2010 Insurance Fraud

Hall of Shame


imageChild worth more dead than alive

Little Ashley McLellan’s lungs filled with freezing water in the family’s backyard swimming pool near Seattle. Her final, futile gasps for air must’ve terrified her. But Ashley’s stepfather Joel Zellmar wasn’t concerned.

The three-year-old’s life meant little; her death meant more. Zellmar drowned Ashley for a $200,000 life-insurance payout.

He'd been married to Ashley’s mother Stacey Ferguson for only a few months when the toddler died in December 2003.

Fire fighters found her wet, unconscious body flopped on the living-room floor. Zellmar claimed he discovered her floating in the pool. She probably went outside to the deck for some cake left there and somehow slid into the water, he told investigators.

It was nearly the perfect crime; no witnesses saw Zellmar drown her. But astute prosecutors still wove a convincing murder case that earned him 50 years in prison. Read full story

Arsonist stokes flames of greed

jeffrey_alnuttDebra Morris dashed back into the flaming house, trying to rescue her cat. But the second-floor tenant never made it back out. Morris perished in the voracious smoke and flames that devoured the structure.

The building’s owner Jeffrey Alnutt had set the place afire, hoping to steal a $277,000 insurance payday to bail himself out of crushing debt and failed business ventures in the Johnstown, N.Y. area. Someone set the fire as revenge because he was a drug informant for local police, Alnutt contended. But the court didn’t buy his story.

The case against Alnutt was largely circumstantial, but was convincingly pieced together by investigators and prosecutors. Read full story

Devlish Christian insurer milks motorists

A so-called Christian auto insurer turned hellish for trusting policyholders.

James Kalfsbeek and Donna Jean Rowe peddled fake auto coverage under the guise of membership in a “Christian” insurer called Puget’s Sound Agricultural Society.

Drivers thought they were covered. But many were saddled with large and unpaid bills when Puget’s Sound refused to pay up.

The California pair ran the con for eight years as fringe members of American society. They declared themselves “sovereign” citizens who ran a “low cost Christian membership society” that didn’t have to follow state fraud laws. Read full story

Fake health plan sickens victims

Anxious for affordable health insurance in a lousy economy, thousands of consumers flocked to American Trade Association (ATA) for what its aggressive marketers claimed was decent coverage at a good price.

But mostly the victims received worthless piece of paper or stripped-down policies that delivered little except empty promises that left some victims with thousands of dollars in unpaid medical bills.

Bart Posey headed up the Tennessee-based ATA. He skillfully preyed on people’s anxiety in a down economy, launching one of America’s biggest fake health plans at a time when bogus operations like his were spreading like poison ivy around the U.S.

ATA bilked at least 12,000 trusting customers and stole as much as $14 million in premiums. Bogus health plans have spread rapidly in the U.S. during America’s traumatic economic trough. Read full story

StephenSchneider2Deadly drug con: money before medicine

Drug addicts knew that Dr. Stephen Schneider reliably supplied the narcotics they needed to get through the day.

The Wichita, Kansas-area doctor ran a deadly pill mill — more of a drug market than clinic.

Schneider freely spooned out powerful painkillers and other prescription drugs to so many addicts that they lined up outside his clinic door. Sixty-eight patients died from overdoses linked to illegal insurer-paid prescriptions handed out in volume to addicts by Schneider and his unqualified staff.

At least 176 overdoses stemmed from his operation, prosecutors contended at his trial. Schneider’s outfit wrote dozens of prescriptions for patients even after they’d overdosed and gone to hospital emergency rooms. Drugs were so easy to obtain that addicts called Schneider the Candyman. Read full story

imageBurglar turns broken back into fortune

Trying to burglarize a Mobil convenience one night, Francis Fredette crept onto the roof. Startled when a car approached, the Clarendon, Vt. man tumbled to the ground and broke his back.

He’d messed up a simple gas-station holdup. But lying painfully on the ground Fredette had a monumental moment of criminal clarity and launched a bigger robbery.

He brazenly blamed the back injury on his innocent landlords, then demanded a fortune in an insurance shakedown that nearly ruined the landlords.

Fredette nearly got away with it. After the fall, he told his co-burglar Louis Stevens to drive him 40 painful miles back to his apartment building and plunk him down on the front doorsteps.

Stevens then kicked out a stair tread at the top of the doorsteps, called an ambulance and had Fredette carted to the hospital. Read full story

Read about previous year’s inductees to the Insurance Fraud Hall of Shame: