Zalma's Insurance Fraud Letter for June 1, 2021

An intentional perversion of the truth for the purpose of inducing another in reliance upon it to part with some valuable thing belonging to him or to surrender a legal right; a false representation of a matter of fact, whether by words or by conduct, by false or misleading allegations or by concealment of that which should have been disclosed, which deceives and is intended to deceive another so that he shall act upon it to his legal injury.

In simple language, fraud can be defined as a lie told for the purpose of obtaining money from another who believes the lie to be true. Civil insurance fraud exists if an insured:

· makes a representation to the insurer that the insured knows is false;

· conceals from the insurer a fact he or she knows is material to the insurer;

· makes a promise he or she does not intend to keep; and

· makes a misrepresentation on which the insurer relies in issuing the policy

· that results in the insurer incurring damage.

To protect insurers against fraud, most insurance policies contain, in clear and unambiguous language, a clause similar to the following from the New York Standard Fire Policy:

This entire policy shall be void if, whether before or after a loss, the insured has willfully concealed or misrepresented any material fact or circumstance concerning this insurance or the subject thereof, or the interest of the insured therein. . .

Fraud may be committed at different stages in the insurance transaction by:

1. applicants for insurance,

2. policyholders,

3. third-party claimants and

4. professionals who provide services to claimants.

Those who commit insurance fraud range from:

1) organized criminals who steal large sums through fraudulent business activities;

2) insurance claim mills;

3) professionals and technicians who inflate the cost of services or charge for services not rendered;

4) people in need of cash who are recruited, for a fee, to be “victims” in an auto accident;

5) ordinary people who want to cover their deductible; or

6) ordinary people who view filing a claim as an opportunity to make a little money.

Health care, workers’ compensation and auto insurance are believed to be the sectors most affected by insurance fraud. However, insurance fraud comes in all shapes and sizes.

They include with regard to first party property insurance:

Health care, workers’ compensation and auto insurance are believed to be the sectors most affected by insurance fraud. However, insurance fraud comes in all shapes and sizes. They include with regard to first party property insurance:

1. Staged Auto Accidents.

2. Arson-for-profit.

3. Insurer Fraud.

4. Faked thefts.

5. Faked vandalism and malicious conduct.

6. Faked hail and windstorm damage.

7. Acquisition of insurance under false pretenses, by misrepresentation of material facts, by concealment of material facts, or fraud.

Specialists who know insurance and insurance fraud investigate it. It is, at least in California where I live and the other 49 states that have criminal insurance fraud statutes, a rather simple crime to prove. It should be the type of case a prosecutor would want to file and try to a jury.

Instead, as an ex-prosecutor said to me: “insurance fraud is a crime prosecutors run away from because the cases are usually heavy with documentary evidence and are complex to prove to a lay jury.”

Consider the public outcry if gangs of bank robbers took $300 billion a year from banks in the U. S. every year. Would the public stand for groups of criminal stockbrokers looting their 401k and other pension plans? What would happen if a motorcycle gang went across the country and stole $300 billion every year from convenience stores across the country? There would be a hue and cry for the heads of the police and prosecutors who failed to stop the crime spree. Yet, when the public is told that a group of criminals steals $300 billion every year from the insurance industry the response is either a yawn or a cheer for the criminals who make Bernie

Madoff, the Ponzi Schemer, seem an amateur.

I have heard the following odd responses from prosecutors to whom insurance fraud cases were presented:

· “A confession on the record with five corroborating witnesses is not enough to support a fraud prosecution.”

· “An insurance company can’t be a victim of a crime.”

· ”You have a good case but I don’t have time to prepare an indictment or take the case to a grand jury.”

· “Juries don’t like insurance companies.”

· “Are you bringing this case because you don’t want to pay a legitimate claim?”

· “I don’t understand what the claimant did wrong.”

· “I don’t see a crime.”

· “I didn’t know crimes existed in the Insurance Code.”

Regardless of the excuses posited by prosecutors it is the duty of an insurer who suspects a fraud is being attempted to report that suspicion to the state’s Department of Insurance and/or local prosecutors. It is not an insurer’s obligation to prosecute—only provide the authorities with evidence sufficient to allow the fraud investigators or prosecutors to make a decision to prosecute or to not prosecute. [This article was adapted from my book “Property Investigation Checklists Uncovering Insurance Fraud, 13th Edition” available as an e-book and paperback from ThomsonReuters at https://store.legal.thomsonreuters.com/law-products/Forms/Property-Investigation-Checklists-Uncovering-Insurance-Fraud-13th/p/106702361 and as a THOMSON REUTERS PROVIEW eBOOK EDITION https://store.legal.thomsonreuters.com/law-products/Forms/Property-Investigation-Checklists-Uncovering-Insurance-Fraud-13th/p/106702363

Wisdom

"The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary." —H. L. Mencken

"An important art of politicians is to find new names for institutions which under old names have become odious to the public." —Charles Maurice de Talleyrand-Périgord

"The battle for the world is the battle for definitions." —Thomas Szasz

“Learn from yesterday, live for today, hope for tomorrow.” — Albert Einstein

"A man always has two reasons for what he does — a good one, and the real one." —J. P. Morgan

"Our obligations to our country never cease but with our lives." —John Adams

Go Directly to Jail – Arson for Profit Fails

Setting a Fire and Presenting a Claim for Items Not Burned is Insurance Fraud & Arson

Sherry Lee Lance appealed her convictions for second degree arson, conspiracy to commit second degree arson, and insurance fraud, all stemming from allegations that Lance conspired with her mother to burn down the home they shared and collect insurance proceeds. In State Of North Carolina, v. Sherry Lee Lance, 2021 NCCOA 236, No. COA20-273, Court Of Appeals Of North Carolina (June 1, 2021) Lance’s central argument is that the State could not prove an essential element of the arson charges—that Lance burned the dwelling house of another—because the only other inhabitant of the home was her mother, who allegedly conspired with her to burn the home. The State’s evidence showed that Lance’s mother still lived in the home when the fire occurred, and there was no evidence that Lance’s mother knew when or how the fire would be set.

