Fraud Roundup

Article

Alaska man guilty of reinstating policy before reporting accident

An Alaska man has pled guilty to theft in the second degree, a class B felony, stemming from a fraudulent insurance claim, according to the state Division of Insurance Office of Special Prosecution and Appeals.

Earlier this summer, an investigation determined that Fadey Kuzmin committed fraud by reinstating his lapsed automobile insurance before reporting an accident. He was ordered to serve five-year Suspended Imposition of Sentence, 120 hours community service and pay restitution of $12,000 to State Farm Insurance Company.

Division of Insurance Director Linda Hall hired an insurance fraud attorney within the Department of Law to help crack down on insurance crimes earlier in 2006. “This conviction is the third felony conviction we’ve received since hiring an attorney dedicated to stopping fraud,” she said.

Hall said insurance fraud of more than $500 is considered a felony offense. Penalties vary based on the amount, with a maximum sentence of 10 years in jail, and can include 120 to 1,000 hours of community service work, probation, as well as full restitution to the victim.

Farm insurer must pay $512,000
in restitution

The former president of Crop Hail Management Inc. in Bigfork, Mont., has been sentenced to more than three years in prison and ordered to pay $512,000 in restitution for money laundering and fraud.

Myron “Mike” Felt, 77, admitted to defrauding 23 insurance companies and other business and state governments with a scheme that began in 2001 to keep farmers’ insurance premiums.

U.S. District Judge Donald Molloy sentenced him to 40 months in prison plus three years of supervised release.

Crop Hail Management issued crop-hail insurance policies to farmers in Montana and other states on behalf of other companies.

When some of the farmers paid premiums to Felt, he deposited them in his personal accounts rather than paying on the insurance policies.

Crop Hail Management kept those “out-of-system” policies separate from the policies for which premiums were properly applied to the accounts, the U.S. attorney’s office said.

Some farmers wound up making claims against the out-of-system policies, not knowing that Felt had kept their premium payments and they had no valid coverage. Felt then paid claims from the diverted premiums he had not yet spent.

In 2001, after paying the claims that came in, Felt kept $141,000 in diverted premiums. In 2002, he kept about $486,000 in diverted premiums.

Eventually, however, Felt did not have enough diverted premiums to pay all the claims. He then began “flipping” the numbers on policies. He would submit to insurance companies a claim on a policy that he had taken the premium payments for, using a policy number assigned to a legitimate policy.

Felt submitted claims against flipped policies totaling $863,000 for payment by other insurance companies. The companies paid Crop Hail Management about $656,000.

Felt used the money to pay creditors and for other personal expenses.

His actions cost 23 insurance companies lost premiums and/or commissions. Two reinsurance brokers and two managing general agencies lost commissions, and five states lost premium taxes.

The case was investigated by the state auditor’s office, the Criminal Investigation Division of the Internal Revenue Service, and the Federal Bureau of Investigations.

Montana’s U.S. attorney, Bill Mercer, said Felt’s prison sentence was appropriate.

“You look at the nature of what he admitted to,” Mercer said. “The loss is a significant factor in terms of what the ultimate sentence will be. The only way to deter this type of crime, and the only way he is justly punished, is if the person is incarcerated. It is the only way we can promote respect for the law.”