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FLORIDA CHIEF FINANCIAL OFFICER TOM GALLAGHER'S WEEKLY NEWSLETTER

Volume 2, Number 47, November 21, 2005 

Family and friends will gather this week to celebrate Thanksgiving. This traditional day in America is an opportunity to give thanks for all of the benefits of this land of plenty.  And this year, after eight hurricanes in 15 months, we also have a unique perspective for appreciating the generosity of the people of this country.   

Many Floridians have recovered from the hurricanes of 2004 and 2005 with the help of others. Stories abound of people pitching in to help their neighbors put on new roofs or remove trees, or to just make sure their neighbors had the food, water and medicine they needed. And, when our neighbors along the Gulf Coast – many of whom responded in our hour of need -- needed us, we were there. 

There is still much work to be done to finish the rebuilding of homes and lives, but it will happen.  

I wish you all a safe, happy and joyous Thanksgiving, especially our troops overseas who are fighting to secure our right to celebrate our wonderful traditions.


-- Tom Gallagher


GALLAGHER ANNOUNCES MULTIPLE ARRESTS FOR STAGED CRASH IN MIAMI

Fraud ring billed more than $100,000 in fraudulent insurance claims

Tom Gallagher, Florida’s chief financial officer, announced the arrests of eight members of an alleged staged crash ring accused of filing more than $100,000 in fraudulent insurance claims from a single staged accident.

Brothers and suspected ringleaders Jimmy Desir, 27, and Nildo Desir, 29, planned and recruited the participants, according to detectives with the Department of Financial Services, Division of Insurance Fraud. All eight are charged with 13 counts each of insurance fraud and grand theft, and one already is facing a minimum sentence of two years in prison for a prior staged accident.  Three clinics were involved – including a chiropractor who was previously arrested for insurance fraud and grand theft.

“Insurance fraud is saddling Florida families with hundreds of dollars in additional premium costs,” said Gallagher, who oversees the department.  “We will continue to aggressively pursue and prosecute those who commit fraud and work with the Legislature to develop hard-hitting laws to put these con artists behind bars.”

Gallagher next year will ask the Legislature to require medical clinics to post insurance fraud posters touting the department’s reward program. He also will ask the Legislature to implement a minimum two-year prison sentence for those who commit phantom and paper accidents – those that never happen – and to renew and tighten restrictions on the release of police accident reports.

In staged accidents, the planners and organizers, usually in connection with unscrupulous clinic owners, target the Personal Injury Protection (PIP) insurance of drivers, and bill an average of $10,000 per accident “victim.”  The Miami office of the Division of Insurance Fraud has made more than 970 arrests with charges in excess of $31 million in PIP fraud.  This includes more than 660 patients, 73 clinic owners, 27 doctors, 66 clinic employees and 135 runners.  The number of PIP fraud-related arrests in Miami has steadily risen every year – 155 in 2003, 202 in 2004, and 224 so far this year.

These latest arrests and the ongoing investigation are part of a joint investigation by the Division of Insurance Fraud, insurance company special investigation units and the National Insurance Crime Bureau (NICB).

The eight suspects, face charges stemming from a two-car staged crash that occurred in Miami-Dade County on April 23, 2003, just prior to a law that went into effect October 1, 2003, mandating a minimum two-year prison sentence for organizing or participating in the staging of an accident.

Insurance fraud detectives said the Desir brothers organized but did not participate in the staged crash, and the six who did, ranging in age from 19 to 31, fanned out to three medical clinics: PR Medical (AKA Sante Medical Services),  8030 NE 5 Ave, Miami; Biscayne Health Group, 700 NE 90 St, Miami; and Mia Higginbotham, DC,  1590 NE 162 St, #400, North Miami Beach.  Higginbotham was arrested on Oct. 21, 2004, on insurance fraud and grand theft charges.  Those charges are still pending.

National Security Insurance Company and the Florida Automobile Joint Underwriters Association (FAJUA) jointly paid more than $49,000 on the bogus claims, which included mostly PIP but also bodily injury and property damage.

