Think again about falsifying receipts
A website selling fake receipts recently posted a link to this blog, which previously included an item about the website. We certainly do not wish to give this website any publicity, but felt we should warn anyone about using fake receipts to submit insurance claims.
It’s a dumb thing to do because insurance companies do check the authenticity of receipts. The penalties for submitting fake receipts to boost a claim can be severe. Our files are filed with arrests and convictions involving false receipts. Check out these recent cases:
What fraud looks like
Think about a Middle Eastern terrorist, and a certain image comes to mind. How about a street mugger? You can picture him too. A corporate con man? White guy in an expensive suit, right? Think Enron or Worldcom execs. All of these are readily available images stored in our brains.
But what does insurance fraud look like?
It’s not easy stereotyping people who commit fraud. They’re of every stripe — male, female, young, old, black, white, brown, rich, poor, well-educated, poorly educated — and come from virtually every corner of the land and in between.
When the coalition was created 15 years ago, one of our founders challenged us to put a face on fraud. That’s a figure of speech — and something we’ve done.
But now we’ve done it literally, too. A new section of our website — Faces of Fraud — features photographs of people who’ve been convicted of insurance fraud, along with a little information on what they did and how they’re paying for their crime.
The purpose of the photo display is to illustrate that insurance fraud is not a faceless crime. The people who commit fraud look like us, our friends, neighbors and co-workers. And they demonstrate that anybody who does it can get caught and punished.
Take a look at what fraud looks like.
Toyota - most reputable?
Toyota — the preeminent car maker that ran TV ads six months ago encouraging people to dump their cars — has been named the most reputable company in the world.
According to the Reputation Institute, a New York consulting group, the car maker bested 600 of the world’s largest corporations in a survey about product and service quality, innovation, workplace, governance, leadership, performance and . . . citizenship.
Citizenship? What good corporate citizen flagrantly encourages people to commit crime? How sad.
Car giveups are certainly on the rise, and that likely is due more to the bad economy than Toyota commercials. Still, this recognition seems to be another example of a corporation getting away with unsavory behavior.
Perhaps we should give those surveyed the benefit of the doubt. Perhaps they placed more emphasis on product than citizenship.
In any event, in the list of top-rated U.S. companies, five insurers placed in the top 75 — Travelers (#61), State Farm (#63), Hartford (#65), Metlife (#72) and Chubb (#74). At a time when insurers’ standing with the public is sagging, it’s good to see the industry represented on the list — as tainted as it may be with Toyota at the top.
And speaking of lists, Wards published its annual compilation of the top 50 insurers based on financial performance, safety and consistency. Eight insurer members of the coalition made the grade: Allstate, Erie Insurance, Fireman’s Fund, Hartford, MetLife, Progressive, Selective and Travelers.
Congratulations to all — all that is, except Toyota.
Prosecutorial innovation
Prosecutorial innovation
Few aspects of insurance fraud are simple. Sophisticated techniques such as predictive modeling are used to detect it. Forensic science, often involving voluminous paper trails, is used to investigate it. Complex strategies are employed to prosecute it.
So when something simple comes along that’s effective, we take notice.
That’s a good description of the Fraud Interdiction Program established by the Los Angeles District Attorney’s office. It’s the kind of idea that leaves you scratching your head, wondering why no one thought of it before.
The idea arose when someone surmised that medical providers who steal from insurance companies probably cheat on their taxes, too. It was a theory easily validated: Just find out how much insurers have paid individual providers and compare that with the providers’ tax returns.
That’s what Asst. District Attorney Al MacKenzie began doing in 2004, launching a long line of successful prosecutions of crooked doctors and lawyers. Tax cases are a slam dunk compared to the many fraud cases that require proof of intent and documentation of medical procedures. Confronted with simple facts involving tax evasion, many defendants quickly cop a plea and go straight to jail. Plus, prosecutors don’t have to convince juries that insurance companies are victims and that doctors — often seen as pillars in the community — are criminals.
Al’s program earned him the first “Prosecutor of the Year” award conferred by the coalition this week.
His track record with this novel program is impressive. In the last year, he’s landed 15 convictions entailing more than $20 million in stolen money. What’s more, the program has identified some 200 suspects who may have defrauded as much as $300 million. So, expect similar cases rolling out of this pipeline for many years to come.
In accepting his award, Al explained that suspicion of tax evasion permits prosecutors to obtain search warrants more quickly, which helps them gather evidence of insurance fraud that they may not have discovered otherwise.
Al’s program is now being emulated elsewhere around the country. And, to his credit, he is enthusiastically assisting other jurisdiction in setting up their own fraud interdiction programs.
