Consumer eViews

Volume 2, Number 14, April 4, 2005    

The world witnessed the passing of a towering figure this past week. A spiritual leader to more than a billion faithful, Pope John Paul II will be remembered as one of the unsung heroes in bringing freedom to those countries behind the iron curtain during the Cold War and as a beloved agent for good in the modern world.

As the pontiff lay in state at the Vatican, leaders and worshippers from all faiths quietly remembered the pope who fought for the good of humanity and tirelessly worked for peace in the world.

Pope John Paul will be buried in St. Peter's Basilica this Friday, April 8, at 10 a.m.  The funeral is expected to draw as many as two million mourners to the Vatican, all driven by the charisma of the Pope who took his message to more nations than any other pontiff over the ages.  President Bush will be among nearly 200 world leaders to attend.

"It is love which converts hearts and gives peace," Pope John Paul wrote in his final service. "Lord, who with your death and Resurrection revealed the love of the Father, we believe in you and with faith we repeat to you today: 'Jesus I trust in you, have pity on us and on the entire world.' "

He will be missed, but we will not forget his lessons.


                      -- Tom Gallagher


Florida’s Chief Financial Officer Tom Gallagher and State Representative Dean Cannon joined to urge support for legislation that would increase penalties for filing fraudulent auto crash reports that can be used to bilk insurance companies, strengthen consumers’ rights to sue operators of unauthorized insurance entities and enhance criminal charges for workers’ compensation fraud.  

Cannon, R-Winter Park, and Sen. J.D. Alexander, R-Lake Wales, are sponsoring companion bills.  Senate Bill 2330 is scheduled to be heard Tuesday by the Senate Banking and Insurance Committee, and House Bill 967 is expected to be heard Wednesday by the House Insurance Committee.

The proposed legislation would impose a two-year minimum mandatory prison sentence for filing any police report on a fabricated auto accident.  It also would require medical clinics to post the department’s Fraud Buster hotline number and reward program information. 

Florida drivers are required by law to carry at least $10,000 in Personal Injury Protection (PIP) coverage, in addition to $10,000 in property damage liability coverage.

“This coverage is intended to protect our citizens by ensuring immediate access to medical care, and ensuring that hospitals – where most legitimate accident victims seek care – are reimbursed,” said Gallagher. “Instead, fake medical clinics are springing up for the sole purpose of fraudulently billing insurance companies.   We have to stop that and need the help of every law-abiding Floridian to do that.” 

“Floridians are getting hit head-on with higher premiums and costs due to insurance fraud,” said Cannon.  “Insurance fraud has a direct financial impact on hard-working Floridians, and the legislation we are proposing would go a long way toward stopping these schemes.” 

In 2003, the Legislature enacted some of the strongest laws against PIP fraud.  That legislation provided a two-year minimum mandatory prison sentence for planning, assisting or participating in the staging of an auto accident or soliciting patients for the purpose of filing fraudulent insurance claims.  

Tougher sentences are the result of the laws imposed in 2003. More convictions are the result of Florida’s first dedicated PIP fraud prosecutor, Nina Vivenzio, whose position is funded through the Florida Automobile Joint Underwriting Association and the Miami-Dade State Prosecutors Office.

In the last five years, the Department of Financial Services’ fraud division, which Gallagher oversees, has arrested more than 900 individuals associated with more than $25 million in PIP fraud, and more than 70 are facing or serving the minimum prison sentence.           

Alexander and Cannon’s proposed legislation also would clarify Floridians’ right to sue the operators of bogus insurance operations.  There is no guaranty fund to cover unpaid claims should an unauthorized insurance company become insolvent.  

Since 2001, the department has taken action against more than 200 unlicensed entities and agents for selling fake insurance to thousands of Floridians, who were left with more than $18 million in unpaid claims.   

The legislation also would enhance criminal charges that can be brought against employers who do not provide workers’ compensation coverage, which is required in Florida for employers with four or more workers.  It would make it a first-degree felony if an employer does not provide the coverage and an employee is killed on the job.  It would be a second-degree felony if an employer does not provide the coverage and an employee is hospitalized with an on-the-job injury.    

