As I look forward to my retirement in 1995, I look back upon many years within the insurance industry with a deep sense of pride and accomplishment. Since its inception six years ago, I have served as President of the Arbella Mutual Insurance Company. During my career I have come into contact with many fine professionals within and outside of the insurance industry. I have taken part in a great many professional endeavors to better the performance of industry personnel in order to better serve our customers. However, there are few endeavors of which I am more proud than the creation of the Insurance Fraud Bureau of Massachusetts (IFB).
The insurance industry's continuing commitment to combatting and eliminating fraudulent claims was demonstrated by founding and funding the IFB. In 1991, the IFB was created to fulfill a specific need of pooling the combined resources of the insurance industry and state agencies including the Attorney General's Office. The creation of the IFB was a unique attempt to synergize the cooperation of public and private entities, an attempt that in four years has become a national benchmark for fighting insurance fraud. The IFB has become renowned across the nation for its success.
The IFB is funded by the casualty insurance industry through the Massachusetts Automobile Insurers Bureau and the Workers' Compensation Rating and Inspection Bureau. IFB funds an insurance prosecution unit within the Attorney General's Office, a first in the country.
Initially, there were interest groups that believed the Insurance Fraud Bureau should be created by and remain within state control. However, by allowing the IFB to function as a private entity, the Legislature has granted a great deal of investigative independence to the Bureau. The discretion afforded has resulted in a wide range of extensive investigations in the areas of automobile bodily injury, automobile theft, workers' compensation, homeowner, life, health, disability, maritime, and multi-line insurance. Additionally, investigations have been conducted of industry personnel, health care professionals, legal service professionals, and licensees of all kinds. Any individual affecting the insurance industry can be subject to IFB investigation.
While our activities involve prosecuting perpetrators of insurance fraud, our objective is to deter and prevent insurance fraud from its inception. Thus, our ongoing deterrent activity is to publicize the activity of the Bureau and the prosecutorial results of the Attorney General's staff.
The public is becoming more aware of IFB activities and its philosophy that criminal conduct involving insurance will not go unpunished in a criminal court, as had been the case historically.
With the professional, hard working, dedicated personnel of the IFB, headed by Dan Johnston as Executive Director and Dan Skelly as Vice President-Chief of Investigations, and the Assistant AGs in Attorney General Scott Harshbarger's office, there is much that should be feared by those who generate a "fraud tax" on our insurance customers.
As I step down as Chairman of the IFB Board of Governors, I will look upon the IFB as one of the most successful organizations I have been involved with in my 47 years in the industry, and I wish to express my gratitude to the many fine individuals with whom I have had the good fortune to be associated.
Chairman, IFB Board of Governors, 1991-1994 President, Chief Operating Officer, Arbella Mutual Insurance Company, 1988-1994
BOSTON- Joint investigative efforts by the Insurance Fraud
Bureau of Massachusetts (IFB), the Department of Industrial Accidents
(DIA) and the Attorney General's Office were rewarded when a Connecticut-owned
employee leasing company and its owner/president were indicted
in one of the largest workers' compensation fraud cases prosecuted
in Massachusetts. The company is accused of altering employee
related statistics which resulted in understating workers' compensation
premiums by over $3 million.
A Suffolk grand jury returned a 74-count indictment against the
Connecticut firm and its owner on December 19, 1994. The corporation
is charged with 11 counts of larceny over $250 and one count of
failing to provide workers' compensation coverage. The owner
is charged with 11 counts of larceny over $250, 25 counts of forgery,
25 counts of uttering a forged instrument and one count of failing
to provide workers' compensation coverage.
The leasing company is alleged to have collected $65,000 from
its client companies during a five month period in 1991 for the
purchase of workers' compensation insurance coverage. Allegations
also include the falsifying of certificates of insurance from
a non-existent insurance company to show proof of coverage. Additionally,
it is alleged that the leasing company under-reported the actual
number of leased employees and misrepresented employees' job classifications
to the assigned risk pool which provided coverage to the client
companies. When the discrepancies were discovered, the leasing
company owed over $3 million in additional premiums. The workers'
compensation policy was cancelled when the company failed to pay
the full premium. The leasing company no longer does business
in Massachusetts.
