Criminal Litigation Track

Criminal Litigation Track
Insurance Fraud: How to Define It and How to Prosecute It
Co-Sponsored by the Insurance Benefits Committee and the New Jersey
Business and Industry Association
Moderator:Robert B. Hille, Esq.
McElroy Deutsch Mulvaney & Carpenter, LLP
Speakers: Joseph Brennan, Assistant Commissioner, Bureau of Fraud
Deterrence
New Jersey Department of Banking and Insurance
Ronald Chillemi, NJ Insurance Fraud Prosecutor
New Jersey Department of Law and Public Safety
Loni M. Hand, Assistant Vice-President and Special Investigations
Unit Director
New Jersey Manufacturers Insurance Company
John Kennedy, Office of the Insurance Fraud Prosecutor
Office of the Attorney General
Alex Kriegsman, Assistant United States Attorney
Insurance Fraud Prosecutions
New Jersey State Bar
Association Annual
Meeting
Office of the Insurance Fraud
Prosecutor
Insurance Fraud Referrals
Bureau of Fraud Deterrence
(civil)
Office of Insurance
Fraud Prosecutor
(criminal)
Unified Referral System
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N.J.S.A. 17:33A-9
Any person who believes insurance fraud
has occurred is required by law to refer the
suspected fraud to OIFP and BFD
Unified referral process for OIFP & BFD
Unified Referral System
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OIFP CLASS
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OIFP (criminal)
County Prosecutor (criminal)
BFD (civil)
Licensing Board (civil)
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DOBI
DCA
MVC
Unified Referral System
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Appropriate use of resources
Mutual assistance
Deconfliction
Fraud affects all types of insurance
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Life
Commercial / Homeowners
Workers Comp
Auto
Auto PIP
Health
Insurance Fraud: Costly Reality
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National healthcare spending: $2.34 trillion
3% fraud = $70 billion
NJ healthcare spending: $70 billion
3% fraud = $2.1 billion
Insurance Fraud: Costly Reality
Healthcare costs
Employers providing
health benefits
Insurance Fraud: Costly Reality
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“So strong an invitation to some is the
country’s ever larger pool of health-care
money that … law enforcement agencies and
health insurers have witnessed … the
migration of some criminals out of drug
trafficking … and into the safer and far more
lucrative business of perpetrating fraud
schemes ….”
Insurance Fraud: Costly Reality
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Survey of 753 P&C carriers:
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Estimate that 15% of all claims are fraudulent in
whole or part
Metuchen dentist charged with
falsifying dental records of 3 children,
grandmother killed in South Plainfield
fire
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— Middlesex County officials today charged
a Metuchen dentist with falsifying the dental
records of three of the four children killed in
the Feb. 23 South Plainfield fire that also
took the life of the children's grandmother.
The false records delayed identification of
the fire victims, Prosecutor Bruce Kaplan
said in a joint statement with South Plainfield
police Chief James Parker . . . .
Criminal Statutes
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Crime of Insurance Fraud:
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KNOWINGLY
Makes a false, fraudulent or misleading statement
Of a MATERIAL fact
In connection with an insurance claim or
application
Criminal Statutes
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Crime of Insurance Fraud:
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KNOWINGLY: the person is AWARE THAT THE
STATEMENT IS FALSE
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MATERIAL: fact is relevant and important in
determining the insurer’s course of action
Criminal Statutes
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Crime of Insurance Fraud:
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5 or more acts and $1,000 = second degree
Second degree = state prison
Criminal Statutes
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Health Care Claims Fraud
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KNOWINGLY or RECKLESSLY
Makes a false, fraudulent or misleading statement
Of material fact
In connection with a claim for a health care
service
Criminal Statutes
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Health Care Claims Fraud:
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KNOWINGLY
RECKLESSLY: consciously disregard a
substantial and unjustifiable risk
Criminal Statutes
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Health Care Claims Fraud:
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Practitioner: licensed by the State to practice any
profession
Practitioner: 1 KNOWING violation, in course of
profession = second degree
Practitioner: 1 RECKLESS violation, in course of
profession = third degree
Criminal Statutes
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Theft by Deception
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Purposely
Obtain property belonging to another
By deception
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$75,000 or more = second degree
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Criminal Statutes
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Criminal Use of Runners
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For money
Procures clients or patients
In cooperation with a provider
Whose purpose is to seek insurance benefits
Criminal Statutes
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Commercial Bribery
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Give or receive
Any thing of value
For the knowing violation
Duty of fidelity
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Lawyer, doctor, chiropractor
Civil Statute
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Insurance Fraud Prevention Act
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KNOWINGLY make false material statement in
connection with a claim or application
KNOWINGLY use (or act as) a runner
Civil Statute
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Rate Evasion:
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Apply for auto insurance
Make a statement that the principal residence is
in NJ, when it is not
Civil Statute
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Penalties:
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Up to $5,000 first violation;
Up to $10,000 second violation;
Up to $15,000 for each succeeding violation
New Jersey False Claims Act
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Anyone can bring suit
False claims to a state government program
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Medicaid ; FamilyCare
Recovery: triple damages plus penalty
Plaintiff keeps:
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15 to 25% of recovery (if AG prosecutes)
25 to 30% (if AG declines case)
OIFP Reward Program
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5% of fraud amount up to $25,000 max
Information must lead to criminal conviction
Case must be new (not already under
investigation by any State entity)
www.NJinsurancefraud.org
Referring a Case
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Insurance fraud in a nutshell:
LIE + MATERIALITY = FRAUD
Referring a Case
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LIE
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precisely what statement was false?
who made that statement?
how many false statements did the person make?
what evidence shows the statement was
false?
what evidence shows the person KNEW the
statement was false at the time it was made?
