The Florida Department of Financial Services has released its annual “Top-10 Fraud List,” summarizing 10 of the costliest or boldest securities, finance and insurance fraud scams investigated by the DFS Division of Insurance Fraud and resulting in convictions in the fiscal year that began July 1, 2005 and ends June 30.
Since last July DIF has made 740 arrests and won 560 convictions. Convictions are up 70 percent over the previous year and jail time is up more than 25 percent, according to Tom Gallagher, Florida’s CFO. The 10 cases on the list represent nearly $15 million in fraud. The list is being released as part of Insurance Fraud Prevention Week in Florida, which continues through June 26.
Gallagher said the arrests and convictions are due to hard-hitting investigations, stronger penalties, and two prosecutors dedicated to auto insurance fraud.
The top 10 fraud cases show fraud is not only costly but also dangerous. In one case six people died as a result of an Apalachicola doctor over-prescribing pain medications, and in another case post-hurricane construction workers were put to work without workers’ compensation coverage. In other cases, disabled and elderly citizens were exploited. The department offers up to $25,000 for information that directly leads to an arrest or conviction in a fraud scheme.
The release of the annual Top 10 Fraud List follows the 15th annual Florida Insurance Fraud Education Council Conference held last week in Orlando. The department is a member of FIFEC and helped host the three-day event for hundreds of insurance fraud investigators and prosecutors. During the conference, DIF Detective Michael Byrne was named FIFEC Investigator of the Year.
‘Top-10 Fraud List’
First Do No Harm: Dr. Thomas Merrill of Magnolia Medical Clinic in Apalachicola was convicted in January of 98 felony counts stemming from his over-prescribing of controlled substances to patients, six of whom died of drug overdoses. The drugs prescribed included Oxycontin, Xanax, hydrocodone, morphine, fentanyl, and oxycodone. Merrill was found guilty of 18 counts of wire fraud, five counts of defrauding health care benefit programs, including two counts that charged that death resulted from the violation, and 75 counts of dispensing or distributing controlled substances, including four counts that charged the deaths resulted from the use of drugs distributed by the defendant. Sentencing is pending, but Merrill could be ordered to pay more than $1.5 million in restitution.
Classic Ponzi Scheme: Two Palm Beach County men were each sentenced to 25 years in prison after they pleaded guilty to what detectives called a classic Ponzi scheme. Thomas A. Masciarelli, 48, of Palm Beach Gardens and Steven P. Petrarca, 55, of Lake Worth each pleaded guilty in March to racketeering (first-degree felony) before Circuit Court Judge Stephen Rapp, and in May the two were sentenced for defrauding more than 30 investors in Florida and Rhode Island. Masciarelli and Petrarca convinced investors to invest in American Real Estate Investors Inc., a company that purported to invest in local real estate. Investors were promised a return of up to 9 percent. The investigation found that Masciarelli and Petrarca never invested the money as promised and instead diverted $1.2 million for their own use.
Preying on the Elderly: A former insurance agent, who organized an elaborate bait-and-switch scheme that systematically defrauded more than 1,200 South Florida seniors, will spend 30 months in prison. At his January sentencing, Brian Lee Shechtman, of Hollywood, Fla. was also sentenced to 15 years probation and was ordered to pay more than $1.4 million in restitution. Shechtman’s scheme targeted senior citizens between the ages of 75 and 94 to switch their health insurance to lower-cost policies, over-billed them and then applied the money to additional life insurance policies without the victims’ knowledge. There were multiple schemes at play and several of the victims had to dip into their life savings to pay medical bills that they thought were covered. Some lost their homes. Two of Shectmans’ cousins were also ordered to spend time in prison for their roles in the scheme.
Empty Promises: Two men who sold empty promises and bogus health insurance plans to tens of thousands of people in Florida and 43 other states can be assured themselves of one thing, they will spend time in prison. The principals of TRG Marketing LLC, Carmelo Zanfei and William Paul Crouse, were sentenced in August 2005 to two years and four years in prison, respectively. Zanfei and Crouse marketed a bogus health plan, claiming that the self-insured plan was exempt from the licensing and certification requirements of state law. The health plan was insufficiently funded and failed to pay millions of dollars in claims, resulting in financial devastation for the customers who believed they had valid health insurance. In addition to their prison sentences, Zanfei and Crouse were ordered to serve 20 years probation and to jointly pay restitution of nearly $3 million and investigative costs.
