Insurance Fraud Prosecutor How’D They Find Out? INSURANCE FRAUD IS a SERIOUS CRIME
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N E W J E R S E Y INSURANCE FFrraudaud Special Report: Cracking Fraud Rings OIFP Draws International Praise Closing Loopholes: Proposals for Legislative and Regulatory Reform New Crime Takes Aim at Insurance Cheats How “Runners” Corrupt the Health Care System Public and Private Sectors Join Forces in Fraud War 2003 Annual Report of the New Jersey Office of the Insurance Fraud Prosecutor How’d they find out? INSURANCE FRAUD IS A SERIOUS CRIME. Don’t Do It. Don’t Tolerate It. Call Confidentially 1.877.55.FRAUD NEW JERSEY OFFICE OF INSURANCE FRAUD PROSECUTOR Inside Front Cover This page was intentionally left blank Annual Report of Annual Report Staff John J. Smith, Jr. First Assistant The New Jersey Insurance Fraud Prosecutor Assistant Attorney General Stephen D. Moore Office of the Editor Supervising Deputy Attorney General Melaine Campbell Co-Editor Insurance Fraud Supervising Deputy Attorney General Feature Writers John Butchko Prosecutor Special Assistant Norma R. Evans for Calendar Year 2003 Supervising Deputy Attorney General John Krayniak Supervising Deputy Attorney General Submitted Michael A. Monahan March 1, 2004 Supervising Deputy Attorney General (Pursuant to N.J.S.A. 17:33A-24d) Scott R. Patterson Supervising Deputy Attorney General Stephanie Stenzel Supervising State Investigator Contributors Jennifer Fradel Supervising Deputy Attorney General Peter C. Harvey Charles Janousek Attorney General Special Assistant Barry T. Riley Vaughn L. McKoy Supervising State Investigator Director, Division of Criminal Justice Photographers Vincent A. Matulewich Greta Gooden Brown Managing Deputy Chief Investigator Insurance Fraud Prosecutor Carlton A. Cooper Civil Investigator Production Paul Kraml Prepared by: Art Director Sina Adl Office of the Attorney General Graphic Designer Department of Law and Public Safety Division of Criminal Justice Administrative and Technical Support Office of the Insurance Fraud Prosecutor Paula Carter Susan Cedar P.O. Box 094 Joan Enright Trenton, NJ 08625-0094 Pat Miller 609-896-8888 Cynthia Ronan www.njinsurancefraud.org Lynn Wasserman Jacqueline Wendel This page was intentionally left blank Contents Message From The Insurance Fraud Prosecutor 5 Special Report: OIFP Targets Fraud Rings 8 OIFP’s Prosecutions Prove Corrupting Influence of “Runners” On Health Care System 16 Pharmacy Scams Busted by OIFP’s Medicaid Fraud Section 26 OIFP Draws International Acclaim 32 Insurance Reforms Toughen Fraud Penalties and Give OIFP New Tools 38 OIFP Civil Enforcement Actions Pack a One – Two Punch In The Fight On Fraud 44 OIFP’s Public Awareness and Insurance Fraud Training Programs Spread the Word on Insurance Fraud 50 OIFP’s Office Structure, Organization and Operations 58 Cooperation, Coordination and Communication Key to OIFP Success 64 OIFP Funds County Prosecutors’ Insurance Fraud Fighting Efforts 74 Insurance Fraud Case Highlights 80 OIFP Criminal Case Descriptions – Insurance Fraud 84 OIFP Criminal Case Descriptions – Medicaid Fraud 142 2003 Medicaid Civil Case Settlements 150 County Prosecutors’ Offices Criminal Case Summaries 152 OIFP Civil Investigations and Actions 164 OIFP Civil Litigation 170 Professional Licensing Proceedings 172 Closing the Loopholes on Fraud: OIFP’s Recommendations for Legislative and Regulatory Reform 176 A Message From The Insurance Fraud Prosecutor Sowing and Reaping in the War on Insurance Fraud I am proud to present the fifth Annual Report of the Office of the Insurance Fraud Prosecutor (OIFP) to the Governor and Legislature of the State of New Jer- sey as required by N.J.S.A. 17:33A-24d. I am pleased to report that, in 2003, we met our goals and exceeded our expectations. In 2003, OIFP prosecuted more criminal cases than any other year in OIFP’s history. In addition, we continued to sow the seeds for successful investigations and prosecutions long into the future. Over the past year, New Jersey attained record highs, both in the number of those charged with, and those convicted of, committing insurance fraud. In 2003, OIFP, together with OIFP funded County Prosecutors’ Insurance Fraud Units, filed criminal insurance fraud related charges against 730 individuals. We obtained convictions against 379 defendants, 109 of whom were sentenced to a total of 194 Greta Gooden Brown years in prison. OIFP cases, alone, accounted for over 70% of the prison time meted out to convicted insurance fraud felons. On the civil side, OIFP’s record in 2003 was equally impressive. As reported in December of 2003 by the Coalition Against Insurance Fraud in its most recent national insurance fraud survey, the New Jersey Office of the Insurance Fraud Prosecutor led the nation in the number of civil sanctions imposed, accounting for 86% of all civil actions taken in the nation. Moreover, in 2003, all of New Jersey’s enforcement efforts resulted in insurance cheats being ordered to pay over $16.5 million constituting restitution, criminal fines and civil penalties. While OIFP was conceived, in part, to address