Each year taxpayers, businesses, government agencies and insurers lose billions of dollars nationally through fraud. Every time a fraud is committed, companies and individuals pay what I call a "fraud tax." This "fraud tax" is the hidden, extra amount we pay in insurance premiums, in taxes, in health care costs and for goods and services because of fraud and abuse which have gone undetected. These frauds are often not "headline grabbing," but they are also not "victimless" or "faceless" crimes. Fraud is crippling small businesses, costing us jobs and diminishing the impact of important government programs. In short, it is making Massachusetts an expensive place in which to do business and to live.
As Attorney General, I have made the detection and prosecution of both private sector and public sector fraud a priority of my office. A major focus of that effort is the fight against insurance fraud --- in all its forms, including automobile and workers' compensation fraud. I am very proud of our success to date and I will continue to fight the "fraud tax." However, these achievements were not reached overnight, nor were they reached without the effort, resources and cooperation of many people, in both the private and public sectors. Much more needs to be and can be done.
My office, working with the insurance industry through the Insurance Fraud Bureau of Massachusetts, has been able to make inroads into the problem of insurance fraud by establishing a public-private partnership that is effectively fighting the abuses that cost us all. With the help of hundreds of individual citizens and business people who can no longer afford to subsidize this waste, fraud and abuse, and are willing to assist in our investigations, we are sending the message that insurance fraud at any level in Massachusetts will no longer be tolerated.
Whether it is occurring in body shops, doctors' offices, or insurance agencies, or whether it is being committed by employees, employers or professionals, the law must apply equally to all, and offenders must know that in Massachusetts they commit insurance fraud at their peril.
Scott Harshbarger
Attorney General
BOSTON- As a result of a two year joint investigation by
the Insurance Fraud Bureau, the Federal Bureau of Investigation,
and the Internal Revenue Service, a 36-count indictment was returned
by a federal grand jury on September 21, 1994 against a Boston-area
chiropractor and his wife. Charges included racketeering, mail
fraud, conspiracy to commit mail fraud and money laundering.
The indictment also seeks forfeiture of almost $2 million of revenue
allegedly obtained between 1989 and 1993 as a result of the fraud
conspiracy.
The chiropractor and his wife, the executive director of his chiropractic
business, allegedly carried out a series of schemes in order to
generate additional business and to increase their personal income
by defrauding Massachusetts automobile and workers' compensation
insurance carriers. The schemes included requiring tests and
treatments that were not medically reasonable or necessary for
the treatment of patients; making fraudulent statements in patients'
files used by attorneys to recover and/or increase bodily injury
and workers' compensation settlements; instituting office practices
such as requiring all automobile injury patients to treat for
a minimum of 25 office visits and subjecting these patients to
a series of high-technology tests not provided to "private"
patients. The excessive testing and treatments virtually guaranteed
auto injury patients of reaching the $2000 no-fault tort threshold
which must be reached before an injured person can sue for pain
and suffering. By instituting these practices, an increased number
of patients were referred to the chiropractic office by attorneys
representing automobile and workers' compensation injury victims.
The subjects also allegedly ordered chiropractic associates not
to discharge patients until they had received a minimum of 25
treatments. Additionally, the associates were often overruled
when they had discharged patients that they felt were either not
injured or which had reached a final result.
According to the Detail Claim Database maintained by the Automobile
Insurers Bureau, this chiropractor consistently ranked among the
five largest chiropractors in Massachusetts when measured by his
billings related to automobile accidents.
This is the second prominent Boston-area chiropractor investigated
by the IFB to be indicted on insurance fraud-related charges .
Convictions - 64
PROVIDENCE, RHODE ISLAND- Acting on a tip from an IFB informant,
Rhode Island State Police were notified and recovered two Revolutionary
War cannons at the bottom of a pond in Roger Williams Park in
Providence. The cannons had been stolen in 1981 from the front
of Town Hall in Warren, Rhode Island. An informant relayed the
whereabouts of the cannons to an IFB investigator who then passed
the information to Rhode Island State Police.
