Zalma’s Insurance

Fraud Letter

The Essential Resource For The Insurance Fraud Professional

A ClaimSchool ™ Publication, Written by Barry Zalma, Esq., CFE © 2017 ClaimSchool, Inc. & Barry Zalma

Volume 21, No. 18September 15, 2017

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Quote of the Issue

“Knowledge is a scarce national resource.”

W. Edwards Deming

Evil Incarnate – Stealing Life Insurance Proceeds from Beneficiaries of the Elderly

When we get old and sick, close to death, the family turns over care of the elderly relatives to professional caregivers who are expected to care for the best interests and concerns of the elderly. The relatives, concerned, usea professional organization and believe that care givers are vetted carefully, are honest, and professional. Whenone of those care givers takes advantage of the elders in their care the punishment must be as severe as the lawallows and claims of error in an appeal must be proved without doubt.

In State Of Ohio v. Lisa Marcum, Court Of Appeals Of Ohio Second Appellate District Montgomery County,2017 Ohio 7517, CASE NO. 27059 (September 8, 2017) Marcum appealed from her March 28, 2016 JudgmentEntry of Conviction, following a bench trial, on one count of insurance fraud ($7,500.00 or more and less than$150,000.00), in violation of R.C. 2913.47(B)(1), a felony of the fourth degree; one count of theft from anelderly person (beyond the scope of consent) ($7,500.00 or more, less than $37,500.00) in violation of R.C.2913.02(A)(2), a felony of the third degree; one count of tampering with records, in violation of R.C.2913.42(A)(2), a felony of the third degree; one count of theft (checks), in violation of R.C. 2913.02(A)(1), afelony of the fifth degree; and one count of bribery, in violation of R.C. 2921.02©, a felony of the third degree.

Marcum was sentenced to 18 months for insurance fraud, 36 months for theft from an elderly person, 36 months for tampering withevidence, 12 months for theft, and 36 months for bribery, all terms to be served concurrently. The court ordered restitution in favor of ScottSchaurer in the amount of $28,220.67.

FACTS

The bench trial began on November 16, 2015. Multiple witnesses were called and they proved that Marcum, assigned to care for Willa andWilliam Stamback, from whom she stole and made claims that she was the beneficiaries of the Stambacks life insurance policy. The nieceof the Stambacks had their power of attorney which, at the urging of Marcum, was removed and put in Marcum’s hand.

Marcum was employed by Right at Home (a in home care organization) and that she initially met her when Marcum brought William to thehospital to visit Willa.

Marcum began working part-time at Right at Home at the end of 2009, and that she became a subcontractor with the company in 2011. Hetestified that she was a State Tested Nurses’ Aide. Marcum was one of the caregivers assigned by Right at Home to care for the Stambacks.

Rachel Ferrara testified that she is an associate attorney at Smith, Rolfes and SkavdahlCompany LPA in Cincinnati, practicing “mostly insurance defense.” Ferrara stated thatMarcum “presented a claim under an insurance policy and I took examination underoath testimony from her.” She stated that the policy was issued by the National MutualInsurance Group, which is a subsidiary or affiliate of Ferrara’s client, Celina Insurance.Ferrara stated that Marcum filed a “theft-loss claim for personal property.” According toFerrara, Marcum was residing at 16 West Walnut Street at the time, and “she wasseeking coverage for these personal property items that were stolen from the residence she wasresiding in.”

Ferrara stated that the named insureds on the policy were Willa and William Stamback. Ferrara stated that Marcum “described [theStambacks] as her parents and she was their daughter and that her daughter, Christina was their granddaughter.” Ferrara testified that

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Marcum “provided several different stor[ies] with regard to how she became acquainted first with the Stambacks and then took over theirhealthcare needs.”

Ferrara testified that Marcum “said she was not paid by the Stambacks when she was providing care for them herself. She was paid in someshape or form by Right at Home when she was in their employ but was not paid by the Stambacks.”

According to Ferrara, in the course of her examination, she learned that Marcum obtained the Stambacks’ powers of attorney. When askedif she spoke to Marcum about William’s relationship to Willa, Ferrara stated that Marcum “said that it was very clear William loved Willavery much and that he would sign anything if he thought it was for Willa. You could use his wife to get him to do anything.” According toFerrara, Marcum stated that she did not become aware that she was the contingent beneficiary on the Stambacks’ wills until after the estatewas submitted to probate.

