Publications

The Senate bill intends to fight workers compensation premium and misclassification fraud. “This legislation will help ensure transparency, reduce fraud and ensure taxpayer money goes to contractors who treat their workers with dignity and respect,” Hochul said on signing the bill on Dec. 30. Contractors and subcontractors now must register with the Department of Labor every two years. The department will determine if a contractor or subcontractor is eligible to bid on public projects, based on previous labor law and workers compensation law violations. It also requires creation of a publicly available database. 

Videos have appeared on YouTube and TikTok, showing viewers how to steal Kias and Hyundais and other vehicles without a key. These are invites to steal the cars even as thefts of Kias and Hyundais explode across the U.S. “… we believe YouTube is not doing enough to quickly and effectively respond to this ongoing issue,” NICB’s CEO David J. Glawe and the Coalition’s Matthew Smith write Susan Wojcicki, CEO of YouTube. “Accordingly, the undersigned organizations formally request YouTube immediately take down any videos which encourage or facilitate criminal activity, including posts providing audiences instruction on how to steal Kia or Hyundai vehicles.”

Two key exits are occurring in Florida. One exit is voluntary, and the other is far from voluntary. 

• The voluntary departure is the retirement by Barry Gilway, CEO of Coalition member Florida Citizens Property Insurance Company. Gilway has served for 11 years as CEO of the state-backed property insurance company of last resort. His retirement comes after the earlier announced stepping down by Insurance Commissioner David Altmaier after six years, effective Dec. 28. Gilway waited to announce his retirement until after the Florida legislature met in special session in mid-December to pass major property insurance reforms. He plans to officially  step down before the 2023 regular session of the legislature begins in March. 
   

• The involuntary departure of an attorney came via ruling by the Florida Supreme Court on Dec. 22. Attorney Scot Strems received a big lump of coal when the state high court disbarred him. Florida insurers had long-asserted Strems was responsible for filing of many frivolous or even fraudulent lawsuits. The disbarment ruling does not address those cases directly focusing more on mismanagement of client case issues. However, importantly the court did note: “On top of mismanaging his firm, Strems also submitted false or misleading affidavits in two cases where he had attempted to negotiate settlements.”

Also in the “exit lane” is Nevada Insurance Commissioner Barbara Richardson, who announced she is stepping down. Richardson has served since March 2016. Prior, she was the New Hampshire Insurance Department’s director of operations and fraud for 12 years. Her replacement has not yet been named. 

In March 2022, the Coalition submitted an amicus curiae brief supporting California’s insurance fraud law. More specifically, we backed the relator and California Department of Insurance in the case of  People ex rel. Rapier v. Encino Hosp. Med. Ctr. et al. (“Rapier”) before the California Second District Court of Appeal. In our brief, the Coalition argued the trial court erred in ruling the California Insurance Frauds Prevention Act did not impose liability for fraudulent claims and writings presented to HMOs and ERISA plans. On Dec. 21, 2022, the California Court of Appeal issued its decision in the Rapier matter. While the court affirmed the trial court’s ruling, it did not address or rule on the issue briefed by the Coalition. We hoped for a better ruling. Still, the important factor is that by not ruling on this important issue directly, the argument may still be made that the statute does apply to both HMOs and ERISA plans. For more information or questions please contact Ross Silverman of Katten Muchin Rosenman LLP ([email protected]).

The practices of insurers allegedly improperly handling claims continued to persist with several developments over the holiday season. 

• According to news reports, several adjusters recently alleged to Florida’s House Commerce Committee that insurers change their estimates of repair costs for damaged homes. Similar actions were also reported to have occurred in North Carolina and Louisiana. “The insurance companies were directing file reviewers to change my estimates to repair the roofs rather than replace a totaled roof,” said Ben Mandell, a licensed all-lines adjuster. “However, the insurer was leaving my name on the estimates in a fraudulent effort to make it appear that I had written this bogus estimate, which defrauded the policyholders out of their proper claim payments.” The Florida committee chair suggested such assertions should be investigated by the state attorney general based on the accusation of fraud. 