FACTS

In September 2016, a house in Fletcher was destroyed by a fire. At the time of the fire, Defendant Sherry Lance and her mother Jonnie Turner lived in the house. They had leased it from the owner for about two years.

After the fire, Fletcher Police Sergeant Ronald Diaz, the town fire chief, the fire marshal, and an SBI agent went to the property to investigate. The SBI agent brought a canine trained to identify accelerants or incendiaries, but the canine did not alert to any.

There was a large hole in the kitchen floor area that the investigators believed was the origin point of the fire a location with no electrical facilities. Sergeant Diaz observed that there was an unusually low number of personal belongings in the home and “not what you would expect in a home that was just lost to a fire.” Sergeant Diaz learned that Lance had obtained a renter’s insurance policy in May 2016, about four months prior to the fire, and had filed a claim for items lost in the fire.

Casey Silvers, a fire investigator hired by the insurance company to investigate the cause of the fire, went to the property to investigate along with a claims adjuster. The claims adjuster also met with Lance to take her recorded statement about the fire. In her recorded statement, Lance explained that she told the landlord about some electrical problems in the home but he would not fix them. Lance explained that she thought the fire was electrical. When asked where she was and what she did on the day of the fire, Lance stated that she had gone “dumpster diving” with her mother, taking their two dogs with them. Lance submitted a “loss inventory list” to the adjuster, listing the items of personal property that she claimed were lost in the fire.

Several months later Sergeant Diaz discovered that Turner had rented a storage unit the day before the fire. After obtaining a search warrant, Sergeant Diaz searched the unit and found a large number of personal belongings and household items, as well as personal financial and legal documents belonging to Lance. Various items that Sergeant Diaz found in the storage unit matched items listed on the loss inventory form Lance submitted to her insurance company. Sergeant Diaz obtained video footage from the storage facility, which showed Lance and Turner accessing the storage unit the day before the fire, moving items into the unit, and later moving items out of the unit after the fire.

The State charged Lance with second degree arson, conspiracy to commit second degree arson, and insurance fraud. The State also presented evidence that Lance made incriminating statements to family members following the fire.

The jury convicted Lance of all three charges. The trial court consolidated the charges and sentenced Lance to a term of 10 to 21 months in prison.

ANALYSIS

Arson is the wilful and malicious burning of the dwelling house of another person. The essential elements of second-degree arson are:

the willful and malicious burning
of the dwelling (i.e., inhabited) house of another;
which is unoccupied at the time of the burning.

The North Carolina Supreme Court has held that the “arson requirement that the dwelling burned be that of ‘another’ is satisfied by a showing that some other person or persons, together with the defendant, were joint occupants of the same dwelling unit.” State v. Shaw, 305 N.C. 327, 338, 289 S.E.2d 325, 331 (1982).

Lance’s mother lived in the home at the time it was burned. There was a risk that Turner could have been in the home at the time it was burned, even assuming Turner participated in the plan to set the fire.

Knowledge of, or participation in, a plan to commit arson does not remove the danger that the other person could be injured or killed when the burning occurs. In fact, especially with the inexperienced arsonist, someone will be injured or die, including the arsonist herself or any co-conspirators. The State’s evidence established that Turner was a person living in that dwelling who could have been in the home at the time it was burned, and that is all that is required to satisfy this element of the arson offenses in this case.

The trial court heard extensive voir dire testimony from the fire cause and origin expert, Silvers. Silvers testified that he works as a senior fire investigator with a fire investigation firm, where he conducts origin and cause investigations for fires, using the scientific method to determine causation. Silvers’s extensive voir dire testimony covered all three prongs of the Rule 702 reliability test, describing in detail the facts and data he collected in conducting his investigation, the principles and methods he applied in accordance with his training and the guidelines for his profession, and the way he applied those principles and methods to the facts of this case to reach his conclusion that he could not exclude an incendiary cause.

The State’s evidence showed that, following the fire, Lance met with an insurance adjuster to provide a recorded statement for her renter’s insurance claim in which she told the adjuster she thought the fire was “electrical” and provided an inventory of personal property she claimed was destroyed in the fire. The State contended that these statements were false and that Lance set the fire.

Viewed in context, these statements all fell within the scope of the specific misrepresentation alleged in the indictment that her property was destroyed by an accidental fire. The court concluded that there was no error in the trial court’s judgment,

ZIFL OPINION

Arson for profit is an evil variation on the crime of insurance fraud. People are often injured or killed in arson fires. Incompetent arsonists like Ms. Lance set fires in places that have no legitimate, or even potential, areas where a fire might accidentally start and takes out all of the valuable contents and places them in storage before the fire so that a claim can be made for items not destroyed and the arsonist can keep the money and still have the property. She was convicted because the criminal activity was obvious, the potential for death or injury to her mother, fire fighters, neighbors or the owner of the dwelling she was renting, could have been injured. Her stay in the gray bar hotel is deserved.

Good News From the

Insurance broker Tarek Abou-Khatwa defrauded CareFirst Blue Cross Blue Shield by creating fake employees and altering years of birth for real employees by up to 40 years. The Washington, D.C. man thus falsely lowered the average age of insured groups to fraudulently pay cheaper premiums. He then inflated the premiums he charged to clients and pocketed the difference — more than $3.8M. Abou-Khatwa also stole the IDs of former employees and clients, lowered their ages, and moved them in and out of shell companies to obtain the fraudulently lower premiums. When CareFirst audited groups controlled by Abou-Khatwa, he invented false census reports, D.C. wage and tax reports plus fake pay stubs to cover up his scheme. Abou-Khatwa was given six years in federal prison and he must repay $3.8M and forfeit $8.4M. The D.C. Department of Insurance, Securities and Banking played a major role in helping break open the scam.