ANALYSIS

An appellate court applies the same standard when reviewing the denial of a Crim.R. 29(A) motion as is used to review a sufficiency of theevidence claim. In contrast, a weight of the evidence argument challenges the believability of the evidence and askswhich of the competing inferences suggested by the evidence is more believable or persuasive. When evaluatingwhether a conviction is against the manifest weight of the evidence, an appellate court must review the entirerecord, weigh the evidence and all reasonable inferences, consider witness credibility, and determine whether, inresolving conflicts in the evidence, the trier of fact clearly lost its way and created such a manifest miscarriage ofjustice that the conviction must be reversed and a new trial ordered.

Because the trier of fact sees and hears the witnesses at trial, the court must defer to the factfinder’s decisionswhether, and to what extent, to credit the testimony of particular witnesses. The fact that the evidence is subject todifferent interpretations does not render the conviction against the manifest weight of the evidence.

INSURANCE FRAUD

The trial court clearly credited the testimony of the multiple witnesses over the testimony of Marcum, and, therefore, the appellate courtdeferred to the trial court’s assessment of credibility. Doing so, the applellate court concluded that the trial court did not err in overrulingMarcum’s motion for acquittal, and that Marcum acted with a purpose to defraud, and knowing that she was facilitating a fraud, inpresenting the claims for the proceeds of Williams’ life insurance policy and for the items allegedly stolen from the Stambacks’ home, inviolation of R.C. 2913.47(B)(1).

Having thoroughly reviewed the entire record, the court also concluded that Marcum’s conviction for insurance fraud is supported bysufficient evidence and not against the manifest weight of the evidence and affirmed the judgment of the trial.

ZIFL OPINION

My mother, for the last 15 years of her life, was cared for 24/7 by a wonderful woman who never tookmore than the amount she agreed was her salary for the service. Before mother died they were closefriends and I showed my appreciation with a bonus sufficient for the care-giver to complete the home sheand her husband were building. Marcum, on the other hand, did not care for the elders in her care butattempted to steal from them and the beneficiaries of their life insurance. Her sentences should have beenconsecutive rather than concurrent. She should never leave jail.

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Insurance Fraud

Next to tax fraud, insurance fraud is the most practiced crime in the world. It is perpetrated bymembers of every race, religion, and nationality. It is found in every profession. The possibility of atax-free profit when coupled with the commonly held belief that criminal prosecution will probablynot occur, is sometimes too difficult for normally honest people to resist.

As those in the insurance industry are aware, many insurance fraud cases go unreported, eitherbecause the victimized organizations do not recognize that they have been defrauded, because theychoose not to report the crimes for fear of bad publicity, or simply because they do not want to dealwith the repercussions and expenses attendant on insurers who report fraud to the appropriateauthorities. If each insurer recognized that at least three percent of its gross premium goes toperpetrators of fraud the insurer might be willing to invest more money in its special fraud

investigation units. Those who believe they can pass the cost of fraud on to the customers are mistaken. The more an insurer pays fraudperpetrators the more fraud perpetrators will seek out insurance with that insurer so that they, too, can profit from fraud. The truth is thatfraud reduces the profit an insurer can make. Those who own stock in insurers should be complaining to the insurer about the lack of effortto protect the profits of the insurer and the dividends the shareholders are entitled to receive.

Insurance fraud is a tort, a civil wrong and, in most jurisdictions a crime. Black’s Law Dictionary, 6th Edition, defines fraud as:

An intentional perversion of the truth for the purpose of inducing another in reliance upon it to part with some valuable thing belonging tohim or to surrender a legal right; a false representation of a matter of fact, whether by words or by conduct, by false or misleadingallegations or by concealment of that which should have been disclosed, which deceives and is intended to deceive another so that he shallact upon it to his legal injury.

In simple language, fraud can be defined as a lie told for the purpose of obtaining money from another whobelieves the lie to be true. Civil insurance fraud exists if an insured:

• makes a representation to the insurer that the insured knows is false;

• conceals from the insurer a fact he or she knows is material to the insurer;

• makes a promise he or she does not intend to keep; and

makes a misrepresentation on which the insurer relies in issuing the policy that results in the insurerincurring damage.