Referring a Case
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MATERIALITY
specifically how was the misrepresented fact
important in determining course of action.
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EG: affected coverage determination; affected
amount of payment.
what evidence shows the statement was
material?
Referring a Case
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Written summary of the fraud
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Concise (2 or 3 pages)
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Who; what; when; where; how; and how do you know?
Clearly identify the lies
Quantify the loss:
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Claimed / paid
Status of claim or application
Any money recovered?
Referring a Case
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Attach relevant documents
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Refer to them in the concise written summary
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Tab or page number
Referring a Case
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Reasonable suspicion:
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Some facts / evidence such that a reasonable
person would suspect fraud
Reasonable likelihood of successful case
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Evidence
Elements
Reasonable investigative steps
What to include / exclude
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All evidence of:
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Falsehood
Knowledge
Materiality
What to include / exclude
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Statements and EUOs
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Claim Notes:
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Include entire statement
Relevant parts
Preserve the rest
Correspondence / Memos / Messages
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If evidential: Falsehood; Knowledge; Materiality
What to include / exclude
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Medical Bills
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Police Reports
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If they contain lies
MVA; fire; theft
Receipts / Invoices / Proof of Loss
All Identifiers
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Name; address; DOB; SSN
Corporate name; address; agents
What to include / exclude
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OIFP CLASS, PO Box 094, Trenton NJ
08625-0094
NJinsurancefraud@NJDCJ.org
GIVE DETAILS (attach documents!)
1-877-55-FRAUD
Anonymous calls problematic
Summary
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LIE + MATERIALITY = FRAUD
Who; what; when; where; how
How do you know that (what evidence is
there)
How much money is involved
New Jersey
Bar Association
May 17, 2012
What is Insurance Fraud?
An intentional act, or combination of acts, which involves
such elements as deception, misrepresentation and/or
concealment, for the purpose of wrongfully obtaining
something of value from an insurance carrier
Why do People Commit
Insurance Fraud?
People Tolerate Fraud & Don’t
Think It Is Wrong
Two of three Americans tolerate
insurance fraud to varying
degrees;
Two of five Americans want little
or no punishment for insurance
cheats; they blame the
insurance industry for its fraud
problems because they believe
insurers are unfair.
Low Risk Crime
Insurance fraud steals
$80 billion every year
With $80 billion, you could pay…
salaries of 2.2 million American workers for a year.
fund all cancer research in America for the next 13
years.
tuition for nearly 15.6 million students at America’s
four-year public universities for a year.
buy a new car for nearly three million licensed drivers.
That’s enough for every driver in New Jersey or
Georgia.
buy coffee and a bagel (with cream cheese) for every
adult in New York City (6 million people) each morning
for 20 years.
Healthcare Fraud = $56 Billion
Health system is an easy target. America's
health care system is huge and vulnerable.
The sheer number of patients and treatments
plus complexity of billing attract cons who are
skilled at looting our overworked health care
system.
The pressure to control costs also encourages
many doctors or health firms to cheat so they
can recoup lost profits or meet rigorous
treatment quotas.
Insurance Fraud Prevention Act /
DOBI Regulations
Carrier Fraud Suits
Fraud Advisory Board
Creation of SIUs
Fraud Plans
SIU Staffing Requirements & Qualifications
Anti-Fraud Training
Database
SIU Referrals
Referral Standard to OIFP/BFD
Reasonable Suspicion of Fraud
What Costs So Much?
Limited cost control in PIP (vs. MCO)
PIP Fee Schedule
The Arbitration System
Costs & Attorney’s Fees
Litigation
Collection
Erodes Benefits
Premiums Stay High
Beyond Dollars & Cents
Ineffective/Dangerous Treatment
Unlicensed/Unqualified Providers
Unnecessary Testing/Treatment
Addiction
What Takes So Long?
Fraudsters don’t want to get
caught
Seeing the big picture (Pattern)
Building a fraud case
Developing a strategy
Who Drives Medical
Fraud?
Insureds
Claimants
Witnesses
Police Officers
Runners
Attorneys
Medical Providers
Fraud Schemes
PIP Mills
Staged Accidents/Paper Accidents
Runners
Billing for Services Not Rendered
Upcoding
Kickbacks
Inflated Bodily Injury Settlements
Prescription Fraud
How to Deter Fraud?
Pocketbooks
Handcuffs
Anti-Fraud Team
Approach
SIU
NICB
OIFP
&
L/E
Prof.
Boards
BFD
Proposed Fraud Bill
A-944 (Riley/Milam);
S-1461 (Vitale/Madden)
Immunity
Anti-Kickback
30-day Coolingoff Period
Questions & Comments
Loni Hand
NJM Assistant Vice President & SIU
Director
(800) 232-6600, Ext. 5665
LHand@njm.com