Dated before the Revolutionary War, the cannons were captured
by the Continental Army after it defeated British General John
Burgoyne at Saratoga in 1777. They were eventually presented to
the Town of Warren in honor of the services of the Warren Light
Artillery during the Dorr Rebellion of 1842.
Although the cannons had been cut into several pieces and engraving
on the cannons had been obliterated, the Town of Warren and historians
are hopeful that the cannons can be restored and displayed again.
A grant by the Wharton Financial Institutions Center, Alfred P.
Sloan Foundation, has been awarded to the Senior
Vice-President of the Massachusetts Automobile Insurers Bureau
(AIB) and Vice-President of Research for the IFB and to University
of Pennsylvania Professors J. David Cummins and Sharon Tennyson
of Wharton's Department of Insurance and Risk Management. This
1994-95 project is the first academic/industry study of insurance
fraud. Theoretical studies by Professors Cummins and Tennyson
will be combined with empirical studies by the AIB and the IFB.
Insurance industry sources estimate that, in the United States
alone, fraud costs the industry at least $16 billion per year.
Yet the importance of research on fraud has only recently begun
to be recognized in the insurance industry and the academic literature
on insurance. A number of recent studies have attempted to identify
fraud patterns and the underlying economic determinants of fraud.
Most of these studies are based on publicly available data that
are aggregated to the state or industry level. Virtually no information
exists on the value of efforts undertaken by individual insurance
firms or industry cooperative organizations to resist fraud. This
study would significantly extend existing knowledge by analyzing
the most detailed database on insurance fraud ever assembled.
The AIB has begun compiling a database of all Massachusetts bodily
injury claims beginning January 1, 1994.
One focus of this project will be a study of this current situation
of bodily injury claims for automobile insurance in Massachusetts.
The new research project will build upon several studies by the
AIB during the 1980's in which researchers found about 10 percent of
the claims were judged "apparently fraudulent" and others
were exaggerated to artificially increase the payment of general
non-economic damages under the tort system. Those studies were
conducted using claims prior to the formation of the IFB in 1991.
In 1991 Attorney General Scott Harshbarger established the Task
Force to Reduce Waste, Fraud and Abuse in the Workers' Compensation
System as an advisory group to work with him and members of his
staff to fight against workers' compensation fraud. To address
more broadly the issues of waste, fraud and abuse in the workers'
compensation system, Task Force members created a series of five
"white papers." The "white paper" subject
areas were selected because further information sharing about
these topics would benefit those involved in the workers' compensation
system. The five "white papers" are: Standards for
Claims Handling to Detect Workers' Compensation Fraud; The
Americans with Disabilities Act and Workers' Compensation;
Temporary Modified Light Duty/Return to Work Program; Workplace
Safety: A Guide for Employers and Employees; and Utilization
Review and Quality Assessment Program.
The "white paper" entitled Standards for Claims Handling
to Detect Workers' Compensation Fraud is the most central
to the mission of the Task Force, that is, to prevent and detect
fraud, and where appropriate, to further investigate and refer
cases for prosecution. The other four "white papers"
address core issues in workers' compensation with which any party
involved in the system needs to be familiar.
If you are interested in a copy of any or all of the "white
papers", please contact Gael DeCologero, Office of the Attorney
General, (617) 727-2200.
On June 10, 1994, the Massachusetts Association of Auto Theft
and Arson Investigators awarded their 1993-94 Achievement Award
to the Insurance Fraud Bureau. The award was given in recognition
of the IFB's efforts in combatting insurance fraud.
LOWELL- A Lowell man was driving a van when he was involved
in a four-car intersection accident. The van driver filed an Operator's
Report and claim to Liberty Mutual Insurance Company stating that
he and six passengers occupied the van at the time of the accident.
However, witnesses at the scene stated that the six alleged passengers
were not in the vehicle at the time of the collision but entered
the van minutes after the collision occurred.
Complaints were filed against seven Lowell residents on insurance
fraud and larceny charges in Lowell District Court on September
15, 1994.