We’re thrilled to recognize such a deserving public servant.
And as a side note, Al’s boss, District Attorney Steve Cooley, deserves praise as well for backing a new program and supporting Al’s efforts. As an elected official, it takes courage to embrace unconventional ideas that potentially could backfire. Kudos to both.
P/C carriers, health insurers coming together
The big news in the world of insurance fraud this week is the announcement of the creation of the Consortium to Combat Medical Fraud.
The Consortium is a joint project of the coalition, the National Health Care Anti-Fraud Association and the National Insurance Crime Bureau. It’s the first time that property-casualty insurers and health carriers have come together in a meaningful way to better detect and investigate fraud by medical providers.
Activities underway include cross-matching data on suspected fraud cases, cross-training investigators, getting insurers comfortable with sharing information across industries and conducting research.
A joint education program last week drew more than 60 investigators from both sides. Many eyes were opened about the different approaches the two industries take to resisting bad claims, detecting fraud and dealing with fraudulent medical providers.
Case studies have made clear the advantages of sharing intelligence and developing joint investigative strategies. One obvious benefit is that prosecutors are more likely to take cases that cross industry lines.
A full story on this effort will soon be published in our quarterly newsletter, Fraud Focus, also available online.
In the meantime, there’s been a lot of good press this week about the announcement. But Sam Friedman, editor of the National Underwriter, writing in his blog, had one biting comment:
When we posted a news story yesterday reporting that “anti-fraud associations representing both the property-casualty and health insurance sectors will pool their resources to increase detection and prevention of health care fraud,” the first question that came to mind was, what took them so long?
He went on to answer his own question:
I suppose I should not be surprised that the p-c and health-disability insurance sectors were off on their own all this time in trying to prevent fraud. While the public perceives the “insurance industry” as two sides of the same coin, the p-c and life-health groups have long operated as if they were two different currencies altogether.
He’s correct that the two sides of the industry have acted as if each has its own set of bad guys. As we have found, these fraudsters are equal-opportunity crooks.
This new effort should take a few more out of action.
Getting an “A” in insurance fraud
Insurance fraud may be a dull, boring topic for some, but high school and college students increasingly choose it as a subject of research reports and term papers. At the coalition, we get a good deal of e-mail from students asking for assistance with papers, and we are always eager to help recruit young people into the fraud-fighting community.
A group of students at Centenary College has demonstrated exceptional leadership: They’ve created a website about insurance fraud and produced an anti-fraud public service message for radio.
These young fraud-fighters. enrolled in the “College Students in Free Enterprise” program, did an outstanding job of researching and writing about fraud and they’ve published useful information on their website. The radio spot is especially good, and hopefully it’s getting well-deserved airtime.
The students were aided by a few industry veterans who were delighted that kids are taking an interest in a topic dear to their hearts. Hopefully, this program will encourage other students and schools to examine the issue of insurance fraud.
And, if you ever have an opportunity to help students learn about fraud, do it.
Whether through a structured program like this one, speaking at your child’s school or just offering to be a source for a term paper, your interaction with young people may be your best chance to make a long-term impact on fraud.
Lie in Kentucky, go to jail
Applicants for insurance in Kentucky have been put on notice: Lie and you may lose your freedom.
A woman who applied for a homeowners policy has been charged with failing to fully disclose her claims history. She faces five years in prison and a $10,000 fine.
Sadly, such cases are rare across the U.S. Fraud bureaus and prosecutors usually don’t consider them a priority. If more did, they would send a stronger signal that honesty is important. Underwriting fraud is basically a fairness issue. The cheats cause honest policyholders to subsidize the premiums of the dishonest.
Hats off to the Kentucky fraud bureau for taking this case. Details are below.
CORBIN WOMAN INDICTED FOR INSURANCE FRAUD
Allegedly falsified claims history information on applicationFRANKFORT, Ky. (June 11, 2008) – A Corbin woman is in custody after being indicted on a felony count of insurance fraud. According to court documents, Christine V. Young filled out an application for homeowners insurance coverage with State Farm Insurance Company stating that she and other household members had no losses for the past three years. She also allegedly stated that no insurer had refused to issue or renew coverage during that time period.
An investigation by the Kentucky Office of Insurance (KOI) Fraud Investigation Division found that another insurer canceled Young’s homeowners policy due to misrepresentations on the application. In addition, Young was directly or indirectly involved in at least four fire losses and one major theft loss during the three-year period.
She was arrested by a KOI fraud investigator and the Corbin City Police and is being held in the Knox County Jail. If found guilty, she faces a maximum sentence of five years in prison and a $10,000 fine.
Is fighting fraud a priority for the feds?
