurers and fraud bureaus clearly need better dialogue so everyone fully understands each other’s needs.

One fraud bureau chief talked about how a few insurers in his state haven’t reported a suspected scam in years, even though reporting is mandatory. Are those insurers doing such a good job that nobody’s trying to scam them anymore? Doubt that.

Insurance-fraud laws broadly define the crime, though there’s no definition of suspected insurance fraud. Each insurer could have its own definition, which determines which and how many cases it sends to the fraud bureau.

Most insurers don’t report all suspected frauds. We understand that. Besides, fraud bureaus don’t have the staff to handle every case. But for an insurer to say it has no suspected frauds to report does a disservice to the larger fraud-fighting community and our common cause.

Fraud bureau directors and SIU leaders need to come together, develop a greater understanding and find more common ground so they can work jointly to combat fraud in the most efficient and effective ways possible.

We urge both sides to reach out to the other to make that happen.

About the author: Howard Goldblatt is director of government affairs for the Coalition Against Insurance Fraud.

Zero tolerance of fraud?

Zero tolerance is an popular catchphrase for insurers to bandy around. It implies a blanket boycott of dubious claims, the marshaling of an insurer’s full resources at every turn.

In practice, zero tolerance is a moving target. Few insurers can assert they contest every dubious claim. Even the most principled insurers decide which claims to challenge, and which to let slide through.

Focusing limited staff resources on a complex staged-crash ring that’s stealing hundreds of thousands of dollars might make more sense, from an insurer’s standpoint, than taking on a handful of smaller homeowner claims that prosecutors likely aren’t interested in pursuing.

Perhaps paying a $5,000 nuisance claim from a clearly setup fall in a restaurant makes more sense, as an insurer sees it, than spending many times that amount in legals fees to defend against the determined crook’s civil suit. A sympathetic jury could dole out $500,000 to the swindler, who’s faking a convincing limp in court. Just pay off the guy and make his claim go away.

That said, one of best business cases for zero tolerance recently was mapped by former CNA chief claims officer George Fay. He writes movingly in the Journal of Insurance Fraud in America

Most claim denials for fraud result in a lawsuit against the company, no matter how solid your case,” George wrote soon after retiring. “A strong anti-fraud position can earn your insurer a reputation within the criminal underworld for being an undesirable target to try and bilk. This principled stance saves legal fees in the long run.”

And helps build customer loyalty: “When you make customers aware of your anti-fraud efforts, they see it for themselves and usually stay with you for life.

Zero tolerance also reflects an insurer’s character, from the leadership down through line staff. “An insurer that knowingly pays a fraudulent claim violates its values statement,” George writes. “And certainly the insurer lacks character. The same is true of insurer employees — from the SIU director to claims personnel to adjusters. Character is critical to building the foundation of successful fraud-fighting efforts.”

Zero tolerance — strengthen your backbone, stop false claims and reap rewards. George Fay writes an inspiring roadmap. Insurers should study that vision closely — your honest policyholders will be glad you did.

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

$1 billion (in savings) or bust

When the ground-breaking anti-fraud partnership between the federal government and the private sector was launched in 2012, there were grand expectations that they could jointly combat fraud much more forcefully that going it alone.

More than 60 organizations have teamed up to share strategy and exchange data. They include federal and state agencies, health plans and p-c insurers. Billions of bits of information have been pooled through a trusted third party.The results are encouraging.More than $260 million has been been saved in recoveries and fraudulent claims not paid.

The HFPP executive board met two weeks ago. It set a goal to expand savings to $1 billion by this time next year. It’s an ambitious goal, yet achievable given the early success of this collaborative effort.

The potential success in future years could far surpass $1 billion as more data is shared and more partners sign up., And it should, seeing that healthcare fraud totals tens of billions of stolen dollars each year in the U.S..

The ultimate goal is to get so effective in combating healthcare scams that fraudsters will view the risks too high to even try. We’re a long way from that day, but collaborative efforts and advanced technology offer the best chance of getting us there.

About the author: Dennis is executive director of the Coalition Against Insurance Fraud and serves as co-chair of the Healthcare Fraud Prevention Partnership. 

It’s a dangerous world in Obamacare land

Two news items caught my eye last week. They took place about 500 miles apart yet both spoke to fraud issues with Obamacare.

Obamacare signup can be easily duped. The feds easily slid 10 fake applicants with bogus SSNs through the signup system, online and by phone. The GAO was testifying on Capital Hill this month, and released a report about the test.

