1 2010 ANNUAL REPORT 2011 ANNUAL REPORT PENNSYLVANIA INSURANCE FRAUD PREVENTION AUTHORITY
2 EXECUTIVE DIRECTOR S MESSAGE To the Honorable Governor Tom Corbett and members of the Pennsylvania General Assembly, on behalf of the Board of Directors of the Insurance Fraud Prevention Authority (IFPA), I am pleased to present this annual report of the IFPA for the calendar year Since its creation in 1995 by Pennsylvania s General Assembly, the IFPA has attacked Pennsylvania s insurance fraud problem by funding both aggressive criminal prosecutions and comprehensive public fraud awareness education campaigns. In 2011, $10.2 million was provided to 15 state agencies (IFPA grantees) to support their investigations and prosecutions of insurance fraud, and $2.0 million was expended to carry out the IFPA s statewide public awareness efforts. Viewed through the lens of 2011 s arrests and criminal prosecutions, the Commonwealth s insurance fraud problem remains largely one of fraudulent motor vehicle insurance claims. Reported insurance fraud reached a new record high, as the insurance industry s fraud investigators increasingly discovered and reported suspected insurance fraud to Pennsylvania law enforcement. HIGHLIGHTS OF 2011: Referrals the reporting of suspected insurance fraud by insurers and consumers constitute the majority of IFPA grantees investigative leads. A total of 3,113 referrals were received in 2011, with IFPA grantees initiating 3,089 investigations, numbers that were 75 percent and 85 percent higher respectively than were seen in 2007 and prior years. Motor vehicle insurance fraud constituted 51 percent of 2011 s referrals. IFPA grantees obtained a total of 387 arrests during 2011, supporting a further 37 arrests made by other law enforcement agencies. Motor vehicle insurance fraud constituted 72 percent of arrests. The leading motor vehicle insurance fraud activities were: fraudulent registrations or claims involving uninsured vehicles (20 percent), false and inflated claims of vehicle damage (18 percent), false claims of stolen vehicles (13 percent), fraudulently claiming injury from accidents (eight percent) and making fraudulent applications to evade the costs of motor vehicle insurance (six percent). Sixty percent of arrested defendants realized no criminal gain from their crimes. IFPA grantees in 2011 obtained 263 convictions, in which 50 individuals were sentenced to serve jail terms. Additionally, 157 individuals were granted rehabilitative dispositions of their charges. Probation was imposed upon 341 individuals, and defendants were ordered to pay $401,866 in fines and penalties to the Commonwealth and $9,691,084 as restitution to victims of insurance fraud. Pennsylvania s fraud-fighting efforts have been noticed and modeled by other states. During 2011, IFPA television and radio advertising was requested by other states fraud bureaus seeking to develop similar efforts. The IFPA increased its interaction with national anti-fraud groups that are working to encourage the creation of a national public fraud awareness outreach focused on consumer education. TWO HOT-BUTTON TOPICS IN PARTICULAR SPURRED PROSECUTION AND POLICY ACTION DURING 2011: 1. Feigned injury from motor vehicle accidents and unnecessary medical treatment are major drivers of fraudulent motor vehicle insurance bodily injury claims. In November 2011, Philadelphia City Council limited access to motor vehicle accident reports to stop the uninvited solicitation of city residents by individuals seeking to profit from the referral of accident victims to medical treatment facilities. 2. The exploitation of Pennsylvania homeowners by roofing and siding contractors was identified as a pervasive and growing problem. Arrests of contractors, who d damaged homes to mislead homeowners into filing fraudulent hail and wind damage insurance claims, confirmed a problem of both fraudulent and also highly deceptive business practices. In addition to criminal prosecutions, pending House Bill 424 s amendments of public adjuster law and new legislation based on model contractor law advocated by national insurance groups offer needed remedies to rid Pennsylvania of rogue contractors. I appreciate this opportunity to share our accomplishments and challenges with you. I thank you, your administration and the General Assembly for the past and future support provided to the IFPA in protecting the Commonwealth from insurance fraud. RALPH W. BURNHAM, Executive Director
3 PENNSYLVANIA S FRAUD PREVENTION STRATEGY: Pennsylvania s $79 billion a year insurance marketplace, where insurers pay out some $61 billion each year in claim settlements and benefits, offers a tempting target for Pennsylvania s fraudsters. Insurance industry experts conservatively estimate that fraud and abuse exists in seven to 10 percent of property and casualty claims, and in one to three percent of life and health insurance claims. The reality is that those estimates flow just from the claims that insurers detect as being potentially fraudulent or abusively inflated. The greater likelihood is that many more such claims remain invisible. Who pays for insurance fraud? Everyone does. Claim expense and claim losses from both detected and undetected fraudulent and inflated claims needlessly drive up insurance rates and premiums for insurance consumers. Costs incurred by insurers in safeguarding against fraud also add to everyone s costs. Clearly, the most desirable return on investment in combating insurance fraud is when fraud never takes place. Since its creation in 1995, the IFPA has employed a twopronged strategy of funding law enforcement s aggressive pursuit of insurance fraud and public awareness efforts aimed at prevention. Our research has shown that few would knowingly risk the costs and penalties of a criminal conviction that they ll bear for a lifetime. Public awareness and education helps potential offenders understand those risks and avoid bad decisions. The costs of this work are borne solely by insurance companies doing business in the Commonwealth through their payments into Pennsylvania s Insurance Fraud Prevention Trust Fund. In 2011, the Trust Fund received $11.6 million from 893 insurance companies whose $29.9 billion in 2010 Pennsylvania insurance business was subject to the IFPA s levy of assessments. This equates to an investment in the Commonwealth s fraud-fighting efforts of 39 cents out of every $1,000 of premium written. From 2011 and prior year funds, the IFPA extended $10.2 million in grants to 15 state law enforcement agencies (IFPA grantees) supporting the work of 49 investigators, 22 prosecutors and 14 administrative staff, and the overtime of 89 fire investigators, and budgeted a further $2.0 million to the IFPA s statewide fraud prevention campaigns. Annual assessments levied upon insurers were $10.8 million in 2007, $11.2 million in 2008 and have been held level at $11.6 million since Grants to law enforcement have steadily risen, driven by IFPA grantee salary and benefit increases, from 2007 s $9.5 million to 2011 s $10.2 million. The nature of the Commonwealth s insurance fraud problem in 2011 remains unchanged from that of