Some 1,800 Florida employers last fiscal year were fined or criminally charged for not providing insurance coverage on more than 13,000 workers.  Two workers were killed in a construction accident last July on a Hobe Sound work site, and their employer had no coverage.  The employer was charged with a third-degree felony and fined $2.4 million.    

“Insurance fraud not only is a drain on our economy, it also is a public safety concern,” Gallagher said.  “We have people on our roads looking to have accidents, we have Floridians being sold bogus insurance plans, and we have workers who may not have access to appropriate medical care if they are hurt on the job.  I urge legislators to join us in support of this legislation.”


Arlene Kaplan, a resident of Ft. Lauderdale getting ready to retire, lost more than $15,000 of her life savings after investing in the nation’s largest viatical settlement provider, Mutual Benefits Corporation, which was shut down last May by both state and federal regulators and is now being charged with investor fraud and racketeering.  Kaplan’s 85-year old mother was also bilked out of $20,000 by the same company.

Patrick Burke, a retired Army Lt. Colonel from Pensacola, was swindled out of $65, 000 by Lifetime Capital Inc., whose principals were convicted just last month of two dozen charges ranging from money laundering to mail fraud.  More than $120 million was misappropriated in this case.

Viatical providers, like Mutual Benefits and Lifetime Capital, buy life insurance policies for less than the face value and resell them to investors who seek to make money upon the insured’s death. By selling a policy for a percentage of its face value, the insured can get cash now for medical, living or other expenses. The tradeoff is giving up a bigger payoff at death for one’s beneficiaries.

Arlene Kaplan, Patrick Burke and countless others who have lost millions of dollars by unwittingly investing in fraudulent viatical settlements are the reason that Florida’s Chief Financial Officer Tom Gallagher is pushing for legislation for stricter regulation of viatical settlements.  

The legislation, House Bill 1437 by Rep. Dudley Goodlette and Senate Bill 2412 by Sen. Rudy Garcia, would require investments in viatical settlements to be regulated as a “security.” For investors, this would mean access to company information, any promises made to investors would have to be documented and approved by state regulators, and a determination of the investment’s suitability would have to be considered, including the purchaser’s financial and tax status, and the purchaser’s investment objectives.  The legislation would also require the broker and sales agent selling viaticals to be licensed.

 “Hundreds of Floridians who have invested their hard-earned money – sometimes their entire life savings – in viaticals have been financially devastated because of outright fraud or inadequate disclosures,” said Gallagher.  “Fraud will flourish in this industry if unethical companies aren’t stopped. We need to take aggressive steps to protect investors.

Gallagher warned that the viatical industry is now targeting seniors who may be willing to sell their life insurance policies to investors at a discount. The potential loss to investors since 1996 is as much as $2 billion. The average age of the investor defrauded is 70 years old and the average loss is $40,000.

Currently, 46 states regulate viaticals as securities. 


Florida’s Chief Financial Officer Tom Gallagher raised concerns with confusing policy language and recommended solutions for helping consumers navigate through their homeowners insurance policies and storm claims.   Gallagher also said he is turning over consumer complaints he has received on confusing policy language to the Office of Insurance Regulation for further review.

“Storm victims are dealing with a number of pressures – financial, family, work and more.  My goal is to alleviate some of the pressure by helping storm victims recover the insurance money due them to pay for losses,” said Gallagher.  “And to make sure there is no pattern of miscommunication to storm victims, I am turning over our consumer complaints to the Office of Insurance Regulation for further review.”

One such confusing situation deals with depreciation holdbacks. Gallagher said that Florida homeowners insurance policies contain a provision that entitles the policyholder to the full replacement cost for their home and contents without any depreciation for materials used.  But insurers can impose a holdback provision and initially pay a fractional or actual cash value amount, but they must explain the procedure for recovering the remainder of the costs of the loss. 

Homeowners who have replacement cost coverage will get the amount of money it costs to complete their repairs or to replace destroyed contents – minus what is referred to as recoverable depreciation.  If a homeowner did not refuse this coverage - in writing - when the policy was purchased, then the replacement cost coverage is automatically included. 

Last week Gallagher met with Milton and Denise Phillips at their home in Lakeland, which was devastated by two hurricanes.  “I was able to explain the process the Phillips would have to go through to rebuild their home, because even after all these months they were still having trouble getting their claim finalized and their home rebuilt,” said Gallagher.

