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April 2004

State: New York

Area of Interest: Department Announces Top 10 Rotten Apples for 2003
Worst Insurance Fraud Cases Seen Out of Record 811 Arrests Made Last Year

Superintendent Gregory V. Serio announced the Top 10 list of worst cases of insurance fraud in New York State for 2003. The annual "Rotten Apples" list reminds New Yorkers of the seriousness of insurance fraud and to report cases of fraud to the authorities.

"This list of ‘Rotten Apples' is a powerful reminder that insurance fraud is far from a victimless crime. Consumers may pay for this crime through higher insurance premiums, cost of goods and in some cases, injury and even death," Serio said. "Insurance fraud is a serious crime which we are aggressively fighting, evidenced by the record 811 fraud arrests made in 2003. As we win the fight on fraud, we can control costs and ensure that New Yorkers receive comprehensive and affordable insurance.

1. MURDER -- A Brooklyn man was accused of staging an accident that resulted in the death of a Queens grandmother. He was charged with murder in the 2 nd degree, manslaughter in the 2 nd degree, criminally negligent homicide and conspiracy to commit insurance fraud.
2. WORLD TRADE CENTER FRAUD -- A Broome County man turned himself in on charges of defrauding Combined Life Insurance Company of $20,000. The defendant filed a death benefit claim stating that his daughter died in the attack on September 11. However, his ex-wife informed the Department that their daughter was alive and living outside New York State.
3. GOTCHA -- In the first phase of an undercover investigation known as "Operation Gateway," 51 people, including one doctor, were arrested for their role in a no-fault insurance fraud ring that defrauded insurers of tens of millions of dollars. In this scheme, individuals called ‘runners' were paid to recruit people to pose as auto accident victims, who were then paid several hundred dollars to claim they were injured in an accident. The ‘victims' were then steered to medical facilities that were part of the scheme where unscrupulous individuals billed insurance companies for unnecessary treatment and lawyers filed bogus lawsuits. The investigation was conducted by the Department's Frauds Bureau, the New York Police Department, and the Brooklyn District Attorney's Office.
4. 23-COUNT INDICTMENT -- A Long Island body shop, its owner and its manager were indicted on 23 counts of insurance fraud. According to the indictment, the defendants engaged in activity where they systematically enhanced the damages to vehicles or failed to do the repair work for which they were paid.
5. TARGETING NO-FAULT FRAUD -- Nineteen members of two insurance fraud rings operating in Queens and Nassau Counties were arrested on various fraud charges. Those arrested included three personal injury attorneys, two former New York City police officers, two insurance brokers, several middlemen, and the operators of various medical clinics. The group ran a personal injury scheme that involved steering auto accident victims to corrupt medical facilities and billing for medical treatments that were unnecessary or never performed.
6. SWEEPING UP -- Eighteen Suffolk County residents were arrested for defrauding the State's workers' compensation system of $550,000. Most of the defendants were gainfully employed while fraudulently collecting benefit checks. Among those arrested were two teachers, the owner/operator of a limousine service, and a chiropractor.
7. BUSTED -- The ringleader and four participants in a Queens-based fraud scheme were arrested for their involvement in the theft of luxury vehicles. Some vehicles were stolen off the street or ‘given up' by their owners to collect the insurance settlements. Cars involved included a Mercedes Benz, a BMW, a Montero and a Hummer.
8. A GOOD DAY'S WORK -- A two-year joint investigation by the Frauds Bureau, the Bronx District Attorney's Office and the New York City Police Department led to the arrest of 16 people, including one former and four active New York City Police Officers, charged with the theft of $750,000 from seven insurance companies. The scheme involved the submission of fraudulent auto accident reports in order to receive compensation from the insurers.
9. WHAT A TEAM -- The Department's Frauds Bureau teamed up with other state and local authorities in a roundup of nine individuals suspected of cheating the State's workers' compensation insurance system. The nine suspects were part of a larger sweep of 15 fraud arrests in cases representing more than $1.1 million. The sweep was conducted in the Albany area over a three-week period in November and was the culmination of a six-month undercover operation.
10. INDICTED -- A 263-count indictment was filed against four psychotherapists for their involvement in a no-fault fraud ring. A licensed psychologist and three psychotherapists in his employ at medical clinics throughout New York City and Long Island were charged with fraudulently billing for counseling services they claimed were provided to hundreds of auto accident victims. According to the indictment, the defendants engaged in a conspiracy to submit falsified no-fault claims totaling approximately $88,000.