In addition to the Desir brothers, the others arrested were:

  • Benitho Alcide, 24, North Miami
  • Jimmy Desir, 27, Miami
  • Nildo Desir, 29, Miami
  • Raphael Dieudonne, 31, Miami
  • Patrick Dieudonne, 27, Miami – prior staged accident charge pending
  • Jimmy Prevot, 19, Miami
  • Baselais Prudent, 24, Miami

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


STATEMENT FROM CFO GALLAGHER ON NATIONAL CATASTROPHE FUND

Over the years, I have advocated several federal and state solutions for avoiding an insurance market meltdown, including the creation of a National Catastrophe Fund. Recently Florida congressional members Ginny Brown-Waite and Clay Shaw introduced legislation to create such a fund.

I applaud Congresswoman Ginny Brown-Waite and Congressman Clay Shaw for initiating legislation that I believe will provide greater support for American families devastated by disasters. I advocated the creation of a national fund following Hurricane Andrew in 1992. This year alone, our nation has suffered 43 federally declared disasters in 32 states including hurricanes in Florida, tornadoes in the Midwest and earthquakes in California. A national catastrophe fund is a sensible solution that Congress needs to pass.

The federal legislation encourages states to establish catastrophic funds to prepare for natural disasters. States’ catastrophic funds would then be backed up by a federal fund named the Consumer Hurricane and Earthquake Protection Fund. The fund, administered by the U.S. Department of Treasury, would share the cost of catastrophic losses after states’ catastrophe funds had been exhausted.


FLORIDA SENIORS URGED TO BEWARE OF SCAMS WHEN CHOOSING NEW MEDICARE PRESCRIPTION COVERAGE

One-Stop Shopping for Information and Resources Made Available 

Florida seniors with Medicare Part A or Part B coverage may now purchase prescription drug coverage under Medicare Part D and choose from nearly 20 plans offering a mix of deductibles, co-payments and levels of coverage.   

Tom Gallagher, Florida’s chief financial officer, reported that his department’s consumer helpline is getting calls from seniors looking for information on the new coverage.   Gallagher said he is concerned that scam artists may try to take advantage of seniors who are confused about their options and the enrollment process.  To assist seniors, Gallagher has created a free brochure that can be obtained by calling the Department of Financial Services at 1-800-342-2762 or by logging on to the department’s website at www.flseniors.net and click on “Medicare Rx Resources.” 

“I am deeply concerned that scam artists will exploit seniors interested in new options under Medicare,” said Gallagher.  “We will aggressively pursue those who attempt to rip off the elderly.  A senior’s best defense against fraud is knowledge.”

Gallagher said there are approximately three million Medicare beneficiaries in Florida eligible for the new Part D coverage.  But he urged eligible seniors to seriously consider signing up for a Medicare plan unless they have existing coverage that is equal to the Medicare plan.  If an individual lacks coverage and doesn’t sign up during open enrollment, a penalty of as much as one-percent per month could be added to the monthly premium.   

Gallagher offered tips to seniors to avoid becoming victims of Medicare Part D scam artists: 

  • Beware of door-to-door salesmen. Agents cannot solicit business at your home.

  • Never give out personal information unless the person or the product is approved by Medicare.

  • Verify that the person and company you are dealing with are legitimate by calling the department at 1-800-342-2762.
     



STATEWIDE ESSAY CONTEST  PROMOTES FINANCIAL EDUCATION AMONG TEENS

Contest offers teens a chance to win up to $750

Florida’s Chief Financial Officer Tom Gallagher is encouraging teens to enter the essay contest aimed at encouraging investor education among middle and high school students in Florida.  The contest, “Cash in on Your Money Smarts,” offers teens a chance at more than $7,500 in prizes statewide, with a top individual award of $750 for one student in each of five geographic regions. 

“This contest is an opportunity for Florida teens to be rewarded for their knowledge of smart investing and their persuasive writing skills,” said Gallagher.  “A lifetime of financial success can come from learning these valuable skills now.”

Gallagher’s statewide public financial education initiative, Your Money, Your Life, is designed to help Floridians make better informed financial decisions.  Gallagher launched the program in 2004 after learning that many Floridians put themselves at financial risk by waiting too late to save and by running up debt.  The program includes a comprehensive educational website available at www.yourmoneyyourlife.org.

