Inexperienced Claims Staff Should Post Sign: 'Fraud Welcome Here'

Saturday, August 25, 2007 | 0

"All men by nature desire knowledge." -- Aristotle

By Barry Zalma

The Need for a Professional Claims Staff

The failure of the insurance industry to make a dent in insurance fraud is a failure of the industry to insist on keeping a staff of professional, experienced, well trained and up-to-date claims staff.

The insurer whose claims staff is young, inexperienced and poorly trained is a profit center for every fraud perpetrator in the country. Without experienced, well-trained staff the fraud perpetrator can steal at his or her ease without concern for criminal prosecution or even a need to put in some effort to defraud the insurer. Insurers with inadequately trained and inexperienced claims staff should put a sign on its door: "Fraud welcome here."

I have some hope from a report in the July 17 BestWire service report about the comments of Roy Hebburn, the divisional technical claims manager for Allianz Insurance, who reportedly told a London insurance conference something that should be obvious: "Efficient handling of claims, particularly for personal injuries, is vital to the financial performance of insurers."

Hebburn also, said, and I agree: "In tough, competitive, mature markets, the influence of superior claims handling on profit performance is increasingly clear."

If insurers are serious about making a profit and avoiding fraud it is necessary that they each commit to:

1. Hiring and retaining professional claims staff.

2. Demanding excellence in claims handling from every member of the claims staff.

3. Constant and regular training of all claims staff.

4. Paying professional claims staff based on the quality of the service they provide to the insured.

5. Paying all claims owed fairly and as promptly as possible.

6. Refusing to pay claims not owed whether because of the terms of the policy or because of fraud.

Insurance is a service business that is long term. It cannot be judged on its performance in a quarter of a year but should more reasonably be judged on performance every quarter century. Penny wise and pound foolish cost cutting in claims and training budgets that results in a short term profit will also result in a long-term loss by payment of indemnity dollars to fraud perpetrators and those who have no right to payment under the terms and conditions of the policy.

Lawyer Must Pay Clients $58 Million

On July 23, 2007 the Texas Lawyer reported on a case pointing out the danger of dealing with class action plaintiffs that resulted in an arbitration panel ordering the firm of Houston plaintiffs lawyer John M. O'Quinn to pay $35.7 million in damages to a class of 3,450 former breast implant clients who allege the firm overcharged them for expenses. Although not specifically an insurance fraud case the judgments and settlements in issue are paid for by insurers and the firm involved has been mentioned in the silicosis cases about which ZIFL has reported in the past.

With interest and attorney fees, the order calls for O'Quinn's firm to pay as much as $58 million to the plaintiffs and their attorneys. The O'Quinn Law Firm was formerly known by several names, but the arbitrators refer to the firm throughout the order as "O'Quinn."

The arbitration panel found that the O'Quinn firm breached a fiduciary duty. In their petition the plaintiffs alleged the O'Quinn's firm wrongfully deducted "Breast Implant General Expenses" -- expenses such as the costs of taking depositions that were relevant to all the suits -- and other fees from their settlement checks. In an earlier order issued in March, a majority of the panel found that the fee agreements between O'Quinn's firm and the class members do not allow for the deduction of general breast implant expenses, certain expenses charged the class members were "inappropriate" and the firm's actions were not authorized by the fee agreements. The arbitration order found that the O'Quinn firm improperly deducted $10.7 million in expenses from client settlement payments for Breast Implant General Expenses and should refund that money, plus interest, to the clients.

The panel found the O'Quinn firm breached a fiduciary duty to the clients, because the Breast Implant General Expense account had run a surplus since 2000, the firm never audited the account and it never informed the class members of the surplus. "These actions were a clear and serious violation of a lawyer's duty to his client," the arbitration order concluded. The arbitration panel also ordered O'Quinn's firm to partially forfeit its fees pursuant to the Texas Supreme Court's 1999 opinion in Burrow v. Arce, which provides for fee forfeiture for breach of fiduciary duty. The panel found O'Quinn's firm made about $263.4 million in fees (a sum greater that defense lawyers working on hourly rates could bill in a lifetime of practice) for representing the class members in breast implant litigation, but the firm should forfeit only $25 million of those fees, because the class members may have benefited from the use of the Breast Implant General Expenses.