Commuter Bonanza
BOSTON- A former Boston man was rearended by another vehicle
as he sat in his 1987 Porsche at the Allston toll booths on the
Massachusetts Turnpike. He submitted claims with his insurance
company and the insurance company of the driver who hit him. He
also claimed to miss six weeks of work at his place of employment
because of the accident even though he worked full-time. Travelers
Insurance Company paid out more that $16,000 on the claim, including
medical bills. The adverse driver called the IFB toll-free hotline
to report that the impact of the collision was much less severe
than the subject had reported.
The subject pled guilty to two counts of motor vehicle insurance
fraud in Suffolk Superior Court on September 23, 1994. He was
sentenced to one year, suspended, in the House of Correction.
He is also required to pay $10,000 in restitution and $1,000 in
fines.
Pre-Inspection Switch Used to Falsify Claim
MALDEN- A subject purchased a vehicle, which had existing
property damage, from a salvage company. After obtaining insurance
coverage from Cigna Insurance Company, the subject's wife reported
that the vehicle was struck by a hit and run driver while it was
parked in front of their house. However, investigation revealed
the vehicle the subject took for the CARCO pre-inspection in order
to obtain automobile insurance was not the vehicle he had bought
from the salvage company. The damages on the reported claim matched
pre-existing damage on the purchased vehicle.
The subject pled guilty to insurance fraud and larceny charges
in Malden District Court on August 4, 1994. He was sentenced to
serve 30 days in the House of Correction, $10,000 in fines and
restitution of $7,751.
Phony Invoice Sounds Alarm
DORCHESTER- A man was involved in a motor vehicle accident
and reported his claim to his carrier, CNA Insurance Company.
As part of the claim, he allegedly submitted a fraudulent invoice
for a car alarm system in order to increase the dollar value of
his claim. The invoice appeared to be altered by $4,000.
A complaint was filed in Dorchester District Court on August
3, 1994 against the subject on insurance fraud and attempted larceny
charges.
Chiropractor's Employees Forge Medical Records
MATTAPAN- A Randolph driver and her three passengers filed
several PIP and bodily injury claims in connection with four separate
accidents. The subjects, former or present employees in a Mattapan
chiropractor's office, used their positions in the office and
their knowledge of the insurance industry to allegedly create
falsified medical treatment records in order to submit bodily
injury or lost wage claims. The subjects also allegedly stole
insurance company checks. Insurance carriers affected in the four
separate accidents included Liberty Mutual, Safety and Hanover
Insurance Companies.
A 21-count indictment was handed down against four subjects
in Suffolk County Superior Court on August 1, 1994. The charges
included counts of insurance fraud and larceny.
Misplaced Vehicle
MELROSE- A subject was involved in a single vehicle collision
resulting in extensive front end damage to his Jeep Comanche.
He was arrested at the scene for operating under the influence
and driving after a suspended license. The car, undriveable after
the collision, was towed to another location. However, the subject
reported to Metropolitan Property and Casualty Insurance Company
that the vehicle was stolen several days after the accident. The
insured claimed the vehicle had never been involved in any prior
accidents and that there were no unrepaired damages to the vehicle
at the time it was reported stolen. The vehicle was recovered
the following month and damage on the Jeep was consistent with
the damage sustained in the accident. It was also determined that
the ignition lock had not been defeated.
A complaint was issued against a Melrose man in Malden District
Court on July 20, 1994 on counts of insurance fraud, attempted
larceny and filing a false police report.
You Can't Go Home Again
BOSTON- Two subjects were allegedly involved in a staged
automobile theft claim. The subjects, a Wakefield insurance agent
and her boyfriend, were dining in Boston. The agent's 1985 Mercedes
was allegedly locked and alarmed. After finishing dinner, the
two subjects allegedly discovered the automobile missing and reported
the theft to Boston police. The subject received $24,805 from
Safety Insurance Company for the theft of the vehicle. Approximately
six months later, the boyfriend was stopped by U.S. Immigration
and Customs Border Patrol when he attempted to re-enter the country
driving the stolen Mercedes while returning from Canada to the
United States.
One subject, a Lynn resident, was indicted in Suffolk Superior
Court on charges of larceny and concealment of a motor vehicle
on July 6, 1994. The investigation is continuing against the second
subject.