past years. Fifty-one percent of reported crimes and 72 percent of arrests come from fraudulent motor vehicle insurance applications and claims. During 2011, IFPA grantees received 3,113 allegations of suspected insurance fraud and insurance-related crimes (fraud referrals). From 2011 s and prior years fraud referrals, they made 387 arrests. From the 3,113 reports of suspected fraud received in 2011, grantees initiated 3,089 investigations numbers that were, respectively, 75 percent and 85 percent higher than in years prior to Arrested offenders were 40 percent female and 60 percent male, of an average age of 39 years. Insurance fraud arrests showed 60 percent of those arrested obtained no gain from their crimes. In 2011, IFPA grantees completed 455 prosecutions, with 263 convictions obtained and a further 157 defendants granted Accelerated Rehabilitative Disposition (ARD) of their charges. Fifty defendants were sentenced to terms of confinement, 341 received probation, and a total of $9,691,084 in restitution and $401,866 in fines and penalties were ordered paid by defendants. An ARD rate of 35 percent of prosecuted defendants is indicative of a first-time offender problem, as ARD is typically not granted to defendants with a prior criminal history. The most common motor vehicle insurance fraud activities were: uninsured vehicles at 20 percent of all arrests, false and inflated claiming of vehicle damage at 18 percent, false claims of stolen vehicles at 13 percent, fraudulent injury claims at eight percent, and fraudulent applications made to evade the costs of insurance at six percent. Unwise and opportunistic decisions, driven by a desire for unlawful financial gain, were the doorway and the path that led people to commit insurance fraud. The IFPA continues to focus its prevention efforts on educating the public about those unwise decisions and their consequences. Statewide public fraud awareness education has been conducted since July 2009 through an integrated social marketing approach utilizing statewide TV and radio advertising, the IFPA s helpstopfraud.org website, public relations, and online and social media. The first measurement of the effort s impact in December 2010 reported increased public awareness of the seriousness of the crime and how it is defined. In December 2012, results will again be measured.
4 PENNSYLVANIA S FRAUD PREVENTION STRATEGY: The campaign has garnered attention outside Pennsylvania as well. During 2011, the IFPA received requests from other states fraud bureaus interested in using Pennsylvania s television and radio advertising materials to address their states insurance fraud problems. The IFPA also increased its involvement with national anti-fraud organizations, anticipating that growing evidence of Pennsylvania s success in preventing fraud will lead insurers to fund a national social marketing effort. Insurance fraud is a shifting target for the insurance industry, anti-fraud organizations and law enforcement. In 2011, two criminal trends in particular drew the attention of law enforcement and policymakers. Feigned injury from motor vehicle accidents and unnecessary medical treatment are known drivers of Pennsylvania s motor vehicle insurance fraudulent bodily injury claim problem. In November 2011, Philadelphia City Council, hearing that easily available police accident reports were a source of unwanted calls to city residents urging them to seek out medical treatment, barred public access to police reports. Telephone solicitors were reportedly earning substantial fees from medical clinics for each individual referred for treatment. From 2007 through 2010, joint investigations of the Philadelphia District Attorney s Office and Federal Bureau of Investigation resulted in the arrests of a large number of individuals who d used bogus police reports to create the appearance of motor vehicle accidents, with participants in the criminal schemes posing as drivers and passengers receiving medical treatments and retaining legal representation to defraud motor vehicle insurers of claim payments. During 2011, the Philadelphia District Attorney s Office continued to announce arrests of individuals who exploited minor accidents involving SEPTA buses and other motor vehicles to feign injury to defraud motor vehicle insurers. Also in 2011, the IFPA heard increasing complaints of rogue contractors, storm chasers, reported to be heavily canvassing Pennsylvania neighborhoods where hail and wind storms had passed through. Flyers offering free inspections of homes promised that all wind or hail damage would be fully covered by homeowners insurance, that policy deductibles would be offset by discounts on repair costs and that contractors would handle the negotiation and settlement of claims for homeowners. In Pennsylvania, individuals representing a homeowner in the adjustment, negotiation and settlement of property damage claims must be licensed as a public adjuster. It appeared that these contractors were not properly licensed to do this and were inducing homeowners to breach their contractual obligations. Where contractor discounts received by homeowners were concealed from insurers during claims, homeowners were potentially being exposed to charges of fraud. Arrests reported by the Lehigh County District Attorney s Insurance Fraud Unit in 2011 confirmed the existence of unethical business practices by individuals working with two home repair contracting firms and the intentional damaging of roofs and siding on large numbers of homes in Pennsylvania and New Jersey to defraud insurers of the payment of claims. Claim settlements ran into the tens of millions of dollars, less expensive repair materials were substituted for higher cost materials shown in repair estimates and, as contractors failed to pay for the materials that were used, homeowners discovered that mechanics liens had been placed on their properties by suppliers. The IFPA asked several of Pennsylvania s property and casualty insurers about hail damage claim frequency and losses experienced since Responses showed that yearly claim volumes tripled from 2008 to 2011 while claim losses increased seven-fold, suggesting that home repair contractors had discovered a gold mine in the insurance policies of Pennsylvania s homeowners. Beyond IFPA grantees present and future criminal prosecutions, other remedies appear necessary to combat rogue contractors. The Property and Casualty Insurance Association of America is an advocate of model contractor law that would make it illegal for home repair contractors to solicit business by offering to waive policy deductibles. Recent legislation in other states and sting operations conducted by authorities cracked down on home repair contractors engaged in the unethical and illegal practice of kicking back policy deductibles. In Pennsylvania s General Assembly, House Bill 424 s amendments of Pennsylvania s public adjuster law would empower Pennsylvania s Attorney General to impose civil penalties upon those who violate public adjuster law and seek relief for those victimized under the provisions of Pennsylvania s Unfair Trade Practices and Consumer Protection Law.
