Consumer eViews

Volume 2, Number 12, March 21, 2005    

It’s been over six months since five storms devastated our state, damaging one out of every five homes. Floridians, who responsibly paid their premiums on time, expect their claims to be settled and paid so they can start to rebuild their homes.  I expect insurance companies to step up to the plate and resolve their outstanding claims. 

To help accomplish this, I called for an emergency rule to expedite the resolution of open claims from last year’s tropical storm and four hurricanes.  The Governor and the Cabinet approved it last Thursday.

I pursued this rule after hearing from over two thousand people at hurricane recovery town hall meetings around the state.   

Under the emergency rule, insurers must settle and pay all outstanding personal residential claims and commercial residential claims resulting from Hurricanes Charley, Frances, Ivan or Jeanne and Tropical Storm Bonnie no later than April 18, 2005.  Claims not settled and paid by that date must be reported to the Florida Office of Insurance Regulation by April 28, 2005.  The report must contain the policyholder’s name, policy and claim number, and a detailed explanation of why the claim has not been settled and paid.   

The rule mandates that outstanding claims be settled within the next 30 days unless the claim is being litigated, is awaiting mediation, or has been recently opened and loss estimates have not been received. 

My goal is that this rule will prompt final action on outstanding claims and ensure that Floridians devastated from the storms can finish rebuilding before hurricane season starts June 1st.


                      -- Tom Gallagher


Florida’s Chief Financial Officer Tom Gallagher will hold a town hall meeting Saturday, April 2, from 9 a.m.-noon in the Lincoln Park Academy Auditorium for Treasure Coast residents who may have continuing concerns with their insurance companies regarding hurricane damage claims and recovery. This town hall meeting is the fifth in a series of seven that Gallagher is holding around the state.

Consumer specialists will be on hand to provide individual assistance to policyholders. For more information, interested consumers can contact 1-800-22-STORM.  

CFO Tom Gallagher Town Hall Meeting
Saturday, April 2nd, 9 a.m. to noon
Lincoln Park Academy Auditorium
1806 Avenue I, Fort Pierce, FL 34950

On Thursday, April 7, a town hall meeting will be held in the Jupiter/Palm Beach Gardens area with the time and location to be announced.

On Saturday, April 9, a Lakeland-Bartow area town hall meeting will be held from 9 a.m. to noon with the location to be announced.


Organized under the leadership of Chief Financial Officer Tom Gallagher, members of Florida’s fire service responsible for fire code enforcement and emergency response attended a seminar held on March 2, 2005, at the Florida State Fire College. The seminar detailed the impact that the “hydrogen economy” will have on local and state agencies.

The session featured national experts on hydrogen-related subjects from BP Petroleum, Ford Motor Company, Plug Power (a fuel cell manufacturer), Stuart Energy, ChevronTexaco, Air Products, and NASA. Additionally, representatives from the Florida Department of Environmental Protection (DEP), the state agency with responsibility for the hydrogen initiative, outlined the state program.  Jim Goodloe, Bureau Chief of Fire Prevention for the Division of State Fire Marshal, discussed statewide fire-code issues related to this subject.  

Florida’s Hydrogen initiative, known as “H2 Florida”, is a statewide program to accelerate the commercialization of hydrogen technologies. H2 Florida was launched to spur investment in Florida’s economy, increase economic security, reduce reliance on foreign oil and maintain Florida’s clean air.  H2 Florida also partners the state of Florida with industry, local governments and universities to showcase hydrogen technologies and educate consumers on the newest hi-tech approach to clean, sustainable energy.

The impact on the Florida fire service is clearly apparent. The unique properties of hydrogen present many new challenges. Fire codes governing the construction of hydrogen fueling stations, stationary fuel cell sites, and hydrogen storage facilities must be promulgated by the State Fire Marshal, incorporated into the Florida Fire Prevention Code, and ultimately enforced by local fire officials. Additionally, fire service (and other) response agencies must be trained to respond to incidents involving these facilities, and to incidents involving hydrogen-fueled vehicles.

This session was just the first of many that will be organized in the future. The State Fire Marshal will be working with DEP and other organizations represented at the session to develop a standardized curriculum on emergency response for fire service agencies, and intends to conduct "train-the-trainer" sessions to ensure widespread offerings of the program.  Additionally, training programs on portions of the fire code related to hydrogen will be forthcoming.

As this moves forward, information on State Fire Marshal initiatives will be distributed to all fire service agencies. For additional information on “H2 Florida”, visit the DEP website: .


Lenders in Orange, Broward and Palm Beach Counties defrauded of over $3 million 

Florida’s Chief Financial Officer Tom Gallagher announced the arrests of three people suspected of falsely obtaining mortgage loans to purchase high-end properties in Orange, Broward and Palm Beach Counties.  Patricia C. Grant, Edgar Grant, and Geisha Morris were arrested yesterday for allegedly falsifying documents to obtain mortgage loans.   

