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Chief Financial Officer Announces Fight Financial Fraud in Florida Week

6/9/2003

CONTACT: Nina Banister
(850) 413-2842

TALLAHASSEE – Issuing his annual Top 10 Fraud List today, which represents more than $35 million worth of insurance and financial fraud schemes investigated by the Department of Financial Services during the fiscal year that ends June 30, Chief Financial Officer Tom Gallagher warned consumers to take steps to protect themselves and their money.

"If it sounds too good to be true, it probably is," Gallagher said. "Check with the department to make sure the agent, broker or company you are dealing with is appropriately licensed. Ask questions, read all paperwork and give yourself plenty of time to make an informed decision."

Governor Jeb Bush and members of the Florida Cabinet, including Gallagher, will sign a resolution on Thursday designating June 8-14 as Fight Financial Fraud in Florida Week.

Insurance fraud investigators and prosecutors will gather Wednesday in Orlando for the 11th Division of Insurance Fraud/Special Investigations Unit joint conference. The three-day conference, organized by the Florida Insurance Fraud Education Committee, will address the latest insurance fraud schemes and most-effective investigative techniques.

With the merger in January of the Department of Insurance and the Department of Banking and Finance into the Department of Financial Services, this year's Top 10 fraud list summarizes both major financial and insurance fraud cases investigated during the past fiscal year by DFS, the Office of Insurance Regulation and the Office of Financial Institutions and Securities Regulation. The cases are not in any order, but all have resulted in an arrest, plea or conviction since July 1, 2002.

On the top 10 list for a third year is the sale of unlicensed insurance, which has left tens of thousands of Floridians uninsured, and many uninsurable.

Unlicensed entities are not authorized to transact insurance in Florida or with residents of Florida. Most are not licensed anywhere. Victims of these phony plans usually end up being pursued by debt collectors for unpaid claims that the unlicensed insurer had no ability or intention of paying. For more than a year, the department has conducted a public education campaign through television public service announcements, billboards and its website, urging consumers to "Verify Before You Buy."

Other schemes on this year's list are Personal Injury Protection (PIP) insurance fraud, viatical settlement transaction fraud, workers' compensation fraud, mortgage loan application fraud and investment fraud.

In addition to the unlicensed insurance public education campaign, the department has held public forums around the state to educate consumers about predatory lending practices. The department operates a toll-free consumer helpline, at 1-800-342-2762, from 8 a.m. to 7 p.m. Monday through Friday. And, through the department's web site, at www.fldfs.com, consumers can file a complaint, check the licensure status of a company or individual, research regulatory actions and access a variety of free information and tips.

During the past fiscal year, the department's Fraud Buster Reward Program has issued more than $30,000 to citizens who provided critical information leading to arrest and conviction in insurance fraud cases. The department's insurance fraud hotline is 1-800-378-0445.

"Fraud costs us all – through higher insurance premiums and through higher prices on goods and services," Gallagher said. "Every one of us must take the initiative to protect ourselves and to report suspected fraud."

The department's 2002-2003 Florida Financial Fraud Top 10 List is below.


DEPARTMENT OF FINANCIAL SERVICES'
2002-2003 FINANCIAL FRAUD TOP 10 LIST

Verify Before You Buy

Carmelo Zanfei and William Paul Crouse, who operated Indiana-based TRG Marketing, LLC, are facing felony charges for selling insurance without a license and racketeering. TRG Marketing, LLC, has failed to pay millions of dollars in health care claims for more than 7,200 Floridians. If convicted on all charges, Zanfei and Crouse could each face up to 60 years in prison in addition to fines and restitution.


Broken promises

The former CEO of World Vision Entertainment, an Altamonte Springs-based production company, was sentenced to more than three years' prison and was ordered to pay restitution of more than $24 million to more than 1,600 victims in a nationwide investment fraud scheme. James Pedro Piromalli pleaded guilty to one count of conspiracy to commit securities fraud. Piromalli misled investors by telling them that investments in his nine-month promissory notes were guaranteed by a bond issued through an offshore insurance company. Investigators say neither World Vision Entertainment nor Piromalli were licensed to sell securities in Florida.


Viatical company president ‘collared'

The former president of the former Ponte Vedra-based Future First Financial Group, Inc., a viatical settlement provider whose license Chief Financial Officer Tom Gallagher revoked for fraud, was arrested in May on numerous felony counts including one count of violating the state's White Collar Crime Victim Protection Act. Randy E. Stelk, of Ponte Vedra Beach, was booked into the St. Johns County Jail with bond set at $10 million. In addition to one count of aggravated white collar crime, Stelk is charged with racketeering, securities fraud and three counts of grand theft in excess of $100,000. Stelk, along with other company principals, allegedly conspired to fraudulently divert $12 million of investor funds obligated for payment of insurance premiums.


Selling unauthorized shares

A Broward County man who used the internet to sell unauthorized shares of a wireless communication company will serve time in prison. Nicholas Kossaris was sentenced to 44 months in prison, 10 years probation and ordered to pay restitution of more than $94,000. Kossaris provided phony stock certificates to at least six investors he lured into his scam.


Pay now or pay later

The owner of South Florida-based Cedar Shakes Supply, Inc. and Regency Roofing was ordered to serve 10 years' probation and pay more than $1 million in restitution for misclassifying his employees' duties to insurance companies to reduce his workers' compensation premium costs. Thomas R. Torok claimed that roofers were supply dealers to reduce his premium bill by $1 million from 1997 until earlier this year. A $15,000 Fraud Buster reward was issued to a citizen who provided critical information leading to Torok's arrest and conviction.


Housing loan rip-off

A Fort Myers woman faces fraud charges after posing as a government official offering low-cost home loans to underprivileged families in Collier County. Roselaine Falmbert allegedly told borrowers that a government program she offered would pay half of their monthly mortgage. Investigators said she collected advance fees on loans that were never made.


Paper accidents

A former Hialeah Police Department detective was charged with filing fictitious accident reports to create "patients" for a friends' medical clinic. Anthony Meyer was charged with insurance fraud, grand theft and official misconduct. A Miami clinic billed six insurance companies for more than $125,000 based on Meyer's fictitious accident reports and collected nearly $123,000 from those billings.


You play, you pay

A West Palm Beach man collected more than $71,000 from an insurance company by filing fraudulent insurance claims on three vehicles, two jet skis, a fishing boat and an airplane. David Samer, also known as Bryan Anderson and Samer Omran David, was ordered to pay full restitution, serve 5 years' probation and perform 300 hours of community service. Based on his fraudulent claims, he could have collected more than $250,000 in insurance payments. A $10,000 Fraud Buster reward was issued to a citizen who provided information critical to the conviction.


Paying the piper

The former vice president of an Internet-based music company was charged with one first-degree felony count of organized scheme to defraud and several counts of grand theft for allegedly using his position at the now defunct Muzic Depot, Inc. to raise and misappropriate capital funds. Jarred Michael Degray allegedly diverted more than $150,000 into personal accounts. Investigators said Muzic Depot, Inc., was in the business of music retailing over the Internet and promoting concerts. As an inducement to invest in the company, Degray allegedly led investors to believe the company was "going public" in the near future and touted the opportunity as "a sure thing."


Not worth the paper

A federal jury convicted a West Palm Beach mortgage broker of bank fraud, wire fraud and mail fraud. Joseph Francis Biggins, president and owner of Mortgage Express, Inc., submitted loan application packages containing fraudulent information to various mortgage lenders, resulting in loans being granted based on the false information. The same investigation to convictions for 13 other mortgage brokers and revocation of their mortgage broker's licenses.