New Jersey’s burgeoning auto insurance rates, the savings to New Jersey’s insurance consumer result- ing from OIFP’s successful prosecutions cannot be precisely quantified. It is un- deniable, however, that by identifying, prosecuting and punishing insurance cheats, OIFP prevents losses of millions of dollars each year. Indeed, some of the successful prosecutions highlighted in this Report, particularly with respect to staged accident rings, have resulted in savings of millions of dollars that would have otherwise been drained from New Jersey’s insurance system through the submission of fraudulent bodily injury claims alone. Further, OIFP undoubtedly deters countless other potential fraudsters from committing insur- ance fraud by publicizing its successful prosecutions. The fruits of OIFP’s labor increasingly drew the attention of others in 2003, both here and abroad. OIFP’s accomplishments were the feature story of the De- cember 2003 edition of Fraud International Magazine. In addition, in 2003, OIFP was selected as a national finalist for the prestigious International Association of Chiefs of Police (IACP) and ChoicePoint Award. The Award recognizes excep- tional innovation and excellence in criminal investigations. While we are proud of the official record of our achievements in 2003, we are equally proud of the tireless efforts of our staff who toil daily behind the scenes to lay the groundwork for our present and future successes. Their mandate, which they fulfill with uncompromising efficacy, is to be productive while maintaining the high quality evidenced in our investigations, prosecutions and programs that have become our trademark. OIFP’s remarkable progress in its brief five year history may be attributed to several factors. The seeds of OIFP’s success were initially sown by the New Jer- sey Legislature when it created OIFP through the enactment of the Automobile continued on next page Insurance Cost Reduction Act of 1998 (AICRA). AICRA designated OIFP as New Jersey’s lead agency in the war on insurance fraud and provided it with the re- sources to wage an unrelenting war. In 2003, Governor James E. McGreevey signed into law landmark legislation which created the specific crime of insurance fraud and established a reward pro- gram for members of the public to provide information leading to the identifica- tion, prosecution and conviction of insurance cheats. With this single act, Gover- nor McGreevey has sown the seeds for OIFP’s continued success by increasing the penalties for committing insurance fraud in New Jersey, solidifying New Jersey’s position as a national leader in combating fraud and enlarging OIFP’s arsenal of weapons in the war against insurance fraud. OIFP’s success may also be attributed to the contributions of our partners and allies in other law enforcement and public agencies as well as the insurance industry. The outstanding contributions of our partners in the law enforcement community and the insurance industry, in particular, enable us to bring to fruition OIFP’s statutory mission of providing for “a more effective investigation and pros- ecution of fraud” in New Jersey than existed in the past. Achieving this mission inures to the benefit of New Jersey’s insurance buying public who are the ulti- mate victims of insurance fraud. Finally, OIFP’s success would not have been possible without the support and leadership of Attorney General Peter C. Harvey and Assistant Attorney Gen- eral Vaughn L. McKoy, Director of the Division of Criminal Justice. Attorney Gen- eral Harvey and Director McKoy are the principal facilitators who enable OIFP to achieve the results for which it was created. We in OIFP recognize and welcome the challenges that lay before us in the months and years ahead. We will continue in the coming year to conduct thor- ough investigations, to develop solid cases, to prosecute aggressively and to sow the seeds for future investigations and prosecutions. We will continue to develop effective anti-fraud programs and initiatives. We will continue to seek new and better ways to accomplish our mission, be it the planning of successful sting op- erations, the tackling of organized insurance fraud rings, or the application of high tech data mining tools to identify new fraudulent patterns or trends. We will con- tinue to spread the word to those who would dare to commit insurance fraud in the State of New Jersey, that they, too, shall reap what they sow. Respectfully submitted, Greta Gooden Brown New Jersey Insurance Fraud Prosecutor OIFP Targets Fraud Rings Vehicles recovered by OIFP State Investigators in undercover sting “Operation Give and Go.” 8 OIFP Targets Fraud Rings OIFP Criminal Prosecutions at All-Time High by Michael A. Monahan It came in to the Newark Police dis- the owner was no victim at all. He was patcher as a frantic 911 call. The caller a thief, who faked the entire carjacking said he had just been the victim of a scenario with a friend in order to file a carjacking at the intersection of William fraudulent insurance claim. How did and Halsey Streets by a man armed the authorities know? Because the car with a gun.