A leasing company "hires" the employees of small businesses
and "leases" them back to the same business. The leasing
company handles all payroll, tax, insurance and employee-related
expenses for the client businesses. With the larger employee
base, they claim the ability to obtain more favorable insurance
premium rates.
Convictions - 72
SEEKONK- The establishment and maintenance of strong reciprocal
working relationships with other law enforcement agencies have
played a large part in the success of the IFB. So when asked
to help, the IFB was more than willing to assist the Seekonk Police
Department regarding a possible insurance fraud case.
A salesman in a Seekonk automobile dealership told a young female
customer, who owed more on her automobile than what it was worth,
that he and another salesman could make her vehicle "disappear"
in return for sexual favors. She could also collect the insurance
money and purchase a new automobile from him. For helping her,
the salesman told her she must perform sexual favors for the two
salesmen. The female, who made the initial complaint to Seekonk
Police, was interviewed by both the IFB and Seekonk Police and
found to be credible. The IFB, with Seekonk Police, are conducting
a joint investigation. Meanwhile, the salesman has been arrested
by Seekonk Police on five outstanding default warrants.
BOSTON- The IFB was honored on December 2, 1994 with an
award from the U.S. Department of Justice, Immigration and Naturalization
Service (INS). Officials from the Deportation/Fugitive Division
in Boston presented this tribute in recognition of the IFB's efforts
in aiding the INS to locate one of their "Most Wanted Escaped
Fugitives".
David McDonald, Deputy Assistant District Director, and Bruce
Chadbourne, Assistant District Director of the INS Deportation/Fugitive
Division in Boston presented a plaque and letter of commendation
to IFB Executive Director Daniel Johnston and Chief of Investigations
Daniel Skelly in recognition of the IFB's assistance to the INS.
The fugitive, a native from the Dominican Republic with a lengthy
criminal record, escaped from the INS detention facility at the
U.S. Coast Guard Base in Boston in March 1994. He had been tracked
across four states before his capture in Lynn, Massachusetts in
August.
AGAWAM- An Agawam man filed an insurance claim with his carrier,
CNA Insurance Company, and a police report stating that his van
had allegedly sustained vandalism damage. Investigation, however,
revealed that a week earlier the subject's vehicle had been towed
from an intersection for impeding traffic. At that time, a Springfield
police officer and a security man at the tow yard had each reported
that the vehicle was heavily damaged. Additionally, a towing
company inventory form included a photograph of the damaged van
and an independent appraisal of the van indicated that the damage
had resulted from two separate collisions and not from an act
of vandalism.
A complaint was issued against the subject in Springfield District
Court on December 19, 1994 on insurance fraud and attempted larceny
charges.
Couple Conjures up Collision Claim
SPRINGFIELD- Two subjects were allegedly involved in a
two car collision. One of the subjects submitted a claim for
personal injuries to his carrier, John Hancock Insurance Company.
Although the subject denied that he knew the other driver, it
was discovered that the two subjects are married. Additionally,
the first subject listed another passenger in his vehicle as being
injured. This passenger is allegedly non-existent and was an
alias name used in order to file a PIP claim with the adverse
carrier, National Grange Mutual Insurance Company.
Complaints were issued in Springfield District Court against
a Springfield couple on seven counts of insurance fraud and larceny
on December 19, 1994.
Taxi Cab Foul Up
HYDE PARK- A Hyde Park man reported to Liberty Mutual
Insurance Company that he was operating his personal vehicle when
he allegedly struck a taxicab and sustained collision damage to
both vehicles. Investigation revealed, however, that the accident
had been a single car collision with a fixed object. The subject
admitted to IFB investigators that he had been hired by the assigned
operator of the taxicab to drive the taxi. While operating the
cab, he was cut off by another vehicle, lost control of the cab,
and struck a pole. The assigned operator of the taxicab, who
did not have collision insurance or the money to pay for repairs,
came up with the scheme to maintain that the other man's personal
vehicle struck the taxicab in order to collect insurance money.