U.S. Attorney Refuses to Prosecute Scruggs

As readers of last month's issue of ZIFL are aware U.S. District Judge William M. Acker Jr. asked the U.S. Attorney to prosecute Richard F. Scruggs for actions relating to various Hurricane Katrina law suits.

On July 25, 2007 the local U.S. Attorney refused to follow the request of Judge Acker to prosecute a Richard F. Scruggs and his firm on allegations of criminal contempt in a Hurricane Katrina insurance dispute. U.S. Attorney Alice Martin said in a letter to U.S. District Judge William M. Acker Jr. that the US chose not to prosecute Richard F. Scruggs and his firm "following a serious and thorough review of the facts.

As readers of ZIFL will recall, in his June 15, 2007 request, Judge Acker said he would appoint another attorney to handle the prosecution if Martin declined the court's request.

Acker ruled in June that Scruggs willfully violated a December 8, 2006 preliminary injunction that required him to deliver all documents about State Farm Insurance Co. that two whistleblower secretly copied. Acker said that instead of complying, Scruggs sent the documents to the Mississippi attorney general's office "for the calculated purpose of ensuring noncompliance with or avoidance" of the injunction.

We will continue to watch for further developments.

Hartford Pays $115 Million to Settle with AGs

Hartford Financial Services Group settled allegations of market timing and improper broker-compensation practices with the attorneys general of New York, Connecticut and Illinois for a total of $115 million. Hartford Financial said it will pay $89 million in restitution and $26 million in penalties.

The New York attorney general found damage to the public resulted from market-timing activities that occurred from 1998 to 2003. Connecticut Attorney General Richard Blumenthal's office reportedly stated that Wall Street traders use market timing to take advantage of the fact that mutual fund share prices are set at the close of the trading day.

By buying mutual fund shares after important events or market changes, but before the share price changes, some of them make "huge amounts of money," according to Blumenthal's office. The practice, however, hurts long-term mutual fund investors by boosting the fees and costs these consumers pay and potentially cutting the value of mutual fund shares.

Since the mid-1990s, Hartford paid "hundreds of millions" of dollars in so-called contingent commissions to insurance agents and brokers, including Marsh, Aon Corp., Willis Group Holdings, Hilb Rogal & Hobbs, Arthur J. Gallagher & Co. and Acordia Inc., according to Blumenthal's office. Under these arrangements, brokers and agents allegedly "steered" new business to Hartford in return for "secret" commissions.

The agreement with Hartford brings to more than $600 million that Connecticut, with other states, has recovered in restitution and penalties through an investigation into "bid-rigging" and hidden contingent commissions according to the Attorney General of Connecticut. Hartford is starting a new supplemental commission program in 2008 to pay property/casualty agents and brokers for their performance in these insurance lines and in its other standard commercial lines. Under the initiative, Hartford said it will pay a fixed commission, set before an insurance policy is sold, which is based on the agent or broker's past performance.

Broker Required to Reimburse Floridians $3.2 Million

As part of a nationwide investigation of insurance brokers and alleged excessive or fraudulent billings for broker fees and commissions, Florida settled a dispute with a major international broker, Willis Group Holdings Ltd.

On July 17, 2007 the Florida Department of Financial Services reported that Willis agreed to reimburse $2.6 million to multiple Florida cities and counties and it had represented as an insurance broker an additional $600,000 in legal fees. The restitution funds will be distributed to the cities of Oldsmar, Safety Harbor and Haines City; Pinellas, Charlotte and Collier counties; the economic development councils of Glades and Hendry counties; the Reedy Creek Improvement District; and school systems in Hillsborough, Orange, Bay, Pinellas and Collier counties. Willis entered into the agreement although it continued to deny any wrongdoing.