To protect insurers against fraud, most insurance policies contain, in clear and unambiguous language, a clausesimilar to the following from the New York Standard Fire Policy:

This entire policy shall be void if, whether before or after a loss, the insured has willfully concealed or misrepresented any material fact orcircumstance concerning this insurance or the subject thereof, or the interest of the insured therein...

Fraud may be committed at different stages in the insurance transaction by:

• applicants for insurance,

• policyholders,

• third-party claimants and

• professionals who provide services to claimants.

• Those who commit insurance fraud range from organized criminals who steal large sums through fraudulent businessactivities; insurance claim mills; professionals and technicians who inflate the cost of services or charge for services notrendered; people in need of cash who are recruited, for a fee, to be “victims” in an auto accident; ordinary people whowant to cover their deductible; or ordinary people who view filing a claim as an opportunity to make a little money.

Health care, workers’ compensation and auto insurance are believed to be the sectors most affected by insurance fraud. However, insurancefraud comes in all shapes and sizes. They include:

• Staged Auto Accidents.

• Arson-for-profit.

• Health Insurance Fraud (corporate).

• Health Insurance Fraud (individual).

• Faked Death.

• Murder for Insurance.

• Insurer Fraud.

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• Faked thefts.

• Murder for life insurance proceeds.

• Workers’ Compensation fraud.

Some insurance professionals divide insurance fraud by the intent of the deceiver. They segregate insurance fraud into “hard” and “soft”fraud.

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Insurance Law is the most comprehensive, and yet practical, insurance law authority available today.

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In addition the standard FC&S Online published by The National Underwriter Company now includes a Fraud Channel with the majorityof the information taken from my work on insurance fraud. It is available at http://www.nationalunderwriterpc.com/Pages/default.aspx. TheFraud Channel covers issues like: Fraud Basics, Checklists and Charts, Investigation, Ethics, Reference Materials, Fraud Of The Week, and both the full text and summaries of insurance fraud Cases.

Prosecutors Immune From Suit For Charging Police Officers With Fraud

When a prosecutor obtains a grand jury indictment for fraud only to later learn than there was inadequateevidence to prove a case against them and dismisses the charges, the prosecutor did both in good faith. A suitfor malicious prosecution requires malice by the person bringing the charge, not just a failure to prove its case.

In Philip Blessinger, et al. v. City Of New York, et al., 17cv47, 17cv108, United States District Court SouthernDistrict Of New York (September 1, 2017) the City of New York, District Attorney Cyrus Vance, and fiveAssistant District Attorneys, moved to dismiss a federal civil-rights action by retired police officers who wereindicted in a massive Social Security fraud.

BACKGROUND

Plaintiffs Philip Blessinger, John Byrne, Scott Greco, and Darlene Ilchert were indicted in a sweeping investigation by the Manhattan DAinto a large-scale Social Security Disability insurance fraud. The masterminds of the scheme, the “Lavallee Group,”approached retired police officers like Plaintiffs and offered to prepare fraudulent applications for Social SecurityDisability Insurance (“SSDI”) in exchange for cash kickbacks from the resulting SSDI benefits.

The Lavallee Group sent Plaintiffs to selected mental-health professionals who provided documentation of psychiatricconditions such as post-traumatic stress disorder, anxiety disorder, and depression. Plaintiffs allegedly used thesediagnoses to file fraudulent SSDI applications, which were prepared by the Lavallee Group and contained substantivelyidentical claims. Once they obtained the SSDI benefits, Plaintiffs paid the Lavallee Group in cash increments of lessthan $10,000.

In January 2014 a Manhattan grand jury indicted Plaintiffs (along with more than one hundred other individuals),charging them with Grand Larceny and Criminal Facilitation. They were subsequently arrested on warrants issued underthe indictments. ADA Bhatia also filed civil asset forfeiture proceedings against Plaintiffs, alleging that the proceeds of the scheme weresubject to forfeiture. Three of the Plaintiffs filed motions to dismiss their indictments for lack of evidence and improper venue; the

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presiding New York Supreme Court justice denied each motion. Following the indictments, the DistrictAttorney’s office continued to investigate the charges by, inter alia, sending investigators to speak to Plaintiffs’family members, neighbors, and friends.

