U. S. Attorney for the Eastern District of Arkansas, Bud Cummins and State Insurance Commissioner Mike Pickens, announced a 20-count federal indictment has been handed down against Jeffrey Ray Johnson for his alleged role in a scheme to fraudulently collect sales commissions and bonuses on phony insurance policies.
According to investigators with the Insurance Department, as a result of this scheme, more than 300 fraudulent policy applications and nearly $1 million in commissions and bonuses were collected between April and November 2000.
Johnson, who at one time operated an office in Little Rock and now resides in Tupelo, Miss., is alleged to have recruited others to execute applications for insurance policies using fictitious names, social security numbers, addresses, and dates of birth. He is also accused of using the identity of unwitting family members and deceased individuals in order to generate a high volume of commissions and bonuses.
In the fall of 2000, the Fraud Investigation Division of the Arkansas Insurance Department received an anonymous tip that a life insurance policy had been issued on the informant’s dead grandfather. Based on this information, Bankers Life and Casualty Company conducted an internal audit and the scheme was uncovered.
As a branch sales manager for the Chicago-based Bankers Life and Casualty Company, Johnson, 45, was not able to sell and thereby receive bonuses on what was known as “Easy Writer” policies, which are low face value burial policies. Johnson is alleged to have recruited agents to enter into the operations of the scheme, to generate fictitious “Easy Writer” policies. Premiums would then be paid on the policies for the first year to avoid a charge-back of commissions and bonuses. This plan allowed Johnson and his co-conspirators, in some instances, to receive bonuses of as much as $30,000 per quarter.
“This Department will not tolerate insurance fraud toward insurance consumers,” Commissioner Pickens said. “We will vigorously work to prosecute and deter insurance fraud in the State of Arkansas.”
Marty Nevrla, director of the Insurance Fraud Investigation Division, said this case was an excellent example of cooperation between state and federal law enforcement officials to fight insurance fraud. “The federal authorities brought their significant interstate jurisdictional powers to bear, while we brought the insurance expertise,” he said.
Charges filed against Johnson include conspiracy, mail fraud, wire fraud, money laundering, and misuse of social security numbers. All are federal violations.
Jeffrey Ray Johnson was the last of six defendants who were agents, managers or employees of Bankers Life and Casualty Company charged in this scheme. Others charged include: Johnny D. Fowlkes, 61, of Austin, Ark.; Kathy Marie Schluterman, 40, of New Blaine, Ark.; Charles David Wright, Sr., 63, Greenbrier, Ark.; and Daniel Paul Williamson, 55, from Little Rock, all charged with mail fraud. Also charged was Rhea Ogle Phelan, 49, of Las Vegas, Nev., who is charged with conspiracy. All five defendants have pled guilty and four have been sentenced to probation. Rhea Ogle Phelan’s sentencing is scheduled for June 10, 2003.
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