Patricia Grant, the ringleader of the scam, filed false W-2 forms, fraudulent bank statements, HUD -1 settlement statements, employment forms, and other documents in order to obtain mortgage loans and purchase expensive homes.

 “The victims of crimes like this are not just the companies that are targeted,” said Gallagher, “we all pay higher costs because of these rip-offs.  I commend the Office of Financial Regulation for their great work in bringing these three to justice, in particular I want to congratulate investigator Mary DiFabbio for her part in these arrests.”  The Office of Financial Regulation falls under the Florida Department of Financial Services.

As part of the scheme, Grant and her associates falsified documents for borrowers stating inflated earnings as employees of companies she owned.  This enabled the borrowers to qualify for mortgage loans for very pricey houses.  Grant and/or her family members lived in some of these properties, others were rented by Grant and the rental payments were made to her, not the owners of the properties.  Many of these mortgage loans were not paid and have been foreclosed or are in the foreclosure process.   

The three face charges of racketeering, conspiracy to commit racketeering, organized fraud, grand theft, and mortgage fraud.  Bond for each was set at $1,000,000. 


Sky-high returns are probably too good to be true

Most people recognize the name Charles Ponzi and associate him with a type of financial fraud called a Ponzi scheme.  Here is a history of Ponzi and his investment scheme.

Carlo "Charles" Ponzi was born in Italy in 1882 and lived there until age 21, when he hitched a ride to America on a steamship to fulfill his dreams of riches and fame. Ponzi learned English and worked in a New York restaurant where he was reportedly fired for short-changing bills.

In 1907, Ponzi became an assistant teller at an international bank in Montreal and started forging customers' names on checks and stealing the money. Convicted of forgery, Ponzi went to prison in 1908 under the alias Charles Bianchi.

After his release, Ponzi returned to the United States and made his way to Boston. Hired as a clerk for an import-export firm, he became familiar with an instrument that would be the basis for his investment scam - international postal reply coupons.

An International Postal Congress in 1907 started issuing postal reply coupons that could be redeemed for postage stamps in participating countries. Americans could buy coupons and mail them to friends and relatives in Europe, who would redeem them for stamps in their own country that could be used on envelopes sent back to America. The only hitch was the cost of these coupons varied from country to country based upon the economy and exchange rates.

Ponzi discovered that a postal coupon bought in a European country for the equivalent of one penny could be redeemed at a U.S. post office for the equivalent of six 1-cent stamps. Given this exchange rate, he figured one could buy large numbers of coupons in Europe and redeem them in America for much more. Ponzi calculated a 200-percent profit on each transaction and believed he could pyramid this profit into millions of dollars. Unfortunately, he had no money and decided to tap the investing public.

Ponzi established the Securities Exchange Company and a few daring Bostonians loaned him money. In return, Ponzi issued company promissory notes which guaranteed a return of 50-percent to 100-percent interest in 45 to 90 days. At the time, banks were paying 4- to 5- percent on savings deposits. When the notes came due, Ponzi paid huge returns as promised.

Word spread quickly, investors lined up in the street, and soon more than 1,000 investors had bought Ponzi's notes, including policemen, priests, mothers and blue-collar workers. It worked for a while as Ponzi used the money from new investors to pay off his earlier obligations - the age-old pyramid scheme. 

As the company prospered, so did Ponzi, buying a 20-room house with air conditioning, heat and a heated pool - luxuries at the time. A chauffeur-driven car, tailored suits and a gold-handled walking stick caught the attention of local media and astute citizens who questioned his ability to pay such outrageous rates of return. Ponzi's bubble popped as the local district attorney started an investigation and reporters began snooping into Ponzi's past and uncovered his criminal record.

Investors swarmed Ponzi's offices, demanding their money back but the business was insolvent with a deficit of millions. Ponzi had bought just a few postal coupons and the investment opportunity was a scam.

Ponzi eventually pleaded guilty to using the mail to defraud and was sentenced to five years in federal prison. Convicted of theft charges in Massachusetts, he disappeared on appeal and turned  up in the great state of Florida.  Under the assumed name of Charles Borelli, Ponzi was involved in a pyramid land scheme, purchasing land at $16 an acre, subdividing it into twenty-three lots, and selling each lot off at $10 a piece.  He promised all investors that their initial $10 investment would translate into $5,300,000 in just two years, but not telling them that much of the land was underwater and absolutely worthless.

Ponzi was indicted for fraud and sentenced to one year in a Florida prison. 

Deported to Italy, Ponzi eventually settled in Brazil. He died a pauper in a charity ward in 1949, but Ponzi’s scheme lives on. Today's swindlers continue to fleece investors who fall for false visions of grandeur. The next time you're offered a deal that sounds too good to be true, be careful. It may be a Ponzi scheme.

Consumer Services HelpLine
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