Publications

A “tidal wave of fraud” has swindled unemployment and other pandemic benefits paid to consumers and businesses, the Times observes. The federal government issued more than $5B in payouts to people alleging they were in financial need or harmed by the pandemic. Most claims were legitimate. Yet COVID-19 relief payments have led to “one of the largest frauds in American history, with billions of dollars stolen by thousands of people.” Some 500 prosecutors across the nation are working on a backlog of investigations for possible prosecution. Many come from more than 39K complaints filed with the U.S. Labor Department. Why should insurance fraud fighters care? As the pandemic winds down — for now — many businesses and consumers may look to insurance fraud to provide the “income” or “assistance” streams of payments they are no longer receiving from the government. Insurers especially should have staff and systems in place to address what may be a tidal wave of insurance fraud in post-pandemic America. 

Sweeping new regulatory standards for oversight of cybersecurity and data protection are being drafted by the New York Department of Financial Services. The newly released proposal would apply to most mid-to-large insurers. It addresses “nonpublic” data maintained or stored on any information system. The rule also mandates annual independent audits of corporate cybersecurity programs. Detailed requirements, including reporting, are also set forth for corporate chief information security officers. If adopted, the new regulation will apply to many insurers, and their contracted entities, as they conduct investigations of insurance fraud. The regulation contains no specific anti-fraud exemption or carve-out, and would apply fully to entities investigating insurance fraud that are subject to its provisions. While the proposed rule should not negatively impact immunity for reporting fraud, that too is an open question. Regardless, compliance with regulatory oversight continues to have a major impact on fraud-fighting — and the willingness of insurers to incur the added time and expense such regulations bring, even when necessary to help protect consumers from insurance fraud.

A recent decision by the New Jersey Supreme Court may relate to potentially fraudulent third-party insurance claims where the policyholder becomes insolvent or defaults. The case is Crystal Point Condominium Association, Inc. v. Kinsale Insurance Company. Like many states, New Jersey law permits claimants to sue the responsible party’s insurer directly under certain circumstances. The anti-fraud question arises if a default is taken against the policyholder, but where issues may be present if the claimant commits insurance fraud. The high court upheld the ability of claimants to file such direct actions. Such actions are derivative claims, the court also ruled, and are subject to the same terms of the insurance policies. Here the court enforced a policy provision mandating binding arbitration. While not addressed in this ruling, the Coalition believes anti-fraud, and claim investigation duties and requirements, should be viewed equally as mandatory policy provisions when these cases arise. 

Important votes to advance the creation of a NAIC electronic portal for filing state-mandated anti-fraud plans were among the many items at last week’s NAIC Summer Meeting in Portland, Ore. The NAIC Market Regulation and Consumers Affairs (D) Committee voted to adopt the Antifraud Plan Repository Workflow recommendation by the Antifraud Task Force. “We’re very excited to see this project progressing through the NAIC process and we look forward to discussing system development with NAIC representatives in the future,” adds Michelle Rafeld, Assistant Director of Fraud and Enforcement for the Ohio insurance department, member of the Antifraud Task Force and a leader of the working group that is developing the central plan-filing portal. As the committee itself notes, “a centralized filing system for insurers to report their antifraud plans to state insurance departments [will] eliminate the need for multiple state filings of the same plan.”

A new proposal by the SEC may increase oversight and transparency for controversial litigation funding. Filings would remain confidential, but private funds investing in lawsuits would have to report certain statistics about their investment strategies to the federal government. Among those are disclosing the percentage of their money that goes toward litigation financing. Such investments exceeded $39B billion per year, a 2019 study estimates. The Coalition does not oppose all litigation funding. However, we strongly advocate for consumer protection from exorbitant fees, and for greater transparency in disclosing when such agreements may be in place. Litigation funding can underwrite abusive and even fraudulent lawsuits against insurers, so stronger oversight and transparency are necessary. 

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Note: Texts of anti-fraud bills are available on the Coalition’s website here.

Dozens of thefts from vehicles were reported regionally over the past few weeks. Nearly 40 bags were stolen in Fairfax County in just one weekend recently — mostly Honda Accords and Civics. Airbags are easy to steal. And they’re appealing because their value is inflated on the black market because of supply-chain scarcities, officials say. Insurance scams also are solid money-makers. “Let’s say a vehicle gets into an accident and the insurance company pays for a legitimate airbag from the manufacturer, which could be over a thousand dollars,” says local college automotive instructor Laura Garcia. “But here that shop, maybe it isn’t that reputable, and will just buy another airbag off the street for a much-lower price, and therefore they get to keep that profit.” Drivers should park on well-lit streets to deter thieves, officials warn. 