• A mid-December New York Times story details a newly-filed federal lawsuit in Illinois alleging Black State Farm insureds have a harder time getting homeowners’ claims paid out compared with white customers. The lawsuit is based upon a study by the Center on Race, Inequality and the Law at the NYU School of Law, in partnership with the Fairmark Partners law firm. “Our information from the survey told us that there was a problem here,” says Deborah Archer, director of the Center. She says the group focused on State Farm because it is the nation’s largest homeowners insurer. “We take this filing seriously. This suit does not reflect the values we hold at State Farm. State Farm is committed to a diverse and inclusive environment, where all customers and associates are treated with fairness, respect, and dignity. We are dedicated to paying what we owe, promptly and courteously,” says State Farm public affairs specialist Gina Morss-Fischer, 

The many months of work done by the NAIC’s Antifraud Task Force on the marketing of Medicare Advantage plans may have caught the attention of the White House. The Biden administration has proposed a ban on misleading ads. Those ads target older Americans, often trying to convince them to sign up for plans that frequently fail to cover medical bills or prescriptions. The rule, proposed by the Centers for Medicare and Medicaid Services, would ban ads that market Medicare Advantage plans with confusing words, imagery or logos. The new regulation also would require including the actual name of the health insurance plan. The proposed rule "takes important steps to hold Medicare Advantage plans accountable for providing high quality coverage and care to enrollees,” said agency Administrator Chiquita Brooks-LaSure.

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

“… were medically unnecessary and/or were the result of kickbacks being paid in return for the referral of the patient,” writes Matt Kochanski, a senior health care fraud fighter for Advise Health, in the latest JIFA article. “Recently, however, something new has emerged. Non-provider entities have started to orchestrate fraud schemes.” Learn all about the emerging scams by billing and practice management firms, device manufacturers and marketing firms.

TrendWatch: “As organizations race to enhance their digital engagement to attract and retain customers, increasingly sophisticated cybercriminals will find and exploit security and anti-fraud weaknesses,” writes Stu Bradley, Senior VP of Fraud & Security Intelligence at Coalition member SAS. “Unfortunately, organizations and businesses not yet prepared for the volume, variety and voracity of incoming fraud attacks will face accelerating losses. In the business of fraud, this means more newly minted criminal multi-millionaires.”
 

TrendWatch: “AI’s pattern recognition abilities make it an excellent tool for detecting and preventing fraud. Financial companies already use fraud prevention AI tools and the insurance industry could follow suit. While a human may be able to recognize when a claim seems suspicious, AI can do so faster and more accurately,” says an article in Techopedia. “Machine learning models can analyze vast amounts of data simultaneously. That lets them compare customer history, similar incidents, false information and more to detect abnormalities in a matter of minutes, if not seconds. They could then either flag a case and alert human workers to investigate it further or deny the claim automatically.”

Andrew Dowd’s sidekick, attorney George Constantine, also will serve quality jail time for filing fraudulent lawsuits to extract insurance money. Constantine and Dowd used recruiters to bring in patients from the streets — usually homeless or low-income people desperate for cash. They were paid to fake injuries at sites such as cellar doors, sidewalk cracks and purported “potholes” in front of businesses such as gas stations and diners. The fake-injured recruits were brought to Constantine’s office — by the carloads. He filed nearly 200 fraudulent lawsuits and earned more than $5M in settlement fees from these fraudulent cases. The patients then were driven to visits with chiros, physical therapists and MRI clinics. Dowd then did nearly 300 unneeded surgeries on their knees, shoulders and backs. Insurers paid about $10K per procedure. Dowd paid hundreds of thousands of dollars in kickbacks for the patient referrals. The patients were paid about $1K after each surgery. Constantine and Dowd will be sentenced March 21. Each of his six federal fraud counts carries up to 20 years. Numerous other ring members have been sentenced, convicted or pled guilty.
 