In August 2016 ADA Santora moved to dismiss the charges against each Plaintiff, citing “additional informationand records . . . includ[ing] psychiatric reports, additional medical records, [and] work history reports, each ofwhich was not available to the People at the time the Grand Jury voted the Indictment.” In light of “this and othernewly discovered information,” Santora stated, “the People believe they are unable to prove the cases againstthese four defendants beyond a reasonable doubt.” The District Attorney also stipulated to a dismissal of the civilforfeiture proceedings the following day.

DISCUSSION

Defendants argued that the claims for false arrest, malicious prosecution, unreasonable asset seizure, and abuse of process under § 1983 arebarred by the Eleventh Amendment (with respect to claims brought against the DA Defendants in their official capacities) and the doctrineof absolute prosecutorial immunity (with respect to claims brought against the DA Defendants in their individual capacities).

The District Court, therefore, concluded that plaintiffs’ claims against the DA Defendants in their official capacities are plainly barred bythe Eleventh Amendment which, with few exceptions, bars federal courts from entertaining suits brought by a private party against the statein its own name.

Plaintiffs alleged that the DA Defendants violated their constitutional rights by indicting and arresting them, freezing their assets aspossible proceeds of fraud, and later dismissing the charges. All of this conduct is part and parcel of a district attorney’s role, inprosecuting (or deciding whether to continue to prosecute) a crime on behalf of the state.

Accordingly, these claims cannot form the basis for liability against the DA Defendants in their official capacities.

Similarly, the claims against the DA Defendants in their individual capacities are barred by the doctrine of absoluteimmunity. Plaintiffs’ claims against the DA Defendants in their individual capacities are based on conduct thatfalls squarely within the scope of absolute immunity.

Accordingly, the plaintiffs’ claims cannot form the basis for liability against the DA Defendants in their officialcapacities.

Similarly, the claims against the DA Defendants in their individual capacities are barred by the doctrine of absoluteimmunity. Plaintiffs’ claims against the DA Defendants in their individual capacities are based on conduct thatfalls squarely within the scope of absolute immunity.

ZIFL OPINION

Although the plaintiffs were properly charged by the grand jury the prosecutors, much to their honor, continuedtheir investigation and discovered that as to the plaintiffs they could not prove beyond a reasonable doubt that theplaintiffs’ were guilty. This is not a finding that they were innocent. They should have accepted the dismissal and return of their fundshappily, decided to never attempt fraud again, and not be so greedy as to attempt to punish the prosecutors who did nothing more than theirduty.

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Hard Fraud vs. Soft Fraud

When someone deliberately fakes an accident, injury, theft, or intentionally commits arson or other loss tocollect money without right from insurance companies, it is considered a hard fraud. Insurance criminals oftenact alone. Increasingly, organized crime rings stage large schemes that steal millions of dollars. When alegitimate loss occurs and an insured adds a single television, an I-Pod or a cellular phone to the loss to coverthe deductible, it is considered a soft fraud.Soft fraud is usually unplanned and arises when the opportunitypresents itself. It is the significantly more prevalent form of fraud. An example of this type of fraud would begetting into a car accident and claiming your injuries are worse than they really are, getting you a biggersettlement than you would get if you were telling the truth about your injuries.

Another example of soft fraud would be claiming you had very expensive art that was destroyed when yourhome was burglarized. In reality, your home was burglarized but your art collection really consisted of prints.

Both frauds, regardless of the appellation, are both civil and criminal fraud. Both soft fraud and hard fraud arecrimes in almost every state and both deserve to be prosecuted to the fullest extent of the law.

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A soft fraud is no less a crime than a hard fraud. The difference is premeditation. Both, if proved, are absolute defenses to an insuranceclaim. Both, if proved beyond a reasonable doubt, are crimes.

E-Books from Barry ZalmaHeads I Win, Tails You Lose - 2017This E-book started as a collection of columns insurance consultant, expert witness and insurance lawyer Barry Zalma wrote and publishedin the magazines “Insurance Journal,” “Insurance Week,” and “The John Cooke Insurance Fraud Report.” It now contains 87 fictionalstories on how insurance fraud is perpetrated by changing the names and places of the incident to protect the guilty.