Anita Fox was mercilessly stabbed to death in a Fort Worth, Tex.-area home where she worked as a housekeeper. Two members of a nomadic and insular ethnic group called Irish Travelers — Virginia and Mark Buckland — had acquired ownership of $4M of life policies falsely taken out on Anita. The Bucklands were named sole beneficiaries, and Anita didn’t know about the policies. Then the Bucklands recruited fellow Travelers Bernard “Big Joe” Gorman and his son Bernard “Little Joe” as investors in the policies. The Gormans wanted a quick return on their investment. So they stabbed and bludgeoned Anita, who was a housecleaner at the Bucklands’ home. Big Joe later died of natural causes before his trial, and Little Joe got 14 years. The insurance agent who forged the policy paperwork, Charles Mercier, recently pled federally guilty to making false statements. So did the Bucklands. Their plea agreements call for five years of probation.

Justice was in no mood to mess with nurse practitioner Trivikram Reddy. He was handed a decisive 20 years in federal prison for stealing more than $52M from Medicare and private health insurers. The Waxahachie, Tex. man ran three clinics. Reddy created bogus patient bills by stealing the provider numbers of six docs to abuse as the supposed treating physicians for claims, even though they didn’t treat the patients. Reddy didn’t even keep medical records — only patient sign-in sheets. And those were routinely altered. He and his staff then spent four months forging medical treatment records after the feds demanded records for a five-year period. They merely entered the info into Microsoft Word documents — without bothering to use a standard electronic medical record system. The feds then raided one of his clinics and found staffers fabricating the records. Other employees were hiding, and gave false names when discovered. Reddy transferred $43M to his mother in Mumbai, India 10 days later. His wife, mother and child bolted for India the same day. Patients received some services for weight-loss management, though Reddy billed for more-expensive pain management. He also falsely billed for phantom EMGs, injections and ultrasounds. And Reddy illegally waived patient copays, deductibles and coinsurance. By not charging his patients for any medical services, Reddy also ensured the patients wouldn’t notify Cigna and start a nosy investigation.

Erik Santos paid recruiters to convince Tricare beneficiaries to get prescriptions for expensive, supposedly customized compound meds the beneficiaries didn’t need. Santos also paid docs to approve pre-printed scripts for large amounts of the meds. The Braselton, Ga. doc didn’t see the beneficiaries or consider their medical needs when approving the meds. Lastly, Santos steered the Tricare beneficiaries to fill their scripts with Patient Care America, a compounding pharmacy in Broward County, Fla. The pharmacy billed Tricare for expensive compound drugs that had little or no medical value. Many of the meds were billed to Tricare at $10K-$15K for a month’s supply, even though the ingredients were only common pain or scar creams. The scheme cost Tricare $12M. The pharmacy paid Santos over $7M in prescription referral kickbacks. The feds paid him more than 10 years in prison.

Harris Hussnain owned a pharmacy in Queens, N.Y. He held himself out as the chief pharmacist at New Moon Pharmacy. Yet Hussnain was neither a licensed pharmacist nor authorized to dispense prescription meds to patients. He still ran the place anyway. Hussnain dispensed prescription meds for years with no medical oversight, including addictive meds such as more than 10K oxycodone pills. Hussnain ransacked Medicare and Medicaid for $3M. He bribed a real pharmacist, Nisha Diler, to act as his full-time staff pharmacist even though she visited the place only occasionally. Hussnain filed falsified paperwork with government entities in New York State to cover up Diler’s absences from the pharmacy. He also sent large amounts of the stolen insurance money to bank accounts in his and his family’s names. Hussnain received three years in federal prison. Diler earlier pled guilty and awaits sentencing.

Postal Inspector Guilty Of Insurance Fraud

After Pleading Guilty Defendant’s Petition Coram Nobis Fails To Reverse His Conviction

Jason Weber pled guilty to a charge of theft of government funds. At the time of the offense, Weber was serving as a postal inspector. The Court sentenced him to a two-year term of probation and ordered him to pay $65,634 in restitution. He has filed a petition for writ of coram nobis, alleging that “new evidence” suggests that his indictment may have been based on “malfeasance and mishandling of evidence” on the part of the government. In United States Of America v. Jason Weber, Case No. 14 CR 241, USDC (June 2, 2021) the USDC considered Weber’s attempt to reverse his conviction.

BACKGROUND

Weber’s conviction involved a scheme to defraud the United States Postal Service. Weber purchased insurance for packages he shipped via USPS under various names. He claimed that these packages contained valuable items. In fact, they did not. Using his position as a postal inspector, Weber prevented the packages he had insured from being delivered by removing them from the mail stream. He submitted to USPS insurance claims supported by fabricated receipts for the supposedly valuable items in the packages, which triggered payments by USPS. Between 2010 and 2013—the period over which the scheme occurred—Weber received nineteen insurance payments from USPS which netted him over $65,000. Though the checks were made payable to a number of names, they were all deposited into Weber’s bank accounts.

Weber pled guilty to theft of government funds under 18 U.S.C. § 641. In his plea agreement, Weber stipulated that he knowingly converted government funds in violation of the statute by depositing nineteen checks in bank accounts he controlled. However, since his sentencing hearing, Weber has maintained that it was his ex-wife, and not he, who committed the charged crime and that she did so without his knowledge. His theory was that his ex-wife, Zina Weber, caused him to take the fall for her wrongdoing. But Weber had no proof of his innocence and offered little proof to implicate his ex-wife.

In 2018, Weber moved to vacate his conviction. Armed with what he called newly discovered evidence, Weber alleged that the government committed a Brady violation by withholding exculpatory evidence that pointed to an alternative perpetrator, his ex-wife. [Brady v. Maryland, 373 U.S. 83 (1963)]. The Court denied that motion after concluding that he could not obtain relief under either Rule 33 or section 2255.

