Fraud affects us all, especially when done on a wide scale and involving multiple conspirators and victims. A recent indictment of thirteen individuals shows that anyone is capable of fraud.

In this case, the defendants include a law enforcement officer, healthcare employees, a paralegal, and even 911 operators who helped perpetrate a collective $100 million no-fault auto insurance fraud scheme in New York and New Jersey.

One of “The Largest in History”

According to U.S. Attorney Damian Williams, “The thirteen defendants charged in [these indictments] are alleged to have collectively perpetrated one of the largest no-fault insurance frauds in history.”

This included going so far as bribing individuals such as hospital employees and even 911 operators to get confidential accident victim information. While no-fault insurance was designed to make getting benefits easier and insurance more affordable, this kind of fraud is what the industry blames for the ever-increasing costs of insurance throughout the country.

Investigations Began in 2017

The investigations themselves have been years in the making. The U.S. Attorney’s Office for the Southern District of New York, the FBI, and the Westchester County District Attorney’s Office have collaborated on these investigations regarding multiple organizations involved in this ongoing fraud since 2017. These schemes earned the involved parties millions of dollars in illegal profits.

The Relative Ease of Defrauding No-Fault Claims

Part of the ability to perpetrate this kind of fraud seemed to lie in the relative ease of collecting no-fault benefits when benefits fall under a specific monetary threshold.

No-fault insurance laws in both New York and New Jersey, where the fraud was perpetrated, require that the no-fault auto insurance company automatically pay claims for some accidents, providing that the claims are legitimate. This means that insurance companies will often pay healthcare providers directly for their services without first going through the victim.

Two Separate Indictments

This investigation has led to two specific indictments. The Gulkarov Indictment has charged eight individuals with participating in fraud. The Pierre Indictment has separately charged five more individuals with participating in other fraudulent activity.

These co-conspirators owned and controlled multiple medical professional corporations, paying medical professionals to use their licenses to incorporate them, and bribed healthcare employees and 911 operators for information regarding victims.

These individuals defrauded the associated insurance companies by billing them for “unnecessary, harmful, and excessive medical treatments” and lying to their representatives. They further laundered that money through check-cashing companies, shell companies, phony loan arrangements, and law firms.

Co-conspirators face between 37 years to 5 years behind bars.

The Many Faces of Insurance Fraud

While most people think of individual victims defrauding insurance companies when they think of insurance fraud, it can be perpetrated by many types of individuals, from the victim, to the insurers themselves, to these types of complicated conspiracies involving the coordinated effort of multiple people.

Medicare alone has estimated an improper payment rate of approximately 6.27 percent, which equates to $25.74 billion in fraudulent payments.

In this case, the fraudulent activity was directed at the no-fault auto insurance industry. This type of fraud can fall into one of two categories. Soft fraud refers specifically to exaggerated damages claimed after a legitimate accident, which is what these specific cases fall into. The other, hard fraud, refers to staging an accident for the explicit purpose of filing an insurance claim.

No-Fault Laws Open the Door for Fraudulent Activity

New York has no-fault insurance laws that cover benefits for individuals who were involved in a motor vehicle accident up to a certain threshold. This is despite who was at fault for the accident. Unfortunately, these laws also open the possibility for those who want to defraud the industry. According to the Insurance Information Institute, these types of fraud may have driven up insurance costs here in New York by as much as $229 million.

On the flip side, however, because of the prevalence of insurance fraud in the state, many legitimate claims are highly questioned, and many innocent people are looked at suspiciously when trying to collect on valid claims. When the insurance company suspects fraud, they may turn it over to state or federal law enforcement agencies to investigate, leading to a criminal investigation.

If you have found yourself on the receiving end of an insurance company’s overzealous suspicions, it is time to get skilled legal advice. Contact the insurance fraud attorneys at Bukh Law Firm to understand your legal options.

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A Santa Rosa man who ran a mortgage elimination scheme that preyed on struggling homeowners in Sonoma and Marin counties faces more than a dozen years in jail when he is sentenced next month, prosecutors said Tuesday.

Ronald Cupp, 59, was convicted of 15 felonies, including forgery and falsifying documents through his Rohnert Park business, North Bay Trust Services.

Cupp promised to get rid of the debt in exchange for upfront fees of as much as $7,500 and 30 percent of whatever loan he “killed,” prosecutor Amy Ariyoshi said.

A banner outside his Commerce Boulevard storefront read, “Mortgage problems? WeKillYourMortgage.com.”

But he never delivered on his pledge, instead leaving clients, including his own mother, in danger of losing their homes, she said.

An early estimate is he cost Bay Area banks $400,000 in missed payments.

“He basically took advantage of desperate people who were trying to keep houses they couldn’t afford,” Ariyoshi said.

Cupp, who had been free on bail during his trial, was taken into custody following the June 4 verdict. He is expected to remain behind bars until his July 29 sentencing.

He represented himself during about a week of court testimony.

Cupp’s sentencing will bring to a close a scheme that emerged last year when Marin County authorities spotted fake deeds to properties in San Rafael and Corte Madera.

An investigation revealed Cupp had filed fake documents that challenged his clients’ lenders to prove they had legal title to properties, prosecutors said. The moves were an attempt to take over the title and become the loan holder on those properties, prosecutors said.

He operated six websites and had clients across the Bay Area.

He was charged along with two former co-defendants in a 57-count criminal complaint alleging acts between March 2011 and January 2012. His co-defendants were later cleared of wrongdoing.

