IFB News Briefs!

• A Sandwich corporation and its officers are indicted on 30 counts of fraud-related charges for underreporting payroll.

• A Lanesboro man pleads guilty to insurance fraud and larceny. The subject claimed that the leg he broke at a softball game was a work-related injury.

• Conspiracy and federal mail fraud charges are levied against two subjects for allegedly misclassifying employees' positions resulting in several million dollars in lost premiums.

• Two health care providers are charged in separate cases on fraud-related charges.

• Complaints are issued against a brother and sister for an alleged staged accident. The brother is a licensed life insurance agent from Worcester.

• A 43-count indictment is issued against three subjects accused of operating an automobile fraud ring in New Bedford.

• A Wakefield insurance agent is indicted on the alleged theft of her own Mercedes.

• Northeastern University Dean of Criminal Justice James Alan Fox, an authority on national crime rates, is interviewed concerning his thoughts on insurance fraud.

Convictions - 98
Individuals Indicted - 117
Complaints Issued - 126
Cases Referred for Prosecution - 219

In recent months the Insurance Fraud Bureau has enjoyed the publicity and notoriety of being featured on network news shows such as CBS's 60 Minutes and ABC's World News This Weekendas part of their national coverage of insurance fraud stories. We have had inquiries and visitors from around the world wishing to explore the successful public/private partnership between the Attorney General's Office and the IFB. While the roles IFB personnel and State prosecutors play in the investigation and prosecution of insurance fraud may have taken a front row in the eyes of the public, these activities are really only a portion of the whole framework in place to combat fraud in Massachusetts.

An important variable in the equation is the role of the insurance companies' claims departments and Special Investigative Units (SIUs) in the initial recognition of suspicious trends and investigation of fraudulent activities that will be referred to the IFB for further investigation. Detection of insurance fraud begins at the insurance company level. These individuals comprise the first leg of the relay team that is committed to combating all types of insurance fraud. The compliments and recognition bestowed upon the IFB are to be shared with industry personnel. Together we are making great strides in the fight against insurance fraud.

Several IFB investigators are checking allegations that some insurance agents are avoiding or lowering premiums by offering low mileage discounts to more insureds than seems appropriate. In 1994, 97% of new customers received a low mileage discount from five area insurance agents. After IFB investigators met with these agents, the average dropped to less than 50% for 1995 new customers. Meetings with additional agents are scheduled.

James Alan Fox is Dean of the College of Criminal Justice at Northeastern University and the author of several books and numerous articles on criminal justice topics. Considered an authority on national crime trends, the main concentration of his studies is serial and mass murders. However, Fox has testified as anexpert witness at the Massachusetts automobile rate hearings on cost containment and insurance fraud (specifically auto theft and auto body repair shops) for the Office of the Attorney General.

Criminal Tendencies

James Fox believes that two categories of "typical"offenders exist in insurance fraud. Fox describes one group as people with propensities toward committing crimes. There are people who "have criminal tendencies, who are just not honest people ... they realize they can go from high risk street crimes to low risk [insurance fraud] crimes." The other group consists of people who "become criminal because the opportunities for making quick money are overwhelming. Opportunity drives their behavior."

Billion Dollar Industry

Because so much of our attention and resources are channeled toward catching violent criminals, Fox claims that insurance fraud frequently goes undetected and that people fail to recognize the severity and ramifications of fraud on the multi-billion dollar industry. "Billion dollar industry? People say the government wastes that much every day. You fail to motivate people at that level. Rather than focus on the money that's lost, focus on things we don't have ... what everyday people don't have because of fraud."Fox believes that citizens would not appreciate lower premiums as a result of fraud prevention or prosecution because the recovered amounts spread over millions of residents would only minimally decrease insurance rates.

Deterrence

According to Fox, deterrence does not seem to prevent fraud. "The deterrence theory basically says that what will discourage people from committing a crime is their perception of the likelihood of getting caught. Years ago, there was a low probability of getting caught. And, if you were unlucky enough to get caught, all you had to do was return the money, or not get any money at all. There was a very low likelihood of any negative sanctions."

Fox stated that for almost any other crime, negative sanctions would occur if an individual was prosecuted for the crime. For example, it would be almost inconceivable for a person discovered stealing to be told "you can't have that, give it back" without any real punishment imposed.

Because insurance fraud can be such a profitable and lucrative 'business', Fox recommends stricter punishment for fraudulent activities. The stigmatization of committing the crime of insurance fraud must be increased, as well as the likelihood of being caught. "If you try the criminalization approach and scare people by talking about going to prison, most people won't be affected by that. I'm not sure we have made much headway with the social stigma approach. I think the perception still is that the risks of getting caught are very slim."