5 UNLUCKY 13 INSURANCE FRAUD CASES FOR 2011 It has become a tradition for the IFPA in its annual reports to illustrate the nature of Pennsylvania s insurance fraud problem. This year s group of 13 cases features multiple defendants whose luck ran out. In the following accounts of insurance fraud, individuals accused but not yet found guilty of crimes are to be presumed innocent until such time as their charges are disposed of by Pennsylvania s criminal courts. CASE 1 FULL-SERVICE HOME REPAIR: CREATE DAMAGE, THEN FIX IT On April 29, 2011, Lehigh County District Attorney James B. Martin announced that two Bucks County contractors, Dominik Sadowski, 34, of Sellersville, PA, and Marcin Porzkowski, 35, of Quakertown, PA, had been charged in Lehigh County with Insurance Fraud (F3), Corrupt Organizations (F3) and related crimes. Undercover investigations conducted by detectives of the Lehigh County Insurance Fraud Task Force, assisted by agents of the National Insurance Crime Bureau and done in cooperation with agents of the Pennsylvania Attorney General s Office (OAG) and the New Jersey Attorney General s Office, disclosed that from 2009 through 2011 the pair, as Precision Builders and Eastern Contracting, had allegedly operated a criminal scheme to defraud insurers through fraudulent hail damage claims. Flyers left by Precision Builders at area homes offered homeowners free home inspections to see if recent hail storms had damaged the homes roofing or siding. Homeowners were reportedly told that their homeowners insurance would fully cover the costs of new roofs or siding. It was also alleged that homeowners were told they would have no out-of-pocket expense, as they would be given a discount equal to their policy deductible by allowing the contractor s business sign to be placed in the front yards of their properties. Told by the defendants that their homes had been damaged by hail, homeowners filed claims with their insurance companies. It was alleged that before insurance company adjusters visited the homes, an inspector from Precision Builders would use a tool to inflict damage on roof shingles and siding. The criminal complaints stated that Sadowski and Porzkowski instructed their companies inspectors as to how to create damage on homes to give the roofs and siding the appearance of having been damaged by hail. Detectives alleged that claim documents were filed with insurers through Precision Builders, with Eastern Contracting doing the work on homes. Porzkowski was identified as the owner of Eastern Contracting and as the individual who provided payroll to several inspectors. Sadowski was identified as performing inspections, marking damage on homes prior to the arrival of insurance company adjuster appointments, and measuring and estimating the costs of home repairs. Allegedly repairs had been made with materials much less expensive than those shown in the contractors work estimates given to homeowners and their insurers.
6 UNLUCKY 13 CASE 2 INJURED WORKER SLIPS ON THE ICY SLOPES OF FRAUD On February 28, 2011, Kevin Deberry, 37, of Allison, PA, was arrested by OAG special agents in Fayette County. According to the criminal complaint, in January 2009 while working as a janitor for Service Master, Deberry told his employer that he d been injured when he slipped on ice at work. Deberry then began collecting workers compensation wage loss benefits from his employer s workers compensation insurer, the Mutual Benefit Insurance Company. Deberry allegedly submitted forms to Mutual Benefit showing that he had not been employed at any time while collecting workers compensation benefits. In January 2010, Deberry also testified at a workers compensation hearing that he had not worked nor received pay since being injured. It was alleged that Deberry had actually worked and collected wages from a landscaping business in 2009 and from Papa John s Pizza in 2010 while receiving workers compensation benefits. Kevin Deberry was charged with two counts of Workers Compensation Fraud (F3), one count of Theft by Deception (F3) and one count of Perjury (F3). On September 23, 2011, Kevin Ray Deberry pled guilty to Workers Compensation Insurance Fraud (F3). He was sentenced to serve two years Intermediate Punishment with electronic monitoring, fined $400 and ordered to pay $4, in restitution and $1, in court costs. CASE 3 UNINSURED DRIVER EXPOSED BY SHARP-EYED WITNESS On March 14, 2011, detectives of the Philadelphia District Attorney s Office filed a criminal complaint charging Michael Leonard, 24, of Philadelphia with Insurance Fraud (F3). A witness to a June 8, 2009 hit and run accident had seen the license plate number of the vehicle that fled the accident scene and had given it to police. Leonard was subsequently identified as the owner of the vehicle and it was found that the vehicle was uninsured at the time of the accident. It was alleged that on April 15, 2009, Leonard used bogus insurance documents showing that his 1989 Mercury was insured by Keystone Insurance Company (AAA MidAtlantic Insurance Company) to defraud the Pennsylvania Department of Transportation of the issue of a Pennsylvania title and registration. On April 11, 2011, Michael Leonard pled guilty to Insurance Fraud (M1). He was ordered to serve three years probation and pay a civil penalty of $2,000 and all court costs.
