Consumer eViews
FLORIDA CHIEF FINANCIAL OFFICER TOM GALLAGHER'S
WEEKLY NEWSLETTER

Volume 1, Number 10, March 8, 2004
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     DERAIL THE BULLET TRAIN

The decisions we make now can impact our state for years to come.  That is why I have joined Governor Bush to pursue a legislative resolution to repeal a constitutional amendment passed in 2000 to create a high-speed rail in Florida.   I believe many Floridians will also be gravely concerned when they learn of the multi-billion dollar price tag associated with building a high-speed rail – a cost that will fall directly in the laps of Florida taxpayers. 

In fact, the price tag is still growing. A report issued by the Florida High Speed Rail Authority in January 2002 estimated that the cost to build the first 80-mile rail segment between Tampa and Orlando would be between $1.2 billion and $1.8 billion.  In January of this year, the Authority reported that the costs have more than doubled to an estimated $2.6 billion.  

As Florida’s Chief Financial Officer, I have a constitutional responsibility to evaluate the financial soundness and accountability of state projects, including a high-speed rail. I have evaluated the data and potential impact on the state's treasury, including the escalating costs, questionable ridership projections, uncertainty of federal funding and lack of private sector participation.  I believe diverting billions of taxpayer dollars to implement a high-speed rail is simply unconscionable.  

With no guarantee of federal funding and a lack of funding from the private sector, Florida taxpayers are facing a $150 million price tag annually for the next 30 years just to build the first rail segment.  The Florida Transportation Commission also announced last month that the proposed rail would not alleviate traffic congestion in and around the I-4 corridor. 

Moreover, implementing a project of this magnitude will come at a great cost to the current and ongoing transportation needs of our state.  Projects like the Palmetto Expressway in Miami, I-75 in Lee County, US 19 in Pinellas County, SR 520 in Orlando, I-95 in Brevard County, Butler Boulevard in Jacksonville, and US 331 in Walton County. These are concrete transportation projects with known benefits. High-speed rail is an unknown.

With Florida nearing its legislatively mandated debt limit, I am now urging state lawmakers to consider that taking on a substantial debt to finance the high-speed rail could negatively impact the state's financial standing and impair our ability to get the best value for our dollar.  State lawmakers need a two-thirds majority to place a constitutional amendment to repeal the high-speed rail on the 2004 ballot.

Absent action by the Legislature, I will be asking Floridians to put this issue back on the ballot.  To accomplish this, I am serving as Chairman of the Derail the Bullet Train (DEBT)– a committee formed to help educate Floridians on the costs and potential impacts of the high-speed rail project and spearhead a citizen petition drive to collect enough signatures to get an amendment to repeal the rail on the November ballot. 

In a time when other state priorities such as education, economic development, and health care deserve our full attention, we need to ensure that taxpayer dollars are spent wisely and efficiently.   The people of Florida deserve to know the truth – and that is funding a high speed rail will come at the expense of other state priorities and solely on the backs of hard-working taxpayers.

                   My best,  

                                                                         --  Tom Gallagher


DEPARTMENT’S FRAUD EFFORTS HIGHLIGHTED IN NEWS REPORT

Good Morning America recently highlighted the Florida Department of Financial Services’ success in getting convictions in insurance fraud cases.

The report, aired last Wednesday, focused on the arrest and conviction of a Lake City couple who had ripped off their workers’ compensation carrier for almost 10 years.  Bruce and Alice Gilbert almost got away with collecting more than  $750,000 based on fraudulent claims filed with the Florida League of Cities.

Bruce Gilbert was a bus driver for Sun Coast Transit Authority in Pinellas County, Florida, when he slipped and fell on the job in 1987.  Three years later he filed for disability.  His wife claimed that as a result of the fall he suffered from a disorder that caused him to revert to the mentality of a child about five years old.  The Gilberts collected disability payments, including payments to Mrs. Gilbert for care she claimed she provided.

In a plea agreement, the Gilberts were sentenced to 15 years’ probation each, with one year of community control, and ordered to pay more than $770,000 in restitution and investigative costs.  They were adjudicated guilty on charges of workers’ compensation fraud and grand theft in the first degree.

The Gilberts would have collected more than $1.4 million in insurance payments, if they had not been stopped in following through on a lawsuit for an additional $700,000.

In surveillance video collected during the investigation, Bruce Gilbert was filmed carrying a gun and driving, but in an interview with investigators he said he read “baby books” and that he rarely ventured far from home.  He was arrested while playing in a golf tournament, and his wife was taken into custody at a local bingo hall.

The Good Morning America report noted that the department’s Division of Insurance Fraud leads the nation in insurance fraud convictions, according to a recent study issued by the Coalition Against Insurance Fraud.

            


PENSACOLA COUPLE TO SERVE 27 YEARS IN PRISON FOR FRAUD

A Pensacola couple has been sentenced to serve a collective 27 years in state prison for organized fraud on consumers and suppliers, theft of sales tax monies, workers’ compensation fraud, racketeering and destruction of evidence.  The convictions last month follow a lengthy investigation by the Department of Financial Services and several other local, state, and federal agencies into complaints about the couple’s business, Backyard Sheds.

Billy Schimmel was sentenced as a habitual offender to 20 years in Florida state prison.  His wife Debbie was sentenced to seven and a half years in Florida state prison.  Both were ordered to pay more than  $289,000 in restitution to at least 30 vendors and customers.  The Schimmels were also sentenced to serve 10 years’ probation upon release from prison. The couple was convicted by a trial jury in March 2003. 