Florida Chief Financial Officer Alex Sink, Attorney General Bill McCollum, and Insurance Commissioner Kevin McCarty reported in a statement that as a result of the settlement agreement no formal action will be taken by state agencies.

A joint investigation by the Attorney General's Antitrust Division and the Department of Financial Services led to allegations that Willis improperly collected undisclosed fees or commissions when it placed various coverages with insurance companies. Willis brokered multiple insurance contracts in Florida from 1999 through 2004, and clients included more than a dozen public entities in Florida, including economic development councils, city and county governments and school boards.

Under the agreement, Willis also agreed to make full written disclosure of all such commissions in the future and to pay the costs of the investigation.

Willis, which once generated about $160 million a year in contingent commissions, was among the first brokers to quit the practice completely. That decision was made in late 2004, in the wake of New York Attorney General Eliot Spitzer's investigations of alleged fraud and anti-competitive practices by brokers and insurers. Spitzer has since been elected governor.

Willis later reached a $50 million settlement with Spitzer and a separate $1 million settlement with Minnesota Attorney General Mike Hatch to settle the charges .

FBI Data Mining Targets Include Insurance Fraud

On July 12, the Associated Press reported that the FBI is gathering and sorting information about Americans to help search for potential terrorists, insurance cheats and crooked pharmacists, according to a government report.

The report, sent to Congress in July marked the department's first public detailing of six of its data-mining tools, which look for patterns to catch criminals. The disclosure was required by lawmakers when they renewed the USA Patriot Act in 2005.

Justice spokesman Dean Boyd told the Associate Press that the databases are strictly regulated to protect privacy rights and civil liberties. In a statement Boyd said:

"Each of these initiatives is extremely valuable for investigators, allowing them to analyze and process lawfully acquired information more effectively in order to detect potential criminal activity and focus resources appropriately.'

The Justice Department is setting up or has:

1. An identity theft intelligence program, used since 2003, to examine and analyze consumer complaints to identify major identity theft rings in a given geographic area.

2. A health care fraud system that looks at billing records in government and private insurance claims databases to identify fraud or over-billing by health care providers. It also has been running since 2003.

3. A database created in 2005 that looks at consumer complaints to the Food and Drug Administration to identify larger trends about fraud by Internet pharmacies.

4. A housing fraud program that analyzes public data on real estate transactions to identify fraudulent housing purchases, including so-called property flipping. The database was built in 1999.

5. A system that compares National Insurance Crime Bureau information against other data to crack down on fake car accident insurance claims and identify major offenders.

One can only hope that the information in the various databases will assist the US Justice Department in its duty to prosecute crimes.

Insurance Fraud Leads to Other Crimes

When people commit fraud and succeed, or partially succeed and are not punished severely, they have no qualms about doing so again. Making a great argument for severe punishment is Steven G. Cooperman, 65, who gained fame with an insurance fraud scheme centered around a fake theft of fine arts and a former Brentwood, California physician pleaded guilty to a federal conspiracy charge on July 10, 2007 for his role in a lawsuit kickback scheme that prosecutors alleged resulted in more than $200 million for a major New York law firm.

Cooperman was convicted of insurance fraud and other crimes in 1999 in an unrelated case and now lives comfortably in Connecticut. He had been cooperating with the government's ongoing investigation into the secret kickbacks scheme.

Prosecutors claimed that the law firm now known as Milberg Weiss paid more than $11.3 million in attorney fee kickbacks between 1984 and 2005 to people who agreed to be plaintiffs in more than 150 lawsuits against companies such as PG&E, United Airlines and Sun Microsystems all of whom were insured.