The gang included members of the Bloods street gang. Prosecutors allege this happened: They forcefully took control of First Response Cleaning Corp., based in Brooklyn. Then the gang elbowed into control of the entire cleanup business in the area. They threatened to shoot anyone who resisted their takeover, or to shoot their families. Octavio Peralta acted as an illegal unlicensed adjuster to further cement the gang’s control. The gang then made false insurance claims for damaged properties. And they imposed a system of rules on the cleanup firms. That included a strict rotation system, with the lead gang dictating which fire companies cleaned up which fire scenes. The gang also extorted the firms into paying them hefty fees or face retaliation and be violently attacked. They sent video recordings of violence and attacks throughout the industry to intimidate victims. And they threatened witnesses who cooperated with the federal investigation. The gang is charged with racketeering and other crimes. 
 

Branden Heywood used his and others ID, including his minor kids, to stage $80K of fake car collisions by submitting forged medical records, the California insurance department says. Here’s how the suspected scheme allegedly went down: The Chino, Calif. man then altered California Highway Patrol collision reports sent to auto insurers. Heywood recruited people on social media to say they were passengers in the fake collisions. As a result, five additional suspects from the Inland Empire area were charged with felony insurance fraud. He’s charged with 39 counts of insurance fraud. Heywood also is charged with possessing two assault weapons. The bust was made by the Inland Empire Auto Insurance Fraud Task Force investigation, led by the California Department of Insurance.
 

A pastor who’s also a home contractor has stiffed homeowners seeking repairs after Hurricane Laura barreled through the Macon, Ga. area in 2020, officials say. The allegations: Brandy Wyatt reached out to roofer Jimmy Collins, Jr. He said he could start repairs on her bathroom right away. Wyatt paid him $15K, yet the bathroom still is unfinished. Her master shower remains unusable. There’s no plumbing to the shower and the shelves are unfinished. The paint job is substandard and the new floor wasn’t leveled properly. Collins kept offering Brandy excuses and finally stopped replying altogether. Nor did Collins pay the subcontracted plumber or flooring firm. Those vendors now are considering placing liens on Wyatt’s house. Collins was arrested on six felony warrants for bilking Wyatt and other homeowners.
 

Ricky Gonzales ran Ricky’s Construction Company, which supplied construction labor for contractors. The Tampa, Fla.-area man lied he paid worker’s comp for the laborers he provided — who were undocumented immigrants. The contractors then sent Gonzales what they thought were payroll checks. Gonzales cashed the checks at banks to pay the workers. Gonzales lied that employees had full worker's comp. In truth, he received and cashed more than $7M of checks from construction contractors for his employees. That far exceeded the limited payroll that Gonzales reported to his comp insurer. His employees thus worked at job sites without adequate insurance coverage. The insurers lost premiums they would’ve charged had they known the true number of workers their policies were being manipulated to cover. Gonzalez also illegally avoided state and federal payroll taxes. He pled federally guilty and faces up to 25 years in prison when sentenced.
 

Phil Esformes drove a custom Ferrari and lived in a huge mansion in South Florida. He’s charged with being the majordomo of a $1.2B Medicare gouging with corrupt nursing homes. Here’s allegedly why: His scheme ranks among the largest insurance scams ever. Esformes was nailed with a 20-year federal sentence until then-President Donald Trump commuted his term in 2019. Prosecutors now will retry Esformes on six earlier charges still available thanks to a hung jury. Esformes dolled out kickbacks to keep 14K patients churning through his facilities, overbilling for services the patients didn’t need. Esformes bribed docs in cash to refer patients to his facilities. He used kickback code words like “fettuccine.” Esformes then inflated invoices to account for kickbacks and bribes. He disguised them as payments for high-end escorts flown to Orlando and chauffeured in limos for nights at the Ritz Carlton. Esformes even bribed a health regulator to provide a schedule of unannounced facility inspections. Other providers also bribed Esformes to send patients to their facilities and falsely bill Medicare. He even bribed a basketball coach to have his unqualified son admitted to Penn as a basketball player. Esformes drove a custom $1.6-million Ferrari Aperta, flew private jets, and bought expensive homes in Miami and Los Angeles. The federal prosecutors who took down Esformes won the Coalition’s coveted Prosecutor of the Year Award. 

Lack of licensing never got in the way of chiro Peter Adamczak’s $1M acupuncture billing scam. The Long Island, N.Y. chiro wasn’t licensed to perform acupuncture, yet billed insurers for phantom treatments anyway. He lied the services were done by an unaffiliated acupuncturist who leased office space from him. Neither the so-called acupuncturist nor Adamczak performed the billed treatments. In one case, a beneficiary who was a relative of Adamczak deposited the insurance checks to their personal bank account and kept the money. Adamczak pled federally guilty and will be sentenced later.
 