In 2020, Weber submitted a “renewed” motion to vacate his conviction under section 2255. Although Weber, in part, recycled the arguments from his 2018 motion, he also submitted additional evidence. In his view, this newer evidence not only further demonstrates his wife’s culpability, but also demonstrates that two others—his former neighbor, Lawrence Ballack, and a prosecutor in his case, William Novak—were all “perpetrating the scheme for which he was convicted.” Weber has since clarified that his 2020 motion should be construed as a petition for writ of coram nobis.

DISCUSSION

A petition for writ of coram nobis is “a rare form of collateral attack on a criminal judgment.” United States v. Delhorno, 915 F.3d 449, 450 (7th Cir. 2019). Coram nobis is available only to defendants who are out of custody and therefore may no longer petition for habeas corpus. Coram nobis is available to correct factual and legal errors in criminal cases where the defendant: (

alleges an error “of the most fundamental character” enough to “render the criminal conviction invalid”;
provides “sound reasons” for his “failure to seek earlier relief”; and
demonstrates that he “continues to suffer from his conviction even though he is out of custody.”

A “fundamental error that invalidates a criminal proceeding is one that undermines our confidence that the defendant is actually guilty. Only errors of a great magnitude justify the cost of putting aside the interest in finality.

Weber bases his claims of fundamental error on the new evidence he has submitted with his brief. He contends that this evidence demonstrates not only that the insurance-fraud scheme continued after his conviction but also that his ex-wife, Novak, and Ballack were all involved in the same kind of scheme for which he pled guilty.

In explaining how this evidence demonstrates his innocence, Weber presents a series of allegations. He claims that his ex-wife, Novak, and Ballack worked together to defraud USPS. He asserts that the eBay receipt is the “same doctored receipt” he has previously accused his ex-wife of using. Weber further alleges that though no eBay purchase was ever made, someone purchased insurance for a package using that receipt (he does not say who) and that Novak received a $297.20 payout from that claim.

Weber then says that on the very day Novak received the check, Weber’s ex-wife made a loan payment in the same amount, $297.20—suggesting, without saying, that these two events must be related. He further asserts that the credit card used to purchase the USPS insurance belonged to Ballack and that Ballack must have used Weber’s IP address to perpetrate the crime for which Weber pled guilty. Weber recognizes that all this alleged conduct would have occurred in 2017 and therefore would have taken place after the offense conduct that led to his indictment. But he asks, if “Novak was committing this offense with Zina Weber and Lawrence Ballack in December of 2017, who could even begin to say that his handling of the prosecution was in good faith?”

If true, Weber’s allegations would be stunning. But both his allegations and his evidence are riddled with deficiencies. For example, Weber has offered nothing to show that the checks, receipts, or copy of the credit card are what he claims they are. None of the evidence he has presented is authenticated. And Weber does not even make an effort to explain, let alone demonstrate, how he came to be in possession of these items, when they came into his possession, and who (if anyone) provided them to him.

Weber contends that Ballack—a man with no apparent connection to the case before the present motion—accessed Weber’s IP address. Yet, Weber does not explain when or how Ballack supposedly did this. Nor does he explain how he knows no eBay purchase was ever made, how he knows that the prosecutor, Novak, actually received the insurance claim check, or why he believes the claim check and his ex-wife’s loan payment are related. Weber never even identifies who he contends purchased the insurance for the lost package.

In short, Weber did not show that he has genuine evidence to support his allegations. Nor has he provided the Court with a credible explanation of how his evidence, even if authenticated, supports his allegations. Weber failed to establish that there was a fundamental error that would undermine confidence in his conviction—which, again, came on a voluntary plea of guilty. Weber failed to show a miscarriage of justice that would warrant disturbing the legitimate interest in the finality of his conviction.

Weber’s petition for writ of coram nobis was denied.

ZIFL OPINION

A federal police officer – a Postal Inspector – abused his profession by defrauding the USPS insurance facility by using his profession to take his fake, insured, posts from the stream of mail and then profited from making claims for lost insured mail. He was caught and pleaded guilty to the crime and was sentenced. With buyers remorse Weber then accused his ex-wife and his prosecutor with the crime to which he pleaded guilty and had the unmitigated gall to file a petition corum nobis to expunge his conviction with a frivolous, undocumented claim that his ex-wife and his prosecutor were the actual criminals. No one likes being convicted but to try to change a plea of guilt by accusing an ex-wife and a prosecutor is simply a waste of time and should never have been put in the hands of a judge.

Health Insurance Fraud Convictions

Physician Pleads Guilty In Medicaid Fraud Conspiracy

Keyvan Amirikhorheh, M.D, 61, of Seal Beach, worked as a physician at Los Angeles Community Clinic. Together with his co-defendants, Amirikhorheh defrauded the Family Planning, Access, Care and Treatment (Family PACT) program administered by Medi-Cal, the California Medicaid program, by submitting and causing the submission of fraudulent claims for family planning services, diagnostic testing, and prescriptions for non-existent patients.

Amirikhorheh is the final defendant to plead guilty. Hilda Haroutunian, 61, of Sun Valley, California pleaded guilty on Sept. 25, 2020, and is scheduled to be sentenced on Dec. 17; Lorraine Watson, 57, a physician’s assistant, of Valley Village, California, pleaded guilty on Oct. 9, 2020, and is scheduled to be sentenced on Sept. 10; Edmond Sarkisyan, 41, of North Hollywood, California, pleaded guilty on Jan. 29, and is scheduled to be sentenced on July 16; and Noem Sarkisyan, 65, of North Hollywood, California, pleaded guilty on March 5, 2020, and is scheduled to be sentenced on Sept. 3.