A number of counts were thrown out after a pre-trial hearing. Cupp’s mother testified at his trial under a subpoena.

Jurors returned guilty verdicts on 15 counts and deadlocked on three theft charges. Cupp is scheduled to be sentenced by Judge Rene Chouteau.

A handful of civil lawsuits against Cupp are pending, Ariyoshi said.

Originally posted in Press Democrat.

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Steven F. Shaw, 49, a New York resident, was sentenced in United States District Court in Albany, New York, to 36 months in prison, to be followed by supervised release for 5 years, and to pay restitution in the total amount of ,653,530, upon his conviction of making false statements in a loan application, tax evasion, and conversion of the funds of a health care benefit program. Senior United States District Judge Thomas J. McAvoy imposed the sentence and directed Shaw to report on August 31, 2010, to the facility designated by the U.S. Bureau of Prisons to begin serving his sentence. The restitution amount was comprised of ,500,000 to Berkshire Bank, 2,530 to the Internal Revenue Service, and ,000 to the Capital District Physicians’ Health Plan for Tougher Industries, Inc.

In 2006, while Shaw was the President and Chief Executive Officer of Tougher Industries, Inc., a heating and air conditioning contractor based in Albany, New York, he caused Tougher Industries to apply for loans in the total amount of approximately million from Berkshire Bank. Because Tougher Industries‘ financial statements were not strong, the bank required Shaw to guarantee the loan personally. To satisfy this requirement, Shaw submitted personal financial statements, tax returns, and a personal biography in support of the loan application. The bank also required that Shaw provide supporting documentation for financial accounts that he had listed on his personal financial statements. The account statements, documents, and information provided by Shaw were false. Shaw inflated his financial statement, falsely represented that it had been prepared and reviewed by a Hartford Financial Services senior vice-president, and falsely claimed to have accounts at Bermuda Commercial Bank Limited, Smith Barney Citigroup, and American Funds.

Shaw submitted false federal income tax returns for the years 2003 and 2004 that were never filed and falsely reflected that they were prepared by a firm that Shaw made up. Shaw also falsely claimed to have earned a Bachelor of Science degree from Pace University and a Masters Degree from Princeton University, though he had never been enrolled at either school, and falsely claimed to have been a member of the United States Ski Team from 1980 to 1982.  The loans to Tougher Industries were approved and disbursed in June of 2006. On November 3, 2006, Shaw filed a voluntary petition seeking the reorganization of Tougher under Chapter 11 of the United States Code in the United States Bankruptcy Court for the Northern District of New York.

Shaw failed to file federal income tax returns for calendar years 2004, 2005 and 2006, despite having taxable income for those years totaling approximately ,995, 9,102, and 2,480, all well in excess of the requisite filing amounts, and tax due and owing for these years of ,991, ,869, and ,670, respectively. Shaw engaged in other affirmative acts of evasion, including attempting to conceal his income by using an incorrect social security number. Shaw used about ,680 in Tougher Industries funds to purchase a 2003 Sea Ray boat, and 0,000 in Tougher Industriesfunds to purchase of real estate on Lake George, and misrepresented what the funds were for.Shaw also embezzled about ,000 from the Capital District Physicians’ Health Plan for Tougher Industries, even though the employees’ health care premiums were not being paid at the time.

United States Attorney Richard S. Hartunian announces the sentence.

The investigation was conducted by the Albany Office of the Internal Revenue Service Criminal Investigation Division, the United States Secret Service, and the United States Department of Labor Employee Benefits Security Administration, following a referral by the Office of the United States Bankruptcy Trustee. The case was prosecuted by First Assistant United States Attorney Grant C. Jaquith, to whom inquiries may be directed at (518) 431-0247.

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Today’s WSJ summarizes the debate between Thaler, a leading skeptic of market efficiency, and Fama, the leading defending of the efficient capital markets hypothesis. As the article notes, the debate could have implications for privatizing social security. It quotes Thaler as saying, “[i]f you give people 456 mutual funds to choose from, they’re not going to make great choices.” The result may be that the securities markets get detached from fundamental values and misallocate resources.

Thaler concedes that “it is not easy to beat the market, and most people don’t.” This is an important point, since it follows that we have no alternative to accepting the wisdom of markets, even if it’s imperfect.

But even if we can’t beat the market, we should be concerned if the market is detached from real values, because then investment dollars would be misallocated. On this point Thaler has little doubt, saying that Fama “is the only guy on earth who doesn’t think there was a bubble in Nasdaq in 2000.” In fact, Fama’s not alone, as I’ve noted.

Assuming markets are inefficient in the weaker sense just noted, what should we do about it? Those who align with Thaler suggest that privatizing social security would further misalign securities prices from value by bringing more irrational investors into the market. The WSJ says that “in a rational world, share prices should move only when new information hit the market. But with more than one billion shares a day changing hands on the New York Stock Exchange, the market appears overrun with traders making bets all the time.”

My main point here is that this conclusion, if true, has implications beyond social security. As I’ve noted, our securities laws are based on the principle that markets should be safe for ordinary investors. If we’re really concerned about a lot of irrational investors running around, then we should be skeptical not only about privatizing social security, but about the securities laws as well. This would mean drastic revisions of disclosure rules, and being honest with investors and voters about what the securities laws are able to accomplish. Investors are either rational or irrational. Public policy should follow logically and consistently from whichever conclusion we choose to accept.

Originally posted by Larry Ribstein on Ideoblog.

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