Author Archives: Michael A. Rosenberg, Esq.

Cuban Crime Rings behind Florida Staged Accident Fraud

Originally intended to provide refuge to those fleeing Cuba’s Castro regime, the Cuban Adjustment Act of 1966 has enabled a thriving Cuban criminal network to expand from South Florida throughout the country and take hold without legal recourse. A recent three-part series by the Sun Sentinel, which examines the prevalence of this illegal activity, reveals that the cost to American businesses and taxpayers exceeds $2 billion over the past 20 years.

The story found Cuban criminals often work in rings that specialize in non-violent economic crimes such as credit card fraud, cargo theft, Medicare fraud, and insurance fraud through staged auto accidents. Frequently, they make their money, move it to Cuba, and return to the U.S. when more money needs to be made.

One massive auto insurance fraud ring with more than 100 participants—most of whom were Cuban—exemplifies just how easy it is for these groups to pull off the crime and get away with it because of their special immigration status.

In this particular case, 21 clinics in Palm Beach and Miami-Dade counties were involved in $18 million worth of fraud. Recruits found participants to smash cars with sledgehammers and stage vehicle accidents. Participants were then sent to the identified clinics that billed injury claims to auto insurance companies for treatment of their fake maladies.

It was discovered that the accused ringleaders were Cuban immigrants who were returning to Cuba on a weekly basis. Millions of dollars stayed in Cuba, apparently used to purchase properties and support family there, as IRS agent Pamela Martin testified at a court hearing last year.

After the FBI started to bust the fraud ring and make arrests, five main organizers fled back to Cuba, evading capture.

According to Fred Burkhardt, who is a South Florida auto-insurance industry fraud investigator from the National Insurance Crime Bureau (NICB), the small-scale outfits of a decade ago have evolved and become very sophisticated and organized.

“Someone is sitting back with a strategy, figuring out where the clinics will be, where the patients will come from,” he said. “There’s a structure involved. There are specific duties that people have.”

Staging auto accidents to defraud insurance companies basically started in Miami in the late 1990s, the Sun Sentinel reported. By 2007, the crime has progressed to other Florida cities like Fort Myers, Tampa, Orlando and Jacksonville, Burkhardt said.

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Filed under Insurance Fraud

Google May Be on the Verge of Selling Auto Insurance in the U.S.

There has been much speculation of late surrounding Google and whether the online giant will soon be entering the U.S. auto insurance market to sell policies online. The tech giant is expected to facilitate insurance sales from existing insurers, in a role similar to that of an insurance agent, rather than becoming an actual insurance company.

Google has been offering online auto insurance in the United Kingdom for the past two years via Google Compare (google.co.uk), which also enables users to comparison shop for credit card offers, travel insurance and mortgages, according to an Insurance Journal article on January 9.

The signs have certainly been pointing in that direction, the article said.

  1. A post in the New York Times technology blog ‘Bits’ reported that Google entered a partnership with CompareNow.com, a site which compares auto insurance quotes from fully licensed insurance providers. On-site users, who fill out one simple form, can then buy a policy online, by phone or through a local agent.
  2. Another indication recently came from Forrester Research analyst Ellen Carney who said in her blog that Google’s online auto insurance shopper—Google Compare Auto Insurance Services Inc.—has been licensed to sell insurance in at least 26 states with authorized carriers including Dairyland, MetLife, Mercury, Permanent General Assurance, Viking Insurance, and Workmen’s.
  3. Carney reported that Google may also be working with CoverHound, a site that provides online quotes for numerous insurance companies including Hartford, esurance, 21st Century, Travelers, Safeco, National General, Progressive, Foremost, Plymouth Rock, and more.

She also believes a launch could happen later this quarter, starting in California, and rolling out to Illinois, Pennsylvania and Texas, even though the pilot program has supposedly been delayed before.

Despite results from a survey by TransUnion last year that found online shopping for auto insurance rates declined about 3 percent in the 12 months ending February 2014 compared to a year earlier, industry analysts believe that Google could still make a dent in the market.

Global research by Accenture found that 67 percent of insurance customers said they would consider buying insurance products from organizations other than the insurers themselves.  In addition, 23 percent indicated that they would consider buying from online service providers such as Google and Amazon.

Google Inc. does own GoogleCompare.com; however, the site is not operational, according to Insurance Journal.  The publication also received no response from Google as expected. The tech company has previously told Reuters and the Wall Street Journal that it does not comment on speculation.