As alleged in court documents, between approximately March 2016 and April 2019, Los Angeles Community Clinic and associated laboratories and pharmacies submitted approximately $8,406,204 in claims to Medi-Cal and were paid approximately $6,660,028 as the result of this fraudulent scheme.

Amirikhorheh pleaded guilty to conspiracy to commit health care fraud. He is scheduled to be sentenced on Oct. 1, and faces a maximum penalty of 10 years in prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Employee Of Autism Services Agency Pleads Guilty To Health Care Fraud And Identity Theft Offenses

JESSICA STUART, 38, of Fairfield, Connecticut waived her right to be indicted and pleaded guilty June 2, 2021 before U.S. District Judge Jeffrey A. Meyer in New Haven to health care fraud and identity theft offenses.

According to court documents and statements made in court, Stuart was employed by Helping Hands Academy, LLC, in Bridgeport, which provided applied behavior analysis services to children diagnosed with Autism Spectrum Disorder (ASD). Helping Hands Academy enrolled as a participating provider in the Connecticut Medicaid Program (“Medicaid”) in approximately September 2018.

Medicaid requires that ASD treatment services be provided under the supervision of a licensed medical practitioner or a Board Certified Behavior Analyst (BCBA), a graduate-level certification in behavior analysis. BCBAs are also required to be credentialed in writing by the state. Stuart does not have a college degree, was not a BCBA or licensed medical practitioner, and did not have any formal training in applied behavior analysis for ASD. Between approximately May 2019 and September 2020, Helping Hands Academy paid Stuart at least $143,0000 and submitted to Medicaid numerous fraudulent claims for applied behavioral analysis services that Stuart performed but was not qualified to provide. Stuart used the name of an individual without the individual’s knowledge or authorization so that Stuart could impersonate a BCBA when she knew she was not a BCBA.

Medicaid suffered a loss of $369,439.96 as a result of Stuart’s conduct.

Stuart pleaded guilty to one count of health care fraud, which carries a maximum term of imprisonment of 10 years, and one count of using false identification in connection with health care fraud, which carries a maximum term of imprisonment of 15 years. Judge Meyer scheduled sentencing for August 31, 2021. Stuart is released pending sentencing.

On April 28, 2021, Nicole Balkas, the owner of Helping Hands Academy, pleaded guilty to one count of health care fraud. She awaits sentencing.

Doctor Sentenced For Drug Trafficking And Health Care Fraud

Michael LaPaglia, 49, was sentenced to 18 months imprisonment on May 27, 2021 by the Honorable Katherine A. Crytzer in the United States District Court for the Eastern District of Tennessee at Knoxville. LaPaglia was also ordered to pay restitution to the health care providers who were victims in this case.

According to documents filed with the court, LaPaglia, a medical doctor, who previously lost his authorization to write prescriptions for controlled substances, had pleaded guilty to an information charging him with one count of conspiring to distribute controlled substances and one count of making a material false statement in connection with the delivery of health care benefits. The charges stem from LaPaglia’s involvement in a mobile Suboxone clinic through which LaPaglia issued prescriptions for Suboxone, Clonazepam, diazepam, and Pregabalin in the name of another doctor.

In the spring of 2018, in the Eastern District of Tennessee, investigators with Federal Bureau of Investigation ("FBI") and Department of Health and Human Services ("HHS") responded to a complaint that LaPaglia was issuing prescriptions for Suboxone without the authority to do so. Investigators learned that LaPaglia would meet patients at his home and in parking lots where, without any meaningful examination, LaPaglia would give the drug customers prescriptions (signed by another doctor) for controlled substances. Customers were charged $300 cash per monthly visit. The customers would then take their prescriptions to be filled at pharmacies, where a number of them used their health insurance to pay for the controlled substances.

Texas Man Pleads Guilty To Receiving Kick Back Payments In Exchange For Referrals To Ok Compounding

Adam Gallardo Arredondo, 59, of Waxahachie, Texas, pleaded guilty to illegal remuneration for health care referrals. Arredondo admitted that he solicited and received checks from OK Compounding, a Tulsa pharmacy, in exchange for referring his patients’ compounding prescriptions. The compounding prescriptions were paid for by federal healthcare programs; therefore, the kickbacks paid to Arredondo violated federal law.

According to the plea agreement, the United States and Arredondo agreed to the following sentence – 36 months of supervised probation and restitution to be paid in the amount of $216,624.75. Arredondo further agreed to surrender his medical license. U.S. District Judge Gregory K. Frizzell will determine Arredondo’s final sentence at a hearing set for Sept. 24.

In the agreement, Arredondo stated that on January 1, 2013, he signed a Consulting Physicians Agreement with OK Compounding, located in Tulsa. The agreement stated that Arredondo would provide services in exchange for an hourly payment from OK Compounding. In his plea, Arredondo stated that he never provided the services listed in the Agreement but was instead paid for sending all of his patients’ compounding prescriptions to OK Compounding to be filled.

Arredondo also created the company, Taffinder Marketing, LLC, and recruited other physicians to enter into similar contracts with OK Compounding. Like Arredondo, those physicians did not perform the services in their contract; rather, they were paid to send their compounding prescriptions to OK Compounding. Arredondo’s company was paid a monthly fee for the recruitment services. On August 14, 2013, Arredondo received a $10,000 check from OK Compounding as payment for referring the prescriptions. The payment included prescriptions that were paid in whole or in part by the federal programs TRICARE, VA, Medicare and/or Office of Worker's Compensation Programs-Department of Labor.

TRICARE suffered a loss of $16,547.75 as a result of the crime. Further losses incurred from other offenses not included in the plea agreement totaled $200,077.00. Those losses include: Department of Labor: $14,746.58; Medicare $53,272.67; Tricare: $119,567.76; and VA: $ 12,489.99

Jury Convicts West Virginia Doctor Of Drug Distribution

Sriramloo Kesari, M.D., 78, a Charleston West Virginia doctor was convicted by a Federal Jury on May 27, 2021 for prescribing a buprenorphine product in violation of the Controlled Substances Act.