The owner of a towing company ripped off Florida’s no-fault auto system, enabling federal prosecutors to nail him with tax-evasion charges for not reporting his ill-gotten gains. Craig Goldstein owned West Way Towing, a South Florida outfit that towed and stored disabled vehicles. That included vehicles involved in collisions. Goldstein referred crash victims to certain attorneys and chiros, who would illegally charge insurers for unneeded treatments covered by Florida’s PIP auto-insurance program. Goldstein charged a cash fee for each patient referral — yet didn’t report the stolen money to the IRS. Nor did Goldstein report cash he received from vehicle storage lien fees and vehicle auctions — the sales prices he manipulated to falsely reflect that he made no profit. Goldstein admitted owing the IRS more than $130K of income tax. He received 15 months in federal prison.

The Golden Anchor wasn’t so golden after all. Reuben Schwartz used a torpedo heater to burn down his bar and restaurant, federal prosecutors charge in Conneaut, Ohio. The case: Schwartz placed stacks of flammable materials inside the building. Holes cut for windows were sealed to prevent bystanders from seeing smoke from the fire. He burned down the building when he planned to be out of town. Schwartz then made an insurance claim. Schwartz acquired repair estimates and quotes for goods and services and altered them to appear the bills were paid. Schwartz also lied that a significant amount of work on the business that was to occupy the redone building was finished. Limited renovations and repairs actually were done. He used the insurance money to pay off debts on other properties he owned. Schwartz also provided false expenses for building a replacement business across the street — now Port District Beverage. Schwartz caused a lumber company to issue a $100K invoice, then canceled the invoice four hours later. He gave the initial invoice to his insurer 11 days later as evidence of costs for building Port District Beverage. Schwartz used the insurance money to unlawfully pay off debts, buy property and pay for work on Port District Beverage.

A sheriff’s deputy lied about the date and time of a crash involving an uninsured vehicle he drove, Florida’s Department of Financial Services says. Corey Michael Jones collided while driving his Town and Country Van in Santa Rosa County in September. The allegations from a recorded call with USAA: Jones said he was “in an accident” and wanted to “make sure the vehicle was covered” on Sept. 17 — even though he “stated the insurance card showed the effective date of Sept. 18.” Later at 1:52 p.m., Jones filed a claim on the van. On Sept. 20, Jones called USAA again and said he added the Town and Country van early in the day on Sept. 17, updating the policy before the crash. USAA conducted a recorded phone interview on Sept. 27. Jones said his fiancée and grandmother bought the van in April, and he said he assumed they had insurance since they received the vehicle’s registration in the mail a few days later. During the same call, the investigator stated, “OK, and you are confirming for me on this recording that you were not already involved in this accident on the side of the road when you logged on and added coverage to this vehicle?” Jones replied, “No, sir.” Later in the call, the investigator told Jones “it sounds like at this point, what you’re telling me is that you knowingly gave false or incorrect information to the presentation of this claim. His reply was redacted. Jones is charged with insurance fraud and was relieved of duty.
 

A general contractor contracted a case of insurance dishonesty in Yuma, Ariz. Isrrael Millan’s schemes included staging vehicle crashes, and deliberately flooding homes and then submitting fraudulent claims. One incident occurred in the early morning of June 2, 2019. Two cronies Millan recruited purposefully crashed a U-Haul truck into the Sunshine Market and Liquor Convenience Store in Yuma. Millan told the store's owner to file an insurance claim so he could be paid to fix the property. The insurer for the U-Haul suspected fraud, didn’t pay the claim, and instead reported the incident to the FBI. Millan was convicted of conspiracy to commit fraud, wire fraud, mail fraud, and money laundering. He’s set to be sentenced February 23.
 

The Georgia insurance department shares two recent cases. The allegations: Daronte Powell filed a claim with his insurer stating that his Lyft driver ran over his foot after his ride to Northlake Mall in the Atlanta area. He said he was reaching for his wallet in the backseat of the car when the driver began driving away. After the incident, Powell sent documents to Lyft indicating he received medical treatment for his injuries. The Georgia insurance department contacted the medical facility listed on the treatment documents. Powell was never a patient there, and the documents were forged. Warrants have been issued for Powell's arrest for insurance fraud and forgery in the first degree. Burglary scam: Angelina Cortez filed a claim for more than $5.6K with The Hartford after her business was burglarized. The Henry County woman  said she replaced the stolen items with purchases from Amazon. She submitted receipts as evidence. After speaking with Amazon, investigators confirmed Cortez canceled the replacement order. Amazon refunded her money while she collected the insurance payout.
 

