Most Outrageous Claims Fraud Cases of 2011
December 20, 2011 3:17 PM
Claims Fraud Headlines and How to Prevent Them
Claims fraud cases can range from absurdly naive to ardently clever. Both the former and the latter can cause insurance and IT execs nightmares. What follows is a list of several examples of noteworthy attempts at fraud gone wrong, followed by a few tips on how to make sure you're on the prevailing end of such cases.
Lars Sundström
Woman who Sought Real Housewife Gig Really Workers Comp Cheat
Michael Vincent Petronella, a.k.a. Michael Constantine, and his wife Devon Lynn Kile were convicted of insurance fraud in one of the largest workers comp scams in California history. Prosecutors say that between 2000 and 2008, Kile and Petronella obtained workers' compensation insurance for their roofing contractor businesses through the state and fraudulently submitted claims for uninsured injured workers. They also under-reported payroll and the number of their employees. A two-year Orange County Premium Fraud Task Force investigation began after an employee was injured falling from a roof and submitted a payroll stub to the California State Compensation Insurance Fund, the stub listed an employer that the SCIF did not insure. The couple owned five properties in California and Texas and owned multiple luxury cars. Petronella is currently serving a 10-year prison sentence for his crimes. His wife, who reportedly applied to be in included on the Bravo TV series The Real Housewives of Orange County, agreed to complete 10 years of probation and pay close to $3 million in restitution in order to avoid the same jail time as her husband. Sources: Orange County District Attorney's office and the San Francisco Chronicle
www.2020.cz
How Much is a Hand Worth?
A Taiwanese man has been released on bond after being accused by Chinese police of attempting to sever his own hand in a $1 million insurance scam. Taiwanese police are investigating Hu Chi-yang, 60, for fraud after insurance companies asked them to, according to BBC News. The retired businessman told reporters that he was visiting his fiancé in the Chinese province of Fujian when three men tried to chop off his hand to take his gold Rolex watch and ring, reports the BBC's Cindy Sui in Taipei. Doctors later amputated the hand. The incident occurred after Hu purchased approximately $1 million worth of insurance. In a news conference, China's police said they found a cleaver with Hu's DNA on it and a video recording at a knife shop that showed he had purchased the knife there. They also said his blood, collected at the scene, contained traces of anesthetic. The BBC reports that police allege Hus hand had 16 cuts, all made in a neat manner. Hu claims he is not lying, denying he bought the knife or touched anesthetic. Source: BBC News
Chiropractic Cons
In May, The Suffolk Superior Court in Boston ordered two former chiropractors to pay Encompass Insurance Company $1,155,129 in damages. Encompass was one of four insurers that alleged Alan and Marc Cohen and their clinics submitted fraudulent medical bills from staged motor vehicle accidents. Also, in May, a Boston judge ordered the Cohens to pay The Commerce Insurance Company more than $3,835,900 in damages. Commerce sued for fraud, conspiracy, unfair business practices, and violations of the Federal Racketeer Influenced and Corrupt Organizations (RICO) Act. This victory demonstrates the excellent results that can be achieved when insurers work proactively to protect their customers from insurance fraud schemes, said Jaime Tamayo, president and CEO of MAPFRE U.S.A. Corp. and The Commerce Insurance Company. Sources: Encompass and The Commerce Insurance Company
New York Politician Pockets Claim
A former New York legislator earned himself four to 12 years in prison early in 2011 for pocketing an $863,000 payout check from an AIG subsidiary. George Guldi was found guilty by a 12-member jury of forging the endorsement of Countrywide Home Loans on an insurance check paid by the American International Insurance Company after a fire destroyed Guldis Westhampton Beach home. Rather than place the claims check into escrow, Guldi placed the proceeds into his own bank account. Guldi received three to nine years in prison for grand larceny. Source: News story appeared on INN
Dishonorable Dismemberment
After pleading guilty to wire fraud, Michael Earl LeDuc, 33, Escanaba, Mich., was sentenced to 57 months in federal prison, as well as three years of federal supervised release after his prison term is complete. LeDuc obtained an accidental death and dismemberment insurance policy from CUNA Mutual Group in 2009. In August 2010, he filed a $251,000 claim, stating that his arm had been cut off in a wood chipper accident. The wire fraud charge is a result of the fact that LeDuc made the claim online, which was processed in Wisconsin and sent to a CUNA Mutual claims manager in Iowa. A claims investigator asked LeDuc to provide medical records to support his claim. Using old medical records, LeDuc forged and submitted them. Throughout the investigation, more instances of insurance fraud surfaced, including a false claim with the Standard Insurance Company and a number of false claims with AFLAC. Sources: Western District of Michigan District Attorney's Office and court documents
Criminal Crowd-Sourcing
Pancha Keophimone, 60, pleaded guilty on Aug. 19, 2011 to 56 felony counts, including conspiracy, capping, insurance fraud, grand theft, tax evasion and sentencing enhancements for aggravated white-collar crime and losses exceeding $2.5 million. According to the Orange County District Attorney, Keophimone was one of 19 defendants involved in the largest medical fraud prosecution in the nation. The defendants are accused of participating in a $154 million medical insurance fraud scheme that recruited 2,841 healthy people from all over the country to receive unnecessary surgeries in exchange for money or low-cost cosmetic surgery. Insurance companies paid out more than $20 million over a 9-month period. Keophimones restitution hearing is scheduled for May 18, 2012. Source: Orange County District Attorney
Tip: Utilize the Increasing Volume of Data
"The larger the amount of data available, the greater the likelihood of discovering fraud, especially when insurers go beyond viewing each claim in isolation and view claims at an enterprise level. Today, insurers are beginning to supplement their own claims information with third party data, such as National Insurance Crime Bureau (NICB) alerts, ISO claims history, even social media data, to increase the possibilities of discovering suspicious activities. Hence with this increasing volume of data, insurers need to implement data management and analytical software that enables them to not only detect suspicious behavior but to prevent future similar fraudulent activities." Stuart Rose, SAS
Tip: Think Like a Fraudster
"The objective of fraudsters is to devise new ways of fraudulently obtaining money from an insurance company that is undetected. Hence, predicting new types of fraud is like predicting the lottery numbers. Fundamentally, it is still the same old frauds being committedit's just in slightly new ways. One example is the emergence of online application fraud and ghost broking. Online application fraud is similar to rate evasion, the insured alters some information to obtain lower rates, such as 'accidentally' transposing the year of birth from 1987 to 1978. "Ghost" brokers work by acting as a 'middle man' between the customer and other brokers/insurers and could provide the customer with a fraudulent insurance policy either by insuring incorrect information, or giving the insured a fake insurance policy." Stuart Rose, SAS
Tip: Continue to Invest
"At most insurers, the technology that is currently in place to support fraud fighting is a mixture of business rules and database searches. While these techniques have proven successful in detecting known fraud patterns, today insurers need to invest in new analytical capabilities to detect unknown and complex fraud activities. These analytical capabilities include: anomaly detection, predictive modeling, text mining and social network analysis." Stuart Rose, SAS