The contractor that handles Obamacare application documents isn’t required to look for fraud, only to inspect to make sure documents have not obviously been altered, the GAO report found.

Sleazy tax preparers also have told filers to pay directly to them the federal penalties for failing to buy health coverage. In some cases the payer has Medicaid or other health and doesn’t owe the penalty.

The scam takes various forms, the IRS says.

Swindlers were spotted at an Atlanta shopping center, trying to con hundreds of people into paying $500 for fake Obamacare “grants.”

And email phishing ploys also were reported early this year, with official-looking Obamacare emails trying to lure people into opening disguised malware links. There’s a large underworld of such spammy cons because they’re easy to mass-mail at little cost.

Often-amateurish schemers have tried to convince consumers to hand over their banking, medical and credit-card info in order to receive their “Obamacare cards” or “enroll” in the healthcare program.

Legitimate questions also have arisen about whether the feds can verify people’s eligibility for premium subsidies in certain states.

The GAO signup test and subsidy-eligibility concerns are fodder for Republicans determined to bring down Obamacare. The GAO test points toward self-admitted system weaknesses that need shoring up. Deeper investigation into the full extent of real-life expoiting of such soft spots needs conducting as well. Still, no evidence of a fraud pandemic revealing fatal flaws in Obamacare yet have publicly surfaced — so far de-fanging that part of the Republican beef.

Consumers, however, likely will remain targets of ID theft and other cons tagged to Obamacare. Slick hackers and other operators have effectively eliminated personal privacy. Consumers will have to stay alert, watch for “official” emails and phone calls and deals from strangers.

With or without Obamacare, it’s still a dangerous world out there.

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

Geeky financier revealed fraud oversight oversights

One of the most tumultuous periods of insurance and securities oversight quietly drew to a close recently when convicted swindler Martin Frankel finished his 17-year federal sentence.

The geekish financier recently was released from federal prison in New Jersey. He’s in a transition facility, prepping for life back on the streets.

Frankel sent shockwaves through the securities and state insurance systems. He launched a daring swindle that exposed large gaps in how states oversee insurance and protect against scams.

He secretly bought several small, ailing life insurance companies back in the 1990s. Hiding his ownership, Frankel looted more than $200 million of their assets and hid the money in Swiss bank accounts. He ran the insurers into the ground. Several hundred innocent employees lost their jobs and livelihoods.

It’s one of the largest insider lootings of insurers in history.

He hid the conniving from state regulators for a decade. Frankel had been banned from securities for bilking investors. Yet incredibly, he next created an investment firm called Thunor Trust as a front for his looting. Yet state insurance regulators had no idea a crook was brazenly doing insurance business.

Frankel lived a princely lifestyle off the stolen insurance loot. He bought a 25-room mansion in swanky Greenwich, Conn. A bevy of live-in girlfriends kept coming and going. Frankel showered them with diamonds, trips and other goodies, while stabling a fleet of 30 luxury cars. By day, he did business in an onsite NASA-like command center with 80 computers and widescreen TVs.

Mississippi and Tennessee insurance regulators finally got wind of Frankel’s maneuvering and busted him.

He tried to burn down his mansion to hide the evidence as law enforcement closed in. Officials found a partially burned to-do list: “Launder more money NOW.” Frankel fled to Europe and was captured in Germany. He had nine fake passports and 547 diamonds.

Frankel even bribed a Vatican official to vouch for a false charity he’d set up to hide his conniving.

The scheme exposed widespread shortfalls in how securities and insurance regulators oversaw such entities.

Call the problems oversight oversights.

“We found inadequate tools and measures for assessing the appropriateness of insurance company purchasers, analyzing securities investments, evaluating the appropriateness of asset custodians, verifying insurers’ assets, and sharing information within and outside the insurance industry,” the feds warned in a report.

Major reforms and stricter oversight went into place. Future Frankels will have a much harder time operating the way he did. Certainly the insurance system is better equipped with tripwires to expose such cons earlier in the game.

On the cusp of freedom, however, Frankel was packed off to jail again this week. He’s already charged with unspecified rules violations.

Whatever. Marty Frankel still did regulators a backhanded favor, putting the systems through a much-needed stress test that hardened oversight considerably. Several hundred honest Americans lost their jobs and careers while Frankel luxuriated in BMWs and diamonds. Yet we can still say “Thanks Marty – sort of.”

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

Fraud statistics and other lies

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

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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

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 HealthCare.gov. 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.