FLORIDA CHIEF FINANCIAL OFFICER TOM GALLAGHER'S WEEKLY NEWSLETTER
Volume 3, Number 8, February 20, 2006
An elderly couple who loses their life savings in an investment scam is tragic financially, mentally and emotionally. Every time a con artist is arrested, we use it as an opportunity to tell Floridians to Verify Before You Buy.
This message was recently underscored with the arrest of Patrick B. Kirkland of Isleworth and Laura Wade of Lady Lake, who targeted Floridians in an estimated $60 million real estate scheme. Thanks to aggressive action, both have been booked on state and federal charges of securities fraud and grand theft.
The investors who were victimized in this case did not realize that Kirkland was not licensed to sell investments in Florida.
To protect those who want to invest their hard-earned money, there are resources available to guard against financial fraud.
You can verify, by phone or online, if an investment or insurance product is registered with our department and if the person selling the product is licensed. You can also find out how many complaints have been lodged against an agent or company you are considering, and the reasons for the complaints.
Verify Before You Buy by calling us at 1-800-342-2762 or visiting us at www.MyFloridaCFO.com. Click on the Verify Before You Buy button in the right column.
We are committed to helping you make safe and informed financial decisions.
-- Tom Gallagher
GALLAGHER ANNOUNCES 21 ARRESTS FOLLOWING INVESTIGATION UNCOVERING MORE THAN 60 STAGED CRASHES IN TAMPA AREA
Tom Gallagher, Florida’s chief financial officer, announced today the arrests of 21 individuals for allegedly staging 10 auto crashes stemming from an investigation that uncovered more than 60 staged crashes throughout Tampa Bay. The 10 staged crashes that these individuals are being charged for resulted in nearly $1 million in fake claims. The round-up was organized by the Department of Financial Services, Division of Insurance Fraud (DIF) and the Federal Bureau of Investigation (FBI).
“Aggressive investigations and prosecutions coupled with legislation I’m advocating this year will tighten the net around these criminals,” said Gallagher, who oversees the Department of Financial Services. “We must continue the fight to protect Floridians from the danger and cost inflicted by insurance fraud schemes.”
The arrests are the result of federal indictments unsealed today in the Middle District of Florida. Among those arrested today are medical clinic owners, staged crash organizers and accident participants. Most auto insurance fraud cases involve the organizing of staged auto crashes in order to fraudulently bill for services covered by personal injury protection (PIP) coverage, which provides up to $10,000 for medical bills from an auto accident, regardless of who is at fault. Florida law requires drivers to carry a minimum of $10,000 in PIP coverage and $10,000 in property damage liability coverage.
Building on hard-hitting legislation passed in 2001 and 2003, Gallagher is pushing for one of the largest and most far-reaching PIP reform bills ever brought before the Legislature. The legislation, sponsored by Rep. David Rivera (House Bill 561) and Sen. J.D. Alexander (Senate Bill 1596), contains several proposals, including:
Make it a second-degree felony to do “paper” or “phantom”
automobile accidents, with a minimum mandatory two-year prison sentence. “Paper” or “phantom” accidents occur when a driver files a fraudulent accident report on a crash that never happened and then bills the insurance company for medical services.
Make it a third-degree felony for any service provider, such as a clinic or body shop, to waive insurance deductibles as a general business practice. Waiving deductibles makes it easier for individuals to profit from PIP fraud schemes.
Revoke the driver license of any individual convicted of committing auto insurance fraud.
Require medical clinics to post the state’s Fraud Fighters reward program hotline and reward program information.
Amend the patient-brokering statute to make current provisions more widely applicable to all medical practitioners. Also address the problem of professional patients -- those who seek a kickback in return for their cooperation in a PIP billing scheme.
Create a forfeiture fund for revenue obtained from property seized in insurance fraud-related felony cases. Proceeds would be used for special equipment and enforcement operations.
Enhance fines for insurance companies who fail to
implement or follow their anti-fraud plan or Special Investigation Unit (SIU) description filed with DIF.