Since the last edition I have added more stories that were published in my twice monthly newsletter, Zalma’sInsurance Fraud Letter which is available free to anyone who clicks the link and a brief analysis of the CaliforniaSpecial Investigation Unit Regulations. In addition the e-book has been totally rewritten correcting typographical andsyntax errors.

The title, “Heads I Win, Tails You Lose” is meant to describe insurance fraud as it works in the United States.Whenever a person succeeds in perpetrating an insurance fraud everyone who buys insurance is the loser. If thefraud succeeds the insurer must charge more premium to cover the expense of defending the fraud and payment offunds to the fraud perpetrator. If the fraud fails the insurer must still charge more premium to cover the expense of

defending the fraud.

Everyone, except the lawyers and fraud perpetrators, lose.

After you make a payment through PayPal, please wait for the article to upload to your machine. If you have a problem with the purchaseplease write to me at zalma@zalma.com.

Insurance Fraud and Weapons to Defeat Fraud

Insurance fraud continually takes more money each year than it did the last from the insurance buying public. There is no certain numberbecause most attempts at insurance fraud succeed. Estimates of the extent of insurance fraud in the United States range from $87 billion tomore than $300 billion every year.

Insurers and government backed pseudo-insurers can only estimate the extent they loseto fraudulent claims. Lack of sufficient investigation and prosecution of insurancecriminals is endemic. Most insurance fraud criminals are not detected. Those that aredetected do so because they became greedy, sloppy and unprofessional so that theattempted fraud becomes so obvious it cannot be ignored.

No one will ever be able to place an exact number on the amount lost to insurancefraud. Everyone who has looked at the issue knows – whether based on their heart, theirgut or empirical fact determined from convictions for the crime of insurance fraud –that the number is enormous.

When insurers and governments put on a serious effort to reduce the amount of insurance fraud the number of claims presented to insurersand the pseudo-government-based or funded insurers drops logarithmically.

The e-book contains the full text of the most important insurance fraud cases in over 2000 pages of material essential to every insurancefraud professional.

Available at http://www.zalma.com/zalmabooks.htm

Getting the Whole Truth

The interview is an essential form of fact gathering for every type of human interaction. Interviews happen everywhere; they are performedby almost everyone. Interviewing is also an art, and the most effective interviews are conducted by those who are knowledgeable andskilled in this art.

The purpose of an interview is to uncover the truth; the method of uncovering the truth is the art of theinterview. The standard interview does not have, nor should it be given, the pejorative sense conveyed by theexpression “giving someone the third degree.” Interview professionals do not use rubber hoses or hot lights, orsubject the interviewee to torture. In their limited arsenal, professionals do not have the power of the state, thereputation of the FBI, the majesty of a court trial, nor the intimidation of a search warrant.

Civil interviewing professionals are, therefore, compelled to get the information they need by intelligence, wit,skill, and experience. They must be masters of the social graces; they must know how to put people at ease. Theskill of the professional causes the person being interviewed to actually want to give information to theinterviewer. When the interview is successful, the subject becomes a virtual partner with the professional in the

effort to uncover the truth, the whole truth, and nothing but the truth.

This ebook will help anyone who needs to obtain information from anyone else gain the information needed whether a business person,reporter, interviewer, investigator or lawyer.

Zalma's Insurance Fraud Letter -- Page 6 of 17

The book will be delivered to you by e-mail shortly after purchase.

Random Thoughts on Insurance - Vol. IV

Since 2010 I have been writing a blog post at least five days a week. This e-book is a collection of those posts that reveal my interest ininsurance case law. Some of the cases reviewed were important. Some were of first impression. Others will be totally unimportant. Allwere interesting to me and, I hope, are interesting to the reader. This e-book is more than 1200 pages of my review of interesting casesfrom 2013 through January 2014.

After you purchase please wait for the e-book to upload from PayPal. If it does not upload please e-mail zalma@zalma.com and I willpersonally send you a copy of the e-mail in pdf format.

Hard Fraud

Those who try to put fraud in more than one category move from soft fraud to what they call “hard fraud.” Hard fraud is considered a fraudor attempted fraud that are premeditated and intentionally committed.