On December 15, 1994, complaints were issued against two men
in Dedham District Court on insurance fraud and attempted larceny
charges.
"Jump-In Passenger" Case Update
DORCHESTER- The driver of a vehicle involved in a two
car collision reported to his carrier, Aetna Casualty and Surety,
that four people occupied his vehicle at the time of the accident.
However, the driver and passenger of the adverse vehicle reported
that there were only two people in the vehicle.
A complaint was filed in Brockton District Court on November
18, 1994 against the driver on charges of insurance fraud and
attempted larceny. The case against one of the jump-in passengers
was previously continued without a finding and that subject was
given probation.
There's a Solution to Every Problem
WEST SPRINGFIELD- A subject contacted his insurance agent,
representing Arbella Mutual Insurance Company, to inquire if the
broken rear window of his vehicle was covered under his policy.
He was informed that he had no comprehensive coverage which would
cover the damage. The following day the subject filed an automobile
theft claim reporting that he had allowed his girlfriend to drive
the vehicle and while she was in possession of the vehicle it
was allegedly stolen from a mall parking lot. After the automobile
was recovered, and as part of the loss, the subject claimed a
smashed rear window and stolen stereo equipment and sun roof.
Mall security officers testified that they never saw the vehicle
in the parking lot.
The subject pled guilty to filing a false auto theft report,
insurance fraud and larceny charges in Hampden Superior Court
on November 3, 1994. He is presently serving a seven to ten year
sentence in state prison after conviction of larceny of a motor
vehicle. His girlfriend pled guilty to similar charges and was
sentenced to six months in the House of Corrections, concurrent
with a present charge she is serving.
Peabody Man Double Dips
PEABODY- A man involved in a motor vehicle accident made
a claim for PIP benefits and received a wage reimbursement of
$7,945. The subject allegedly stated on his PIP application that
he was a self-employed businessman and provided documentation
in support of his lost wage claim illustrating he was earning
more than $1,000 per week. He also answered "no" to
the question if he was currently collecting workers' compensation
or disability benefits. The Peabody man was, in fact, collecting
workers' compensation benefits at the time of the accident and
had received temporary total and partial disability benefits throughout
this same time period. Carriers affected in this loss included
CNA, Sentry and Commercial Union Insurance Companies.
On November 3, 1994 in Peabody District Court a complaint was
issued against the subject on charges of insurance fraud and larceny
by false pretenses.
Arlington Auto Ring Broken
ARLINGTON- Three subjects submitted allegedly false lost
wage and bodily injury claims in connection with five separate
automobile accidents that occurred within a 40-month time span.
The subjects allegedly claimed personal injuries and filed PIP
applications in conjunction with these accidents. They also allegedly
used falsified Wage and Salary Verification forms to claim lost
wages or to extend the lost wage period. Carriers victimized
in the scheme include CNA, Safety, Aetna and Hanover Insurance
Companies.
Complaints were issued in Boston Municipal Court, Lowell District
Court and Peabody District Court against the three subjects on
a total of 33 counts of insurance fraud, larceny and perjury charges.
One of the subjects has pled guilty and has been sentenced to
six months in the House of Correction and restitution of $6,000.
The other two subjects are awaiting trial.
Keep Those Receipts! They May Come in Handy One Day!
WEST SPRINGFIELD- A subject reported to the police that
his motor vehicle had been broken into and he listed as missing
a compact disc player and related equipment. He reported the
value of his stereo system at approximately $2,000. He contacted
and reported the theft of the items to his carrier, Amica Mutual
Insurance Company, and supplied a receipt for the purchase. When
a claim representative contacted the store at which the subject
allegedly purchased the equipment, he was told that they did not
sell that brand of equipment. However, the store was familiar
with the subject because he had bought another piece of stereo
equipment from them. The receipt submitted to the carrier was
allegedly altered with the addition of the alleged stolen items.
