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

Volume 1, Number 20, May 17, 2004

Monday, May 17, 2004, is the 50th anniversary of Brown vs. the Board of Education, the landmark Supreme Court decision which led to the desegregation of the nation’s public schools. America has come a long way in the five decades since the nation's highest court struck down the ''separate but equal'' doctrine, long used to justify a two-tiered system of education.

Yet work remains for the goal of equal educational opportunity for all Floridians. One step toward this goal is school choice, where Florida is a leader in the nation in its range of opportunities. It’s my hope that our school choice and voucher programs, along with our public schools, continue to grow in the quality of educational experience for each and every student.

Florida’s voucher programs now serve an estimated 24,000 children and empower parents to pursue high-quality educational opportunities. For these vital programs, financial accountability is crucial to their continued success. I firmly believe that just as we hold Florida’s students to high standards, we must also hold government to the same standards.

On another topic of interest to Floridians, I applaud the Governor’s push to make Florida a leader in offering small employers and their employees access to tax-advantaged health savings accounts (HSAs) and health reimbursement arrangements (HRAs). These accounts will help Floridians pay for out-of-pocket health costs with pre-tax dollars and empower them to make wise financial decisions about their medical care.

In addition to offering another option for Floridians seeking health care coverage, these accounts will be attractive to young, healthy individuals who so often choose to go without insurance and will help lower overall costs in the market.

I look forward to partnering with Governor Bush and Lieutenant Governor Jennings to promote expanded access to these accounts around the state.

                                                                                                              -- Tom Gallagher


OWNERS OF INSOLVENT INSURANCE COMPANY CHARGED WITH THEFT, RACKETEERING AND CONSPIRACY

Florida’s Chief Financial Officer Tom Gallagher announced that four officers of the former Miami-based Aries Insurance Company have been charged with diverting more than $60 million from the company. Aries was ordered into liquidation in 2002.

Aries wrote personal and commercial auto and property coverage, as well as workers’ compensation coverage, and had about 70,000 policyholders when it was taken into receivership. Investigators with the Department of Financial Services, Division of Insurance Fraud, said Marcos Fraynd, sons Paul and Saul, and daughter Fanny Fraynd willfully misrepresented the company’s 2001 financial statement to cover up the theft.

“This conduct has cost Florida’s taxpayers more than $100 million as state guaranty funds have had to step in to cover outstanding claims and return premiums to policyholders,” Gallagher said. “I am grateful to the investigators and the Office of Statewide Prosecution for persevering in following this money trail and bringing these charges to fruition.”

Aries owner Marcos Fraynd and sons Paul, who served as president, and Saul, who served as secretary, are each charged with racketeering and conspiracy to commit racketeering. The elder Fraynd also is charged with three counts of first-degree grand theft, Paul is charged with four counts and Saul is charged with two counts. Bond for the three men is set at $1 million each. Fanny Fraynd, who served as the company’s treasurer, is charged with 10 counts of filing of false and misleading financial statements. Her bond is set at $50,000. Fanny and Saul Fraynd are expecting to surrender tomorrow. Marcos and Paul Fraynd are still being sought.

The Fraynds diverted the money through various family companies, investigators said. The principle companies involved were Aries and Onyx Underwriters Incorporated, which acted as the managing general agent for Aries. Other companies were Onyx Insurance Group Incorporated, Onyx Capital Corporation, Omega Finance Corporation, and All Florida Auto Parts Incorporated.

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. To report suspected insurance fraud, 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 a conviction.


NEW YORKER SENTENCED FOR FAKING THE IDENTITIES OF FLORIDIANS FOR CASH

Florida Chief Financial Officer Tom Gallagher announced that New York resident, Vincent Gaines, Jr., was sentenced in federal court to nearly six years in prison and ordered to pay $98,000 in restitution after faking the identities of at least three Floridians in order to collect nearly $200,000 in unclaimed cash being held by the state.

The sentence follows a joint investigation by the Florida Department of Financial Services’ (DFS) Office of Fiscal Integrity and the U.S. Postal Inspection Service. Gaines, 35, of Queens, NY, falsified the driver’s license information and social security card of a Florida man in an attempt to collect nearly $98,000 from the Bureau of Unclaimed Property, also part of DFS. After investigators detected the scam, it was discovered he had already collected $98,000 in unclaimed property by falsifying the identity of a Florida couple.

According to investigators, Gaines targeted individuals by searching through state records of Floridians whose unclaimed property was being held by the state. Gaines then submitted several claim forms with false information to the bureau. After obtaining a payment of $98,000 based on a claim he submitted for a Florida couple, Gaines then went to T.D. Waterhouse, an investment firm, and used the couple's dates of birth and social security numbers to open an investment account, into which he deposited the money.

Gaines was subsequently arrested at a commercial mail-receiving agency in Ridgewood, NY, last November. Approximately $67,000 of the funds were frozen upon his arrest. On February 9, 2004, Gaines pleaded guilty to four counts of mail fraud. All three Floridians have since received their unclaimed cash from the state.

