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FLORIDA CHIEF FINANCIAL OFFICER TOM GALLAGHER'S WEEKLY NEWSLETTER

Volume 3, Number 26, June 26, 2006

Methamphetamine has destroyed families and wreaked havoc on many Florida communities.  But legislation that I pushed for and Governor Jeb Bush signed into law today sends a strong message that we will not tolerate anyone manufacturing this deadly drug in our state.  

In fact, Florida is being recognized for aggressively getting in front of what has become an epidemic in other states, and that is a direct result of the governor’s leadership in creating the Office of Drug Control (ODC), state lawmakers and the efforts of our first responders who are fighting against this evil drug.  

Last summer, I voiced my concern and called for action to protect communities as our State Fire Marshal’s Office was seeing an escalation in the number of meth lab fires and explosions.  Over several months, we worked with various stakeholders to identify solutions – solutions that today become a part of our response to this deadly drug. 

I commend Representative Faye Culp and Senator Carey Baker for recognizing the urgency of these measures and for being effective advocates for this legislation. 

This is a fine example of government responding quickly to a critical need and protecting Florida’s families and communities.   

-- Tom Gallagher


GALLAGHER COMMENDS GOVERNOR’S SIGNING OF BILLS TO FIGHT METHAMPHETAMINE, INSURANCE FRAUD

Tom Gallagher, Florida’s chief financial officer, hailed legislation that Governor Jeb Bush signed as a tremendous step toward making Florida’s communities safer from methamphetamine and meth labs and also reining in auto insurance fraud. Gallagher, who oversees two law enforcement agencies involved in these issues, pursued the legislation and said legislators are to be commended for taking these bold but necessary steps.

“Methamphetamine devastates families and communities, and this legislation will significantly bolster our ability to protect Floridians from this evil drug,” Gallagher said. “The anti-fraud legislation will allow us to continue an aggressive crackdown on auto fraud that already has led to increased arrests and jail time and reductions in premiums in the last three years. This legislation is a big win for the people of Florida.”

House Bill 1325, sponsored by Rep. Faye Culp and Sen. Carey Baker, authorizes the immediate removal of children found in methamphetamine labs, allows courts to withhold bond for meth manufacturers, and extends greater protections to emergency responders injured while responding to meth labs. House Bill 561, sponsored by Rep. David Rivera and Sen. J.D. Alexander, tightens the grip on fraud artists who steal from Florida’s hard-working families by staging or fabricating auto crashes and making fraudulent auto insurance claims.

The State Fire Marshal’s Office has responded to more than 50 meth lab fires and explosions in the last two years. And, in conjunction with the Multi-Jurisdictional Counter Drug Task Force, the State Fire Marshal’s Office has helped educate and prepare hundreds of Florida emergency responders to respond to the dangers these labs pose. More than 1,000 responders in 16 states, including Florida, have been injured responding to meth labs in the past five years, and nearly half of all children found in meth labs test positive for having the drug in their blood.

In addition to authorizing the Department of Children and Families to begin dependency proceedings for the immediate removal of children found at meth labs and allowing courts to hold meth producers without bail while awaiting trial, House Bill 561 enhances criminal penalties when firefighters or other emergency response personnel are injured or killed while responding to meth labs (third-degree felony if injured; second-degree felony if killed or severely injured) and prevents them from having life or health insurance canceled if they test positive for meth as a result of performing their jobs.

“The number of meth labs found in Florida has increased by 1,100 percent in five years,, and that means more children, first responders and communities are at risk,” Sen. Baker said. “We must do all we can to fight back against this insidious drug.”

Rep. Culp said the legislation builds on successful strategies already put in place by Gov. Bush and the Governor’s Office of Drug Control. “For those who still have not gotten the message that we don’t want meth in our state, they will know we mean business when they are left to sit behind bars.”

