Publications

This week, however, has seen two major anti-fraud developments here in Washington, D.C. On Capitol Hill, a newly filed bill in the U.S. House seeks to increase joint oversight of health insurance by the federal government and the state departments of insurance. The bill also would mandate more consumer disclosures, and greater licensing and marketing oversight of health insurance. Across the street, the U.S. Supreme Court will consider reviving a pair of lawsuits accusing pharmacy operators of overbilling government health insurance programs for prescription drugs. The cases arise under the Federal False Claims whistleblower act and will address the government’s ability to go after fraud. The key question in both cases is whether companies can shield themselves from whistleblower fraud lawsuits by pointing to an “objectively reasonable” interpretation of the law that supports their conduct — regardless of whether they actually believed that interpretation in good faith at the time. The lower courts dismissed the federal claims for alleged fraudulent billing of Medicare and Medicaid, ruling for the defendants, Safeway Inc and SuperValu Inc. 
 

New laws continue to pour in as more state legislatures start their 2023 sessions. Among the interesting bills around the nation are:

• Arizona. A bill would require — in case of an adverse underwriting decision —  the insurer or agent responsible for the decision to either provide the applicant, policyholder or individual applying for coverage with the specific reason for the adverse underwriting decision in writing or they must be advised they are entitled to know the specific reason in writing. Insurers would also have to notify the applicant, policyholder or individual proposed for coverage with a summary of their rights under state law.
   

• New York. Runners would be subject to new criminal penalties if a newly-filed Assembly bill becomes law. The proposal creates the crime of unlawful procurement of clients, patients or customers by anyone knowingly acting as a runner — or using, soliciting, directing, hiring or employing another person to act as a runner. The bill also defines a runner as a person, who knowingly, for profit, seeks to procure clients, patients or customers for an attorney or medical provider to falsely or fraudulently obtain insurance benefits or make a claim against an insurer or insured.
   

• Oregon and Alaska. The Coalition and Honda’s life-saving model counterfeit-airbag bill already has been introduced in Oregon and Alaska in 2023. Marketing, distributing or installing counterfeit airbags would be a specific crime. Similar laws have been enacted in more than half of all states.
   

• Indiana. The Hoosier State is among the first states to file data privacy bills. A Senate bill would create a new consumer data protection act. The legislation contains an important insurance fraud protection exemption: The bill would not apply when necessary to prevent, detect, protect against, or respond to security incidents, identity theft, fraud, harassment, malicious or deceptive activities, or any illegal activity, to preserve the integrity or security of systems, or to investigate, report, or prosecute persons responsible for any such actions. 

How can a labor union joining the Coalition help lead the fraud fight? The United Brotherhood of Carpenters & Joiners of America is already active with the Coalition in seeking laws and regulations to stop employee misclassification and failing to provide workers compensation coverage. In December the Coalition was advised of an opening for a labor representative on an important anti-fraud commission in California. We connected the Union with the governor’s office leading to Gov. Gavin Newsom announcing the appointment of Dan Calamuci to the California Fraud Assessment Commission. The Commission allocates funding to fraud prosecutors statewide. Calamuci has been a Senior Representative at Nor Cal Carpenters Union since 2022, where he previously was a Research Analyst since 2007. He also was a Teaching Assistant at the University of Massachusetts, and a U.S. Campaign Coordinator at the National Labor Committee for Worker and Human Rights. Congratulations to Dan from all of us at the Coalition on your appointment. 
 

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

Read about a terrific 2022 — and fast-unfolding year ahead — in the 1Q 2023 issue of Coalition Quarterly. We finished 2022 with an alltime high of 283 members, with our first union, international organization and the California Labor Commission among the year’s 42 new members. The latest Hall of Shamers were dishonored, and our Prosecutor of the Year was crowned. Tracy M. Thompson, New Jersey’s accomplished Insurance Fraud Prosecutor, will be the Coalition’s new Deputy Executive Director. Also announced were 2023 studies of consumer and fraudster attitudes about fraud — and how insurers can best deploy resources to optimize their fight against fraud. Record-breaking attendance at our annual Member Meeting in December brought these and many more achievements and plans to the forefront. Read all about the Coalition’s 2022 fraud-fighting leadership and ambitious 2023 goals in Coalition Quarterly.

