Insurance Claims Investigation News

April 27, 2005

BY JIM RITTER Health Reporter

Deerfield-based VeridianHealth says it has enjoyed \”incredible growth\” in the tests it performs to diagnose pinched nerves and carpal tunnel syndrome.

The company says its name is inspired by a Latin word for true and trusted.

But in a lawsuit made public Tuesday, Illinois Attorney General Lisa Madigan charged VeridianHealth has fraudulently billed health insurers for $234 million.

Madigan charged the company uses unqualified technicians to conduct unnecessary tests. And in some cases, VeridianHealth charged for tests that weren\’t done, the suit alleges. VeridianHealth has \”wasted valuable insurance dollars that should have been available for legitimate medical procedures,\” Madigan said. Its conduct \”is one reason medical insurance rates continue to rise.\”

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teven I. Cohen, a licensed chiropractor who has practiced at variously named clinics at 3100 S. Memorial Drive, appeared in court Wednesday for the first part of his sentencing hearing.

Cohen was indicted in 2004 on 527 counts of health care fraud, 21 counts of mail fraud, two counts of obstruction and one count each of conspiracy to commit health care fraud and money laundering. In July, he entered guilty pleas to two counts of mail fraud and one count of conspiracy to commit health care fraud as part of a plea agreement.

The mail fraud charges stem from claims submitted to Blue Cross/Blue Shield for patient treatments not actually rendered. Cohen also conspired with another chiropractor to use provider numbers, some not belonging to them, to submit claims to insurance companies for procedures that were not performed, assistant United States Attorney Yvonne Watford-McKinney said.

Gratzmiller has pleaded guilty to false declarations before a grand jury in connection with previous testimony given during a grand jury investigation of fraud at the chiropractic office. Among other things, Gratzmiller told a grand jury he had not been asked to move medical records.

Wednesday, Gratzmiller testified he, Cohen and another man at the clinic did move records after an investigator with Blue Cross/Blue Shield began asking for them.

Gratzmiller also testified Cohen asked that services not provided be billed to insurance companies that would pay for them and that provider numbers of medical doctors were used rather than those of chiropractors because insurance coverage would be better.

Gratzmiller is also expected to be sentenced today on the perjury charge.

April 18, 2005

The Louisiana State Police reported that the chief of police in Vinton, La.—Billy Ray Vice—was arrested on Apr. 15, 2005, by the state police criminal intelligence unit. He is being charged with Extortion, Insurance Fraud, and Malfeasance in Office.

The bond on the warrant has been set at $75,000.00. The investigation reportedly revealed Vice was attempting to extort another candidate from campaigning in the election for the position of chief of police in Vinton on Apr. 2, 2005. Vice attempted to use unsubstantiated information aimed at discrediting the candidate prior to the qualification date. The state police said evidence obtained in the investigation indicates Vice is responsible for the filing of a false criminal report in February against the candidate for the purpose of defamation of character prior to the election.

Allegedly, evidence was also obtained that indicates Vice is responsible for falsifying a criminal report pertaining to a vehicle pursuit which involved a Vinton patrol unit in March 2005. The report was used to file a fraudulent insurance claim on behalf of the town of Vinton.

Billy Ray Vice was appointed as the acting chief of police in October 2004 after the former elected chief, Betty Dupre, resigned from the position.

Early-morning raid results in six arrests in connection with the largest insurance fraud ring in North Carolina history.

Raleigh, NC — The state\’s department of insurance has cracked the largest insurance fraud case in North Carolina history.

Authorities have arrested six family members from Chatham and Randolph counties.

The six are suspected of masterminding an extensive auto insurance fraud ring with possible ties to the illegal drug trade.

The group has allegedly been staging accidents and filing for claims for more than 10 years, collecting as much as two million dollars.

Investigators suspect that as many as 480 auto crash claims were deliberately caused so the defendants could collect insurance payments.

Those charged are Frankie Alston of Siler City, Gloria Alston of Siler City, Ellen Burns or Sophia, Reynaldo Dimas Colores of Siler City, Dorothy Maria Depaz of Siler City and Jose Anton Depaz of Siler City.