Fox also suggests an aggressive publicity campaign to increase public awareness about the ramifications of insurance fraud.

Insurance Fraud Bureau of Massachusetts

To fight insurance fraud, Fox considers high visibility of detection (and eventual prosecution) essential to obtain public credibility. "Insurance companies themselves have to walk a fine line. If they get a reputation for being too tough with their claimants, they may be eradicating fraud but they also scare away business from people who aren't fraudulent ... People want a claim settled quickly. They don't want a lot of hassle or people snooping around. "

Instead, Fox recommends that more companies utilize the Insurance Fraud Bureau to investigate and to prosecute insurance fraud. "People have to realize that there is a mechanism for identifying fraudulent claims and the people who are involved with [committing] those claims. There have to be real sanctions, such as license revocations and significant fines -- not just lack of profit."

Before the advent of the IFB, Fox had expressed concern that the detection of fraud was minimal and negative sanctions rare. Just a few years ago the only penalty against insurance fraud offenders was the denial of a suspicious claim.

The Insurance Fraud Bureau is now winning recognition for its efforts in detecting and prosecuting fraud. Upon seeing the volume of cases, as well as the number of convictions, Fox remarked how highly impressed he was with the IFB s record.

Fox is optimistic that the Insurance Fraud Bureau will continue to enjoy a successful campaign against fraud in Massachusetts. He cautions that "as with any new entity, it takes a while for parties to recognize the value" of the new group, but praised the IFB for its powerful entry into the industry. He hoped to continue to read about the successes and growing recognition of the IFB.

Automobile Highlights

BOSTON- A Wakefield insurance agent and her boyfriend, after dining in Boston, allegedly discovered her 1985 Mercedes missing and reported the theft to Boston police. The subject received $24,805 from Safety Insurance Company for the alleged theft of the vehicle. Six months later, the boyfriend was stopped by U.S. Immigration and Customs Border Patrol at the Canadian border when he attempted to re-enter the U.S. driving the stolen Mercedes.

A Wakefield insurance agent was indicted on charges of insurance fraud, larceny, concealment of a motor vehicle and filing a false report of theft in Suffolk Superior Court on July 6, 1995. Her boyfriend was previously indicted on similar charges.

GILBERTVILLE- A Gilbertville woman claimed that she sustained a knee injury due to a fall while performing her duties as a school van driver. She received temporary total disability benefits from Cigna Insurance Company in excess of $20,000. In reality, the woman injured her knee while jumping down several stairs in her home.

Charges of insurance fraud, workers' compensation fraud and larceny against a Gilbertville woman were continued without a finding for six years in Ware District Court on June 2, 1995. The subject was ordered to pay restitution of $8,420.

CHELMSFORD- A subject allegedly submitted two claims for property damage to Liberty Mutual Insurance Company for pre-existing damage to his home. He had previously submitted the same claims for damage to Cambridge Mutual Fire Insurance Company for which he was paid almost $1,000 for his losses. The duplicate claims were discovered through a check with the Central Index Bureau.

A complaint was issued against a subject on two counts each of insurance fraud and larceny in Lowell District Court on May 18, 1995.

Marine Highlights

NORTHAMPTON- A man reported the alleged theft of his 40-foot O'Day sailboat from its mooring to Maryland Casualty Insurance Company. The sailboat was originally purchased in a damaged state and a friend of the subject was going to rebuild the vessel. The friend, at the same time, purchased another 40-foot O'Day sailboat, also in a salvaged state. Boatyard records indicate the two 40-foot sailboats were hauled to the yard for storage and repairs. One boat was severely damaged on the left side and the other was damaged on the right side. Investigation of this claim revealed that the two salvaged sailboats were pieced together to make one. The non-existent boat was allegedly registered and insured on paper, then reported stolen in an attempt to collect the insurance proceeds.

Complaints were issued against a subject and his wife on charges of insurance fraud and filing a false report of theft in Northampton District Court on June 29, 1995.

Health Highlights

BURLINGTON- An optometrist, on return from a vacation in Florida, allegedly slipped on a patch of oil at a car rental office and injured his elbow. He began treatment for his injury and was considered totally disabled for 18 days and partially disabled for 12 days. He also claimed $5,000 in lost wages due to his inability to work as a result of the injury and received payment from CNA Insurance Company. Investigation revealed, however, that the optometrist did provide services to patients at several nursing homes during the time he claimed to be disabled.

A complaint was issued against a Burlington optometrist in Woburn District Court on May 4, 1995 on charges of insurance fraud and attempted larceny.