Senate Bill 1596 enhances penalties for the newest twists on auto insurance fraud – “phantom” and “paper” auto accidents that never actually occur – making either a second-degree felony punishable by a two-year minimum mandatory prison sentence.

Florida law requires drivers to carry a minimum of $10,000 in Personal Injury Protection (or PIP) coverage and $10,000 in property-damage liability coverage. Many auto insurance fraud cases involve unscrupulous lawyers, doctors and clinic owners who illegally bill for services covered by PIP, which provides coverage for medical bills from an auto accident, regardless of who is at fault.

Auto insurance fraud has been estimated to cost the average Florida family as much as $250 a year, but tough legislation passed in 2001 and 2003 in tandem with increased arrests and prosecutions have led to lower premiums in recent years.

"Fraud has driven up insurance rates for far too long. This legislation sends the message that fraud will no longer be tolerated," said Sen. Alexander. "Those who participate in auto insurance fraud will pay for their crimes."

Rep. Rivera said the legislation also will help fight insurance fraud by providing for a forfeiture fund to help finance ongoing investigations into PIP fraud.

“The work being done by the Division of Insurance Fraud and law enforcement agencies around the state to combat insurance fraud is commendable,” Rep. Rivera said. “As a result of aggressive investigations and prosecutions, auto insurance premiums are decreasing and that’s good news for Florida’s families.”

This corresponds with a 2003 law that established a two-year minimum sentence for anyone organizing or participating in an actual staged auto crash. The legislation also:

• Provides for revocation of the driver’s license of anyone convicted of auto insurance fraud.
• Makes 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 insurance fraud schemes.
• Requires medical clinics to post the state’s Fraud Fighters hotline and reward program information.
• Clarifies that kickbacks for patient referrals are illegal whether the patient is being referred to or from a medical clinic, and provides that patients themselves may be punished for soliciting kickbacks for their cooperation in fraudulent billing schemes against the insurer.

Gallagher has overseen the department’s Division of Insurance Fraud for the past five years, during which time the department has made more than 3,200 insurance fraud arrests including more than 1,000 PIP fraud arrests. The division has consistently led the nation’s insurance fraud bureaus in arrests and convictions. The new legislation becomes effective on July 1, 2006.


GALLAGHER URGES FLORIDIANS TO CELEBRATE SAFELY

Florida’s Chief Financial Officer and State Fire Marshal Tom Gallagher is urging Floridians to think about fire safety as they make their Fourth of July plans. In Florida, only sparklers are legal for the general public to use without a permit, so Gallagher said citizens who want to see fireworks should attend a professional show.

“The Fourth of July is a great time for families and friends to relax together and reflect on the freedoms we all enjoy,” Gallagher said. “But fireworks can be dangerous, especially to children, and for that reason items that launch or explode are illegal in Florida.”


For a list of hundreds of sparklers that are legal to use in Florida, as well as safety tips, visit the State Fire Marshal’s web site at www.MyFloridaCFO.com/sfm/.

Illegal fireworks include shells and mortars, multiple tube devices, Roman candles, rockets and firecrackers. Floridians should not sign “waivers” in order to purchase fireworks. Signing a waiver will not clear you of responsibility should you be caught using them, and using fireworks illegally is a first-degree misdemeanor punishable by up to one year in jail and a $1,000 fine. If you cause a fire or damage someone’s property, you could also be held personally liable.

Even with legal sparklers there is still a risk of injury. When lit, some sparklers can reach temperatures between 1,300 and 1,800 degrees, which is at least 200 degrees hotter than a standard butane lighter.

Illegal fireworks aren’t the only fire hazard facing Floridians looking to celebrate this weekend. Gallagher said grills and camp fires also can pose real risks.

The Consumer Product Safety Commission reports that each year about 30 people die and 100 people are injured as a result of charcoal and gas grill fires, explosions and misuse. Many of these fires and explosions occur when consumers first use a grill that has been left idle for a period of time or just after refilling and reattaching the grill's gas container.