Two guilty pleas were announced by the Washington insurance department: Joseph David Calvert (Saleh) told Homesite Home Insurance that he crashed his vehicle into a car lift inside his shop. Yet Homesite discovered Farmers had already paid him for the same damage. Homesite denied the $10.6K claim. A week and a half later, Calvert filed a claim with Metromile Insurance, saying he ran his vehicle into an object. Metromile requested photos from Calvert’s earlier claims, and discovered it was the same damage he claimed previously. Metromile denied his $7.9K claim. Calvert will serve 120 days of home detention. Tory McMillen (Friday Harbor) bought a 2012 Volvo S80 sedan in March 2021. Two months later, the Friday Harbor man, McMillen told Geico that an unknown male he met at a bar had vandalized the car. Geico discovered the damage existed before McMillen bought the Volvo. Geico denied McMillen’s $6K claim. He was given three months in county jail.

Celebrating 30 years strong: What a difference 30 years makes! The Coalition was founded as a small anti-fraud startup in 1993. Defenses against fraudsters were far-weaker around the U.S. Our forward-thinking founders wanted to help unify and energize anti-fraud efforts through the Coalition. Today we’re a recognized nucleus of the fraud fight — nearly 300 member organizations strong. The Coalition is the nation’s only insurance-fraud group that brings together insurers, consumer groups, business partners, regulators and other influencers from around the U.S. — and globe. Together, we’re helping pass strong fraud laws, influencing landmark court cases, educating millions of consumers — and so much more. The Coalition will celebrate our 30th anniversary throughout 2023. You’ll read a fresh new story about our history and achievements in each issue of Fraud News Weekly. You’ll also learn more about the worst fraud cases, staged-crash rings out of control, anti-fraud heroes, and how the fraud fight has come into its own. Come celebrate 30 years strong with us. Each week throughout 2023, we’ll recount a highlight moment of the Coalition’s history — or the fraud fight itself — to help celebrate our 30th anniversary. 

Since that time the company has expanded the services offered to include a variety of insurance and investment products designed for credit unions and their members. With some recent acquisitions and an expansion to offer products outside our typical Credit Union space, they have seen a lot of new fraudulent activity in the last 2 years. Their SIU supports the entire organization and is primarily involved with our Claims and Underwriting teams, but also partners with their Legal, Compliance, and Financial Services areas.  Most of their investigative work comes from their disability, and life products. They also help their P&C teams, but with much of the business being commercial, there are much smaller volumes of claims that need SIU involvement. 

The industry is going through a major shift to be digital, but their internal systems have not kept the same pace. Their fraud fighting is stuck in a reactive approach, while they know they must be more proactive and use the information they have available to them. They are working on cleaning up their data and analytics to advance their approach. Siloed and legacy systems need to be linked together to build out a single source of information. Further, we are looking at using the data to enhance and build better predictive analytics and finding better controls to avoid risk. Once again we welcome CUNA Mutual Group.

Happy New Year from everyone at IASIU! This time of year is about family, friends and the infamous New Year’s resolution. But for fraud fighters like us, this is also one of our busiest times of the year. In addition to an increase in insurance scams, holiday frauds were also abundant as people scrambled to order gifts for their holiday celebrations. Non-payment and non-delivery scams cost consumers more than $337 million annually, reveals the Internet Crime Complaint Center’s IC3 2021 report. Credit card fraud accounts for another $173 million in losses. These types of fraud affect everyone, but unfortunately the scammers don’t stop there. Often when they successfully commit one type of fraud, they launch other types as well. It’s for that reason the SIU community never stops fighting to resist insurance fraud. This is also why IASIU remains committed to assisting and informing our members, business partners, and the public through education, awareness and networking. So join us in celebrating the New Year — but let’s all stay aware and vigilant.