7 CASE 4 MAN INJURED MOVING FURNITURE PINS BLAME ON SHOPPING MALL On October 6, 2011, detectives of the Delaware County District Attorney s Office filed a criminal complaint in Delaware County charging Kenneth Tuttle, 45, of Chester, PA, with Insurance Fraud (F3), Theft by Unlawful Taking (F3), Receiving Stolen Property (F3) and Theft by Deception (F3). On February 14, 2008, Tuttle filed an insurance claim with CNA Insurance Company stating that on December 5, 2007, he was injured when he stepped from his car in the 69th Street Mall parking garage in Upper Darby and fell after slipping on ice. Claiming injury to his right knee and lower back, Tuttle was initially treated at Delaware County Memorial Hospital and subsequently received follow-up care from a chiropractor. Tuttle received $25,119 from CNA for his claim. It was alleged that Tuttle s injury was caused by his moving furniture in his Upper Darby apartment on December 5, 2007, and not by his having slipped on ice in the parking lot. Tuttle reportedly told detectives that due to personal hardships he d fabricated his story to CNA, seeing that as an easy way to receive a cash payment. On November 28, 2011, Kenneth Tuttle pled guilty to Insurance Fraud (F3). He was sentenced to serve a maximum of 23 months of Intermediate Punishment with electronic monitoring, and to pay $25,119 in restitution and $3, in court costs. CASE 5 LOOSE LIPS SINK SCHEMES On May 26, 2011, William Hayes, 64, of Douglasville, PA, was arrested by OAG special agents and charged in Montgomery County with Insurance Fraud (F3), Theft by Deception (F3) and False Reports to Law Enforcement Authorities (M3). According to the criminal complaint, Hayes owned a 2002 Jaguar which was insured by the Allstate Insurance Company. Allegedly, on June 12, 2010, Hayes rented a storage shed, hid the Jaguar inside, and approximately two weeks later reported to Phildelphia Police that the Jaguar had been stolen during a carjacking. The next day, Hayes filed a claim with Allstate for the theft of this vehicle and the claim was paid by Allstate. Reportedly, Hayes bragging about what he d done led a concerned citizen to contact the OAG s Insurance Fraud Section. Hayes provided a full statement, allowing investigators to recover the Jaguar. On October 3, 2011, William Nelson Hayes pled guilty to Theft by Deception (F3). He was sentenced to serve two years probation with 50 hours of community service, and was ordered to pay $7, in restitution and court costs.
8 UNLUCKY 13 CASE 6 DNA EXPOSES DECADE-OLD INSURANCE FRAUD On June 1, 2011, Pittsburgh Police Department Auto Theft detectives filed criminal complaints charging three individuals with crimes arising from the April 2000 false report of a stolen vehicle to Pittsburgh Police and GEICO Insurance Company. One of those individuals, Kelly Davern Fields, 46, of Bruceton Mills, WV, was charged with Criminal Conspiracy/ Insurance Fraud (F3) and False Reports to Law Enforcement (M3). The criminal complaints state that on April 26, 2000, minutes before Davern s mother reported to Pittsburgh Police that her 1999 Chevy Suburban had been stolen, the Suburban was found crashed in the 800 block of Fisher Street with a man badly injured near the vehicle. Police were unable to interview the injured man as he remained in a coma. Davern s mother subsequently filed a claim with GEICO Insurance Company for the theft of her vehicle and the claim was paid. It was alleged that Davern s boyfriend, who had been driving the Suburban with a suspended license at the time of the crash, had fled the scene, abandoning his injured friend. Davern, her mother and her boyfriend had allegedly agreed to falsely report the vehicle as stolen to police and GEICO. On April 11, 2011, a DNA match between blood found in the crashed Suburban and that of Davern s boyfriend led police to reopen the case. The injured man, after recovering, named Davern s boyfriend to police as the Suburban s driver. On September 27, 2011, Kelly Davern Fields pled guilty to Conspiracy/Insurance Fraud (F3) and False Reports to Law Enforcement (M3). She was sentenced to serve five years probation, and to pay $14, in restitution to GEICO and all court costs. CASE 7 LOVE THAT DUCK, FRAUD CHEATS NOT SO MUCH On June 16, 2011, detectives of the Philadelphia District Attorney s Office arrested Lillian Edwards-Curry, 26, of Philadelphia, charging her with two counts each of Insurance Fraud (F3), Theft by Deception (F3) and Forgery (F3), and Attempted Theft by Deception (F3) and Securing Documents by Deception (M2). It was alleged that the defendant, in two separate claims on her American Family Life Assurance Company (AFLAC) policy of disability insurance, in 2009 and again in 2010, defrauded AFLAC of $12, by submitting false information, forged signatures and altered documents to AFLAC to conceal that she was no longer ill and had returned to work. On September 20, 2011, Lillian Edwards-Curry pled guilty to Insurance Fraud (F3) and Forgery (F3). She was sentenced to serve seven years probation and pay $12, in restitution and court costs.