Gallagher said he is exploring solutions to discourage insurance companies from holding back too much money or for too long by requiring the insurer to pay interest on the holdback.  Gallagher said he would also like to see insurers, every six months, re-contact policyholders entitled to recoverable depreciation but who have not applied for it.

Gallagher also pointed to a provision in Florida homeowners policies that requires policyholders to notify their insurers that all repairs and replacement of property be submitted and finalized within 180 days to qualify for payment. Unfortunately, some Floridians have received correspondence from their insurers that refers to this deadline and believe they must make all repairs and purchase new contents within this timeframe.

To make his point, Gallagher displayed correspondence from Mr. Robert Hoke, of Perdido Key, which showed a message from an adjuster saying Mr. Hoke had 180 days to purchase his lost contents if he wanted to receive recoverable depreciation.  However, Mr. Hoke’s condominium probably won’t be rebuilt for two to three years.

“Because of the incredible widespread damage caused by last year’s storms and the amount of time it has taken to settle all claims we do not expect this deadline to be enforced,” said Gallagher.  “But if someone is threatened with such a deadline, I want to hear about it.” 

Gallagher reminded policyholders that they need to keep all receipts for any work done and for contents purchased to provide to their insurer for reimbursement.  Also, he recommended consumers get more than one estimate for repairs and pick the lesser of the estimates to prevent conflicts over price gouging. 

Policyholders may also have any estimate approved by the insurer in advance, which could be helpful if short-term financial assistance is needed to complete repairs or to replace contents.   

For more information or to request assistance consumers can contact the Department of Financial Services hurricane insurance hotline at 1-800-22-STORM.  Consumer guides explaining Florida homeowners insurance policies can be downloaded from the For the Consumer section at


Several posed as reporters to gain access to the reports

Florida’s Chief Financial Officer Tom Gallagher announced that investigators with the Department of Financial Services, Division of Insurance Fraud, and Florida Department of Law Enforcement have arrested eight individuals on charges of illegally obtaining traffic accident reports from police departments throughout Palm Beach, Broward and Dade counties.  Several posed as reporters to gain access to the reports.

The information was used to solicit accident victims to go to medical clinics and auto body shops for the purpose of collecting money on fraudulent auto insurance claims. The police departments involved are not suspected of any wrongdoing and supported the investigation.  In Florida, access to traffic accident reports is restricted during the first 60 days, and those who access the information cannot use or disclose the information for the purpose of solicitation. 

“This ongoing investigation indicates these individuals had no legitimate reason to possess the accident reports and that they intended to use the information to fraudulently bill insurance companies,” said Gallagher, who oversees the Department of Financial Services and Division of Insurance Fraud.  “I thank the investigators for working so hard to protect Floridians from the burden of this kind of fraud.”

In the last two months, DFS investigators have arrested more than 50 individuals throughout Florida for various auto insurance fraud scams.  The department’s fraud division has arrested more than 900 individuals associated with $25 million in auto insurance fraud in the last five years. 

“These types of crimes victimize everyone and we all pay the price,” said Amos Rojas, Jr., Special Agent in Charge of FDLE in South Florida. “This kind of criminal activity will not be tolerated, and additional arrests are forthcoming.

Some of the individuals arrested today are facing as many as 70 counts of obtaining confidential crash reports, a third-degree felony punishable by up to five years in prison, per count.

Several gained access to the confidential accident reports by pretending to work for media publications, such as Impact News Weekly, South Florida Journal and Greek American Herald.  Investigators said they saw Charles Raefield Rhodes, 58, receive bulk crash reports from his son, 22-year-old Courtney Gissendanner, at Rhodes’ Hollywood home, where he had several women making phone calls to solicit accident victims.

The investigation is continuing and further arrests are anticipated. 

Gallagher this year is supporting pending legislation that would impose a two-year minimum mandatory prison sentence for filing a fraudulent auto accident claim.  Sponsored by Rep. Dean Cannon (HB 967) and Sen. J.D. Alexander (SB 2330), the legislation would also require medical clinics to post the department’s Fraud Buster reward program hotline and information.  Gallagher is also asking the Legislature for funding for more PIP fraud investigators and prosecutors.