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Filed under Fla. Stat. 627.736 (2012)

Separate PIP Fraud Cases Lead to Three Jacksonville Arrests

Three individuals from the Jacksonville area, who have allegedly been involved in personal injury protection (PIP) fraud schemes, have recently been arrested by the Division of Insurance Fraud (DIF) in separate cases.

The first individual apprehended was Walter Juarez Lopez, who owned and operated Therapy Diagnostic Tech Medical.  According to DIF, the 42-year old helped organize staged accidents in 2011, in which participants were sent to his clinic as well as Arlington Rehabilitation Services. His role in the scheme resulted in more than $32,000 in fraudulent claims, DIF said.

Also arrested in November was Jose Burgos who organized a fake crash for insurance money in 2012.  The 40-year old, who sent participants to One Touch Therapy Center, was tied to more than $31,000 in false claims, DIF reported.

Last but not least, Edwin Edgardo Martinez-Rodriguez, 46, was also nabbed for his role as a staged accident organizer.  In 2012, he organized a fake accident that resulted in more than $16,000 in false claims made by Gate Parkway Diagnostic Center and Wellness Rehab Services, LLC, according to DIF.

Fraudulent claims were submitted to several insurance companies including Direct General, Esurance, GEICO, Infinity, Progressive, State Farm and Travelers.

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Filed under Insurance Fraud

Boca Raton Medical Billing Company Members Indicted in Ohio Fraud

Seven people and a Florida medical billing company were indicted on December 17, 2014 for their roles in a multi-million dollar health care fraud conspiracy involving a controversial form of chiropractic manipulation, according to a news release by the U.S. Attorney’s Office for the Northern District of Ohio.

Members of the fraud scheme indicted are:

  • Physicians Surgical Group (PSG) of Boca Raton, Fla.
  • Christopher Liva, 36, of Boca Raton
  • Edward Liva, 64, father of Christopher Liva, based in Boca Raton
  • Carolyn Via, 51, of Boca Raton
  • Mark Fritz, age not provided, of Coral Springs
  • Three other medical professionals from Northeast Ohio

The Livas and Via owned PSG and were also part owners of Shaker Heights Surgical Center (SHSC), located in Ohio.  Fritz was chief financial officer at PSG.

The U.S. Attorney for the Northern District of Ohio alleged that, from 2007-2010, the defendants deceived various private insurance companies, bilking them out of millions of dollars on behalf of patients who underwent manipulations under anesthesia, a risky treatment that is normally reserved for those who have not responded to more conservative chiropractic treatment.  The procedure is classified as surgery by the American Medical Association, according to the indictment.

In order to defraud the insurance companies, the defendants disregarded actual diagnoses, created fake diagnoses, submitted false billing claims, and represented that the procedures were performed by medical doctors, when in fact they were performed by chiropractors.

Additionally, the indicted parties marketed SHSC and the experimental manipulation procedure to chiropractors in Ohio. Chiropractors were paid a flat fee of $4,000 for each patient they referred to SHSC, and the clinic waived patients’ co-pays and deductibles.  The clinic then typically submitted three types of claims to the insurance companies—for professional fees, facility fees, and fees for anesthesia services.

The Livas, Fritz, PSG, and the three Ohio medical professionals are charged with one count each of conspiracy, wire fraud, health care fraud, and money laundering.  The Livas and Via each face an additional count of money laundering.

Prosecutors are also seeking to seize property derived from the criminal conspiracy, including two properties in Boca Raton, money, a watch, and 4.18-karat diamond stud earrings.

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Filed under Insurance Fraud

Florida Still a Top 10 State in Vehicle Thefts Despite Dramatic Decreases Overall

The good news—the probability of your car being stolen has been dwindling over the past two decades. The bad news—if you live, work or play in Florida, your chances are still higher than in 47 other states.

That assessment is supported by the National Insurance Crime Bureau (NICB), which recently released a national analysis of vehicle theft since 1960.

This report, which compared annual statistics for thefts, population, and vehicle registrations from 1960 through 2013, found that even with an increase in population and registrations of over 60 million in 2013, thefts were down to 699,594. Based on the most recent FBI crime figures, these numbers translate to a whopping 58 percent reduction in the number of vehicles stolen last year from 1991, when vehicle theft reached an all-time high of 1,661,738.

Florida has historically been a state with a high level of vehicle theft. From the years 2000-2013, Florida ranked third in the number of stolen vehicles nationwide, surpassed only by Texas and California. There have only been a few years (1963 and 1966-69) when Florida did not rank in the Top 10.