The prosecutors alleged that Cooperman, his wife and other family members were plaintiffs in about 70 class action and shareholder lawsuits. The charges claimed Cooperman received $6.4 million in kickbacks. On July 9, 2007, a former partner in the law firm, David J. Bershad, 67, of Montclair, N.J, pleaded guilty to one count of conspiracy that includes obstruction of justice and making false statements under oath. Cooperman entered the plea in federal court. In return, prosecutors will recommend that he be sentenced next year to only 1 1/2 years in prison. When he returns from prison he will be able to return to his comfortable life living off the income on the $6.4 million in kickbacks he received from the guilty lawyers.

Bershad was responsible for overseeing the firm's accounting department and financial affairs. He agreed to forfeit $7.75 million, to pay a $250,000 fine and could face up to five years in federal prison when he is sentenced next June. Another former partner, Steven Schulman, is awaiting trial.

The law firm was known as Milberg Weiss Bershad & Schulman before Bershad and Schulman resigned.

The firm has pleaded not guilty to charges in the case and trial is pending.

Prosecutors are due to reconvene the grand jury as soon as July 12, 2007 raising the possibility that more indictments are on their way. Mr. Bershad's statement to the court makes much of the involvement of "Partner A" and "Partner B," who are widely assumed to be Melvyn Weiss and Bill Lerach, neither of whom have been charged in the kickback case. Mr. Lerach is a former name partner who has said he'll soon retire.

Mr. Bershad's plea is nonetheless a victory for the Justice Department and vindicates its charges about plaintiff lawyer corruption. It also indicates that critics who have long claimed that the securities class action business is mostly a dishonest racket were correct and that it was just too hard to resist all that available insurance money.

Fraud Requires Reliance & Prompt Action

Fraud is a lie told with the intent to cause someone damage. Insurance fraud is a lie told to an insurer to convince it to insure a person it would not normally insure or to pay a claim it would not normally pay. Once the insurer learns of the lie, or should have learned of the lie, it must act promptly. On July 23, 2007 the Ninth Circuit Court of Appeal deprived a plaintiff of the right to sue Dow Chemical because the plaintiff knew or should have known of the potential misrepresentation and did not inquire promptly. The mere fact that the deception was established in a deposition in another case did not relieve the plaintiff of its obligation to inquire immediately. In Hamilton Materials v. Dow, 2007 DJDAR 11178, the US Court of Appeals - Ninth Circuit found that a knowledgeable plaintiff cannot claim late notice of a hazard and fraud when it was on inquiry notice long before the running of the statute of limitations.

Hamilton Materials Inc. is a manufacturer of asbestos-based construction products. It alleged fraud against Dow Chemical Corp. and others (defendants), but asserted that its fraud claim did not accrue until a deposition in 2003, when it discovered defendants' specific intention to deceive their customers regarding the health hazards of Calidria. The district court denied Hamilton's motion to remand the case to state court, finding that Hamilton knew, or should have known, about its potential claims against defendants long before the applicable statutes of limitation ran.

Statutes of limitation generally start to run when a claim accrues-that is, "when the cause of action is complete with all of its elements." A plaintiff has inquiry notice of its fraud claims when he "learns, or at least is put on notice, that a representation is false." The fraud claims Hamilton asserts for misrepresentations connected with its purchases of asbestos from 1965 to 1977 were found to be time-barred. Government regulations, books and news articles have described the dangers connected to all types of asbestos. Accordingly, Hamilton, a knowledgeable manufacturer of asbestos products, should have been on inquiry notice of its claim. Further, Hamilton was not required to have notice of defendants' specific intention to deceive before its fraud action accrued. The key factor is that "a reasonable person-especially a sophisticated manufacturer of asbestos-would have been on notice of a potential misrepresentation." In reaching its decision the Ninth Circuit found that it is clear that any fraud claims the plaintiff had for misrepresentations associated with its purchases of asbestos from 1965 to 1977, were barred by the statute of limitations. All that is relevant is that a reasonable person, especially a sophisticated manufacturer of asbestos, would have been on notice of a potential misrepresentation. This is the date that the complaining party learns, or at least is put on notice, that a representation is false.

