Colorado agent pleads guilty
A Billings, Mont., insurance agent has pleaded guilty to issuing $160,000 in construction bonds on behalf of two insurance companies and keeping the premiums.
Michael D. Hutton, 59, also acknowledged that he forged customers’ names on premium financing agreements to obtain loans purportedly to pay the customers’ premiums.
Hutton, the principal of M.D. Hutton Insurance in Billings, pleaded guilty at his arraignment to wire fraud, mail fraud and money laundering. Senior U.S. District Judge Jack Shanstrom scheduled Hutton’s sentencing for Dec. 20. He remains free on conditions.
Prosecutors said the bond fraud occurred from May 1999 to May 2004. Hutton told investigators he kept the money because he was broke and had suffered business losses.
Assistant U.S. Attorney Kurt Alme said S.E. Inc. of Deaver, Wyo., a power line substation construction company, paid Hutton $160,152 for 38 performance and payment bonds. Hutton issued the bonds on behalf of St. Paul Mercury Insurance Co. and St. Paul Fire and Marine Co., but kept the money. Performance bonds promise the bonding company will pay if a contractor fails to perform promised work. Payment bonds guarantee subcontractors will be paid.
In the mail fraud scheme, which ran from September 2002 to May 2004, Hutton forged and submitted 28 premium financing agreements to Provident Financial Inc., on behalf of 12 customers.
Provident would then pay loan proceeds to Hutton or directly to the insurance company issuing the customers’ policies. When Provident provided the loan proceeds to Hutton, he kept them. When Provident provided them to the insurance company, he kept some or all of the premiums paid to him by the customer.
Hutton used some of the loan proceeds and premiums to make payments on loans to Provident.
The money laundering count charged that Hutton sent Provident a check for $7,067, using money he had obtained in the mail fraud scheme, to make a loan payment.
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Twelve arrested for overbilling insurers
Twelve suspects in California have been arrested on felony insurance fraud charges. The arrests were the result of a three-and-a-half year investigation into Accident Help Line Medical Group for insurance fraud.
The arrests were made by investigators from the California Department of Insurance’s (CDI) Fraud Division, as well as the Fresno and Kings County District Attorneys’ offices. Undercover operatives and investigators had found that various Accident Help Line clinics in Hanford, Fresno and Merced, Calif., allegedly provided excessive and unnecessary treatment to patients for the purpose of over billing insurance companies. They also allegedly prescribed excessive total temporary disability time off work to patients covered by workers’ comp insurance.
The investigation resulted in the arrests of six licensed chiropractors, a doctor of osteopathy, a physician’s assistant and four other clinic workers — all employees of Accident Help Line. Charles Richard Affatato, 34, of San Francisco, was booked into the San Francisco County Jail. William Edward Sheaffer, 60, of Hanford, was booked into the Kings County Jail. Marisela Vargas-Montes, 40, and Jason Everett Walker, 35, both of Fresno, were booked into the Fresno County Jail. Ralph Gregory Howell, 58, of Clovis, Lorene Louise Hebert, 45, of Raymond, Emma Mendez-Defarless, 25, of Fresno, and Mark Peter Lungren, 34, of Kingsburg, all surrendered to the Merced Superior Court. Mikel R. Meyer, 50, of Sparks, Nev., surrendered to the South Lake Tahoe Police Department. Eva Soria Prieto, 22, of Orange Cove, Ronald Wayne Richards, 58, of Fresno, and Elizabeth Rodriguez, 27, of Fresno, surrendered to the Fresno County Jail. Each suspect was booked in jail with $100,000 bail.
The Merced County District Attorney’s office filed a criminal complaint charging the suspects with multiple felony counts of insurance fraud-related charges, including: felony violations of conspiracy to commit insurance fraud; presenting or causing to present any false or fraudulent written or oral material statement in support of, or in opposition to, any claim for compensation for the purpose of obtaining or denying any compensation; and assisting in the presentation of a knowingly false or fraudulent written or oral material statement in support of, or in opposition to, any claim for compensation for the purpose of obtaining or denying any compensation.
Accident Help Line came to the attention of CDI investigators through complaints, tips and information received from the special investigative units of Geico and Zenith Insurance Companies, State Compensation Insurance Fund, and other insurance carriers. Since late 2002, investigators have received numerous suspected fraud referrals accounting for millions of dollars in suspected workers’ compensation insurance fraud.
The Fresno Regional Office of the CDI, and the District Attorneys’ Offices in Merced, Fresno and Kings Counties initiated an investigation. Geico and Zenith, SCIF and other insurance carriers, as well as Foster Farms also assisted in the investigation. The Merced County District Attorney’s office is prosecuting this case.
Alameda County suspects arrested
Four suspects in Alameda County, Calif., have been arrested in a staged auto collision ring that allegedly caused more than 100 collisions in the Bay Area resulting in more than $2 million in losses to insurers, according to the California Department of Insurance.
Investigators with CDI’s Fraud Division and the AB 1050 Bay Area Auto Fraud Task Force (BAAFTF) believe the four comprised the collision ring dubbed “Operation Phantom Menace.”
The BAAFTF — a task force comprised of CDI Fraud investigators, the California Highway Patrol (CHP) and the Alameda County District Attorney’s office — served multiple location search warrants which included: three law offices, three chiropractic clinics and three residences. The suspects were arrested for multiple counts of insurance fraud, conspiracy and grand theft.
Arrested was Norberto “Chito” Diaz Mora (a.k.a. Chito Mora), 52, of Daly City, on 140 felony counts involving insurance fraud. Mora was the alleged ringleader or “capper” of the ring. Also arrested were three chiropractors: David Wu, 37, of San Francisco; Reza Aliakbar, 39, of San Jose; and Marcello Mehmandoust, 39, of Alameda. All were charged with multiple felonies related to insurance fraud.
All four suspects were booked into the Alameda County Jail, with bail ranging from $100,000 to $250,000. If convicted, each suspect could be fined up to $50,000 and/or receive five years in prison or double the value of the fraud, whichever is greater.
The arrests are a result of a two-year undercover investigation of false auto accidents and reported accidents that never occurred. The suspects allegedly recruited people with policies covering bodily injury damages and instructed them to crash their vehicles in staged or paper-scripted collisions. The alleged parties to the fictitious accidents would make false insurance claims with insurance companies, stating they were passengers in one of the involved vehicles and required chiropractic treatment for their alleged injuries.
The chiropractors allegedly involved in the conspiracy knowingly provided bills to the victims’ insurers for services never rendered.
BAAFTF began the investigation in August 2004. The five staged collisions resulted in losses of approximately $75,000. BAAFTF’s investigators estimate that the crime ring orchestrated more than 100 auto collisions throughout the Bay Area, with an estimated loss to insurance companies of $2.3 million.
BAAFTF was assisted by 21st Century , USAA, Liberty Mutual and Progressive. The National Insurance Crime Bureau also provided assistance. The case is being prosecuted by the Alameda County District Attorney office.
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