A complaint was filed against the subject in Springfield District
Court on September 29, 1994 on charges of insurance fraud and
attempted larceny.
Stolen Porsche Recovered
NORTH ATTLEBORO- After receiving a tip from an informant
concerning a stolen vehicle, IFB investigators, working with North
Attleboro Police, obtained a search warrant and recovered
a 1985 Porsche which had been reported stolen from Rhode Island
three years ago.
A North Attleboro man admitted to facts of receiving stolen
property on September 27, 1994 in Attleboro District Court. The
case was continued without a finding for one year.
HAVERHILL- Due to a joint investigation by the Federal
Bureau of Investigation and the IFB, a search warrant was issued
against a company owned by a Haverhill businessman who also serves
as a city councilor. Files, documents and computers were seized
in the search. The subject allegedly under-reported payroll and
misclassified employees resulting in the evasion of workers' compensation
premium owed. It is alleged that the company routinely split
its employees' compensation by representing 60% as trucking expenses
and materials and 40% as labor costs. Additionally, high risk
personnel were allegedly misclassified to lower risk occupations
to evade premium owed. This case originated from a phone call
to the IFB toll-free hotline number.
"Busy Beaver" Case Update
NORTH ADAMS- A subject reported that he tripped, fell
and injured himself in an unwitnessed accident at his place of
employment. He received temporary total disability benefits for
over a year from Cigna Insurance Company. However, investigation
revealed that the subject held at least three different jobs during
his time of disability.
On December 12, 1994, a North Adams man pled guilty to insurance
fraud, workers' compensation fraud and larceny in Adams District
Court. He was sentenced to two and a half years in the House
of Correction, suspended, and $8,520 in restitution.
"What You Don't Say ... " Case Update
LONGMEADOW- A man who reported a work-related injury collected
temporary total disability benefits from Cigna Insurance Company.
He subsequently began employment with a temporary agency. On
his job application he stated that he had been self-employed and
omitted any reference to his disability benefits.
Charges of workers' compensation fraud and larceny were continued
without a finding against a Longmeadow man in Springfield District
Court on November 4, 1994. He was ordered to pay $6,071 in restitution.
"Chef Cooks Up Scheme" Cas Update
SWAMPSCOTT- A man who was injured on the job trying to
lift a stud off a pallet collected disability benefits over a
20-month period in the amount of $29,000 from Electric Mutual
Insurance Company. Despite the subject's contention of disability,
he worked full-time as a restaurant chef through the same time
period.
The case was continued without a finding against a Swampscott
man on October 4, 1994. He received supervised probation and
must pay $13,255 in restitution.
Nurse's Aide Has History of Back Injuries
BEDFORD- A former nurse's aide received fifteen weeks
of workers' compensation benefits for a back injury sustained
while employed at a nursing home. While collecting the workers'
compensation benefits from Liberty Mutual Insurance Company, the
woman was also employed at another nursing care facility. The
Bedford woman has a history of multiple workers' compensation
claims based on three separate back injuries. On two such claims,
she received over $42,000.
A Bedford woman pled guilty to larceny and insurance fraud
charges on October 12, 1994 in Middlesex Superior Court. She
was sentenced to serve four months in the House of Correction
and three to five years in State Prison, suspended. She was also
ordered to pay $7,500 in restitution.
BROCKTON- A subject had reported to police in January 1991
that upon returning to his residence one evening he found that
his home had been burglarized. He provided a list of missing
items to the police. He then contacted Prudential Insurance Company,
filed a claim for the stolen items and was paid $8,725 for his
loss. In September 1993, police executed a search warrant at
his residence on unrelated criminal charges and located many of
the items that had been listed as missing on the police report
from the 1991 burglary.
The subject pled guilty on December 28, 1994 in Brockton District
Court to charges of insurance fraud, larceny and filing a false
police report. He was sentenced to one year in the House of Correction,
suspended, and to pay restitution of $8,725 to the insurance carrier.