California courts hold that inquiry notice is only a question of fact where the "facts alleged were susceptible to opposing inferences." [Saliter v. Pierce Brothers Mortuaries, 81 Cal. App. 3d 292, 300 (1978)]. The court concluded that the only inference that can be drawn from the facts is that Appellant knew or reasonably should have known of the alleged wrongdoing.

Good News from the Coalition Against Insurance Fraud

Convictions Reported by the Coalition Against Insurance Fraud

* Eye doc Douglas Greer bilked health plans out of more than $1 million in part by performing worthless operations on patients. The Washington, D.C., surgeon did 30 laser operations on one patient who didnt have glaucoma. And 108 of 136 cataract operations he performed required "scleral grafts" to heal a burn on the white part of the eye. But these grafts are needed only once out of every 1,000 cataract operations, the feds said. Greer faces up to 51 months in federal prison when sentenced.

* Alabama insurance agent Peter Thosteson used two professional employer organizations to provide client businesses with worthless workers' comp coverage. Thosteson was head of TMG Staffing Services and Allarre Partners, which provided comp coverage through two fake insurers, Regency Insurance of the West Indies and Transpacific International. The insurers paid no claims and had no reserves. Client firms paid Thosteson more than $4.8 million in comp premiums, which he rewired to personal accounts throughout the U.S. Thosteson pleaded guilty Wednesday, and faces up to five years in prison when sentenced. Thomas King received 14 years in May for using Regency as a front to steal client workers comp premiums through his Jacksonville, Fla.-based PEO, Miralink.

* An Alabama agent who once headed the Fairhope, Ala., airport authority steered at least four client employee-leasing firms to a sham insurer that sold them useless workers' comp coverage. Thousands of employees had no coverage in 2001 and 2002 when W. Colton Coile put clients in touch with Regency Insurance of the West Indies. Regency sold the firms hundreds of thousands of dollars of comp coverage. The Point Clear man admitted he did no research to see if Regency was legitimate. Coile pleaded guilty and faces up to five years in federal prison when sentenced. He recently was named Volunteer of the Year in Fairhope.

* A Long Island gutter-installing business must repay insurers nearly $520,000 for dodging state-required workers' comp premiums. In one of the largest comp cases brought by the state, Long Island Gutters claimed it had only two employees when it actually had as many as 15. Size of workforce is one factor in computing workers comp premiums. State investigators staked out the company and discovered the discrepancy. Long Island Gutter simply made mistakes in reporting its employees to the state, the company argued, contending that its "very common" for discrepancies to show up in audits of larger firms.

* A nursing assistant sought workers' comp coverage, claiming she was injured while lifting a patient. The unnamed Florida woman said she felt a pop and burning sensation in her back when she climbed into her car after her shift ended. She returned to light-duty work a week later, but claimed that aggravated her back injury. But video surveillance caught her washing, vacuuming and detailing her vehicle. She rotated her body, squatted, kneeled and sat without any apparent discomfort. Witnesses also said the woman admitted she didnt hurt her back at work. Claim denied.

* A Massachusetts woman kept selling coverage and stole more than $188,000 in premiums from clients even after her license was yanked. Heather Renzoni lost her license for 10 years in 2002 for misrepresenting policy terms and conditions to clients. Still, the Holden woman continued contacting former clients about their policies and accounts. She never told them shed lost her license. Twenty-four clients gave her nearly $190,000 to buy new life policies or reinvest. They wrote the checks out directly to her. But instead of buying the coverage, Renzoni deposited the checks into her bank account and spent the money for personal uses such as payments on her Mercedes. Some clients complained to the insurance department when their policies lapsed. The Massachusetts fraud bureau and police investigated. Remarkably, at trial she blamed the insurance industry for lack of oversight. Renzoni was convicted anyway, but won't serve any jail time. She received 300 hours of community service and must repay the stolen money within 30 days.