Source: State of New York

State: New York

Area of Interest: OSHA Cites Bronx Employer After Two Workers Die in Oil Tank
Alleges Willful and Serious Violations of Safety and Health Standards

TARRYTOWN, N.Y. -- The U.S. Labor Department's Occupational Safety and Health Administration (OSHA) has cited Bronx-based Eastmond & Sons Boiler Repair and Welding Service, Inc., for alleged willful and serious violations of safety standards following the deaths of two employees on Sept. 15. The workers were overcome by toxic fumes while cleaning a 4,000-gallon fuel oil tank in the basement of 1876 Arthur Ave. in the Bronx.

OSHA's inspection found that Eastmond failed to evaluate hazardous conditions in the oil tank before workers entered and while they were working inside it. The company also did not provide workers with equipment to test the air in the tank prior to and during entry and failed to properly prepare and maintain required entry permits. These citations, with $112,000 in proposed fines, were classified as willful. OSHA defines a willful violation as one committed with an intentional disregard of, or plain indifference to, the requirements of the Occupational Safety and Health Act and regulations.

Twelve additional citations were classified as serious. Five addressed the company's failure to implement safe confined space entry procedures; failure to review or revise the confined space program after the fatalities; failure to ensure that supervisors verified proper execution of entry permits; failure to ensure that rescue services and the means to summon them were available; and failure to provide mechanical rescue devices for employees working in confined spaces.

The remaining seven citations involved deficiencies in the company's respiratory protection program, electrical safety hazards, a discharged fire extinguisher and failure to ensure the use of personal protective equipment. A total of $22,800 in fines were proposed for the serious citations. A serious violation is one in which there is substantial probability that death or serious physical harm could result, and the employer knew, or should have known, of the hazard.

Source: Occupational Safety and Health Administration

State: Illinois

Area of Interest: Madison, Ill., Business Cited Again for Serious and Willful Violations of Worker Safety and Health Laws; $462,600 Penalty Proposed

The U.S. Labor Department's Occupational Safety and Health Administration (OSHA) has proposed $462,600 in fines for Midwest Racking Manufacturing, Inc., of Madison, Ill., for failing to protect workers from numerous workplace hazards OSHA identified in a recent inspection and eight previous inspections.

The investigation found that the company has consistently failed to correct grave and potentially disastrous workplace hazards, including the lack of such basic worker protections as personal protective equipment, machine guarding, fire prevention measures, safety training, fall protection, and lockout/tagout procedures.

"To ensure that injury and illness rates continue to decline, we must make sure that employers protect employees from workplace hazards," said U.S. Secretary of Labor Elaine L. Chao. "The significant penalty of $462,600 in this case demonstrates this Administration's commitment to protecting the health and safety of American workers."

The current fine and OSHA citations follow an inspection initiated in September 2003, following receipt of a complaint. The inspection led to 17 alleged serious violations and 23 alleged willful violations ranging from electrical hazards and smoking permitted within 20 feet of a spray painting operation to a lack of eye and foot protection and improper use or lack of the use of respirators. OSHA has cited the company numerous times since 1995 and has failed to correct identified hazards in spite of offers of free assistance through OSHA's consultation services. Midwest manufactures metal storage rack systems.

Source: Occupational Safety and Health Administration

State: California

The Commissioner will travel to New York to negotiate with company executives and find ways to bring more competition to the struggling workers' compensation market

Continuing his push to reform the state's broken workers' compensation system, Insurance Commissioner John Garamendi will travel to New York to meet with executives of some of the country's largest insurers to try to bring more of them back to the California market.

Commissioner Garamendi will leave for New York on Saturday and plans to meet with the executives over the course of several days, as well as attend the National Association of Insurance Commissioners meeting.