The charges include obtaining property by false pretenses, habitual felon and conspiracy to obtain property by false pretenses.

Department investigators allege the fraud ring may have been part of a larger illegal drug operation and they expect Tuesday\’s arrests to be the first in an ongoing investigation.

Insurance Journal – April 11, 2005

A Fullerton insurance claims adjuster and two accomplices were arrested April 8 by California Department of Insurance Fraud Investigators for their alleged participation in an auto insurance fraud scheme.

According to Investigators, Leonardo Davinci Hines was employed by Robert Moreno Insurance Services in the City of Fullerton, California between Dec. 20, 2001 and Jan. 15, 2003.

Hines has been charged with eight felony counts of grand theft and five counts of insurance fraud. Fredrick Jerome Hines, the brother of Leonardo, has been charged with five counts of grand theft, and Joslynn Brown has been charged with one count each of grand theft and insurance fraud. The case is being prosecuted by the Orange County District Attorney\’s Office. Bail has been set at $50,000 for Leonardo Hines, $35,000 for Fredrick Hines, and $15,000 for Joslynn Brown.

Leonardo Hines was at the center of an alleged scheme to introduce \”stuffed\” passengers into vehicle accidents for which he was administering the claims. CDI Fraud Division was notified that Hines was issuing unauthorized bodily injury settlement checks. Leonardo Hines allegedly issued 13 checks, totaling $54,477, for the settlement of bodily injury claims to claimants that were not involved in the automobile collisions.

Investigators found that from eight claim files, Leonardo Hines authorized checks payable to Fredrick Jerome, Gerome Fredrick, Jerome Hines, and Joslynn Brown. None of these individuals were involved in any of these eight separate automobile collisions.

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ChoicePoint is in the business of aggregating information about consumers.
As a result of theft, ChoicePoint and other firms in this business are under
attack. For example, The Atlanta Journal-Constitution in a recent editorial
has suggested that companies such as ChoicePoint should be prohibited \”from
warehousing personal information in the first place.\” (\”ChoicePoint\’s offer
not enough\” @issue April 1.)

This is a fairly bizarre suggestion. Consumers are familiar with credit
reporting agencies and can observe the benefits of these agencies. For
example, it is possible to get a credit report and finance major purchases
such as automobiles within minutes.

Firms such as ChoicePoint are less visible, but equally useful. For example,
they make it possible to purchase insurance quickly and with relatively
little paperwork. Similarly, they reduce the cost and increase the speed of
background checks for employment, apartment rental, and numerous other day
to day transactions. The reduction in hassles and increase in speed is
something that directly benefits consumers. It may appear that the reduction
benefits companies and does no good to consumers.

The Atlanta newspaper refers to making commerce more efficient, implying
that the benefits are to businesses. But economists know that in competitive
industries (and even in non-competitive industries), reductions in costs are
passed on to consumers, so that the cost of goods and services that involve
personal information are reduced. If the AJC recommendations were adopted,
it would take us longer and cost more to do business of all sorts. Increased
costs would be direct, in the form of additional prices for goods and
services in markets where information is valuable. They would also be
indirect, as the wrong people would be selected in many ways.

For example, access to records for matters such as employment leads to
increases, not reductions, in security. By reducing the cost and increasing
the ease of background checks, ChoicePoint makes it less likely that felons
will obtain jobs requiring trust, or that child molesters will get jobs with
access to children. Costs of mismatches of people and jobs, or of increased
insurance premiums because of worse sorting of risks, are subtle and hidden,
but would be real and substantial.

Moreover, ChoicePoint is not unique in having data stolen. Recently, we know
that the University of California had about 160,000 names stolen in two
separate incidents. Theft of data is a serious problem in today\’s world, but
forbidding the use of data to avoid theft is not a useful solution. Cars are
routinely stolen and stolen cars are sometimes used in the commission of
additional crimes, but no one advocates outlawing cars to avoid such misuse.