It is considered “hard fraud” because the person perpetrating the fraud did so intentionally and the claim wasmade for the sole purpose of defrauding the insurer rather than a fraud of opportunity. Of course, fraud isalways an intended act or failure to act that damages another. The differentiation exists because some fraudperpetrators are honest people tempted to “cheat a little” when a real claim appears while hard fraudperpetrators intend to do the crime even before a loss is reported. Both have committed the crime or cheated aninsurer but soft fraud perpetrators are nicer than those who perpetrate hard fraud.

Hard fraud is defined as a type of fraud committed by criminal organizations with the intention to defraud an organization. Hard fraudinvolves criminal activities such as staging a car accident, injury, arson, loss, break-in, or someone writing false bills to Medicare toillegally receive money from insurance companies.

INTENTIONAL FRAUD RELATING TO INSURANCE PREMIUMS

The key to hard fraud is when the perpetrator intends to deceive an insurer for profit. As you read the following decision consider the intentof the party defendants and why they were convicted of a crime. FALSE SWEARING

In common language, the “false swearing” provision of an insurance policy merely means that if the insured lies under oath the policy isvoid whether the lie is in a proof of loss or at an examination under oath. In Texas and Oklahoma, false swearing is explained this way:

Where an insured knowingly and willfully overestimates the value of property destroyed or damaged, the policy is voided and the insured’sright to recover is defeated.

The reason for the false swearing defense can be explained because it would be unjust to allow a claimant to misrepresent facts under oaththat might lead to a valid defense and then allow him to escape the consequences of the falsehood simply because he had succeeded so wellthat the company was unable to establish the defense.

In common language, the “false swearing” provision of an insurance policy merely relates to a lieunder oath.

In Texas and Oklahoma, false swearing is explained this way: “Where an insured knowingly andwillfully overestimates the value of property destroyed or damaged, the policy is voided and theinsured’s right to recover is defeated.”[Summit Machine Tool Manufacturing Corp. v. GreatNorthern Insurance Co., 997 S.W.2d 840 (Tex. App. Dist. 3, 1999)].

The Mississippi Supreme Court explained the reason for the “false swearing” defense that “[i]t wouldbe unjust to allow a claimant to misrepresent facts which might lead to a valid defense and then toallow him to escape the consequences of the falsehood simply because he had succeeded so well that

the company was unable to establish the defense,” Edmiston v. Schellenger, 343 So. 2d 465, 467 (Miss. 1977), cited with approval in Dukev. Hartford Fire Insurance Co., 617 F.2d 509, 510 (8th Cir. 1980) (per curiam) (applying Arkansas law).

The Eighth Circuit upheld a “false swearing” defense when it stated:

The Willises also argue that State Farm made no showing that it had actually relied on Mr.Willis’s misstatements, or that it would have done anything different had Mr. Willis told thetruth. The jury was not instructed, however, that a showing of reliance was necessary, and theWillises did not object to the jury instruction. We think, moreover, that the instruction wascorrect: Although reliance must be shown in a claim for fraud in the inducement, & Anexception to this general rule exists, of course, if a statutory provision specifically makes aparty’s reliance an element of the defense of fraud or false swearing, see, e.g., McCullough v.State Farm Fire and Casualty Co., 80 F.3d 269, 272 (8th Cir. 1996) (applying a Nebraska

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statute), but no such statutory provision currently exists in Arkansas. [Willis v. State Farm Fire and Casualty Company, 219 F.3d 715, 219F.3d 715 (8th Cir. 08/14/2000)]

The New Jersey Legislature defined false swearing as existing when a person: “makes a false statement under oath or equivalentaffirmation, or swears or affirms the truth of such a statement previously made, when he does not believe the statement to be true.” [NewJersey Statute, NJSA 2C:28-2.]