According to court documents and evidence presented at trial, distributed the drug Suboxone outside the scope of professional practice and not for a legitimate medical purpose. Kesari, who was at times physically located in California, operated a cash-only operation whereby he would sign prescriptions that his employee would distribute in exchange for cash payments. Although Suboxone is approved as a drug for treating opioid addiction, Kesari provided no meaningful addiction treatment and instead, prescribed Suboxone to an undercover DEA agent who was demonstrating clear signs that the Suboxone was being diverted or sold on the street.

Kesari is scheduled to be sentenced on Aug. 25, and faces a maximum penalty of 20 years in prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Videos on YouTube And Zalma On Insurance from Barry Zalma

Over 110 Videos describing important insurance issues described by Barry Zalma and available to anyone who views or subscribes to the YouTube account. Issues include insurance fraud, definition of insurance, insurance as a contract of personal indemnity, millions for defense and not a dime for tribute and the tort of bad faith. Please subscribe. There are 62 Videos are at https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw/videos but I have had some difficulty posting new videos to my YouTube channel. I have posted about 175 videos on insurance, insurance claims, insurance law, and insurance fraud to this YouTube Channel my Rumble channelhttps://rumble.com/c/c-262921 and my blog, https://zalma.com/blog.

Free Insurance Videos

Barry Zalma, Esq., CFE has published five days a week videos on insurance claims, insurance claims law, insurance fraud and insurance coverage matters at

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/ podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

Other Insurance Fraud Convictions

Former Insurance Broker Pleads Guilty To Defrauding Insurance Companies And Individual Investors Out Of More Than $1-Million

Brian Bartz, 39, of Rochester, NY, pleaded guilty before U.S. District Judge Charles J. Siragusa to wire fraud and aggravated identity theft. The charges carry a mandatory minimum term of 2 years imprisonment and a maximum of 22 years imprisonment.

Between January 2015, and January 2020, the defendant was employed as an insurance broker at several different life insurance companies, selling and servicing policies and receiving commissions and bonuses for selling such policies. In connection with his employment, Bartz submitted approximately 105 fraudulent policy applications in various individuals’ names without their knowledge, utilizing actual names, social security numbers, and dates of birth. As a result, life insurance policies were issued, and the defendant was paid a total of $382,740.63 in commissions and bonuses he was not entitled to receive. Bartz also used approximately $70,579.83 that he fraudulently withdrew from various bank accounts of unsuspecting clients in order to pay policy premiums on the fraudulent life insurance policies he obtained.

In addition, Bartz defrauded his insurance clients and potential clients by falsely claiming to also be an investment advisor, persuading individuals to invest funds that he never invested nor intended to invest. Rather than investing such funds on behalf of his clients, Bartz used them for himself, by gambling with them or paying back prior investors. To prevent victims from inquiring about their investments, Bartz issued fake account statements. The victims included a widow who “invested” a $332,500 payout from her deceased husband’s life insurance policy with the defendant. Bratz stole all but $10,000 of that widow’s investment.

In total, the loss amount for Bartz’s schemes is approximately $1,026,668.46.

Sentencing is scheduled for July 29, 2021, before Judge Siragusa.

5 More Plead Guilty In New Orleans Staged Truck Accident Cases

Lois Russell, 61, of Gibson, Louisiana; Tanya Givens, 43, of Gibson; Henry Randle, 64, of Gibson; John Diggs, 60, of Thibodaux, Louisiana; and Dakota Diggs, 25, of Ft. Smith, Arkansas, pleaded guilty to conspiracy to commit mail fraud in relation to the schemes that have plagued the New Orleans area arising out of staged automobile accidents with tractor-trailers in New Orleans, Louisiana.

According to the guilty plea, on March 27, 2017, Russell, Givens, and J. Diggs conspired with passenger James “Curtis” Williams to stage an accident with a tractor-trailer at the intersection of Chef Menteur Highway and Downman Road.

Damien Labeaud and Roderick Hickman, who have already pleaded guilty to staging other accidents, also participated in this accident. Hickman, while driving Russell’s car, intentionally struck the 18-wheeler and then fled the scene with Labeaud. Russell advised the New Orleans Police Department that she was the driver and she, along with Givens and J. Diggs, made claims for personal injuries. In total, the victim trucking and insurance companies paid out $272,500.00 for these fraudulent claims.

Also according to the June 1, 2021 guilty plea, on May 17, 2017, Randle and D. Diggs, along with participants Labeaud, Mario Solomon and Ryan Wheaten participated in a staged automobile accident in the vicinity of U.S. Highway 90 East and Calliope Street in New Orleans.

Labeaud and Solomon fled the scene. Randle falsely reported to the NOPD that he had been driving and that the tractor-trailer had struck his vehicle. Shortly thereafter, Labeaud and Solomon went on to stage a second accident in the vicinity of Louisa Street and Chickasaw Street with Bernell Gale (Gale), Troy Smith (Smith), Marvel Francois (Francois), and another passenger. Labeaud, Solomon, Wheaten, Gale, Smith, and Francois were also charged. Labeaud, Solomon, Gale, Smith, and Francois already pled guilty.

Randle, D. Diggs, and Wheaten made claims for personal injuries. The victim trucking and insurance companies paid out approximately $10,000.00 for these fraudulent claims.

Russell, Givens, Randle, J. Diggs, and D. Diggs face a maximum sentence of five years.

Sentencing is scheduled for September 15, 2021, before U.S. District Judge Lance M. Africk.

Montana Man Must Pay Restitution as Condition of Probation to Insurer For Arson

Jimmie Richard James, 78, a south-central Montana man who pleaded no contest to hiring someone to burn down his house for the insurance money so he could pay a debt to the federal government in a drug case was been ordered to pay restitution.