“We have returned approximately $84 million in the last year to property owners,” said Gallagher, who oversees DFS. “This is an unusual case but reminds us to be diligent in reviewing the claims submitted to us and take extra precautions to ensure that property is returned to the rightful owner.”

The Bureau of Unclaimed Property holds cash or property that has been lost or abandoned by Floridians and is currently holding more than $1 billion in unclaimed property. Individuals may claim cash or property belonging to them at any time and at no cost. Floridians can search the online database of unclaimed property at www.fltreasurehunt.com or call 1-88-VALUABLE.

Floridians should report fraud or abuse involving state funds to the Department of Financial Services by calling 1-800-GET-LEAN (1-800-438-5326).


WOMAN CHARGED WITH SELLING PHONY INSURANCE CARDS
 

Florida’s Chief Financial Officer Tom Gallagher announced the arrest of a woman who sold phony motor vehicle insurance cards to an undercover insurance fraud investigator with the Department of Financial Services.

Tia L. Brown, 36, owner of T.N.T. Tag & Title, located at 665 SW 27th Ave., sold the investigator two fraudulent motor vehicle insurance cards for $50.  She is charged with creating, marketing or presenting a false or fraudulent motor vehicle insurance card, a third-degree felony.

“The sale of phony insurance cards is a growing and serious problem,” Gallagher said.  “Drivers who buy and use these fake cards put themselves and everyone on the road at risk because if they have an accident they will have no coverage.”

The undercover investigator met with Brown in her office, where she allegedly generated the fraudulent cards on her office computer, listing the carrier as United Auto Insurance Company.  A check with United Auto showed no policy with the number or policyholder name listed by Brown. 

If convicted, Brown faces up to 10 years in prison. She was booked into the Broward County Jail on a $10,000 bond.

The Department of Financial Services, Division of Insurance Fraud, investigates fraud in all types of insurance, including health, life, auto, property and workers’ compensation.  Anyone with information about this case or other possible insurance fraud 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 a conviction.


 

TEENS ARRESTED FOR MULTIPLE ARSONS

Three teens have been arrested after confessing to setting several fires in the Ft. Myers Shores area. The arrests come after Chief Financial Officer and State Fire Marshal Tom Gallagher issued a warning to parents to be on guard against juvenile arson as the summer months approach.

“Arson has the highest rate of juvenile involvement of all other serious crimes,” Gallagher said. “Given the chance, children will play with fire, and most fire deaths involve children. These are preventable occurrences that can be stopped with education and information.”

Gallagher issued the warning during Arson Awareness Week last week. Florida is one of seven states participating in a new Juvenile Firesetting Intervention and Prevention Project. The Florida project is being coordinated by the State Fire Marshal’s Office with funding from the Office of Juvenile Justice and Delinquency Prevention.

The arrested teens, identified as Richard Shambaugh and Christopher Smith, both 15, and Andrew Smith, 13, confessed to setting at least eight fires in the Ft. Myers Shores area during the previous two months. The youths set fire to numerous structures, including a mailbox, two vehicles, a dumpster, two portable toilets and a business, investigators said. The loss to the business alone, Estate Treasures, is estimated at nearly $200,000.

The investigation, conducted jointly by the State Fire Marshal’s Office and the Lee County Sheriff’s Office, began Tuesday when the teens confessed to stealing and killing two ducks and then placing them into a portable toilet and setting it ablaze with the ducks inside.

The teens are charged with several crimes, including arson, theft, cruelty to animals, and criminal mischief. The investigation continues to determine if the youths were involved in any other fires in the area.

The Bureau of Fire and Arson Investigations is the law enforcement branch of the Division of State Fire Marshal that assists other state and local fire and law enforcement agencies in the investigation of fires of suspicious origin.

Anyone with information regarding this or any suspicious fire can call the Bureau of Fire & Arson Investigations at (239-278-7525) 24 hours a day. Information may also be mailed to the Bureau of Fire and Arson Investigations, 4700 Terminal Drive, Suite 4, Ft. Myers, Florida, 33907. Up to a $2,500 reward is offered for information leading to an arrest.


MIAMI COUPLE CHARGED WITH FRAUD, GRAND THEFT
Investigators say husband faked injury

A husband and wife are facing insurance fraud and grand theft charges after a Department of Financial Services’ investigation revealed that the husband faked a serious mental injury from an on-the-job accident.

FCCI Insurance Group’s Special Investigative Unit referred the claim to the department’s Division of Insurance Fraud when company investigators said they saw Ismael Vasquez , 64, driving and shopping alone. In a November 2002 deposition, Vasquez appeared to be in a stupor and his wife, Maria Sansivirini, testified that he was totally dependent on her.

“Workers’ compensation fraud wreaks havoc with Florida’s economy,” said Florida’s Chief Financial Officer Tom Gallagher, who oversees the Department of Financial Services. “Employers struggle with the higher costs of insurance, workers suffer when employers may be forced to cut jobs or benefits, and we all pay through higher costs for goods and services.” 