State Fire Marshal Gallagher advises Floridians to follow these precautions to celebrate safely:

Sparklers

Use sparklers and other legal novelties on a flat, hard surface. Do not light them on grass.
Use sparklers in an open area. Keep children and pets at least 30 feet away from all ignited sparklers.
Light only one item at a time and never attempt to re-light a “dud.”
Don’t use any unwrapped items or items that may have been tampered with.
Keep a fire extinguisher or water hose on-hand for emergencies. It’s a good idea to drop used sparklers in a bucket of water.

Grills

Check the tubes that lead into the gas burner for any blockage from insects, spiders, or food grease. Use a pipe cleaner or wire to clear blockage.
Check for gas leaks, following the manufacturer's instructions, if you smell gas or when you reconnect the grill to the LP gas container. If you detect a leak, immediately turn off the gas and don't attempt to light the grill until the leak is fixed.
Check grill hoses for cracking, brittleness, holes, leaks or sharp bends.
Move gas hoses as far away as possible from hot surfaces and dripping hot grease. If you can't move the hoses, install a heat shield to protect them.
Never use a grill indoors. Use the grill at least 10 feet away from your house or any building.
Never burn charcoal inside of homes, vehicles, tents, or campers. Charcoal should never be used indoors, even if ventilation is provided.

NOTE: Gallagher also reminds Floridians to check the batteries in their smoke detectors.


CFO GALLAGHER RELEASES ANNUAL TOP 10 FRAUD LIST

2005-2006 Top 10 cases add up to nearly $15 million in losses

Tom Gallagher, Florida’s chief financial officer, released the Department of Financial Services’ annual Top 10 Fraud List summarizing 10 of the costliest or boldest securities, financial and insurance fraud scams investigated by the department’s Division of Insurance Fraud (DIF) and resulting in convictions in the fiscal year that began July 1, 2005, and ends June 30.  These 10 cases represent nearly $15 million in fraud.  The list is being released as part of Insurance Fraud Prevention Week in Florida, which continues through Saturday. 

 “The department is committed to tracking down and rooting out fraud to protect the citizens of Florida,” said Gallagher, who oversees the department and the DIF.  “We are proud that our enforcement efforts have led to lower auto and workers’ compensation premiums as well as higher rates of incarceration, and we will continue to aggressively pursue these criminals.”

Since last July 1, the department’s fraud division has made more than 740 arrests and won more than 560 convictions.   Convictions are up 70 percent over the previous year, and jail time is up more than 25 percent. Gallagher said that is due to hard-hitting investigations, stronger penalties, and two prosecutors dedicated to auto insurance fraud.   

The top 10 fraud cases show fraud is not only costly but also dangerous.  In one case six people died as a result of an Apalachicola doctor over-prescribing pain medications, and in another case post-hurricane construction workers were put to work without workers’ compensation coverage.  In other cases, disabled and elderly citizens were exploited.  The department offers up to $25,000 for information that directly leads to an arrest or conviction in a fraud scheme.  

The department also conducts public education campaigns, including “Verify Before You Buy,” that have been used as models by other states.  By logging on to www.MyFloridaCFO.com, consumers can verify state licensure of any agent, broker or company; file a complaint; read brochures on various topics from life insurance to viaticals; sign up for the CFO’s weekly consumer newsletter eViews, and get answers to financial questions based on their specific needs at either the Senior Resource Center or Your Money, Your Life.  Those without access to a computer can utilize the same services by calling the department’s toll-free consumer helpline at 1-800-342-2762.

The release of the annual Top 10 Fraud List follows the 15th annual Florida Insurance Fraud Education Council Conference (FIFEC) held last week in Orlando.   The department is a member of FIFEC and helped host the three-day event for hundreds of insurance fraud investigators and prosecutors.  During the conference, DIF Detective Michael Byrne was named FIFEC Investigator of the Year. 

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. 