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Wisdom

“What we need is a machine that will let us see the other guy’s point of view.” – Arthur C. Clarke

“Constant experience shows us that every man invested with power is apt to abuse it, and to carry his authorityas far as it will go.” — Charles-Luis de Secondat

“But how can you say, ‘It was only talk, so no harm was done?’ Were this true, then your prayers, and yourwords of kindness, would be a waste of breath.” — Rebbe Nachman of Breslov

“Let the American youth never forget, that they possess a noble inheritance, bought by the toils, and sufferings,and blood of their ancestors; and capacity, if wisely improved, and faithfully guarded, of transmitting to their latest posterity all thesubstantial blessings of life, the peaceful enjoyment of liberty, property, religion, and independence.” — Joseph Story

“A witty saying proves nothing.” – Voltaire

“The greatest danger to liberty today comes from the men who are most needed and most powerful in modern government, namely, theefficient expert administrators exclusively concerned with what they regard as the public good.” — Friedrich Augustvon Hayek

“The struggle is always between the individual and his sacred right to express himself and ... the power structure thatseeks conformity, suppression and obedience.” —Justice William O. Douglas

“The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, whostrives valiantly, who errs and comes up short again and again, because there is no effort without error or shortcoming,but who knows the great enthusiasms, the great devotions, who spends himself for a worthy cause; who, at the best,knows, in the end, the triumph of high achievement, and who, at the worst, if he fails, at least he fails while daringgreatly, so that his place shall never be with those cold and timid souls who knew neither victory nor defeat.” –

Theodore Roosevelt

Barry Zalma

Barry Zalma is the principal of Zalma Insurance Consultants. He is available for consultation on any and all insurance issues faced byyou or your clients.

Barry Zalma founded ZIC to help resolve every insurance claim problem faced by you or your clients. His experience and skill as aconsultant can make the difference before a jury or other trier of fact. For more than 45 years as a claims person andinsurance coverage attorney, Barry Zalma has represented insurers, advised insurers on claims handling, interpretedcoverages and testified as an insurance coverage, insurance bad faith, insurance claims handlingand insurance fraud expert on behalf of insurers and policy holders’ suing insurers.

Mr. Zalma has been rated “AV Preeminent” and is an internationally recognized expert oninsurance, insurance claims handling, insurance coverage, insurance fraud, and insurance badfaith. Barry Zalma will promptly review your file materials and advise you about the viability ofyour decision to sue or your defenses. He can help you narrow the scope of discovery.

Consultation with Mr. Zalma and ZIC can save you or your client thousands of dollars in the

Zalma's Insurance Fraud Letter -- Page 8 of 17

defense or prosecution of an insurance dispute. ZIC will assist you in the effort to find a solution to an insurance claims dispute that is fair,intelligent, beneficial and economical.

ZIC is available to provide expert advice to individuals and their counsel. Advice from ZIC is indispensable to the resolution of insurancedisputes. Consultation from ZIC can save you, your counsel or client hundreds of hours of investigative and legal work.

ZIC rates are all inclusive. Mr. Zalma’s hourly fee takes account of all incidentals from telephone calls and postage.

Claims In A Catastrophe

© 2008 Barry Zalma, ClaimSchool, Inc.

In 2008 I wrote this article to help those faced with catastrophic losses. I reprint it here because of Hurricane Harvey and Irma in hopes itwill help those victims of the catastrophes deal with their claims.

Presenting a Claim

If your house was damaged or destroyed by the fire, windstorm, or flood as a result of state declaredcatastrophes and you had a fire, homeowners, flood insurance, tenant’s homeowners or condominium policyyou will be dealing with an insurance adjuster. You should recognize that dealing with an insurance adjuster ina catastrophe is usually fairly easy because of the number of claims the adjuster is required to deal within ashort time.

The full article is available at http://zalma.com/blog/catastrophe-claims/

Good News From the

* A former Louisiana cop faked the theft of an ATV and trailer. Donald W. Malray had the ownertransfer the machines to him. He then told the guy to report the theft to the Homer, La. police, where Malraywas an officer. The insurer paid the owner about $13,000. Investigators found the stuff at the home ofMalray’s girlfriend. He’ll get up to 20 years in prison when sentenced Dec. 6. Malray tossed away a nearly30-year law-enforcement career, and was the Homer department’s assistant chief at one point.