Here’s a novel fraud case. While not insurance-related, the charges allege a deadly pandemic-related exploiting of anxious consumers: A self-styled church “bishop” peddled a deadly product containing industrial bleach as a cure for COVID-19. Tens of thousands of people bought Mark Grenon’s “Miracle Mineral Solution.” The Bradenton, Fla. man claimed it cures COVID-19, cancer, Alzheimer’s, diabetes, Parkinson’s, HIV/AIDs and other serious conditions. Yet when swallowed, his chemical brew became chlorine dioxide — a powerful bleach used for industrial water treatment and bleaching textiles, pulp and paper. Grenon’s toxic “cure-all” caused dangerous side effects in his victims —˜including severe vomiting, diarrhea and life-threatening low blood pressure. Some victims required hospitalizing, developed life-threatening conditions, and even died after drinking the Grenon’s poison. He sold it under the guise of Genesis II Church of Health and Healing, a bogus church he created to avoid federal oversight. Grenon mixed the chemical in a shed in his backyard. Officers seized dozens of blue chemical drums containing nearly 10K pounds of sodium chloride powder and thousands of filled bottles. Grenon kept selling the stuff even after being handed a federal injunction. He was recently extradited from Columbia to face federal charges. 
 

Bribing addicted patients to get overpriced rehab and urine tests, a Beverly Hills surgeon and his girlfriend falsely billed insurers $676M. Randy Rosen ran Wellness Wave, a surgical center. His girlfriend Liza Vismanos owned Lotus Laboratories, a testing lab. The couple hired body brokers to find and pay addicted patients living in sober homes. The patients typically needed the cash payouts, and readily got involved. The patients got unneeded drug tests, cortisone shots and implants of Naltrexone, a drug that can reduce opioid cravings. None of the addicted patients were referred by a doc. Nor did the couple have the patients fully examined to ensure they needed the treatments. Most patients aren’t good candidates for Naltrexone; unless it’s used correctly it can contribute to a patient’s death by overdose. Rosen and Vismanos used the insurance money to fund an opulent lifestyle. They bought a $3.2M mansion with views of the Pacific Ocean complete with lap pool and wine cellar. They also had high-priced cars, expensive purses and jewelry, eclectic art, and bars of silver and gold. Rosen and Vismanos pled guilty and will be sentenced later.

Jerking movements, tremors, head bobs and other symptoms described Army vet Bruce Hay’s purportedly debilitating medical condition. And the Kansas City-area, Kans. man lied he could get around only with a walker. He couldn’t even bathe, dress or eat on his own. Hay insisted he had a mysterious conversion disorder, so docs declared him 100% disabled. In fact, Hay faked the symptoms to scarf more than $450K of federal disability benefits. He displayed the symptoms just before and after medical exams, including hobbling with his walker. Then he was caught working in home construction, throwing hay bales into the back of a moving truck, hunting deer, driving a car and hauling more than 1M pounds of scrap metal. A jury convicted Hay, and he’ll spend up to 20 years in federal prison when sentenced. 

This is a great entry level opportunity with room for growth. The position will be posted on the Job Board on Indeed, if you know of any potential candidates directly in the DC metro area, please contact Joe at [email protected].

The Hall of Shame candidates are flying in and are being gathered. There is a slew of individuals that deserve to be selected but we are narrowing it down to the worst of the worst. Many of these stories are sad to read due to the nature of the crimes, but are well worth being chosen. Tom Donahue and Joseph Matos along with the rest of the PIC committee are working hard to ensure that the list is robust. If any Coalition member has come across a story that we have not published as of yet in Fraud News Daily or Fraud News Weekly, please feel free to send a potential Hall of Shamer to [email protected].

2022 Prosecutor of The Year is still open for submissions, although we have found some possible candidates that could be worthy of selection, we still ask our members to submit anyone they feel should be recognized and the PIC committee will review as a group.

As we approach our 30th year supporting fraud fighters across America, we ask that anyone with photos or great quotes about their time and experience with the Coalition to please email them to [email protected] prior to November 15th. The more stories and photos you can share, the better it will be to tell our story in 2023.

IASIU is proud we’re led by talented SIU professionals who volunteer their time to make an impact on the fraud fight. We’re created for the fraud- fighting community, by the fraud-fighting community. As Henry Ford once said, “If everyone is moving forward together, then success takes care of itself.” If we stand together and learn from one another we’ll continue to find success. IASIU looks to the brilliant minds among our membership to join the committees that shape the progress and future of IASIU and the fraud fight. Consider investing your time and talents by joining one of IASIU’s committees. Take a moment to review the active IASIU committees. If you find one that matches your interests and talents, contact the committee chair and see how you can help advance our mission — and your career. Get involved today, and join our united front!