The department’s 2005-2006 Top 10 Fraud List follows:

2005-2006 DEPARTMENT OF FINANCIAL SERVICES’ TOP 10 FRAUD LIST

First Do No Harm – Dr. Thomas Merrill of Magnolia Medical Clinic in Apalachicola was convicted in January of 98 felony counts stemming from his over-prescribing of controlled substances to patients, six of whom died of drug overdoses.   The drugs prescribed included Oxycontin, Xanax, hydrocodone, morphine, fentanyl, and oxycodone.  Merrill was found guilty of 18 counts of wire fraud, five counts of defrauding health care benefit programs -- including two counts that charged that death resulted from the violation -- and 75 counts of dispensing or distributing controlled substances -- including four counts that charged the deaths resulted from the use of drugs distributed by the defendant.  Sentencing is pending, but Merrill could be ordered to pay more than $1.5 million in restitution.   Detective Buddy Hand was the lead investigator.

Classic Ponzi Scheme – Two Palm Beach County men were each sentenced to 25 years in prison after they pleaded guilty to what detectives called a classic Ponzi scheme.  Thomas A. Masciarelli, 48, of Palm Beach Gardens and Steven P. Petrarca, 55, of Lake Worth each pleaded guilty this past March to racketeering (first-degree felony) before Circuit Court Judge Stephen Rapp, and in May the two were sentenced for defrauding more then 30 investors in Florida and Rhode Island.  Masciarelli and Petrarca convinced investors to invest in American Real Estate Investors, Inc., a company that purported to invest in local real estate.  Investors were promised a return of up to 9 percent.  The investigation found that Masciarelli and Petrarca never invested the money as promised and instead diverted $1.2 million for their own use.  Detective Ted Padich was the lead investigator.

Preying on the Elderly – A former insurance agent who organized an elaborate bait-and-switch scheme that systematically defrauded more than 1,200 South Florida seniors will spend 30 months in prison.  At his January sentencing, Brian Lee Shechtman, of Hollywood, was also sentenced to 15 years probation and was ordered to pay more than $1.4 million in restitution.   Shechtman’s scheme targeted senior citizens between the ages of 75 and 94 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.  There were multiple schemes at play and several of the victims had to dip into their life savings to pay medical bills that they thought were covered.  Some lost their homes.  Two of Shectmans’ cousins were also ordered to spend time in prison for their roles in the scheme.  Detective Troy Cail was the lead investigator.

Empty Promises – Two men who sold empty promises and bogus health insurance plans to tens of thousands of people in Florida and 43 other states can be assured themselves of one thing – they will spend time in prison.  The principals of TRG Marketing, LLC. – Carmelo Zanfei and William Paul Crouse – were sentenced last August to two years and four years in prison, respectively.  Zanfei and Crouse marketed a bogus health plan, claiming that the self-insured plan was exempt from the licensing and certification requirements of state law. The health plan was insufficiently funded and failed to pay millions of dollars of claims, resulting in financial devastation for the customers who believed they had valid health insurance.  In addition to their prison sentences, Zanfei and Crouse were ordered to serve 20 years probation and to jointly pay restitution of nearly $3 million and investigative costs.  Detective Anne Erwin was the lead investigator. 

A Friend Indeed – Charles “Gary” Cowden, of Sanford, is facing six to eight years in prison -- plenty of time to think about how he bilked a friend and several others out of more than $1 million.  The investigation began in early 2005 when the department received an allegation that he sold fictitious annuities, valued at $50,000, to a friend.  Cowden was arrested for grand theft and a search warrant was executed at his home office.  As a result of that search, he was charged with an additional count of grand theft and uttering a forged instrument stemming from the discovery that Cowden had sold other fictitious annuities in excess of $1 million.  Cowden pleaded guilty to numerous felony charges and will be sentenced in July.  Detective Neil McDonald was the lead investigator. 

