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Doi Releases 2001-2002 Top 10 Fraud List to Kick off Florida Insurance Fraud Prevention Week


TALLAHASSEE - Florida Department of Insurance regulators and fraud investigators spent much of the past year rooting out unauthorized entities that sold bogus health insurance plans to more than 30,000 Floridians, leaving at least $6 million in unpaid claims.

Other major insurance fraud cases involved agents swindling customers by slipping them unwanted products, or failing to forward premiums leaving policyholders without coverage. In the past several months at least 12 South Florida physicians have been charged with fraud for signing insurance claims for medical visits that never occurred. And then there was the Pinellas County man who continued to cash his wife's workers compensation disability checks for six months after her death.

"Some fraud schemes we see every year, but others you just can't fathom," Florida Treasurer and Insurance Commissioner Tom Gallagher said today as he released the department's annual Top 10 Fraud List. Governor Jeb Bush and the Florida Cabinet, which includes Gallagher, have designated this week Florida Insurance Fraud Prevention Week.

"I believe consumers have become much more savvy about asking questions, but they have to be diligent with every purchase and every claim," Gallagher said. "From reading the fine print before signing onto a policy to reviewing every Explanation of Benefits they receive from their insurance companies, consumers have to be their own first line of defense."

It is estimated that insurance fraud adds as much as $1,400 a year to the average Florida family's premium costs. Fraud occurs in all lines of insurance including auto, life, health and workers' compensation. The Top 10 List includes some of the most expensive or unusual fraud cases department investigators have worked on over the past fiscal year that began last July 1. The 10 cases combined represent losses of more than $15 million.

This week some 450 insurance fraud investigators, both from the insurance department's Division of Insurance Fraud and dozens of insurance companies, will meet in Orlando this week for the tenth year to analyze new fraud schemes and investigative techniques.

Insurance agents, claims adjusters and prosecutors also are expected to attend the Joint Division of Insurance Fraud/Special Investigative Units Conference, organized by the Florida Insurance Fraud Education Committee.

The Division of Insurance Fraud investigates various forms of fraud in insurance, including health, life, auto, property and workers' compensation insurance. In fiscal years 1999-2000 and 2000-2001, fraud arrests made by the department increased 25 percent each year. Numerous divisions within the department contribute to insurance fraud investigations, including the Division of Agent and Agency Investigations, the Division of Consumer Services, the Division of Legal Services and the Division of State Fire Marshal, which actually made the arrests in one of the cases, "They Called Him ‘The Torch,'" on this year's Top 10 list.

The department offers a reward of up to $25,000 for information leading to a conviction in complex fraud schemes. To report fraud, call the department's Fraud Hotline at 1-800-378-0445.

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The Department of Insurance 2001-2002 Top 10 Fraud List follows.

Department of Insurance 2001-2002 Top 10 Fraud List

Coverage You Can't Count On

The chief organizer of a Pennsylvania organization that sold bogus health insurance to thousands of Floridians is facing two felony counts of communications fraud based on transactions that occurred in Palm Beach, Dade and Broward counties. Gallagher shut down N.A.P.T. last year for operating without an insurance license, and the defunct company is now in receivership in Florida. Six unauthorized entities have been shut down in Florida since February 2001, with more than 30,000 Floridians left holding the bag for at least $6 million in unpaid claims. In April and May, Gallagher issued a public service announcement on cable stations throughout Florida warning consumers to "Verify Before You Buy." Unauthorized entities do not have access to a guaranty fund to cover unpaid claims when they go out of business, which happens when the incoming premiums no longer keep up with the costs of claims.

Now You See It, Now You Don't

Two Miami title insurance agents were arrested on charges of conspiracy to commit racketeering and grand theft for diverting nearly $6 million in escrow funds. The women, both licensed title agents, face revocation of their licenses. Investigators said the title agency's records showed funds were being separately maintained in the title agency's escrow bank accounts, were misappropriated, temporarily or permanently diverted into personal bank accounts or business bank accounts that the agents controlled, or were cashed. Because some escrow funds received by the title agency from mortgage lenders were never disbursed on behalf of the borrowers, warranty deeds that were prepared by the title agency and publicly recorded contained the false claim that properties were free of all encumbrances.

Money for Nothing

A South Florida insurance agent was charged with organized fraud for stealing retirement funds that clients intended to invest in annuities. The funds were diverted to a company that had been dissolved since 1994. Investigators said that instead of purchasing legitimate annuities from life insurance companies, the agent put more than $100,000 of the investors' funds into a defunct Vero Beach company. Some customers continued to receive monthly statements as late as May 2000 indicating that their investments were continuing to accrue value at 7-percent interest. Customers notified the department when the statements stopped.

