Fraud Roundup

Oregon Fines Former Marsh Executive
The Oregon Department of Consumer and Business Services has fined a former executive of insurance broker Marsh USA Inc. for her role in overcharging public entities for insurance coverage.

Debora A. Leopold-Hutchins, who was fined $6,000, is the last of three former Marsh USA vice presidents sanctioned by DCBS in connection with the overbilling.

Following an investigation by the DCBS Insurance Division, Marsh USA was fined $75,000 in November 2005 for overcharging 22 public entities, including school districts, community colleges, counties, and cities. The overbilling occurred from 1999 to 2004 and involved accounts in which the company contracted to provide insurance brokerage services for an agreed-upon fee, DCBS said. In the 22 cases, Marsh also collected commissions in violation of its contracts with the public entities. The commissions were not apparent because they were included in premium charges on Marsh’s billing statements, DCBS said. Marsh has returned or credited the excess payments to the public entities.

In earlier action against former Marsh vice presidents, Patsy G. Hanson of Tualatin surrendered her insurance agent’s license in April 2007 in lieu of enforcement action. In March 2006, DCBS revoked the license of Robert H. Lilly of Gresham.

DCBS said Leopold-Hutchins and Hanson should have prevented the overbilling because of their positions. Lilly’s license was revoked for using a dishonest practice in the conduct of insurance business.

Marsh said it has instituted reforms to ensure insurance contracts are properly documented and followed, and to ensure full disclosure of all compensation it receives.

State Fund to receive $113,000
San Diego County Superior Court Judge Fred McGuire has ordered a San Diego construction firm owner to pay the California State Compensation Insurance Fund $113,327 in restitution for defrauding the workers’ compensation insurance carrier; and $60,000 to the State Economic Development Department for unemployment tax evasion. Thomas Behrendt, also was sentenced to three years formal probation as part of his June 4 sentence.

State Fund, which had insured Behrendt’s firm Sunset Structures Inc. from 2003 to 2006, suspected fraud during a review of an injured worker’s claim. Behrendt originally denied that the injured worker was a company employee.

Behrendt failed to pay proper workers’ compensation insurance premiums for three years, and unemployment taxes, and by extension gained an illegal competitive advantage.

SCIF assisted the San Diego County District Attorney’s Office, including Deputy District Attorney Ernie Marugg, in its investigation which included a detailed audit of Behrendt’s workers’ compensation records.

Calif. issues 58 arrest warrants
Law enforcement officers from five California counties have served 58 arrest warrants for insurance fraud and related charges, such as grand theft, receiving stolen property and perjury, following investigations of alleged auto insurance and workers’ comp insurance fraud.

Four suspects have already been arrested and were charged late last year. Another suspect is in federal custody; a hold has been placed on him to answer for the local charges. A total of 66 suspects will be charged (three persons were already in custody on unrelated charges and were re-arrested) with insurance fraud.

Each count of insurance fraud is a felony and carries a maximum sentence of up to five years in state prison and/or a fine of $50,000, as well as the possibility of being ordered to pay fines and restitution.

California Commissioner Steve Poizner said the arrest warrant announcement covers four sets of enforcement actions.

Operation Scratch n’ Play involved suspects using false receipts to obtain insurance monies through fraudulent insurance claims for aftermarket stereo equipment, custom wheels and tires and performance parts. Fraudulent receipts provided to the undercover investigators ranged from $800 to $5,000.

In Operation Back Draft in Fresno County, 12 suspects in the city of Parlier allegedly conspired in the disposal of five vehicles to collect insurance benefits.

In Operation Round-Up, 13 suspects spanned six cases and involved family members or close friends who conspired to dispose of their vehicles to collect insurance benefits, or to conceal the identity of an excluded driver to obtain insurance benefits.

Workers’ compensation insurance premium fraud occurred in Fresno and Kern Counties, CDI said, with the arrest of two suspects. Two cases resulted in net losses totaling approximately $2.2 million.