Vasquez claimed he was injured in July 1999 at Metal Tech, Inc., in Hialeah, when a large metal tube fell on his head. He said he injured his head and left eye and was left with mental and cognitive impairments. To date, FCCI Insurance Group has paid the couple more than $70,000 in workers’ compensation insurance benefits.

In addition to workers’ compensation fraud and grand theft, Sansivirini is also charged with perjury. If convicted on all of the charges, each could face as much as 30 years in prison.

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 a conviction.                               


MAN ARRESTED FOR SELLING FAKE INSURANCE CARDS

A man has been charged with selling fraudulent motor vehicle insurance cards to nearly 200 South Florida drivers, at least a dozen of whom are now facing charges for using the fake cards, Florida’s Chief Financial Officer Tom Gallagher announced today.

Howard M. McKinon, 57, of 481 W 30th St., Riviera Beach, was arrested last night on 14 counts of marketing a false or fraudulent motor vehicle insurance card and one count of organized scheme to defraud. If convicted on all of the charges, he could face up to 75 years in prison. The charges stem from an investigation by the Department of Financial Services, Division of Insurance Fraud. McKinon was booked into the Palm Beach County Jail. The Palm Beach County State Attorney’s Office is prosecuting the charges.

“This individual may have put countless citizens at risk as these drivers were driving uninsured,” said Gallagher, who oversees the Department of Financial Services. “We intend to send a strong message that we will not tolerate anyone putting citizens at such risk.”  

Last year, the Florida Legislature made it a third-degree felony to create, market or present a false or fraudulent motor vehicle insurance card.

State fraud investigators determined that McKinon issued at least 196 cards, most of them to drivers in West Palm Beach and Riviera Beach. Others were traced to Boynton Beach, Jupiter, Palm Beach Gardens, Belle Glade, Delray Beach, Lake Worth, Wellington, Palm Springs, Lake Park, and Mangonia Park.

The investigation was initiated in January after state investigators were contacted by the Palm Beach County Tax Collector’s Office. An alert clerk became suspicious of a Progressive Insurance card purporting the minimum statutory levels of Personal Injury Protection and Property Damage coverage.

Working with Progressive Insurance Company’s Special Investigative Unit, state investigators determined that the insurance cards were forgeries and that the coverage did not exist. Working with the Palm Beach County Tax Collector’s Office, they determined all of the suspicious cards had the same policy number, with different personal and vehicle information typed on them.

Investigators then turned to the Department of Highway Safety and Motor Vehicle (DHSMV) Bureau of Financial Responsibility to determine how many cars had been registered with the bogus policy number.

Consumers should buy coverage from a licensed insurance agent. To check licensure of an insurance agent or company, log on to www.MyFloridaCFO.com or call the department’s Consumer Helpline at 1-800-342-2762.

The Department of Financial Services, Division of Insurance Fraud, investigates fraud in all lines of 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 a conviction.


WEST PALM BEACH MAN ARRESTED FOR STEALING ONE HALF-MILLION DOLLARS IN STATE FUNDS

Florida Chief Financial Officer Tom Gallagher announced the arrest of a West Palm Beach resident for stealing more than a half-million dollars in state funds for personal use.

Thomas Edward Kinsey, age 61, was arrested today by investigators with the state Department of Financial Services, and charged with felony grand theft in the first degree. If convicted, Kinsey faces up to 30 years in prison and a $10,000 fine. Kinsey was booked into the Palm Beach County Jail.

“Stealing taxpayer dollars for personal gain is unconscionable and warrants swift and severe action by state prosecutors,” said Gallagher, who oversees the Department of Financial Services.

The investigation, conducted by the department’s Office of Fiscal Integrity, revealed that Kinsey, President and Chairman of the Board for Florida Development Enterprises Corporation (FDEC), was awarded a $1.9 million grant from the Florida Department of Elder Affairs (DOEA). The grant required Kinsey to combine state funds with private funds to build an assisted-living facility for elderly, low-income residents in West Palm Beach. Phase I of the grant, in the amount of $1.3 million, was to be used for various preconstruction activities. Phase II of the grant, in the amount of $600,000, was to be used for construction-related activities.

Investigators found that Kinsey obtained Phase II funds by misrepresenting to the DOEA his intended use of the funds. On the day Kinsey received $600,000, he deposited it into his FDEC bank account and immediately transferred $500,000 to a personal bank account in his and his spouse’s name. Kinsey continued to make transfers between the accounts and wrote numerous checks to himself and to other entities or persons for his private business and personal expenses until the funds were exhausted. None of the funds were spent in the manner he represented to the DOEA, and no facility was ever built.

“This atrocious conduct was especially unfair to our elderly, low-income citizens who were the intended beneficiaries of the assisted living facility,” said Gallagher.

Attorney General Crist’s Office of Statewide Prosecution and Fifteenth Judicial Circuit State Attorney Barry Krischer will prosecute the case.

Floridians should report fraud or abuse involving state funds to the Department of Financial Services by calling 1-800-GET-LEAN (1-800-438-5326.)


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