9 CASE 8 AUTO BODY SHOP PLAYS BUMPER CARS WITH CUSTOMER VEHICLES On April 19, 2011, Philadelphia District Attorney Seth Williams announced that 11 people had been charged with insurance fraud from a lengthy investigation of alleged illegal activities at University Collision Centers (UCC) in Philadelphia. It was alleged that the firm s owner and employees, seeking to inflate the value of motor vehicle physical damage claims, added damage to vehicles brought into UCC for repairs. UCC employees reportedly used a forklift modified to accept a variety of car bumpers, as well as other methods, to create damage to cars. The firm s attorney had allegedly advised the owner of UCC with respect to fraudulent aspects of the business and allegedly filed fraudulent bodily injury claims in concert with the firm s owner and certain employees of the firm. It was also alleged that a Philadelphia police officer had acted as a wreck chaser, receiving a fee for steering accident victims to UCC and had filed fraudulent claims for damage to his own vehicles. And, seven Pennsylvania-licensed motor vehicle physical damage appraisers employed by insurers had allegedly participated in the scheme by inflating their damage appraisals in exchange for cash payments. Arrested were: UCC owner Edward Hildebrandt, 41, of Philadelphia; UCC manager David Coleman, 41, of Chadsford, PA; Philadelphia Police Officer Gary Cottrell, 44, of Philadelphia; Attorney Michael Wolf, 52, of Phoenixville, PA; and Motor Vehicle Physical Damage Appraisers John Howell, 65, of Cherry Hill, NJ, David Robertson, 44, of Cherry Hill, NJ, Addaie Amankwaaw, 30, of Philadelphia, Richard Reilly, 40, of Mullica Hill, NJ, Steve Wilkinson, 52, of Philadelphia, Arthur Juliano, 34, of Philadelphia and Cheryl Stanton, 55, of Philadelphia. CASE 9 INSURANCE FRAUD: A POOR FIX FOR A FAULTY TRANSMISSION On January 28, 2011, Ayanna Jackson, 32, of Philadelphia, was arrested by OAG special agents in Delaware County. According to the criminal complaint, Jackson filed a claim on May 16, 2008, with State Farm Insurance Company stating that her 2004 Buick Rendezvous had been stolen from the 5300 block of West Stiles Street in Philadelphia. State Farm settled Jackson s claim by paying in excess of $9,000 to the financial firm that held a lien on the Buick. In October 2009, State Farm investigators learned that Jackson had parked and left her Buick in another individual s driveway, saying the Buick was having transmission problems. Ayanna Jackson was charged with one count of Insurance Fraud (F3) and one count of Theft by Deception (F3). Ayanna Jackson pled guilty to one count of Insurance Fraud (M1) in Delaware County. On June 27, 2011, Jackson was sentenced to serve four years probation and ordered to pay restitution of $9, and all court costs.
10 UNLUCKY 13 CASE 10 INSURANCE FRAUD NO FREE RIDE FOR BUS PASSENGERS On January 18 and 21, 2011, detectives of the Philadelphia District Attorney s Office arrested Latanya Mathis, 23, and Ronald Moore, 36, of Philadelphia, on Insurance Fraud (F3), Attempted Theft by Deception (F3), False Reports to Law Enforcement (M3), False Alarms to Public Safety Agencies (M1), and Conspiracy (F3). After a SEPTA bus was involved in a minor accident with a taxi cab on November 19, 2008, Mathis and Moore said that they d been injured in the collision and both pursued personal injury claims against SEPTA. It was alleged that the pair conspired to falsely claim that they d been injured in the accident. Video from the bus security cameras showed that Mathis, a passenger on the bus, had not hit her head against a partition as she d claimed and that Moore had gotten onto the bus after the accident took place, spoke with Mathis and then lay across a seat, holding his back as though he were in pain. Ronald Moore and Latanya Mathis entered guilty pleas to Insurance Fraud (F3) and Conspiracy (F3). On April 5, 2011, Moore was sentenced to serve two years probation and to pay a civil penalty of $1,000 and court costs. On July 12, 2011, Mathis was sentenced to serve five years probation and pay $16,000 restitution and court costs. CASE 11 COPS CRASH STAGED ACCIDENT FRAUD RING On October 14, 2011, criminal complaints filed in Erie County by officers of the Erie City Bureau of Police charged Edgar Rodriguez Delgado, 38, of Erie, PA, and nine others with multiple counts of Insurance Fraud (F3) and Criminal Conspiracy/ Solicitation to Commit Theft by Deception (F3). It was alleged that Rodriguez, alone and in concert with his co-defendants, falsely reported to auto insurers that vehicles had been damaged in accidents to defraud insurers of the payment of auto physical damage claims. The operation of this staged accident ring in the City of Erie had been uncovered by GEICO Insurance Company special investigators and brought to the attention of Erie Police in April Also arrested and charged were Erie residents Nestor Rodriguez, 43; Jacqueline Ayala, 47; Hector Cartagena, 35; Carlos J. Rivera Colon, 34; Frankie Mattei Ayala, 23; Eliot Rodriguez, 21; Emanuel Castillo, 28; Carmencita Maldonado, 35; and Edwin Acevedo, 26. Victimized insurers included State Farm, Progressive, Bristol West, Safe Auto and 1st Acceptance Insurance companies.