In 2003, the Legislature enacted some of the strongest laws against PIP fraud with the Florida Motor Vehicle Insurance Affordability Reform Act.  That legislation provided a two-year minimum mandatory prison sentence for staging, planning or assisting in the staging of an auto accident or soliciting patients for the purpose of filing fraudulent insurance claims.  More than 70 individuals are now serving or facing that sentence.

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 Busters Hotline at 1-800-378-0445.  A reward of up to $25,000 may be offered for information leading to an arrest and conviction.

Below is a list of the individuals arrested so far: 

Jose Manon, 60, 461 SW 112 Ave., Fort Lauderdale

Edward Phillips, 55, 101 S. Cortez Drive Circle North, Margate

Courtney T. Gissendanner, AKA Courtney Rhodes, AKA Courtney Washington, 22, 500 NW 24 Ave., Fort Lauderdale

Charles Raefield Rhodes, 58, 2718 Pierce St., Hollywood  

Kathi Rodriguez, 31, 371 NW 42 Ave., Coconut Creek

Tina Vallorani Desposito, 46, 8549 NW 45 St., Coral Springs

Thomas Vallorani, 56, of Tamarac

Marcus Sanford, 66, of Miami


Due to overwhelming response at the five town hall meetings held so far, two additional town hall meetings have been scheduled. 

Florida’s Chief Financial Officer Tom Gallagher has announced dates and locations for the next town hall meetings to assist Floridians still recovering from last year’s hurricanes.  The first four meetings were held in Pensacola, Sebastian, Punta Gorda, Orlando and Fort Pierce. 

Jupiter and Bartow are the next scheduled locations. 

“Hurricane victims who are still struggling to settle insurance claims are urged to attend one of these meetings,” Gallagher said.  “We want to direct all available resources to getting storm victims’ lives back to normal.”

Gallagher will be accompanied by consumer specialists who will be able to work with policyholders individually.

CFO Tom Gallagher Town Hall Meetings

Thursday, April 7th,  5 p.m. - 8 p.m.
Jupiter Community Center, 210 Military Trail, Jupiter

Saturday, April 9th, 9 a.m. to noon.
Bartow High School, 1270 South Broadway, Bartow.  

For more information, call the Department of Financial Services’ storm hotline at 1-800-22-STORM or log on to


Florida Insurance Regulation Commissioner Kevin McCarty issued a consent order revoking the license of viatical settlement company, Mutual Benefits Corporation, for violations of Florida and federal laws involving securities violations, fraud and misrepresentation. The Receiver of Mutual Benefits Corporation signed the consent order agreeing to the revocation after obtaining permission from the United States District Court.
The action follows lengthy investigations by the Florida Office of Insurance Regulation (OIR) and the Securities and Exchange Commission (SEC). OIR issued an order suspending Mutual Benefits’ license to act as a viatical settlement provider in Florida in May 2004. Additionally, the U.S. District Court, for the Southern District of Florida, authorized the SEC to seize the assets of the Ft. Lauderdale-based company and placed it in federal receivership.
The company was charged with racketeering and 15 counts of investor fraud based on an investigation by the Division of Insurance Fraud. 
Viatical settlements are agreements in which existing life insurance policies may be purchased by viatical settlement providers and re-sold to investors. The life insurance policies are sold for a percentage of the face value and, upon the death of the insured, the investor collects the policy benefit. The company used investor money to purchase $1.55 billion in life insurance policies.
”Mutual Benefits utilized a Ponzi scheme, defrauding investors and creditors of millions of dollars,” said McCarty. “I refuse to allow this business to fleece another Floridian out of their life savings.”
McCarty also praised the work of investigators from OIR, the Department of Financial Services and the SEC in the case.
OIR’s investigation revealed that Mutual Benefits did not escrow adequate funds to pay future policy premiums, did not honor contractual obligations, issued improper viatical settlement contracts, used unlicensed sales agents, failed to adequately disclose information to investors, and dealt in fraudulently obtained policies. Investigators also discovered that Mutual Benefits had transferred a total of $7.6 million between accounts to cover premiums. Mutual Benefits is currently a defendant in various federal and state actions brought by investors, beneficiaries and viators (those who sell their policies at a discount).
Any investor inquiries should be directed to the receiver for MBC, Roberto Martinez, at (305) 577-1099.

Consumer Services HelpLine
(800) 342-2762.