Staged Accident Results in Murder Convictions
SPRINGFIELD- An uncle and his nephew planned an automobile
accident in order to claim phony injuries and collect from their
insurance company, Republic Western Insurance Company. Using the
ruse of moving some furniture, they rented a U-Haul truck and
asked a third man to help them with the work and drive the truck.
As they were driving to what the driver thought was the work site,
the uncle and nephew tried to convince him to collide with another
vehicle in order to report an accident and claim injuries. The
driver refused. However, as they were pulling into traffic from
a side street, the nephew, sitting in the middle of the front
seat, put his foot on top of the driver's foot on the accelerator
and applied pressure. The U-Haul truck lurched into oncoming traffic
and struck the front end of another vehicle. A 70-year-old man
later died from his injuries sustained in the crash. The Hampden
County District Attorney contacted the IFB for their assistance
in investigating the insurance fraud angle. The investigation
resulted in the discovery of the staged accident plot.
On June 10, 1994 two men were found guilty of second degree
murder in Hampden Superior Court. They were sentenced to mandatory
terms of life in prison; they will be eligible for parole after
serving 15 years.
GARDNER- An owner of a truck courier service allegedly
underestimated employee payroll, misrepresented job classifications
and falsely reported the number of drivers her company employed
in order to lower her company's workers' compensation insurance
premiums. The owner is alleged to have misrepresented facts about
her business to the Workers' Compensation Rating and Inspection
Bureau to obtain coverage. The risk was assigned to Liberty Mutual
Insurance Company.
The subject was indicted in Worcester Superior Court on September
16, 1994 on counts of larceny and workers' compensation fraud.
It is the first time the premium fraud felony provisions of the
Workers' Compensation Reform Act of 1991 are being used.
Man Confesses to DIA Judge
SPRINGFIELD- A subject allegedly slipped, fell and injured
himself at his place of employment. He received temporary total
disability benefits for six months. However, investigation revealed
that the subject worked for two different employers during the
time period he collected over $8,900 in workers' compensation
benefits from Liberty Mutual Insurance Company. The subject also
admitted at a Department of Industrial Accidents (DIA) hearing
that he had been employed during the time he was collecting the
benefits. The judge who presided over the hearing referred the
case to the IFB.
On September 13, 1994 a complaint was issued against the subject
in Springfield District Court on insurance fraud, workers' compensation
fraud and larceny charges.
Haven't We Met Before?
CAMBRIDGE- A man filed a workers' compensation claim in
1982 when he reported a job-related injury he sustained at his
place of employment. He was paid disability benefits from Travelers
Insurance Company. At a subsequent DIA hearing, the subject testified
under oath that he had never appeared before the DIA under any
other name or for any other claim. However, investigation uncovered
evidence that the subject did appear before the DIA under a different
name for a slip and fall claim he filed against a prior employer.
The subject collected workers' compensation benefits on both cases.
The DIA judge who presided over the second hearing recognized
the man and referred the case to the IFB.
The subject was found guilty of two counts of perjury in Suffolk
Superior Court on August 12, 1994. He was sentenced to serve 60
days in the House of Correction, two years probation and victim
witness and probation fees.
Busy Beaver Works Three Jobs
ADAMS- A man allegedly 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. Upon investigation, it was uncovered that the
subject held at least three different jobs during the time of
alleged disability. The subject also stated at an Independent
Medical Exam (IME) that he had not returned to work since his
date of injury.
A complaint was issued against an Adams man on charges of insurance
fraud, workers' compensation fraud and larceny over $250 in Adams
District Court on July 29, 1994.
Oh, Brother!
SALISBURY- An employee claimed to be disabled due to a
knee injury he allegedly sustained at his place of employment.
Despite his claim of total disability, investigation showed that
he worked full-time for three separate employers. He allegedly
used his brother's identity to avoid detection and collected $35,000
in total disability benefits from American Policyholders Insurance
Company while working for the other employers. This case originated
from a phone call to the IFB toll-free hotline number.
