Kentucky Woman Receives Prison Term for Insurance Fraud

March 26, 2008

Federal officials sentenced a Prospect, Ky. woman to 41 months imprisonment for one count of mail fraud, U.S. Attorney David L. Huber of the Western District of Kentucky announced.

Chief Judge John G. Heyburn II, also sentenced Gail Kubovchik, 57, to three years supervised release following incarceration. In addition, restitution in the amount of $1,075,504.66 was imposed, according to the Kentucky Office of Insurance.

Kubovchik pleaded guilty in October 2007 and admitted that, from on or about December 2005, until February 2007, she owned and operated The Service Agency, a commercial insurance agency located in Louisville, Ky, according to KOI. During this period, Kubovchik knowingly executed a scheme to defraud multiple insurance companies and insurance premium finance companies by means of false and fraudulent pretenses in the total amount of $1,104.066, KOI added.

The scheme to which she pleaded guilty involved Kubovchik fraudulently applying for and receiving dozens of bogus insurance policies on railroad cars that did not exist, KOI reported. Kubovchik applied for and received insurance policies for railroad cars from multiple insurance companies, including the Fireman’s Fund, Zurich Insurance, and United Shortline, and was able to obtain the bogus insurance policies by creating fictitious companies that allegedly owned the railroad cars, KOI said. To accomplish this, Kubovchik would create the fictitious businesses using various Internet Web sites and then obtain actual insurance policies on the railroad cars allegedly owned by the bogus companies, according to KOI. She would then obtain financing for the bogus insurance policies from insurance premium finance companies, including Baytree Finance Company, Arizona Premium Finance Company, and Premium Payment Plan. Kubovchik caused the three finance companies to finance dozens of bogus insurance policies, KOI added.

In addition, Kubovchik’s scheme to defraud involved her obtaining multiple premium finance loans, each from different finance companies, on the same bogus insurance policy, according to KOI. Kubovchik would then use the proceeds from the first loans to pay the monthly premiums on the bogus insurance policy and then would keep the second loan’s proceeds for herself, KOI reported. For each of the fraudulent loans obtained on the bogus insurance policies, Kubovchik caused documents to be mailed through the U.S. Postal Service by the premium finance companies, including Baytree Finance Company, Arizona Premium Finance Company, and Premium Payment Plan, according to KOI.

Ultimately, Kubovchik caused 45 fraudulent loans to be funded by Baytree Finance Company, 3 by Arizona Premium Finance Company, and 31 by Premium Payment Plan, KOI said. The total loss was approximately $1,104,066.

Huber praised the work of the Kentucky Office of Insurance and cited this as another example of diligent state and local police work. Approximately one-third of our cases are due to local and state law enforcement agencies, he said.

John Burkholder, Acting Executive Director of the Kentucky Office of Insurance commended fraud investigators for taking the initial action against the unlicensed activity.

“We all pay when this type of activity goes unpunished. It is important for consumers to verify that they are dealing with a licensed agent,” Burkholder said.

Source: Kentucky Office of Insurance

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