The National Insurance Crime Bureau ((NICB) assisted in the investigation that resulted in today’s arrests. The operation included a two-year undercover operation and revealed some 62 staged crashes that occurred between 1999 and 2005. The targets of the operation were individuals who profit from insurance settlements based on injuries obtained from non-existing or staged automobile accidents.
Assisting in the arrests today were personnel from the FBI, DIF, the US Marshal's Service, US Immigration and Customs Enforcement (ICE), the US Postal Inspection Service and the Hillsborough County Sheriff's Office. In all, 17 DIF detectives and supervisors were involved in making the arrests, and Det. Jim Kappel of DIF’s Hillsborough office participated from the start of the operation. The charges will be prosecuted by the United States Attorney's Office.
“I commend the investigators and prosecutors for their diligence in bringing these individuals to justice,” Gallagher said.
The department’s insurance fraud division has made more than 1,000 PIP fraud-related arrests since 2001 and during that time has consistently led the nation’s fraud bureaus in insurance fraud arrests and convictions.
The Department of Financial Services, Division of Insurance Fraud, investigates fraud in all types of insurance, including health, life, auto, property and workers’ compensation. To report information about this case or any other possible insurance fraud case, call the department’s Fraud Fighters hotline at 1-800-378-0445. A reward of up to $25,000 may be offered for information leading to a conviction.
GALLAGHER BANS AGENT WHO MISLED SENIORS
More than 100 agents have met similar fate in last three years
Tom Gallagher, Florida’s chief financial officer, has permanently revoked the license of a south Florida insurance agent for misleading five senior citizens into purchasing annuities and life insurance policies that caused them to lose more than $150,000 in surrender fees and benefits. While his clients lost money, Eric James Brown, 36, of Delray Beach, collected nearly $200,000 in commissions for selling the policies. Gallagher has ordered Brown to pay restitution to the victims.
“We have zero tolerance for insurance agents who deceive our seniors and cheat them out of their hard-earned retirement funds,” said Gallagher, whose Division of Agent and Agency Services conducted the investigation on Brown. “Most insurance agents are good corporate citizens – small- business men and women who serve our communities. Insurance agents who engage in theft and fraud give good agents a bad name and drive up insurance costs on all Floridians. Our mission is to bring the full force of the law against unscrupulous agents and to aggressively educate our seniors against these scams.”
In the last three years, Gallagher has taken action against 110 agents for theft and fraud involving the elderly. Florida is home to more than 2.9 million Floridians over the age of 65 and, Gallagher said, the state’s senior population is projected to grow by as much as 30 percent over the next several years.
Gallagher has launched numerous public education campaigns, including an on-line Senior Resource Center, at http://www.flseniors.net/, that provides important information and resources on a variety of topics from long-term-care options to financial scams.
This month, Gallagher is providing, at no cost, a 30-minute video program that offers personal stories from actual victims of senior scams, inside tips from a former scam artist, and advice from investigators and senior advocates.
Senior scams can vary widely, from misrepresentation of the risks involved in a purchase to outright fraud and theft. The following are recent cases resulting from department investigations:
• Gallagher has suspended the license of a Pensacola agent who forged a customer’s signature on a new annuity application and a withdrawal form on the customer’s existing annuity policy. Wallace Lee Campbell, Jr., 58, pocketed a $2,800 commission and caused his customer to lose $7,500 in early-withdrawal penalties.
• A former insurance agent was sentenced to two-and-one-half years in prison and ordered to pay restitution for systematically defrauding South Florida seniors between the ages of 75 and 94. Brian Shechtman, 38, organized a scheme to get senior citizens to switch their health insurance to lower-cost policies, overbilled them and then applied the money to additional life insurance policies without the victims' knowledge. The scheme resulted in $2 million in commissions.