“These sentences reflect the seriousness of the fraud and economic damage perpetrated by these individuals,” said Florida’s Chief Financial Officer Tom Gallagher.  “This sends a strong message that we will not tolerate anyone taking advantage of Florida’s citizens.”

The Escambia County State Attorney’s Office began receiving complaints in 1999 regarding the Schimmels’ Pensacola-based business operations.   An investigation coordinated among the department’s Division of Insurance Fraud, Escambia County State Attorney’s Office, the Florida Department of Law Enforcement, and the Department of Revenue disclosed the Schimmels were collecting payments but were not building the contracted sheds.  Investigators also found that the Schimmels were not paying sales tax and were hiding their payroll under various fictitious companies to avoid paying workers’ compensation premiums.

Authorities in Baldwin County, Ala., assisted with the investigation.

The Schimmels’ business office burned during the course of the investigation. The State Fire Marshal’s Office determined the fire was intentionally set, which led to the charge of destruction of evidence.
 


GALLAGHER SPEAKS TO CITIZENS REPRESENTING PALM BEACH COUNTY

CFO offers inspiration and promises to push for more consumer financial protections during annual Tallahassee gathering .

Chief Financial Officer Tom Gallagher offered a hopeful vision of Florida’s future and promised to ensure seniors and financial consumers are better protected from fraud and abuse at a Tallahassee rally last week.  Gallagher spoke to more than 100 concerned citizens from Palm Beach County who made their annual trek to the state’s capital for the opening week of the legislative session. 

Gallagher applauded state leaders’ continued support of education accountability reforms as students geared up to take the Florida Comprehensive Assessment Test.  Referring to one of the greatest successes of the reforms, Gallagher thanked teachers, students and parents for the phenomenal and continued increase in the number of fourth graders reading at grade level.

He also credited Florida’s job-friendly economic climate and low tax base with the state’s net increase of more than 114,000 jobs, when many other states are experiencing job losses.

Gallagher closed by reiterating his support for more consumer protections in the financial services industries, especially for Florida’s seniors.  He promoted a Financial Consumer’s Bill of Rights, aimed at providing consumers with fair and reasonable options when dealing with insurance situations and a bill to help prevent identity theft when an insurance company or financial institution improperly disposes of customer records.  

He also talked about legislation to require insurance companies and their agents to clearly document the suitability of annuities for seniors. Hundreds of seniors, who lost their life savings because annuities sold to them did not meet their financial needs and objectives, have contacted the Department of Financial Services for help.  Gallagher said immediate action is needed to protect our most vulnerable citizens, Florida’s 2.9 million seniors.

Gallagher also commended Palm Beach County Leaders for organizing a successful and productive legislative day.
 


RECEIVER APPOINTED FOR LIFETIME CAPITAL

A receiver has been appointed to oversee LifeTime Capital, Inc., a viatical company that once operated out of Dayton, Ohio, and South Florida.

H. Thomas Moran II, of Oklahoma City, has been appointed receiver to prevent waste and dissipation of the assets of LifeTime.  In January, federal indictments were returned against eight company principals alleged to have participated in a large-scale money laundering, mail fraud and interstate transportation of money obtained by fraud. 

The indictments were the result of a long-term investigation by the Federal Bureau of Investigation, the Florida Department of Financial Services’ Division of Insurance Fraud, and the Florida Office of Financial Regulation’s Division of Investigations.

Moran was appointed receiver at the request of a disgruntled investor in a case filed in the United States District Court for the Southern District of Ohio, Western Division. The case has been assigned to Chief United States District Judge Walter Rice and United States Magistrate Sharon L. Ovington.  It is believed that there are a significant number of LifeTime investors.

LifeTime Capital, Inc. was a corporation created to distribute beneficial interests in life settlement contracts through a national network of independent representatives.  LifeTime has more than 3,000 investors who and approximately $150 million portfolio based on the face value of life insurance policies it purchased with investors’ money.  The policies insured the lives of individuals who were supposedly terminally ill or advanced in age, with relatively short life expectancies.

When LifeTime sold interests in the policies, funds were reserved to pay future premiums.  However, the policies did not mature in the time period declared by LifeTime, and premium reserves were depleted.  As a result, investors were being billed for the premiums. Many of the policies were on the verge of lapsing.  With the court's approval, Moran arranged interim financing to pay the premiums on these policies.  The arrangement of financing by the receiver allows billing of premium expense to the investors to be temporarily suspended. 

Moran was appointed because of his considerable experience in the life and viatical industry and in the takeover and management of distressed/problem viatical companies.  In February 2002, Moran was appointed conservator of the viatical portfolio of Accelerated Benefits Corporation (ABC).  Moran has also worked extensively as a court-appointed consultant with the conservator of Future First Financial Group, a Florida company, which was placed in conservatorship in August of 2002.

Moran will be sending letters to all investors notifying them of the receivership and informing them of how to obtain updated information concerning the receivership.  Investors will soon be able to check the status of the receivership at www.lifetimereceiver.com or call 877-847-8525 to hear a pre-recorded message.

A trial for the indicted principals is scheduled for March 22 in Pensacola.


Florida Department of Financial Services'
Consumer Services HelpLine
(800)342-2762.