Sing it from the Rooftop – A Louisiana roofing contractor who came to Florida to profit from hurricane-damaged homes in Central Florida didn’t do himself or his workers any favors.  Todd Woods, owner of A-1 Construction, presented certificates of liability insurance to a local roofing contractor, the City of St. Cloud, and Osceola County, but when it was discovered the coverage was valid only in Louisiana, Woods leased five employees – including himself – through two employee leasing companies. However, during a local television interview Woods said he had brought several hundred workers to Florida.  Woods was arrested for presenting false certificates of liability insurance (third-degree felony) and working without workers' compensation insurance (second-degree felony) and was ordered to participate in the Pre-Trial Diversion Program and pay a $10,000 fine and investigative costs.  Lt. Susan Alberti was the lead investigator. 

Trust Fund Tackle – Her boss trusted her with his mail, phone calls and business accounts, but clearly shouldn’t have.  Louanne Hickey used her access to steal more than $140,000 from accounts, and intercepted mail, telephone calls, notices, and information from banks intended to notify her boss John Galletta Jr., an attorney in St. Johns County, of the matter.  Hickey was convicted of second-degree grand theft and was sentenced to 10 years probation, with the first three years to be served on community control, and was also ordered to pay $42,000 in restitution.   Detective Ronald Caroll was the lead investigator.  

A ‘Churning’ Sensation – Tampa Insurance Agent Herman Roger Letchworth III “churned” up a big mess for himself.  Churning is the industry term for an agent selling or creating a new policy only to earn the commission.  Letchworth churned up thousands of dollars in fraudulent commissions for himself by pilfering money from existing customers’ policy premiums and falsifying life insurance applications for nearly 60 customers in Pinellas and Hillsborough counties.  During the DIF investigation, Letchworth admitted he changed names, dates of births, addresses and telephone numbers of customers to generate new applications for life insurance policies.   Last September, Letchworth was convicted in Pinellas County of insurance fraud and ordered to pay $81,000 in restitution.  Detective Michael Byrne was the lead investigator.

 A Cash Infusion – DIF Detective James Kappel received a tip that Michael Andre Griffin, of Tampa, was approaching patients at St. Anthony’s Out-Patient Clinic and offering $100 a week and grocery coupons to seek HIV-infusion treatment at North Tampa Medical Center.  Detective Kappel went to the clinic and was approached by Griffin, who offered the detective $100 a week and a $50 Kash and Karry credit card if he agreed to get the treatments.  Later, in a telephone call, both Detective Kappel and DIF Detective John Womer were solicited to get the treatments and a $30 massage three times a week was added to the offer.  Using a DIF vehicle equipped with audio and video recording devices, the detectives met with Griffin and were again solicited.  Last October, Griffin pleaded guilty to patient brokering and was sentenced to 151 days in county jail.  Griffin provided information that led to additional arrests by the Federal Bureau of Investigations and the Federal Department of Health and Human Services for $6 million in fraudulent Medicare and insurance billings.   

Double Rip-Off – A dozen individuals have pleaded guilty to purchasing the identities of unsuspecting customers at a Miami auto dealership and using the information to create driver licenses for imposters to present at area clinics for treatment of alleged injuries from auto crashes.  The crashes occurred on paper only and the ringleader was paid cash by several personal injury clinics for “patients.”  The insurance companies quickly learned that there had been no real crashes involving their insureds and no payments were made. Ultimately the clinics were also being bamboozled since they would not have paid in advance for these imposters if they were not going to be able to collect from the insurance companies.  In effect, the ring was only interested in pocketing the brokering fees for the imposter patients, knowing full well that follow-up visits could never occur, since the patients were imposters.  A sales associate at the auto lot suspected to be the conduit for the stolen identities was arrested on unrelated charges of transacting insurance without a license and possession of cocaine.  As a result of this investigation, 14 individuals have been arrested and 12 have pleaded guilty.  Detective Jerry Brown was the lead investigator.


Consumer Services HelpLine (800) 342-2762