False Billing Doctor to Jail

On June 7, 2007, Jonathan Wiktorchik appeared at Bucks County Court of Common Pleas before Judge Kenneth Biehn and pled guilty to one count of Insurance Fraud (F3) and one count of Theft by Deception, the Pennsylvania Attorney General reported.

Jonathan Paul Wiktorchik, 55, of 1445 Churchville Road, Southampton, was the owner of Upper Bucks Chiropractic Clinic. On March 5, 2007, Wiktorchik was charged with submitting $90,000 worth of false insurance claims to Highmark and Independent Blue Cross for more than 1,800 procedures, which were not rendered.

Several patients of Upper Bucks Chiropractic Clinic submitted complaints upon receiving Explanation of Benefit Forms from Independent Blue Cross for dates of treatment they never received. Some of these alleged visits reported by Wiktorchik to Independent Blue Cross and Highmark even included dates on which his office was closed. A search warrant for Upper Bucks Chiropractic Clinic was executed by the Office of Attorney Generals Insurance Fraud Section. Based upon a comparison between the dates the insurance companies were billed by Wiktorchik and Wiktorchiks personal documentation of the actual dates of service, it was determined that Independent Blue Cross and Highmark were in fact billed for phantom visits.

In total, Upper Bucks Chiropractic Clinic received over $50,000 in insurance payments for medical procedures that were never performed. Wiktorchik was sentenced to serve 6 to 23 months incarceration, 3 years consecutive probation and ordered to pay $50,000 in restitution and pay all court costs.

Probation for WC Fraud

On June 12, Charlotte Aziz pled guilty to one count of Workers Compensation Insurance Fraud in Allegheny County. Aziz claimed to be injured while working at the Thrift Drug Company, in Pittsburgh, and consequently began collecting Workers Compensation benefits through Liberty Mutual Insurance. An investigation revealed that Aziz was employed from April of 2003 though November of 2003 in Georgia, while still collecting Workers Compensation. Even after Azizs employment was discovered, she submitted a signed Employee Verification form indicating that she was not employed. Aziz was sentenced to serve 2 years probation, ordered to perform 50 hours of community service and pay $4,433.49 in restitution along with all court costs.

Luxury Restaurateur Jailed for Fraud

On July 2, Dennis Pappas, 60, the former vice president of Cipriani USA, which operates the Rainbow Room restaurant in Manhattan, was ordered to serve a minimum 18 months prison and ordered to pay more than $1 million in restitution. The former vice president of a luxury restaurant chain pleaded guilty on May 2 to second-degree insurance fraud.

The Manhattan District Attorney's office said in a statement that from 2000 until April 2006, Pappas claimed he was disabled and unable to work due to a heart condition, During that period he was employed at Cipriani and was promoted to vice president. While receiving disability payments from various insurance companies, Pappas also received a combined salary of $891,855 from Cipriani. In addition, while claiming total disability Pappas received compensation that included the use of a $5,750 per month apartment and a large sports utility vehicle.

He was ordered to pay $639,000 to Custom Disability Solutions, $179,000 to Cigna Life Insurance Company of New York, $109,000 to MetLife Insurance Company and $90,000 to the U.S. Social Security Administration.

The District Attorney's office said that in an unrelated case, Pappas was convicted in 1998 in Brooklyn federal court of income tax evasion and charges stemming from an extortion and pension fraud scam. Federal prosecutors said at the time Pappas had laundered money for the Colombo crime family.

Six Months, Suspended for Fraudulent Agent

On July 10, Kansas Insurance Commissioner Sandy Praeger announced the results of an investigation of insurance fraud by her department's Anti-Fraud Division and that former insurance agent, Ronald E. Hummel was sentenced in District Court in Stafford County for one count of felony theft and two counts of an insurance agent failure to pay insurance premiums to the insurance company. His six-month prison sentence was suspended pending successful completion of his one-year probation.