11 CASE 12 A CURIOUS CASE OF VANISHING CO-PAYMENTS On December 15, 2010, officers of the Jefferson Boro Police Department filed a criminal complaint in Allegheny County alleging that Beverly Lizik, 57, of West Mifflin, PA, while employed as a receptionist at a local medical practice, had stolen some $20, over the period of April 26, 2007 through December 6, It was alleged that Lizik manipulated office records to falsely show that patients had not paid their health insurance plans co-payments to the practice and could not collect on them. Lizik was charged with Insurance Fraud (F3) and Theft by Unlawful Taking of Movable Property (F3). On October 24, 2011, Beverly Lizik pled guilty to Theft of Movable Property (F3). She was sentenced to ten years probation, and was ordered to pay $19, in restitution and $ in court costs. CASE 13 PLAYING WITH YOUR CUSTOMERS MONEY IS A BAD BET On October 13, 2011, detectives of the Philadelphia District Attorney s Insurance Fraud Unit filed a criminal complaint in Philadelphia County charging Iohakim A.A. Mechikas, 33, of Philadelphia with 29 counts of Receiving Stolen Property (F3), 29 counts of Theft by Deception (F3), two counts of Bad Checks (M2), and one count each of Tampering with Records (F2), Forgery (F2) and Securing the Execution of Documents through Deception (M2). It was alleged that the defendant, while an employee at East Coast Car Group, stole more than $370,000 by forging signatures on checks, depositing them to several accounts he d established with check cashing agencies without the knowledge or authorization of his employer, converting the money to his own use, and making false representations to the business customers. In several instances, Mechikas had allegedly sold vehicles without the permission of the vehicles owners, with owners receiving less than the full sale price obtained from the sale of the vehicles. The alleged crimes were uncovered after Selective Insurance Company paid out $41, to settle its insured s claim that a 2007 Ford Mustang had been stolen from the lot of East Coast Car Group. Selective s insured had left his vehicle there in October 2010 hoping to have the business sell the car for him for $40,000. The defendant sold the vehicle for $33,000 without its owner s permission and the owner then reported the vehicle as stolen to Selective and the Philadelphia District Attorney s Office. The vehicle was later recovered by police in New Jersey, registered to another person through the actions of the defendant. On January 6, 2012, Iohakim A.A. Mechikas pled guilty to multiple Theft by Deception (F3) charges. He was sentenced to serve 10 years probation, was ordered to join Gamblers Anonymous and stay away from casinos, and was ordered to pay restitution of $343, and court costs.
12 FRAUD REFERRALS AND ARRESTS ARRESTS (BY FRAUD TYPE) OTHER 1% LICENSEE 3% COMMERCIAL LIABILITY 3% WORKERS COMP/DISABILITY 6% HOMEOWNERS/RENTERS 7% HEALTHCARE/LIFE 8% AUTO 72% INVESTIGATIONS OPENED (BY FRAUD TYPE) COMMERCIAL LIABILITY 1% LICENSEE 4% HOMEOWNERS/RENTERS 9% HEALTHCARE/LIFE 9% WORKERS COMP/DISABILITY 12% OTHER 14% AUTO 51%
13 FRAUD REFERRALS AND ARRESTS FRAUD REFERRALS INVESTIGATIONS OPENED ARRESTS CONVICTIONS COURT-ORDERED RESTITUTION (IN THOUSANDS) POTENTIAL VICTIM LOSS (IN THOUSANDS)
14 2011 BOARD OF DIRECTORS CHARLES G. WILKER is Chairman of the IFPA Board of Directors and as an IFPA Board Member represents Pennsylvania s workers compensation insurers. Mr. Wilker was appointed in 2011 to his present four - year term by the Honorable Joseph B. Scarnati III, President Pro Tempore of the Senate of Pennsylvania. Retired from the Pennsylvania State Police, Mr. Wilker has spent the last 26 years with the Erie Insurance Group investigating insurance fraud. He is a Senior Supervisor of Investigative Services for Erie Insurance Group and supervises insurance investigations in Western Pennsylvania. He has been a member of the International Association of Special Investigative Units since Mr. Wilker has served as an IFPA Board Member since W. SCOTT RHINEHART is Secretary of the IFPA Board of Directors and as an IFPA Board Member represents Pennsylvania s insurance consumers. Mr. Rhinehart was appointed in 2011 to his present four - year term of service by Pennsylvania Governor Tom Corbett. Mr. Rhinehart, who is retired as President of Central Penn Sales, LLC, is a past president of the American Salvage Pool Association (ASPA) and is managing partner of Ardmore LP. Mr. Rhinehart has received a special service award from the ASPA and is a recipient of the York County Small Business of the Year Award. He presently serves on the Board of Trustees of York College and was honored during York College s 2011 Commencement with the award of a Doctor of Humane Letters degree. Mr. Rhinehart is the IFPA s longest serving Board Member, now serving his fifth consecutive four-year term. EDWARD J. LITCHKO is Treasurer of the IFPA Board of Directors and as an IFPA Board Member represents Pennsylvania s accident and health insurers. Mr. Litchko was appointed to the IFPA Board of Directors in 2009 for a four - year term by the then Democratic Leader of the Senate. Mr. Litchko is Senior Director, Corporate and Financial Investigations Department, Independence Blue Cross, and formerly was Chief (Special Agent-In-Charge) of the Criminal Investigations Division for the Internal Revenue Service s Philadelphia, PA, Newark, NJ, and Foreign Operations Field Offices. He retired from the federal government after serving for more than 28 years in federal criminal law enforcement with the IRS. He is