The FBI and U.S. Department of Justice seem to be going to great lengths recently to tout their successes in combating insurance fraud.
In recent days, both the FBI and Justice Department have issued news releases citing results and claiming that economic crime and health care fraud remain a priority for the federal government. U.S. Attorney General Michael Mukasey even gave a speech yesterday to highlight the importance for the Justice Department to fight health care fraud aggressively.
Mukasey had a lot of good things to say in his speech. I especially like this:
“We cannot prosecute our way out of this problem. For every crooked durable medical equipment company we bust, there is another one to replace it before the ink on the indictment is dry. For every wayward provider we charge, there are others willing to engage in the same frauds. The money, and the temptation, are simply too big.
That’s why the deterrent effect is such an important part of your cases. These are highly deterrable offenses, and those who might otherwise be tempted to commit them do not want to do time . . . we must learn lessons from these prosecutions that will help us to devise ways of preventing a recurrence of these frauds. That is one reason why the cooperative efforts of agencies such as the Department of Health and Human Services are vital to our long-term success.”
Too bad he also didn’t promote cooperation with private insurers.
The speech and both news releases issued cited recent numbers of arrests, cases and recoveries, but mostly fail to provide year-to-year comparisons. A peak inside the FBI’s website reveals why the agency doesn’t wish to highlight year-to-year trends. Health care fraud cases are flat, at best, and insurance fraud cases have declined in each of the last four years.
After 9/11, more than 2,400 FBI agents were re-assigned to terrorism, and today the white-collar crimes units are still some 1,700 agents below pre-9/11 levels. And it doesn’t look like that is going to improve anytime soon, according to this recent article:
“Despite a powerful surge in bank robbery, mortgage fraud and white-collar crimes, the Bush administration’s 2009 budget leaves an already handicapped FBI criminal program without the agents it needs to respond — a shortcoming acknowledged by top FBI officials.”
The federal government plays an important role in not only investigating and prosecuting fraud, but also in helping to send a strong message that aggressively fighting fraud is important for government agencies, insurers and society in general. Weakening those efforts hurts us all.
The new Massachusetts miracle
Anyone who doubts that focused anti-fraud efforts can have impact — and put dollars back into the pockets of consumers — need only look at the latest numbers out of Massachusetts.
Since the state launched focused fraud-fighting efforts in 11 communities, claims have fallen $278 million, mostly because of lower medical provider billings — and that’s only for auto insurance. Workers compensation and health insurance probably benefited as well, as many rogue chiropractors and other providers closed up shop.
The most dramatic declines were in Lawrence, Mass., where staging car crashes has long been a way of life for many citizens. Injury claims per 100 accidents dropped from nearly 140 to about 50 over the last four years. Medical billings from auto accident injuries declined from $9 million to less than $1 million in the city.
This impressive news was announced at this week’s insurance fraud summit, cosponsored by the Massachusetts Insurance Fraud Bureau (IFB) and the state’s office of attorney general. I was honored to be the featured speaker at the event; I not only commended fraud fighters in the state, but also challenged them to build on their success.
For all the progress in Massachusetts, there remains great potential for even more success. Part of my optimism stems from the fact that the fraud-fighting community there is more cohesive than in many other states. That was evident at the summit, which drew a lot of local police officials, DAs, and representatives from the U.S. attorneys office, IRS, DMV, labor department, as well as many insurers operating in the state.
Good results can happen when people work together. Congratulations to everyone in Massachusetts.
Tragedy in North Carolina
Financial auditors in state insurance departments are the unheralded workers who help ensure that insurance companies remain solvent and that insurance agencies stay honest. The news out of North Carolina today is sad: A state auditor, Sallie Rohrbach, 44, is missing and an insurance agent has been charged with her murder.
Details are sketchy, and speculation about a motive would be premature at this point. More information probably will be released this afternoon when agent Michael Arthur Howell, of Charlotte, 40, is arraigned.
Update - May 21, 2008 - A body was recovered yesterday by police. Howell appeared in court, but few details were provided. The North Carolina Department of Insurance released this statement:
The news this evening that Sallie’s body was found brings conflicting emotions to those of us at the Department of Insurance. We are devastated that all hope is lost, but we also find a sense of closure in knowing that we can lay to rest our dear friend and colleague with the dignity and respect she deserves. Not knowing where to find her was torturous, so at least in that regard there is some relief.
We pray for peace for Sallie’s family and want them to know that we grieve with them.
Finally, we send our sincere thanks to the Charlotte Mecklenburg Police Department. Their response to this case was, in our minds, exceptional, and we commend them for their professionalism. Thank you, CMPD, for bringing closure to those who knew and loved Sallie.