"Blabbermouth" Case Update
BRAINTREE- A case developed when a thief broke into a home,
stole a set of car keys and an automobile that was parked in the
driveway. The thief, who stopped to pump gas in the stolen vehicle,
bragged to the station attendant that he had just stolen the automobile.
The attendant reported the theft to the police. That same evening,
upon recovery of the then abandoned vehicle, the police went to
the insured's home. The daughter, who was asleep at the time
and alone in the house, was unaware that her vehicle was missing.
She accepted the police officers' offer to check the rest of
the house and together they determined nothing amiss. However,
the father reported to his insurance carrier, Hingham Mutual Insurance
Company, that several items had been stolen from his home from
the burglary.
The father and daughter each pled guilty to insurance fraud,
attempted larceny and conspiracy in Quincy District Court on November
22, 1994. The father was sentenced to one year in the House of
Correction, suspended. The daughter was sentenced to one year
probation.
MARSHFIELD- The former owner and principal of an East Weymouth
insurance agency stole over $88,000 by selling fraudulent surety
bonds primarily to minority-owned and women-owned businesses.
The subject used three different schemes; he sold surety bonds
written by non-existent companies, sold forged surety bonds from
a legitimate company, or required customers to post "collateral"
for surety bonds which was never returned. The amount of money
stolen by the agent ranged from $2,600 to more than $20,000 from
each victim.
The subject pled guilty to eight counts of larceny in Essex
Superior Court on August 22, 1994. He was sentenced in October
to serve four to five years in state prison. He was also ordered
to pay over $100,000 in fines and restitution. The subject has
already served a federal prison sentence stemming from this scheme.
"Stealing Sales Assistant" Case Update
WAKEFIELD- A former Metropolitan Insurance Company clerical
sales assistant forged the endorsements of several policyholders
and cashed their proceed checks which totalled over $15,000.
The policyholders were friends and relatives of the woman. An
internal audit by the carrier uncovered the thefts.
A Wakefield woman admitted to facts in Lynn District Court
on November 16, 1994 and five counts of larceny were continued
without a finding. She was ordered to attend psychiatric therapy
and gambling therapy and to pay restitution of $15,295.
REVERE- A Revere man took out a life insurance policy on
his brother from Aetna Life and Surety Insurance Company in the
amount of $100,000 and listed himself as the sole beneficiary.
The man subsequently filed a claimant's statement for death benefits
and produced two death certificates and a burial permit to the
carrier as proof of his brother's death. However, investigation
revealed that the subject allegedly forged his brother's signature
on the policy and signatures on the death certificates. The brother
is, in fact, alive and well and was unaware that a life insurance
policy had been taken out in his name by his brother and that
a claim had been filed.
A complaint was filed against a Revere man in Quincy District
Court on November 29, 1994 on insurance fraud and attempted larceny
charges.
TAUNTON- A subject reported to his insurance carrier, Prudential
Insurance Company, and to police that items had allegedly been
stolen from his boat which he had left parked in the driveway
of his home. Items reported missing included a CB radio, a marine
radio, marine batteries and a portion of the motor. The subject
denied that he had ever made inquiries regarding replacing or
repairing these same items prior to his loss. However, investigation
showed that he had actually ordered and received the delivery
of the new parts for his boat prior to the date of the alleged
theft.
A complaint was issued against the subject on insurance fraud
and attempted larceny charges in Taunton District Court on September
30, 1994.
Workers' Compensation Premium Evasion Indictments
IFB Progress Report
(through December 30, 1994)
Individuals Indicted - 87
Complaints Issued - 92
Cases Referred for Prosecution - 192
IFB Assists Seekonk Police Department
Apprehension of Escaped Fugitive Nets Honor for IFB
Automobile Highlights
A Picture is Worth A Thousand Words
Workers' Compensation Highlights
Search Warrant Issued Against Haverhill Business
Property Highlights
Don't Keep Those Reported Stolen Items Laying Around the House
Multi-Lines Highlights
Agent Preys on Minority and Women Business Onwers
Life Highlights
Reports of My Death are Greatly Exaggerated
Marine Highlights
It's All in the Timing