on the Board of Directors of the Blue Cross Blue Shield Association National Antifraud Advisory Board and has been an IFPA Board Member since He graduated from the Professional Academy for Healthcare Management Course. He earned an undergraduate degree in Business Administration, Accounting major, from Bloomsburg University and attended the University of Baltimore s MBA program. He was the Distinguished Honor Graduate at the Maryland Military Academy U.S. Army Officer School and retired from the U.S. Army in August 2002, reaching the rank of Lieutenant Colonel. WILLIAM V. CONLEY, First Deputy Attorney General of the Pennsylvania Attorney General s Office, was named to the IFPA Board of Directors in 2011 as designee of Pennsylvania Attorney General Linda L. Kelly. Mr. Conley, who from was Executive Deputy Attorney General in charge of the Criminal Law Division of the Pennsylvania Office of Attorney General, again joined the Office in September 2011 to serve as First Deputy Attorney General. An experienced attorney and seasoned prosecutor, Mr. Conley previously served as an Assistant District Attorney in Allegheny County and as an Assistant U.S. Attorney for the Western District of Pennsylvania. He has tried cases involving outlaw motorcycle gangs, heroin traffickers and many other major crime offenders, and in private practice in both Pennsylvania and North Carolina has represented clients in complex business litigation. Mr. Conley received his Bachelor of Arts degree in Criminology from the Indiana University of Pennsylvania and his Juris Doctorate, graduating magna cum laude, from the University of Pittsburgh School of Law. Between college and law school he served four years on active duty with the U.S. Marine Corps, rising to the rank of Captain. Mr. Conley and his wife have two adult daughters, Kathy and Stephanie, along with a son, Mike, who recently returned from a tour of duty in Afghanistan with the Marine Corps.
15 KAREN V. HIGGINS serves on the IFPA Board of Directors as designee of the Philadelphia Federal Insurance Fraud Task Force. She is presently the Inspector in Charge (INC) of the Philadelphia Division of the U.S. Postal Inspection Service, where she is responsible for the oversight of enforcement of over 200 laws protecting employees and assets and ensuring the public trust of the U.S. mail system within the Philadelphia, Central Pennsylvania and South Jersey Districts of the Postal Service. Ms. Higgins has worked as an inspector for more than 26 years, serving in Chattanooga, TN, Newark, NJ, Philadelphia, PA, Washington National Headquarters, and the Washington, DC, Field Office. Her prior work assignments include various criminal investigative functions, strategic planning, and intelligence analysis. Ms. Higgins was promoted to the position of Inspector In Charge in March Prior to her current assignment, Ms. Higgins served as the INC of Intelligence and the INC of Operational Support in the Washington, DC, Headquarters Office. Ms. Higgins earned a Bachelor of Science degree in Criminal Justice from the University of Delaware, Criminal Law Paralegal Certification from the Institute for Paralegal Training in Philadelphia, PA, and a Masters of Arts degree in Business and Organizational Security Management from Webster University. JOHN HENRY serves on the IFPA Board of Directors as the representative of general commercial liability insurers and was appointed in 2011 to his present four-year term of service by the Honorable Frank Dermody, Democratic Leader of the Pennsylvania House of Representatives. Mr. Henry was first appointed to the IFPA Board of Directors in Mr. Henry is currently a Senior Investigator with the Motorists Insurance Group s Special Investigative Unit in Pittsburgh, PA. He received his Bachelor of Arts degree in Administration of Justice from Penn State University in 1994 and has spent 17 years investigating insurance fraud in Pennsylvania and neighboring states. He worked in the Special Investigative Unit of the USF&G Insurance Company prior to taking his present position with Motorists. He currently serves as President of the Greater Pittsburgh Chapter of the International Association of Special Investigative Units and remains an active member with the Pennsylvania Association of Arson Investigators. LEE AFFEL serves on the IFPA Board of Directors as the representative of Pennsylvania s auto insurers. Mr. Affel was appointed in 2011 to a four-year term of service by the Honorable Samuel H. Smith, Speaker of the Pennsylvania House of Representatives. Mr. Affel is employed by State Farm Mutual Insurance Company, where he is responsible for special investigation personnel and operations throughout the Northeastern United States and the identification and handling of suspected fraudulent claims in the auto and homeowners lines of business. In Mr. Affel s 26 years at State Farm, he has held positions as Claim Superintendent, Claim Supervisor and Claim Representative. In addition to being on the IFPA s Board of Directors, Mr. Affel holds membership in several international and statewide investigative associations. Mr. Affel earned his Bachelor of Arts in Economics from Hobart and William Smith Colleges and his Juris Doctorate from Widener University School of Law. Mr. Affel has served as an IFPA Board Member since OFFICE STAFF RALPH W. BURNHAM Executive Director JOAN A. DOCKERY Office Administrator DEBRA I. CHAMBERLIN Administrative Assistant
