Volume 1 Number 7
February 16, 2004









 

 

 

 

Report Insurance Fraud
1-800-378-0445
Outside of Florida
850-413-3261
 


THIRD AGENT PLEADS GUILTY IN INSURANCE ‘SLIDING’ SCHEME

A third agent has pleaded guilty to racketeering and conspiracy to commit racketeering for his role in a scheme to slide undisclosed coverages and hidden costs to hundreds of auto insurance customers. 

Aquileo Hernandez, 42, entered the plea in Miami-Dade Circuit Court.  Judge Dennis Murphy adjudicated Hernandez guilty, banned him from Florida’s insurance industry and ordered him to surrender his insurance license.   Hernandez also was ordered to pay $15,000 in restitution to the Miami-Dade Crime Victims Compensation Fund, serve 15 years of probation and 500 hours of community service, and pay $4,000 for investigative costs to the Department of Financial Services, Division of Insurance Fraud.

 “This underhanded scheme hurt people who were already struggling to pay for insurance,” said Florida’s Chief Financial Officer Tom Gallagher, who oversees the Department of Financial Services.  “This sentence sends a strong message that we will not tolerate anyone taking advantage of our citizens.”

Hernandez and four others were arrested in March 2002 following a Division of Insurance Fraud investigation of the now-defunct chain of six Salem Discount Insurance agencies in Miami-Dade County. 

The investigation was dubbed “Operation Electric Slide.” Investigators determined there was a scheme throughout the agencies to defraud customers by adding additional fees for legal defense coverage and motor club memberships to each policy without the customers' permission or knowledge.  The computers used for insurance quotes in each agency were set up to automatically add $50 to each purchase.   Employees were encouraged to charge as much as they could, sometimes adding as much as $200 to policies for the ancillary products.  Commissions on these products were as high as 90 percent.  The manager of each branch agency was charged with RICO and RICO conspiracy.

Undercover investigators twice purchased insurance from Hernandez, who managed the agency at 16228 Collins Avenue, Miami Beach, and were "slid" on each occasion.  Four additional sliding victims identified Hernandez as having personally dealt with them, and subsequent search warrants of the agency Hernandez ran established clear evidence that agents “slid” unwanted coverage to more than 200 customers at that location in 1998 and 1999.

“Very few insurance agents engage in this type of scam, but those who do risk more than their livelihood – they risk criminal penalties as well.” Gallagher said. 

 Two other defendants pleaded guilty before Judge Murphy last April.

Jason Salem, 38, president of Salem Discount Insurance, was sentenced to 15 years probation and was ordered to pay $822,000 in restitution to the Miami-Dade County Crime Victims Compensation Fund. He also was ordered to pay $21,000 in investigative costs.

Yaudat Ohan, 27, who worked as an agent for Salem, was sentenced to five years probation and was ordered to pay $55,000 to the Miami-Dade Crime Victims Compensation Fund.

Salem and Ohan also were banned from the insurance industry and ordered to surrender their agent licenses.

Charges against remaining codefendants Ramon Goodman and Michael Durdungi are pending trial.  Investigators state they anticipate that any testimony of Salem, Ohan, and Hernandez as to the activities of Goodman and Durdungi will support the other evidence against them.

Assistant State Attorney Herman Wan prosecuted the case and can be reached at 305-547-0673. 

Salem Discount Insurance had offices at 1465 Collins Ave., Miami Beach; 740-1 71st St., Miami Beach; 8839 S.W. 40th St., Miami; 904 E. 25th St., Hialeah; 2574 N.E. Miami Gardens Dr., North Miami; and 2750 N.E. 183rd St., Aventura.  Several of the offices have since closed.

One former employee told investigators that while she worked with the agency between September 1995 and November 1996, she witnessed as many as 5,000 customer files with hidden charges added.  She said the practice was directed by Salem and included threats of salary cuts to employees who did not want to participate. 

The Department of Financial Services, Division of Insurance Fraud, investigates various forms of fraud in insurance, including health, life, auto, property and workers’ compensation insurance. Anyone with information about this case or another possible fraud scheme should call the department’s Fraud Hotline at 1-800-378-0445.  A reward of up to $25,000 may be offered for information leading to an arrest and conviction.