Problems of information theft are serious, but banning the use of
information is not a solution. Firms such as ChoicePoint might make access
to information more difficult in order to deter theft, but this will also
have costs. Information was stolen from ChoicePoint by criminals claiming to
be new firms. If as a result it becomes more difficult for new businesses to
purchase information from firms like ChoicePoint about potential customers
or suppliers, then entry into markets will be reduced.

Economists know that facilitating entry is one of the best ways to keep
consumer prices low, so making entry more difficult will have an unseen but
substantial effect on consumer prices.

One remedy is to penalize the real culprits in this matter. Increased
penalties for actual theft of information of all sorts make sense. Since it
may be difficult to catch these thieves, we must consider more substantial
penalties to provide adequate deterrence. But penalizing victims of theft
such as ChoicePoint will not improve matters, and will make all of us poorer.

Paul H. Rubin is a professor of economics and law at Emory University and
author of \”Privacy and the Commercial Use of Personal Information.\”

Legislation to stiffen the penalties for those committing insurance fraud is moving through the legislatures of two states. In Indiana, the state Senate voted to approve House Bill 1403, which would expand the state\’s insurance anti-fraud laws by covering more crimes and increasing the penalties for those convicted.

Also, the Florida House insurance committee approved legislation that would impose a two-year minimum prison sentence for the filing of a police report after a fabricated accident. The measure would also require health clinics to post the number for the state Fraud Buster hotline and reward information for reporting fraud.

A Baltimore City Police officer has been charged with two counts of insurance fraud and attempted theft. Eric Spilman has been charged in the Circuit Court for Baltimore County with making fraudulent statements about an insurance claim to Progressive Insurance Company and attempting to steal approximately $4,000 in insurance proceeds. Spilman had claimed he had been driving when his vehicle was involved in an accident Feb. 19, but his wife, Lori, who did not have a driver\’s license, was driving. If convicted, Spilman could face up to 15 years in prison on each count.

Insurance Journal

April 4, 2005

Tough legislation to increase fraud penalties in Florida for filing fraudulent auto crash reports that can be used to bilk insurance companies, to strengthen consumers\’ rights to sue operators of unauthorized insurance entities and to enhance criminal charges for workers\’ compensation fraud have the support of Tom Gallagher, Florida\’s CFO and Rep. Dean Cannon.

Cannon, R-Winter Park, and Sen. J.D. Alexander, R-Lake Wales, are sponsoring companion bills. Senate Bill 2330, is scheduled to be heard Tuesday by the Senate Banking and Insurance Committee, and House Bill 967 is expected to be heard Wednesday by the House Insurance Committee.

The proposed legislation would impose a two-year minimum mandatory prison sentence for filing any police report on a fabricated auto accident. It also would require medical clinics to post the department\’s Fraud Buster hotline number and reward program information.

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Insurnace Journal Report

April 1, 2005

Delaware Insurance Commissioner Matt Denn has initiated a crackdown by his department on auto insurance fraud.

Denn announced several policy changes in the way auto insurance fraud cases are handled, including makeing them public. Denn also announced his officie was taking immediate action against six alleged auto fraud perpetrators.

\”We want to send a clear message to the public that people attempting to engage in auto insurance fraud will be identified, caught, and punished,\” Denn said. \”Delawareans already pay enough for auto insurance. They should not have to pay higher insurance rates to subsidize people who try to cheat the system.\”

The insurance industry estimates that 11 to 15 percent of claims paid out by auto insurance carriers are the result of fraud.

Long Island, NY. The Nassau County District Attorney’s Criminal Frauds Bureau arrested a Baldwin psychologist on March 29 for billing an insurance company for therapy never actually given to a patient described in business records, authorities say.

Dr. Melvon Swanston, 58, submitted more than $3,000 worth of bills to Liberty Mutual Insurance Company for about 30 psychotherapy treatment sessions that were never performed. Swanston went as far as to keep logs of the improved mental health of the patient, says Nassau County District Attorney Denis Dillon.