• Ronald S. Rogart, 60, was arrested in Gilchrist County on charges of elder exploitation and insurance fraud. The former insurance agent is accused of defrauding several seniors between the ages of 72 and 86 by running newspaper advertisements offering “Long Term and Home Health Care Programs.” Detectives said the price he quoted was less than the actual cost of the policy, so Rogart would submit an application reflecting a lower level of coverage to match the quote he gave. When he received the policy, he would forge the documents so the clients wouldn’t know they had been sold less coverage than what they had asked to buy.
Gallagher said seniors must be extra vigilant because their life savings make them attractive targets for scam artists. He urged these precautions to avoid becoming a victim:
o Do an assessment of your financial means and investment objectives.
o Understand that all investments involve risk: generally, the higher the return, the higher the risk.
o Ask the sales agent (broker) about commissions, fees, penalties, sales charges and any other costs.
o Ask as many questions as you want and take notes. Walk away if they avoid your questions.
o Take your time. High-pressure sales tactics will rush you into an unwise decision. A sound investment will be just as good tomorrow or next week.
o Document all transactions.
o Carefully read and understand documents before you sign them.
o Ignore “inside information,” “hot tips” and “rumors.”
o Hang up on “cold calls” from strangers.
o Beware of "bonus" interest rates as they are usually limited in duration and have strings attached.
o Be cautious of sales pitches that claim you will "recoup" all penalties with the higher returns of a new policy.
o Remember: if it sounds too good to be true, it probably is.
Responding to calls and letters from hundreds of seniors robbed of access to their savings because they were convinced to liquidate CDs, stocks and savings accounts to fund annuities, Gallagher pushed for legislation that passed in 2004 requiring agents to document the basis for selling annuities to seniors and also gave the department authority to take corrective action if a company or agent violates the law.
To report fraud, call the department’s Fraud Fighter’s Hotline at 1-800-378-0445 or log on to www.MyFloridaCFO.com/fraud. A reward of up to $25,000 may be offered for information leading to a conviction.
MEDIATION TO RESOLVE INSURANCE DISPUTES AVAILABLE TO 2005 STORM VICTIMS
Tom Gallagher, Florida’s chief financial officer, would like Floridians to know that mediation is available to homeowners who suffered damage from the 2005 hurricanes and have not been able settle their insurance claims. The program is free to policyholders and seeks to achieve quick and fair settlements for storm victims.
“My number one priority continues to be helping Floridians recover from two unprecedented hurricane seasons,” Gallagher said. “This program has proven results in helping families recover from the 2004 storm season, and I know it will help thousands more still seeking assistance after the 2005 storms.”
Gallagher initiated the mediation program in the aftermath of multiple hurricanes in 2004. Of 12,000 requests for mediation, 93 percent were settled successfully.
Insurance companies are required to notify homeowners whose claims are in dispute of their right to mediation. Once this notification has been made, the company has 21 days to settle the claim; otherwise the policyholder can call the Department of Financial Services to request that mediation be scheduled. Mediation can help a hurricane victim avoid the lengthy and costly option of going to court. The mediation is non-binding in those cases where the homeowner chooses not to settle. Court-approved mediators are provided through the Collins Center for Public Policy.
Storm victims can learn more about mediation by calling 1-800-22-STORM.
The following offices are conducting mediation sessions for Floridians who are having trouble settling their hurricane insurance claims:
Broward Mediation Center
3544 South University Drive
Davie, FL 33328
Orange County Bar Association
880 North Orange Avenue
Orlando, FL 32801
Schofield Law Firm
25 West Cedar Street, Suite 450
Pensacola, FL 32502
Dickerson Law Firm
110 East Reynolds Street, Suite 203
Plant City, FL 33563
Wotitzky Mediation Firm
407 East Marion Avenue, Suite 103
Punta Gorda, FL 33950
TRG OPERATORS TO PAY $3 MILLION
Tom Gallagher, Florida’s chief financial officer, announced today that Florida victims of TRG Marketing LLC, the Indiana-based unauthorized insurance entity that left hundreds of Floridians with unpaid medical claims, will get back nearly $3 million in restitution. Gallagher oversees the Department of Financial Services, Division of Insurance Fraud, which conducted the only criminal investigation against the operators. TRG left an estimated 7,300 victims in 43 states.