Currently, the State Compensation Insurance Fund writes policies for about 60 percent of the market, making it the largest workers' compensation insurer in the nation. But it has struggled financially, and a tripling of its size in the past four years has placed its management under tremendous pressure.

State Fund, however, recently announced positive financial results in January, indicating that significant legislative reform of the system signed into law last year is working. Also, the Workers' Compensation Insurance Rating Bureau (WCIRB) issued a revised projection of losses for the industry on Tuesday, lowering its estimate from $24.9 billion to $17.9 billion. Commissioner Garamendi said these events are powerful indications that the market is stabilizing and can indeed begin to attract new insurers. 

Commissioner Garamendi's legislation to continue reform of the system was introduced last month as ABX4 15 by Assemblyman Juan Vargas, D-San Diego. He sees it as a bridge to help bring labor and business together for a solution. If legislation is passed by March 31, he will be able to calculate the additional savings into his July pure premium rate advisory recommendation. Insurers often use this number as a baseline to set premium rates.

The Commissioner and other reform leaders have worked since taking office to push comprehensive reform of the system, which grew from $9 billion in costs in 1995 to nearly $30 billion in 2003. The Commissioner currently manages 25 bankrupt insurers who were victims of a pricing war that ensued after the state Legislature eliminated the minimum rate law in 1995.

As those companies became insolvent, their business primarily went to the State Fund, which grew from around 20 percent of the market just three years ago to the dominant force in the market today. As competitors left the market and medical costs within the system soared, employers began to experience, double, triple, and even quadruple increases in their annual workers' compensation premiums.

Source: State of California

State: New York

Area of Interest: Former Arena Football Player Arrested for Grand Theft in Workers Compensation Fraud Case

Superintendent of Insurance Gregory V. Serio today announced that Chris Perry, a former star on the Buffalo Destroyers arena football team, has been arrested in California on grand theft charges. Mr. Perry, who began collecting New York workers' compensation benefits following a career-ending injury in 1999, allegedly submitted fraudulent documents to collect nearly $15,000 that he was not entitled to receive.

Mr. Perry subsequently moved to California and in January, 2002 began to work for the City of South Lake Tahoe, within its Parks and Recreation Department. The New York State Insurance Department was informed of Mr. Perry's activities, and contacted the authorities in California to have him arrested. Mr. Perry was arrested on March 5 and faces a felony charge and up to one year in jail. The El Dorado County District Attorney's Office is prosecuting the case.

The arrest resulted from a joint investigation conducted by the Insurance Department Frauds Bureau, the New York State Insurance Fund (NYSIF) Division of Confidential Investigations and the New York Workers' Compensation Board Fraud Inspector General, working in cooperation with California insurance officials and local law enforcement authorities.

Source: State of New York

State: New York

Area of Interest: Insurance Department and Attorney General Announce 10 Count Auto Fraud Indictment - Two Attorneys and Five Health Care Providers Among 11 Charged

Superintendent of Insurance Gregory V. Serio and Attorney General Eliot Spitzer today announced the filing of a 100-count indictment charging 11 people and seven corporations for engaging in a far-reaching scheme to defraud insurance carriers of an estimated $1 million. Those charged in this orchestrated scheme include health care providers, attorneys and a network of recruiters.

"Those involved in this no-fault ring attempted to defraud the no-fault insurance system of over $1 million" Serio said. "This is money stolen from the insurance system and from honest auto insurance consumers. It's through the continued efforts of the New York State Auto Fraud Unit, that the Insurance Department, working with the Attorney General's Office, is combating insurance fraud and taking these offenders off the street."

New York's no-fault law allows reimbursement to medical facilities for services provided to persons injured in motor vehicle accidents. The defendants manipulated New York's no-fault system by soliciting motor vehicle accident victims to attend Queens-based IK Medical P.C., and submitted fraudulent no-fault claims for treatment that had not been provided and for medical procedures that were unwarranted.

Among the charges the defendants face are scheme to defraud, money laundering, grand larceny, insurance fraud, and falsifying business records.

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