From our Is It Happening Here? files: The UKs’ cost-of-living crisis is spurring a fraud spike by hard-pressed Brits, says a survey by the law firm Weightmans. More than half of surveyed insurance professionals say they see a significantly higher number of false claims than in previous years — with 97% expecting scams to increase further. As for specific scams: credit hire (60%), such as faking invoices supposedly for hiring a replacement vehicle; bent metal (45%), such as buying an already-damaged vehicle to claim it was involved in an accident; and home claims (35%), such as falsely claiming a high-value item was damaged or stolen.

Here’s the alleged insurance plot: The suspects were paid $1K each to take part in the crash and receive treatment at local medical clinics. Amauri Rodriguez met with an unknown male who organized the crash. That male offered Rodriguez $1K to manage the crash. They met for final instructions the day of the crash. One vehicle was driven by an unknown male, with Yadira Sanchez and Lixelly Mayari as passengers. The other vehicle was driven by Ruberlandy Cruzata with Orislaidy Montano as passenger. After the collision, the unknown driver of the first vehicle fled the scene. Rodriguez then got behind the wheel, with Sanchez and Mayari still inside. The responding Miami-Dade police officer questioned whether the crash was staged, and Rodriguez confessed. Despite his confession, they all attended PIP therapy clinics. National General Insurance was billed more than $27K for bogus treatments, and United Auto was billed more than $25K. Both insurers denied the payments. The suspected staged crashers each faces up to 15 years in state prison if convicted.

The Washington insurance department shares two guilty pleas: Joseph David Calvert. The Selah man told Homesite Insurance, claiming he ran his vehicle into a car lift inside his body shop. Homesite discovered that Calvert had already filed and been paid for a claim with Farmers Insurance for the same damages. Homesite denied his $10.6K claim. A week and a half after Homesite denied the claim, Calvert filed a $7.9K claim with Metromile Insurance, stating he’d run his vehicle into an object. Metromile requested photos from Calvert’s earlier claims and discovered it was the same damage he’d already claimed. Tory McMillen. The Friday Harbor man bought a 2012 Volvo S80 sedan in March 2021. Two months later, McMillen filed a claim with Geico. An unknown male he met at a bar had vandalized the car, he lied. Geico discovered that the damage existed before McMillen bought the Volvo. The insurer denied McMillen’s $6K claim. The insurance department’s Criminal Investigation Unit completed both probes, leading to the Calvert’s and McMillen’s guilty pleas.
 

A contractor staged flooding and other destructive losses to steal insurance payouts. Isrrael Millan borrowed two vehicles to stage a collision in Yuma, Ariz. He arranged to have a man’s home flooded a month later. The insurer paid Millan for the restoration work. He set up another home flood a month after that incident. Next, Millan hired two cronies to crash a U-Haul into the Sunshine Market and Liquor Convenience Store in Yuma. He told the owner to file a claim so Millan would be paid to fix the property. The U-Haul’s insurer suspected a ruse. Instead of paying the claim, the insurer referred the case to the FBI. Millan was federally convicted and will be sentenced Feb. 23. 

Deputies responded to a boat and trailer fire just after midnight on Nov. 6, in Hurricane, Utah. A witness who reported the fire told deputies they saw a Ford truck pulling a boat, then saw the same truck about 20 minutes later going the opposite direction with the boat before noticing the fire in the distance. The $100K boat belonged to a rental company owned by Joseph Brad Arave. This suspected scam allegedly went down: Arave claimed he didn’t know the boat was missing and that someone must’ve stolen it. He then made damage claims for the boat and trailer. Shortly after the fire was reported, Arave was pulled over in a rental truck for speeding and acted nervously. Detectives used a search warrant to pull dates, times and GPS locations during the time Arave rented the truck. Tracking logs showed the truck drove to the fire’s location, stopped for several minutes, then left without stopping until Arave was pulled over. He refused an interview with detectives and hired a lawyer. Arave eventually was arrested, and detectives found meth in his truck. He then fled to avoid a fraud prosecution, and now has an arrest warrant. 