A Salisbury man was indicted on six counts of insurance fraud,
workers' compensation and larceny charges in Middlesex Superior
Court on June 30, 1994.
What You Don't Say ...
LONGMEADOW- A subject allegedly sustained a work-related
injury and began to collect temporary total benefits of $250 per
week from Cigna Insurance Company. He subsequently began employment
with a temporary agency. He stated on his job application that
he had been self-employed and omitted any reference to the employment
of which he was still collecting benefits. The subject also answered
"no" to the question if there were any medical conditions
that would interfere with his job performance and he used a false
social security number when completing his application and tax
forms. During the time of his new employment, the subject indicated
at an IME that he had not been working within the past six months.
Charges of workers' compensation fraud and larceny were filed
against a Longmeadow man in Springfield District Court.
Chef Cooks Up $29,000 Scheme
SWAMPSCOTT- A Swampscott man was allegedly injured on the
job trying to lift a stud off a pallet. He collected disability
benefits over a 20-month period in the amount of $29,000 from
Electric Mutual Insurance Company. Despite his contention of disability,
the subject allegedly worked full-time as a restaurant chef throughout
the period he was collecting disability benefits. This case originated
from a phone call to the IFB toll-free hotline number.
A complaint was issued against the subject on insurance fraud
and larceny charges in Salem District Court on June 2 , 1994.
BRAINTREE- A thief broke into a home, took a set of car
keys left on the kitchen counter, and stole the vehicle that was
parked in the driveway. During his getaway, the thief stopped
for gas and told the station attendant that he had just stolen
the automobile. The attendant wrote down the plate number and
reported the theft to police who soon after recovered the vehicle.
Police officers notified the owner of the vehicle who was unaware
that the vehicle had been stolen as she had been asleep in an
upstairs bedroom when the theft occurred. Her parents were not
at home that evening. The police officers offered to search the
house with her to determine if any other items were missing and
they found nothing amiss. However, the father filed an insurance
claim to Hingham Mutual Insurance Company alleging theft of a
Tiffany lamp, stereo, jewelry and money although a police photographer
had taken pictures showing all of the items still in the home
the night of the alleged theft.
Complaints were issued against a father and daughter in Quincy
District Court on July 22, 1994 on charges of insurance fraud,
attempted larceny and conspiracy.
"Foxy Lady" Case Update
HOLBROOK- Three Holbrook residents conspired to falsify
a claim against Hingham Mutual Insurance Company when one of the
subjects filed a claim against his friend's homeowner policy claiming
that he fell and injured his elbow outside the friend's home.
However, the injury actually occurred outside the Foxy Lady Lounge
in Providence, Rhode Island where he attended a bachelor party.
Each subject pled guilty in Brockton Superior Court. Each was
sentenced to two years probation, $2,500 in fines and probation
fees.
FALL RIVER- As a result of an undercover investigation,
a Fall River man was arrested in September 1993 at the offices
of the Automobile Insurers Bureau when he attempted to collect
on a fraudulent life insurance policy claim worth $134,000 in
connection with the false claim that his wife died. The subject
had bought a life insurance policy from Credit Life Insurance
Company in his wife's name covering a mortgage on property he
owned in Fall River. In January 1993, the woman, who investigators
determined to be living in Nigeria, sent a falsified Nigerian
death certificate to the subject in the United States. He then
filed a claim against the life insurance policy stating that his
wife had died.
The subject was found guilty of attempted larceny, insurance
fraud and conspiracy in Suffolk Superior Court on June 24, 1994.
He was sentenced to serve two and a half years in state prison.
Chiropractor Indicted on Federal RICO Charges
IFB Progress Report
(through September 23, 1994)
Individuals Indicted - 85
Complaints Issued - 79
Cases Referred for Prosecution - 181
IFB Helps Preserve Piece of History
IFB Vice-President Honored with Wharton School Grant
W.C. Task Force "White Papers"
MAATAI Honors IFB
Automobile Highlights
Isn't This a Bus Stop?
Workers' Compensation Highlights
First Premium Avoidance Indictment in Massachusetts
Property Highlights
Blabbermouth
Life Highlights
Spouse Comes Back to Life