A Friend Indeed: Charles “Gary” Cowden, of Sanford, Fla. is facing six to eight years in prison, plenty of time to think about how he bilked a friend and several others out of more than $1 million. The investigation began in early 2005 when the department received an allegation that he sold fictitious annuities, valued at $50,000, to a friend. Cowden was arrested for grand theft and a search warrant was executed at his home office. As a result of that search, he was charged with an additional count of grand theft and uttering a forged instrument stemming from the discovery that Cowden had sold other fictitious annuities in excess of $1 million. Cowden pleaded guilty to numerous felony charges and will be sentenced in July.
Sing it from the Rooftop: A Louisiana roofing contractor who came to Florida to profit from hurricane-damaged homes in Central Florida didn’t do himself or his workers any favors. Todd Woods, owner of A-1 Construction, presented certificates of liability insurance to a local roofing contractor, the City of St. Cloud, Fla. and Osceola County, but it was discovered the coverage was valid only in Louisiana, Woods leased five employees, including himself, through two employee leasing companies. However, during a local television interview Woods said he had brought several hundred workers to Florida. Woods was arrested for presenting false certificates of liability insurance (third-degree felony) and working without workers’ compensation insurance (second-degree felony) and was ordered to participate in the Pre-Trial Diversion Program and pay a $10,000 fine and investigative costs.
Trust Fund Tackle: Her boss trusted her with his mail, phone calls and business accounts, but clearly shouldn’t have. Louanne Hickey used her access to steal more than $140,000 from accounts, and intercepted mail, telephone calls, notices, and information from banks intended to notify her boss John Galletta Jr., an attorney in St. Johns County, of the matter. Hickey was convicted of second-degree grand theft and was sentenced to 10 years probation, with the first three years to be served on community control, and was also ordered to pay $42,000 in restitution.
A ‘Churning’ Sensation: Tampa Insurance Agent Herman Roger Letchworth III “churned” up a big mess for himself. Churning is the industry term for an agent selling or creating a new policy only to earn the commission. Letchworth churned up thousands of dollars in fraudulent commissions for himself by pilfering money from existing customers’ policy premiums and falsifying life insurance applications for nearly 60 customers in Pinellas and Hillsborough counties. During the DIF investigation, Letchworth admitted he changed names, dates of births, addresses and telephone numbers of customers to generate new applications for life insurance policies. Last September, Letchworth was convicted in Pinellas County of insurance fraud and ordered to pay $81,000 in restitution.
A Cash Infusion: DIF Det. James Kappel received a tip that Michael Andre Griffin, of Tampa, Fla. was approaching patients at St. Anthony’s Out-Patient Clinic and offering $100 a week and grocery coupons to seek HIV-infusion treatment at North Tampa Medical Center. Kappel went to the clinic and was approached by Griffin, who offered the detective $100 a week and a $50 Kash and Karry credit card if he agreed to get the treatments. Later, in a telephone call, both Kappel and DIF Det. John Womer were solicited to get the treatments and a $30 massage three times a week was added to the offer. Using a DIF vehicle equipped with audio and video recording devices, the detectives met with Griffin and were again solicited. Last October, Griffin pleaded guilty to patient brokering and was sentenced to 151 days in county jail. Griffin provided information that led to additional arrests by the Federal Bureau of Investigations and the Federal Department of Health and Human Services for $6 million in fraudulent Medicare and insurance billings.
Double Rip-Off: A dozen individuals have pleaded guilty to purchasing the identities of unsuspecting customers at a Miami auto dealership and using the information to create driver licenses for imposters to present at area clinics for treatment of alleged injuries from auto crashes. The crashes occurred on paper only and the ringleader was paid cash by several personal injury clinics for “patients.” The insurance companies quickly learned that there had been no real crashes involving their insureds and no payments were made. Ultimately the clinics were also being bamboozled since they would not have paid in advance for these imposters if they were not going to be able to collect from the insurance companies. In effect, the ring was only interested in pocketing the brokering fees for the imposter patients, knowing full well that follow-up visits could never occur, since the patients were imposters. A sales associate at the auto lot suspected to be the conduit for the stolen identities was arrested on unrelated charges of transacting insurance without a license and possession of cocaine. As a result of this investigation, 14 individuals have been arrested and 12 have pleaded guilty.
DFS also conducts public education campaigns, including “Verify Before You Buy,” that have been used as models by other states. By logging on to www.fldfs.com, consumers can verify state licensure of any agent, broker or company; file a complaint; read brochures on various topics from life insurance to viaticals; sign up for the CFO’s weekly consumer newsletter eViews, and get answers to financial questions based on their specific needs at either the Senior Resource Center or Your Money, Your Life. Those without access to a computer can utilize the same services by calling the department’s toll-free consumer helpline at 1-800-342-2762.
Source: Florida Department of Financial Services
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