“I am pleased that this money is being returned to the victims,” Gallagher said. “This may help them recover from the financial anguish, but the mental anguish may never be undone.”
Carmelo Zanfei and William Paul Crouse were ordered to pay restitution during sentencing last August by Ninth Circuit Court Judge Julie H. O’Kane. Zanfei was sentenced to two years in prison, and Crouse was sentenced to four years in prison, and they will jointly pay the restitution. The department’s investigation identified about 180 Florida victims, one of whom is due $138,000.
Teresa Orr, of Monteverde, Fla., has steadfastly declared that her husband Pete Orr, a NASCAR-circuit driver, died because he could not get timely access to medical care he needed due to mounting unpaid claims. Orr’s death prompted Gallagher to pursue legislation, the “Pete Orr Bill” that passed in 2003, which significantly increased criminal penalties for individuals convicted of operating an unlicensed insurance entity.
Department investigations have led to emergency cease and desist orders against 28 unlicensed entities in Florida, and administrative or criminal charges against nearly 250 insurance agents and unlicensed entity operators. Because these entities are not licensed in Florida, there are no assurances of their ability to pay claims. Investigations are continuing.
Employers, health care professionals and individuals shopping for insurance coverage are urged to check with the department to be sure they are dealing with a Florida-licensed insurance company and a Florida-licensed insurance agent. To check on the license status of a company or agent, consumers should visit www.MyFloridaCFO.com and click on Verify Before You Buy, or call the Department of Financial Services' Consumer Helpline at 1-800-342-2762.
FAMILIES CAN NOW ENROLL ONLINE
State-subsidized insurance program also launches new marketing campaign to reach eligible families and increase enrollment
With the click of a mouse, Florida families with uninsured children can now go online to apply for affordable, quality health insurance through Florida Healthy Kids and KidCare. The re-designed Healthy Kids Web site at www.healthykids.org also allows parents to check the status of their application and make payments once their children are enrolled. Many customer service improvements were made to the program over the past few months. Easy access and online enrollment were the top requests from families who suggested ways to make the program better.
“This is the best time for families to enroll in the program because it’s easier to apply for benefits,” said Healthy Kids executive director Rose Naff. “If a family sends us an application, we’ll get them health insurance.
According to the latest study of the uninsured by the University of Florida, there are 143,000 children that qualify for the program. Using this information, Healthy Kids is launching a grassroots effort, combined with advertising, to reach out to these eligible families.
“We determined the best way to increase the number of children in the program is to find out where the uninsured children are and let their families know they’re eligible,” Naff said. “Our goal is to reduce the barriers that keep families from enrolling. With grassroots help in the community and strategic marketing of the program, we can get more kids insured.”
Today there are only 211,227 children enrolled in Healthy Kids and KidCare. Naff is encouraging all families with uninsured children to apply for benefits.
“We want to fill the program and we have the funding resources to do it. Enrollment is easier and families just need to know they can apply for this quality program.””
The Healthy Kids program offers affordable, quality health insurance for children 18 years of age and under, whose parents can’t afford private health coverage but earn too much to qualify for Medicaid. Children enrolled in the program receive regular doctor’s visits, dental check-ups, and immunizations.
Florida Healthy Kids is a public-private partnership created by the
Florida Legislature in 1990 to provide comprehensive, affordable health care coverage to previously uninsured children in Florida
STATE GOVERNMENT FINANCIAL REPORT
Chief Financial Officer Tom Gallagher announced that the Florida Comprehensive Annual Financial Report (CAFR) has been completed for the fiscal year that ended June 30, 2005.
The CAFR is a comprehensive presentation of the state’s financial and operating activities during the fiscal year prepared in accordance with generally accepted accounting standards. The basic financial statements within the CAFR have been approved by the Florida Auditor General’s Office.
The report is available on the department’s website at www.MyFloridaCFO.com by clicking on the link to 2005 Annual Financial Report for Florida - CAFR .