16 LAW ENFORCEMENT The IFPA fights fraud by supporting law enforcement personnel who aggressively investigate and prosecute insurance fraud criminals. While the anti-fraud efforts of many other states are centralized in a single agency, Pennsylvania has a decentralized program. This enables insurers and consumers as victims an increased access to law enforcement. In addition to 12 insurance fraud units, funding is also provided to two agencies for arson investigation and one regulatory agency. Our law enforcement program funds 49 investigators, 22 prosecutors, 12 support personnel and two fraud examiners, and provides overtime and training support to 89 fire and arson investigators. From the $11.6 million Fiscal Year funds, a total of $10 million in grants were extended to the following agencies for personnel, training, equipment and expenses: PA ATTORNEY GENERAL S OFFICE INSURANCE FRAUD SECTION Grant amount: $4,858,496 Grantee since 1995 PHILADELPHIA DISTRICT ATTORNEY S OFFICE INSURANCE FRAUD UNIT Grant amount: $2,443,415 Grantee since 1995 ALLEGHENY COUNTY DISTRICT ATTORNEY S OFFICE Grant amount: $378,451 Grantee since 1997 ALLEGHENY COUNTY POLICE DEPARTMENT Grant amount: $204,068 Grantee since 1997 CUMBERLAND COUNTY DISTRICT ATTORNEY S OFFICE Grant amount: $181,419 Grantee since 1997 DAUPHIN COUNTY DISTRICT ATTORNEY S OFFICE ARSON GRANT Grant amount: $16,250 Grantee since 2004 DELAWARE COUNTY DISTRICT ATTORNEY S OFFICE CRIMINAL INVESTIGATION DIVISION Grant amount: $214,202 Grantee since 2004 ERIE BUREAU OF POLICE Grant amount: $93,849 Grantee since 2004 LANCASTER CITY POLICE DEPARTMENT Grant amount: $120,000 Grantee since 2004 LEHIGH COUNTY INSURANCE FRAUD TASK FORCE Grant amount: $369,760 Grantee since 1996 MONTGOMERY COUNTY DISTRICT ATTORNEY S OFFICE Grant amount: $175,000 Grantee since 1997 NORTHEASTERN PENNSYLVANIA REGIONAL TASK FORCE Grant amount: $365,755 Grantee since 1996 PENNSYLVANIA DEPARTMENT OF INSURANCE ANTI-FRAUD COMPLIANCE Grant amount: $227,676 Grantee since 1998 PENNSYLVANIA STATE POLICE FIRE MARSHAL DIVISION ARSON GRANT Grant amount: $277,261 Grantee since 1997 YORK COUNTY DISTRICT ATTORNEY S OFFICE Grant amount: $99,249 Grantee since 2004
17 FINANCIAL The IFPA operates on a fiscal year basis that runs from July 1 through the following June 30. The IFPA is annually audited by an outside independent audit firm and additionally is reflected in the Commonwealth of Pennsylvania s Comprehensive Annual Financial Report as a Component Unit of the Commonwealth. FOR FISCAL YEAR JULY 1, 2010 THROUGH JUNE 30, 2011 TREASURY ACCOUNT Assessments $11,621, Interest Earned $35, Fines and Penalties $114, Miscellaneous $0.00 TOTAL REVENUE $11,771, Balance carried over from previous year $4,329, TOTAL FUNDS AVAILABLE $16,100, Grants Paid ($9,109,952.00) Public Relations ($1,976,488.00) Training ($90,323.00) Operating Expenses ($79,502.00) Operating Account Transferred ($382,938.00) OPERATING ACCOUNT Beginning Balance $417, Funds Received from Treasury $382, TOTAL FUNDS AVAILABLE $800, Interest Earned $1, Miscellaneous Income $0.00 Personnel Expenses ($270,408.00) Operating Expenses ($167,549.00) Capital Asset Expenses ($5,487.00) TOTAL OPERATING EXPENSES ($443,444.00) BALANCE IN OPERATING ACCOUNT $358, (To be carried over for next year s operating expenses) BALANCE IN TREASURY ACCOUNT $4,460, (To be applied to future grants)
18 PREVENTION CAMPAIGN The IFPA s ongoing campaign to educate Pennsylvanians about the seriousness of the crime and its potential consequences uses real-life situations to show how an unwary or unwise consumer could make a bad choice. The IFPA continued its award-winning and impactful television approach with two new 30-second spots that premiered in October 2011 in all Pennsylvania media markets. In Permanent Record, a job applicant is forced to tell her prospective employer about a felony that is on her permanent record an insurance fraud conviction. In Asking For Trouble, a young man brags about how he plans to pull off an insurance fraud scheme faking an injury from a car accident. His friend isn t so sure that s a good idea or anything he wants to be associated with. Two new 60-second radio spots echoed and reinforced the themes of the TV spots. The IFPA took its online messaging to new creative places during 2011 to help Pennsylvania insurance consumers become more knowledgeable about their auto insurance policies and steer clear of trouble. When autumn s deer mating season sent more animals running across roadways, the IFPA was ready with a Web ad that appeared on weather.com in targeted geographic areas with a heavy deer population. Consumers who clicked on the ad were directed to helpstopfraud.org/deer to get facts about insurance policies (such as the difference between collision and comprehensive coverage) and deer season driving tips. During the holiday season, the IFPA reached out to the shopping masses statewide by placing online messages on top retail sites including Amazon, Target and Walmart, driving viewers to click through to helpstopfraud.org for more information. The IFPA continues to use public relations to extend and support the paid advertising messages to consumers and influencers. During 2011, this effort garnered coverage in all seven media markets, achieving 1,728,962 circulation/ impressions inside Pennsylvania in 2011 an 18 percent increase over Coverage included articles in newspapers, business journals, newsletters and online, in addition to television and radio interviews. This integrated approach drove 115,442 total visits to HelpStopFraud.org during 2011 an increase of 37 percent over 2010.
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20 6 KACEY COURT, SUITE 101, MECHANICSBURG, PA helpstopfraud.org