Give ‘Em the Slip

An owner of a Miami-Dade auto insurance agency and several of his agents were charged with racketeering and conspiracy to commit racketeering for allegedly sliding undisclosed coverages and hidden costs to thousands of customers. Sliding is an industry term. It occurs when an agent sells an applicant a coverage or product without their knowledge or consent. Investigators said agency employees were instructed to charge as many hidden costs as they could get away with, ranging from $40 to $200, with commissions of up to 90 percent paid on those hidden charges. One former employee told investigators that while she worked with the agency between September 1995 and November 1996, she saw hidden charges added to as many as 5,000 customer bills.

A Shell Game

A Hialeah man was sentenced to 13 years in prison for his part in a scheme that fraudulently billed more than 40 insurance companies for more than $400,000 using a network of shell corporations and rented drop boxes located throughout Dade and Broward counties. Alejandro Noriega, 41, was found guilty on 39 counts of grand theft, 39 counts of insurance fraud, one count of organized scheme to defraud and one count of violation of probation. An ongoing investigation has led to numerous other arrests. Investigators said Noriega played a major role in the illegal billing scheme by opening up four shell corporations in Miami-Dade County. While the companies were registered with the state, the addresses were for rented drop boxes. Throughout Miami-Dade and Broward counties, Noriega opened a total of eight drop boxes used to collect insurance checks sent by insurance companies to pay the bogus medical claims. Using various aliases, Noriega also opened four bank accounts in Miami-Dade County and used them to launder insurance checks.

Operation Medical Deception

Seven doctors, three clinic owners and six clinic workers were arrested this past spring in a sweep of arrests stemming from investigations into complaints from dozens of auto accident victims that their insurance companies were billed nearly $1 million for clinic visits they did not make. The ongoing investigation has since led to the arrests of at least five more doctors and other clinic workers. Since 1999, the department has made more than 300 arrests relating to personal injury protection (PIP) insurance fraud. The doctors arrested as part of Operation M.D. allegedly signed medical reports for patients they did not see or for patients who were seen by unlicensed medical personnel. Unlicensed personnel told investigators that they also fabricated patient reports when the patients did not return for visits. One patient's insurer was billed while he was incarcerated. The clinic owners allegedly directed the billing activities.

When is a Roofer Not a Roofer?

The owner of a Palm Beach County roofing company was charged with fraud for classifying roofers as supply dealers on his payroll to avoid more than $1 million in workers' compensation premiums. The man, facing up to 35 years in prison, is accused of misclassifying his employees' duties with three different insurance companies from 1997 until this year.

Senior Scam

An Aventura insurance agent voluntarily surrendered his state license based on allegations that he was involved in a scheme that misled elderly customers living in central and south Florida into buying life insurance when they thought they were buying or renewing health insurance policies. Jay Steven Goldman, 38, agreed to permanently withdraw from Florida's insurance industry. Investigators suspect the scheme also involved former agents, whose licenses were previously revoked by the department, who allegedly paid to use the credentials of licensed agents. The group allegedly convinced elderly victims in Bonita Springs, Englewood, Punta Gorda, Fort Myers, North Fort Myers, Plant City, Sebring, Port Charlotte and Naples to purchase or renew health insurance policies when in fact the consumers were unknowingly sold life insurance policies.

They Called Him ‘The Torch'

An Orlando man known to law enforcement as "The Torch" was arrested in a sting operation for accepting a contract to burn a sports utility vehicle so that its owner could collect the insurance settlement money. An accomplice also was arrested. The man became a suspect in January, after a State Fire Marshal investigator found a Honda partially burned in Volusia County. The car's owner, who had reported it stolen in Orlando, confessed that he had paid to dispose of the vehicle for insurance recovery purposes. Investigators then recorded "The Torch" agreeing by phone to meet with a vehicle owner who wished to have her vehicle destroyed in order to collect the insurance. The disgruntled vehicle owner was actually an undercover officer. Sixty-five percent of the 1,782 vehicular fires reported to the State Fire Marshal's office in 2001 were determined to have been deliberately set.

Not Even In Death Do Us Part

A Pinellas Park man was charged with fraud and grand theft for allegedly cashing his wife's disability checks for six months after her death in June 2001. The man's wife began receiving workers' compensation disability checks in 1992 after she was injured while working for a fast-food chain in New York. The couple moved to Pinellas Park later that same year. Bi-weekly checks had been sent to the couple's post office box in Pinellas Park through the end of 2001, and the checks continued to be cashed. In December 2001, the disability insurance company was notified by Social Security that the woman had died on June 20, 2001. A week later, the man called to inquire why he had not received a check, still never advising the insurance company that his wife was dead.