A public adjuster forged signatures on $592K of insurance checks intended for seven client victims whose homes were damaged by Hurricane Ida, the Louisiana State Police say. The allegations: Andrew Joseph Mitchell began soliciting property-damage victims after Ida barreled through several Louisiana parishes. After obtaining a greater insurance settlement, the Texas-based adjuster deposited the funds without paying the homeowners. Mitchell forged the homeowner’s signature to obtain the money. The Texas insurance department also charged Mitchell civilly. He stole $7.6B from 14 clients. Among the victims, Mitchell cashed four insurer checks worth more than $6M intended for the Friendship Missionary Baptist Church in Albany, Ga. He also took $322.5K of insurer checks intended for the St. Paul Lutheran Church in Minnesota. He returned the money — minus his fee — after the church filed a police complaint. And Mitchell charged clients more than the maximum 10% fee allowed by Texas, while using corporate names that weren’t licensed.

Seneca Birchmore lost his agent license because he wrote unauthorized life policies to illegally collect more than $8K of life commissions. The Cincinnati man then stole the IDs of two other agents to write more life policies for clients who didn’t want them. Birchmore deposited more than $93K of commissions from dozens of their clients into his own bank accounts. Law enforcement received complaints from victims that money was being automatically withdrawn from their bank accounts for policies they never bought. Many victims were seniors. In a separate incident, Birchmore fraudulently obtained two COVID Paycheck Protection Program loans worth more than $40K. Birchmore falsely claimed on the loan applications that he owned a business with more than $13M in gross income in 2019. Birchmore pled federally guilty to the ID thefts and must repay $143K; no word on jail time. He’s also federally charged for the alleged PPP con.

A dockworker at the Port of Long Beach fraudulently billed his union’s health plan for sexual services. Cameron Rahm is one of nine to submit more than $2.1M in fraudulent claims to their union’s health insurance plan for sexual services — and phantom physical therapy. Rahm obtained sex from women at three businesses that offered chiro, PT and acupuncture. Rahm’s health plan was run by the International Longshore and Warehouse Union and Pacific Maritime Association. He made $178.4K of false chiro and PT claims under the name of his wife, who was a plan beneficiary. He also requested $240 in cash per month from a colluding crony in exchange for his authorization to submit false claims for reimbursement for phantom services. Rahm pled guilty and faces up to 10 years in federal prison when sentenced. Four other dockworkers at the Port of Long Beach also pled guilty and face up to 10 years.
 

Life insurance and a bitter custody battle formed the motives for Robert Alan Fratta’s hired shooting of his estranged wife. The Texas man was executed by lethal injection Tuesday. Farah was found shot twice in the head in the garage of her home in a Houston suburb in 1994. Fratta tried to collect on her life policy just days after her death. He hired a teenager to kill Farah for $1K and a Jeep. Fratta barely tried to hide his tracks. He told a variety of friends he wanted Farah dead, and asked them if they knew anyone he could pay to have her killed. He told one pal, "I'll just kill her, and I'll do my time and when I get out, I'll have my kids.” Fratta didn’t help his case when TV cameras caught him with a big grin after leaving a police interview shortly after Farah was killed. Fratta spent decades on death row, repeatedly appealing his 1995 conviction. He was given a final chance to make at least some peace with himself and family. When asked if he had any final words, Fratta simply said “No.”
 

Stephen Brobeck, CFA Senior Fellow and Past Executive Director, was on the ground floor of our founding in 1993. The Consumer Federation of America is a founding member — and still active.