The NICB attributes a variety of factors which together have brought about such positive national results, including:

  • Law enforcement efforts to develop innovative investigative processes
  • The sharing of these processes across law enforcement communities as well as with the International Association of Auto Theft Investigators and the International Association of Special Investigative Units
  • Collaboration and coordination among these agencies
  • New technologies incorporated into vehicles during the auto manufacturing process
  • New technologies available to purchase in the after market

Click on the link to read the NICB national analysis of vehicle theft.

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Filed under Insurance Fraud

Third DCA Upholds Ruling in PIP Case Millennium Radiology v. State Farm

On December 10, 2014, the Third District Court of Appeal affirmed a trial court ruling in Millennium Radiology (a/a/o Yesenia Arango) v. State Farm. In the case, Yesenia Arango’s $10,000 PIP policy limits were exhausted after a lawsuit was filed and served on State Farm by Millennium Radiology.

Roig Lawyers attorney Mark Rose had successfully argued in the lower court that paying out the entire $10,000 was a complete bar to additional claims against the policy of insurance, absent bad faith on the insurer’s part or the insurer’s payment of untimely submitted bills. Following the ruling, the case was certified as a question of great public importance to the Third District Court of Appeal.

The Third District Court of Appeal affirmed the ruling, finding that in an action brought by an assignor of PIP benefits that is founded upon a breach of contract, exhaustion of PIP benefits after a lawsuit is filed “absolves the insurer from any responsibility to pay an otherwise valid claim” where the exhaustion occurred (1) after the insurer paid an amount less than the provider feels was appropriate; (2) after a lawsuit has been served on the insurer; and (3) absent any bad faith by the insurer in the handling of the claims.

The case is Millennium Radiology v. State Farm, Case No. 3D12-3143 (Fla. 3rd DCA, December 10, 2014). Click on the link to view the court ruling.

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Filed under Case Law, Fla. Stat. 627.736 (2008)

SIUs Detect Soft Fraud with Technology

Unlike the criminals guilty of ‘hard’ fraud—such as the ones we often report about on our blog involving PIP insurance schemes through staged car accidents—there is another group of people who commit ‘soft’ fraud without fully realizing the impact it has on increasing their insurance costs.

Soft fraud, also known as opportunity fraud, is the bane of the insurance industry and the Special Investigative Units (SIUs) that serve them. The little lies, exaggerations, and exclusions that make up this type of fraud are difficult to detect, and when they are uncovered, are often difficult to investigate without offending long-term customers.

According to a commentary by Joseph Bracken on InformationWeek Insurance & Technology, soft fraud includes circumstances like:

  • Overstating the extent or origin of damage when filing a claim
  • Overestimating the value
  • Minimizing annual mileage driven
  • Neglecting to mention the existence of teenage drivers

Consumers’ tolerance to soft fraud has been shown in an Insurance Research Council 2013 study in which 24 percent of respondents thought it was acceptable to overstate the amount of a claim submission as a way to offset the cost of a deductible, and 10 percent said that insurance fraud “doesn’t hurt anyone.”

However, the Coalition Against Insurance Fraud, reveals just how much insurance fraud hurts—it costs the economy $80 billion annually, which is enough to cover salaries of 2.2 million American workers for a year.

This is where analysis using technology can come into play, Bracken says, to help SIUs protect policyholders from soft fraud, including the following:

  1. Establish a baseline on the number of claims being investigated, keeping in mind that based on industry data, about 10-20% of insurance claims have the potential to be fraudulent.
  2. Establish patterns of activity according to type of claim or claimant demographic to identify inconsistencies.
  3. Set up business rules and maximum limits to identify the claims that need closer review, basing them on claim characteristics (exceeding a certain dollar limit) or insured behavior (such as a change in the coverage limit up to 60 days before a claim).
  4. Develop norms for common claims and flag those that veer from the norm.
  5. Compare in-house and third-party data to identify inconsistent behavior.
  6. Compare average retail store values with claim values.
  7. Eliminate data silos so investigators can merge data from different sources within the company.

While this analytical investigative approach may seem a heavy-handed way to combat soft fraud, it ends up being an essential component to achieving several goals—it’s successful in detecting claims that are most likely to be fraudulent, it’s cost-effective for SIU investigators to zero in on those claims, and it ultimately decreases premium costs.

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Filed under Insurance Fraud