District Judge Jessica Fehr last week sentenced James to five years on probation and ordered him to pay over $172,000 to the insurance company for the August 2016 fire in Ballantine, The Billings Gazette reported.

James, then 73, offered his girlfriend $5,000 to burn down his house according to recorded phone calls made from a Colorado prison in 2016, while James was serving time for meth trafficking, prosecutors said.

A federal judge also ordered James to pay the federal government $164,000 from the sale of his house as part of his sentence.

James was concerned the house would only sell for $130,000 and he would have to pay another $30,000 in storage costs for his belongings, so he called his girlfriend to arrange a fire. He also called his attorneys to make sure the home was still insured, court records said. The insurance company paid out $168,000 after the fire, which James used to satisfy his forfeiture order, court records said.

If James fails to pay, normal conditions of probation, would require him to serve the five years in prison.

New Books for the Insurance Claims Professionals:

The Compact Book of Adjusting Property Insurance Claims – Third Edition

A Manual for the First Party Property Insurance Adjuster Newly Updated and Edited

The insurance adjuster is not mentioned in a policy of insurance. The obligation to investigate and prove a claim falls on the insured. Standard first party property insurance policies, based upon the New York Standard Fire Insurance policy, contain conditions that require the insured to, within sixty days of the loss, submit a sworn proof of loss to prove to the insurer the facts and amount of loss.

The policy allows the insurer to then, and only then, respond to the insured’s proof of loss. The insurer can then either accept or reject the proof submitted by the insured.

Technically, if the wording of the policy was followed literally the insurer could sit back, do nothing, and wait for the proof. If the insured was late in submitting the proof the insurer could reject the claim. If the insured submits a timely proof of loss the insurer could either accept or reject the proof of loss. If the insurer rejected the proof of loss the insured could either send a new one or give up and gain nothing from the claim. Suit on the policy would be difficult because the policy contract limited the right to sue to times when the proof of loss condition had been met.

Insureds and insurers were not happy with that system. It made it too difficult for a lay person to successfully present a claim. The system, as written into the standard fire policy seemed to run counter to the covenant of good faith and fair dealing that had been the basis of the insurance contract for centuries. Most insurers understood that their insureds were mostly incapable of complying with the strict enforcement of the policy conditions. To fulfill the covenant of good faith and fair dealing insurers created the insurance adjuster to fulfill its obligation to deal fairly and in good faith with the insured.

The Third edition adds new material from 2018, 2019, and 2020 is easier to use and more compact than the original.

Available as a Kindle book.Available as a paperback.

The Compact Book on Adjusting Liability Claims, Third Edition

A Manual for the Liability Claims Adjuster Newly Updated and Edited

This Compact Book of Adjusting Liability Claims is designed to provide the new adjuster with a basic grounding in what is needed to become a competent and effective insurance adjuster. It is also available as a refresher for the experienced adjuster.

The liability claims adjuster quickly learns that there is little difficulty with a claimant (the person alleging bodily injury or property damage against a person insured) if the claim is paid as demanded. The insured may be unhappy if the claimant’s claim is paid as presented since most do not believe they did anything wrong or fear an increase in premiums charged for subsequent policies.

The adjuster must be prepared to salve the insured’s emotions, explain why in the law and the policy it was appropriate to pay the claimant and that the settlement is in the best interest of both the insured and the insurer the adjuster represents.
The adjuster knows, and must be prepared to explain to an insured, that if a claim is resisted or denied the claimant will be unhappy, will probably file suit. If not promptly settled the claimant’s lawyers will rake the insured over the coals to prove that the insured is liable for the claimant’s injuries. The litigation will take time, effort, and money to establish the extent of the injuries and who is responsible for the injuries. Failure to settle promptly can cost the insured his or her reputation and will certainly cost the insurer much more than the claim could have been resolved for had it been resolved before the claimant retained a lawyer.

The Third edition adds new material from 2018, 2019, and 2020 is easier to use and more compact than the original.

Available as a Kindle book Available as a paperback.

“It’s Time to Abolish The Tort of Bad Faith“

The concept of unintended consequences is one of the building blocks of economics. Adam Smith’s “invisible hand,” the most famous metaphor in social science, is an example of a positive unintended consequence.

INSURANCE AS A NECESSITY

Neither the courts nor the governmental agencies seem to be aware that in a modern, capitalistic society, insurance is a necessity. No prudent person would take the risk of starting a business, buying a home, or driving a car without insurance.

The risk of losing everything would be too great. By using insurance to spread the risk, taking the risk to start a business, buy a home, or drive a car becomes possible.

Insurance has existed since a group of Sumerian farmers, more than 5,000 years ago, scratched an agreement on a clay tablet that if one of their number lost his crop to storms, the others would pay part of their earnings to the one damaged. Over the eons, insurance has become more sophisticated, but the deal is essentially the same. An insurer, whether an individual or a corporate entity, takes contributions (premiums) from many and holds the money to pay those few who lose their property from some calamity, like fire. The agreement, a written contract to pay indemnity to another in case a certain problem, calamity, or damage that is fortuitous, that is that occurs by accident, is called insurance.

In a modern industrial society, almost everyone is involved in or with the business of insurance. They insure against the risk of becoming ill, losing a car in an accident, losing business due to fire, becoming disabled, losing their life, losing a home due to flood or earthquake, or being sued for accidentally causing injury to another. The insurers, insureds, or people damaged by those insured are dependent on one another. In a country where human interactions are governed solely by the terms of written contracts, insurance would be a simple means of spreading risk and providing indemnity based on the promises made by the contract of insurance. But, in this the real world, insurance contracts are controlled by statutes enacted to ostensibly protect the consumer of insurance, regulations imposing obligations on the conduct of insurers and the decisions of trial and appellate courts interpreting insurance contracts.