On April 16, the Kansas Insurance Department revoked the insurance license of Hummel and his agency, Cenco Services, Inc. On April 30, 2007, Hummel, who also owns Cenco Services, Inc., pleaded no contest to one count of felony theft and two counts of failure to pay.

Jail for Australian Insurance Broker

Insurance fraud is not limited to the U.S. It is an equal opportunity crime perpetrated across the world by everyone who buys, sells, or is involved with insurance. It is also a crime engaged in by family members who feel that the family that commits fraud together stays together -- in adjoining cells.

For example, Paul John Blundell, a former director of insurance brokerage Blundell & Associates Pty. Ltd. was sentenced July 13, 2007 on two counts of fraudulently omitting to account for money. Mr. Blundell in May pleaded guilty in the New South Wales District Court of all three counts, which involved about $160,000 Australian ($139,829) received from clients as insurance premiums, but which was not used for that purpose.

According to a statement by the Australian Securities & Investments Commission (ASIC) Mr. Blundell received two fixed terms of six months and will serve at least nine months in jail. He was sentenced to a further 18 months for another count of fraudulently omitting to account for money between April and July 2002. The sentences will run concurrently.

According to the ASIC, Mr. Blundells brother, Richard, on July 12 was sentenced to a two-year jail term, discounted to 18 months after a guilty plea, for four counts of dishonestly obtaining money by deception in May to July 2002.

Guilty in $5 Million Health Care Fraud

On July 23 the U.S. Attorney's Office reported that a Savannah, Georgia doctor pled guilty to participating in a $5 million scheme to defraud Georgia health care insurance programs. The U.S. Attorney reported that Rafael G. Razuri, who was an owner of Southside Medical and Rehabilitation Center, pled guilty to conspiracy to commit health care fraud. A co-defendant, Eric J. Baty, a chiropractor formerly of Savannah, pled guilty to the same charge on June 4.

Razuri was indicted in January after a federal and state investigation into billings to Medicare, Georgia Medicaid and private insurance companies for physical therapy services to Southside patients. Evidence showed that from July 2000 through June 2005, Razuri conspired to bill more than $5 million in fraudulent physical therapy claims, and to defraud private insurers by creating false records of automobile accident victims, the prosecutors said.

Razuri remains on bond pending sentencing, which has not been scheduled. The offense carries a penalty of up to five years in prison and a $250,000 fine.

Convicted in Oklahoma

On July 25, it was reported that a federal jury in Oklahoma convicted the owners of a Norman employment service of defrauding businesses by billing them for workers' compensation insurance coverage that didn't exist.

The panel found Justin Bruner, 36, of Norman, and Paul W. Voyles Jr., 66, of Oklahoma City, guilty of mail fraud but jurors were unable to reach verdicts on three counts of knowingly filing false employment tax returns against Bruner.

The men's professional employer organization, Fairway Employment Services, provided small businesses with employment-related services, such as keeping track of payroll, paying employment taxes and providing workers' compensation insurance, according to the U.S. Attorney for the Western District of Oklahoma.

Voyles was responsible for securing the workers' compensation through his independent insurance agency, Great States Insurance.

Bruner, who was president of Fairway, and Voyles knew their company never paid premiums for workers' compensation coverage to any insurer during the relevant time period, prosecutors alleged. They sent fraudulent invoices for workers' compensation fees to May Drilling in Perry in June 2001.

The men could face five years in prison on each conviction and a fine of up to $250,000 on each count. A federal judge will sentence the men in about 90 days.

This column was first published in Zalma's Insurance Fraud Letter. Zalma's Insurance Fraud Letter (ZIFL) is published 12 months a year by ClaimSchool. Zalma serves as an expert witness or consultant in insurance coverage, claims handling, insurance bad faith and fraud. Zalma's law practice is limited to the representation of insurers and those in the business of insurance. He is available to provide advice and counsel concerning insurance fraud, first and third party insurance coverage issues, bad faith and first party insurance appraisals. It is republished here with permission.

You can read the full Insurance Fraud Newsletter at http://www.zalma.com.

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