The essay contest, “Cash in on Your Money Smarts,” is open to Florida teens who are between the ages of 14 and 18.  Students must submit a 1000-word essay to the Florida Department of Financial Services by January 27, 2006.  Essays may be submitted electronically or by mail, in English or Spanish. 

The following question:  “If you had $100,000 to invest, what would you invest in and why?” is posed for each participant to consider and write a comprehensive response. The essay should address why you would invest in certain companies or products, what information you used to back up your investment decisions, and how investing can help you meet your money goals.

Judging the contest will be representatives from the Florida Council on Economic Education, a non-profit organization that supports financial education initiatives in schools and businesses statewide.  In addition, department employees Fred Varn and Greg Thomas, who also serve on the Leon County and Wakulla County School Boards respectively, will participate in the judging process.

Cash prizes will be awarded to each of the top three essays in five regions across the state, for a total of 15 winners.  First place offers a $750 cash reward, second place garners $500 and third place is $250.  For complete contest details, to download an essay application or submit an essay electronically, log on to www.MyFloridaCFO.com and click “Cash in on Your Money Smarts.”

Support for the “Cash in on Your Money Smarts” essay contest comes from the Investor Protection Trust, a fund created in 2003 from a multi-million dollar settlement reached with federal regulators.  A portion of the fund was earmarked for investor/financial education.

“The ‘Cash in on Your Money Smarts’ contest dovetails with classroom efforts and, just as importantly, gives families of students a way to get involved,” said Gallagher.  

Gallagher also said that department staff is available to conduct presentations in schools across the state to help teach basic financial management skills to Florida students. 


DON'T BELIEVE EVERYTHING YOU HEAR

"Before you invest, investigate" was the slogan of the National Better Business Bureau back in 1929. The same concept applies today, 76 years later.

Here are some vintage financial observations that can help you avoid becoming a victim of financial fraud.

Big returns — It is always easy for investment promoters to boast that an investment will provide higher-than-average dividends or market profits. However, the heavy risks associated with these abnormal returns are not always revealed. Promises of high returns may be "the chief talking points of financial charlatans." 

Prominent names — Using the name of successful or noteworthy people to lure victims is an old ploy. However, the names of these people and their endorsements may be without authorization or knowledge. As a prudent investor you should investigate the merits of the investment and make decisions based on sound financial analysis.

The ground floor — Being the first to get in on an amazing moneymaking opportunity may be equivalent to the same opportunity the "spider extended to the fly."

Inside information — We all know what happened to Martha Stewart after she was accused of acting on insider information. Insider tips are often false, misleading or downright illegal. Don't rely on information you gleaned at the office water cooler or from a broker who claims to have the inside scoop. The only scoop may be the one in your pocket as a swindler reaches in for your money.

The irresponsible guarantee — Promises that profits will be made, dividends paid or that the company will buy back your investment if you are unhappy mean nothing unless they are in writing. Even if the promises are in writing, they may be false or the company won't be able to fulfill its promises and guarantees.

Telephone canvas — Back in the 1920s, crooks used the telephone to promote bad investments. Today is no different. However, the problem extends to the Web and e-mails. While the telephone remains a tool for legitimate businesses, it is also used by swindlers.

False sense of security — Usually associated with real estate deals when an investor is told, this is "the safest investment on earth." Hucksters attempt to unload property upon people who want to make an investment and not a speculation. Fabulous profits are promised from increased values or earnings when the property is developed. This scheme can be very tempting, particularly in Florida where prices seem to go up and up. However, caution is the red flag, even when making a "sure bet" real estate investment.

In closing, here is a passage from author George Husser writing in a 1929 booklet titled "Crooked Financial Schemes Exposed."

"Most of the newest fraudulent enterprises are revivals of those which have long made forays into the field of legitimate business. They represent the same old wolf, disguised as a lamb a little more effectively than ever in our complex economic world. A fundamental characteristic of the faker is his opportunism. Nothing of public interest escapes him as a possible means of squeezing money from gullible persons."



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