A simple insurance contract between two parties might say: “I insure you against the risk of loss of your engagement ring valued at $15,000 by all risks of direct physical loss except wear and tear for a premium paid by you of $15.00.” Anyone who could read would understand that contract. If something happens to damage, destroy or lose the ring the insurer will pay you $15,000.00. However, insurers cannot write such a simple contract because the state requires many terms and conditions that complicate the policy wording and confuse the common person. The states and courts that did so had nothing but good intentions to protect the consumer against the insurer and control the actions of the insurer.

The tort of bad faith was created because courts felt that insurers treated their insureds badly and defeated the purpose for which insurance is acquired. It has served its purpose. Fair Claims Settlement Practices laws and regulations are now available to control insurers who do not act in good faith. Insurance fraud statutes and Regulations provide assistance to insurers who have been deceived by those they insure or who are victims of attempted insurance fraud.

It is time that all contracts, including insurance contracts, are treated like any other contract, and insureds who believe the insurer breached the contract of insurance can sue to recover the benefits promised by the policy.

Available as a paperback here. Available as a Kindle book here.

Legal Disclaimer

ZIFL is made available by the publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using ZIFL you understand that there is no attorney client relationship between you and the publisher. ZIFL should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

Consider Books to Show Your Appreciation to Your Insurer Clients or Claims Employees

Many insurers refuse to allow their employees to receive gifts from lawyers, independent adjusters or vendors.

If you wish to thank your insurance company clients for allowing you to represent their interest or if you wish to honor your claims personnel it is time to give them something that will be useful to them throughout the coming year and that will not offend insurer’s rules to avoid attempts to extort clients for business from insurer employees.

The Insurance Claims Library

Over the last 51 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it for insurers and their claims staff to become insurance claims professionals.

Consider the Insurance Claims Library where, for a small investment you can provide each claims office – rather than individual adjusters – a group of insurance books that will help them throughout the year.

By providing clients, claims departments, or claims personnel with any one or more of the books offered by the Insurance Claims Library. By so doing you can add to the insurance claims professionalism of your clients, employees and claims personnel. With delivery handled by Amazon.com any one or more of the following books, all available from amazon.com and http://zalma.com/blog/insurance-claims-library/, will gain the respect and gratitude from each recipient and their employers.

New and Now Available from the Zalma Insurance Claims Library

The Insurance Examination Under Oath Second Edition

A Tool Available to Insurers to Thoroughly Investigate Claims and Work to Defeat Fraud

The insurance Examination Under Oath (“EUO”) is a formal type of interview authorized by an insurance contract. It is taken under the authority provided by the agreement of the insurer, when he, she or it acquires a policy of insurance, to submit to a condition of the insurance contract that compels the insured to appear and give sworn testimony at the demand of the insurer. Failure to appear and testify is considered a breach of a material condition.

The EUO is conducted before a notary and a certified shorthand reporter who is present to give the oath to the person interviewed. The reporter will record the entire conversation and prepare a transcript to be read, reviewed, corrected and signed by the witness under penalty of perjury or by an oath taken before a notary or judge.

The EUO is a tool only sparingly used by insurers in the United States. A professional insurer will only require an insured to submit to an EUO when a thorough claims investigation raises questions: About the application of the coverage to the facts of the loss, the potentiality that a fraud is being attempted, or to assist the insured in the obligation to prove to the insurer the cause and amount of loss.

Although seldom used the EUO is an important tool needed by insurers when there is a question of coverage, destruction of evidence needed to prove a compensable loss or the amount of loss or evidence indicating the potential that a fraud is being attempted. The EUO and Legal Action provisions in an insurance policy are conditions precedent to an insured’s ability to file suit, and that since the insured failed to substantially comply with the terms of those provisions, the appropriate remedy is dismissal without prejudice. The insured’s failure to comply with these conditions does not bar his ability to bring suit to recover, but merely suspends his ability to bring suit until he has fully complied with those conditions.

Available as a paperback here or Available as a Kindle book here

Zalma on Insurance Blog Posting

Contract of Personal Indemnity & Insurable Interest May 28, 2021
Washington State Immunizes Insurer from Bad Faith Claim if Insured Arrested May 28, 2021
Casualty Insurance May 27, 2021
The Law of Unintended Consequences Strikes Again to Help Set Up a Bad Faith Case May 27, 2021
Just Published – Zalma on Insurance Part 101 – Third Edition May 26, 2021
The Unethical Insured May 26, 2021
No Bull – Coverage Limited to Described Locations May 26, 2021
New Free Videos From Barry Zalma, Esq., CFE May 25, 2021
Appraisal of a Homeowners Policy Claim May 25, 2021
Insurers do not have Carte Blanche To Take Forever Resolving Their Own Coverage Obligations May 25, 2021
A Video About the Effect of the Tort of Bad Faith May 24, 2021
Substantial Compliance With Statute Effectively Transfers Title to a Vehicle May 24, 2021
A Video About the Assault & Battery Exclusion May 21, 2021
A House is not Built by Magic May 21, 2021
A Video About More Exclusions May 20, 2021
Charitable Immunity Defeats Malpractice Suit May 20, 2021
A Video Explaining Four Exclusions May 19, 2021
Mafioso Cons Jeweler Out of $2.09 Million May 19, 2021
A Video About Coverage Counsel May 18, 2021

Insurance Fraud Costs Everyone

Fictionalized True Crime Stories of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers.

The stories help to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the Perpetrators than any Other Crime.

This book started as a collection of columns I wrote and published in the magazines “Insurance Journal,” “Insurance Week,” and “The John Cooke Insurance Fraud Report” insurance trade publications serving the insurance community in the United States. Since the last edition I have added more stories that were published in my twice monthly newsletter, Zalma’s Insurance Fraud Letter which is available free to anyone who clicks the links.

Available as a Kindle Book and Available as a Paperback from Amazon.com.

Barry Zalma, Esq., CFE

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.