* Rehan Zuberi masterminded the large-scale bribing of docs to refer patients to his imaging centersfor expensive insurer-paid tests. The Morristown, N.J.-area man paid several million dollars in kickbacks todozens of docs and chiros for the referrals. The kickbacks were paid from shell companies Zuberi created.The bribe money was delivered in cash, checks, gift cards, lavish dinners and expensive vacations. Manyimaging centers also were listed as co-owners of luxury vehicles, including a Ferrari and multiple Mercedes-Benzes. He’ll spend up to 8years in state prison when sentenced Dec. 6.

* Seven con artists paid the price for comp scheming in Ohio. Among the newest convictions the Ohio Bureauof Workers’ Compensation lists: Robert Leonard (Niles) failed to comply with repeated attempts by BWC toreinstate lapsed coverage for his business, McMenamy’s LLC. Leonard repaid $13,224. … Joseph Stewart(Titusville, Fla.) was found assembling countertops, kitchen cabinets and a display case for a market in Toledowhile collecting temporary total disability benefits. … Investigators caught Michael R. Strickland (Woodville)delivering mail for a trucking firm while collecting BWC benefits. Strickland waited for 3 months to report hiswork activity after he left disability and returned to work. BWC has secured 90 convictions so far this year.

* A brittle temper that led to a work fracas landed Randall Brown McKay a jail term for comp fraud. TheSanta Ana, Calif.-area man was known for being a workplace hothead. He berated a longtime forklift operator fornot opening large, transparent plastic strips at the door of the plant to let in more air. McKay then jumped in frontof the guy’s moving forklift and dared the driver to hit him. The worker stopped just short. McKay next ran at theshaken fellow, clocked him in the head and tried to knee him. McKay turned around and filed a comp claim, saying

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the other employee attacked him, and that a pallet on the onrushing forklift struck and injuredhim. The plant’s security video quickly doused McKay’s claim. He received 6 months in jail for the phony comp claim and for attacking a fellow worker.

* The mastermind of a scheme to bribe dozens of docs for referrals to his imaging centersreceived 8 years in prison. Rehan “Ray” Zuberi gave out thousands of kickbacks — ranging invalue from $50 to $150 — to docs for referring patients to his Diagnostic Imaging Affiliatescenters for tests. The Boonton, N.J. man’s total bribes amounted to hundreds of thousands ofdollars, the state Office of Insurance Fraud Prosecutor says. The kickbacks were paid from shellcompanies Zuberi created. The loot was delivered in cash, checks, gift cards, lavish dinners andexpensive vacations. Zuberi raked in millions in imaging claims from the illegal referrals. Lifewas good for Zuberi. He and his wife drove a Lamborghini, Rolls-Royce, Ferrari and Mercedes. A lien was placed on Zuberi’s9,000-square-foot mansion. He could’ve received more jail time, except his sentence was shaved for helping convict 17 docs and chiros hebribed.

* Brian Christopher Hanson hurt his back while on duty, he told his comp insurer. The California Highway Patrol officer was placedon limited-duty status. He watched training videos for an hour then never returned to work. The Sacramento-area man’s back hurt toomuch to sit for long, he said. Then the department discovered Hanson driving nonstop for long periods of time, and doing outdooractivities. Docs reviewed his medical records. Hanson was injured, though he overstated his symptoms and understated his work abilities.Hanson pleaded no contest to comp fraud. He received 180 days in county jail and was permanently bounced from the force.

* Ivan Alberto Hernandez-Madrigal bought a minimal comp policy for his firm Professional Staffing and Payroll Services. The FortMyers, Fla. man fraudulently claimed he provided comp coverage to multiple construction firms for a fee — effectively renting out thesmall policy. He also provided them payroll services. Hernandez thus operated as an unlicensed employee leasing company with no compinsurance for clients. Clients had employees who had work-related injuries. Hernandez failed to report the injury claims to the insurer.Instead he paid medical bills from his firm’s bank account, or simply denied high-dollar claims himself. Injured employees were left withthousands of dollars in medical debt. Hernandez received 10 years in state prison and must repay more than $1 million.

Health Insurance Fraud Convictions

South Carolina Family Practice Chain, Its Co-Owner, and Its Laboratory Director Agree to Pay the UnitedStates $2 Million to Settle Alleged False Claims Act Violations for Illegal Medicare Referrals and Billing forUnnecessary Medical Services

Family Medicine Centers of South Carolina LLC (FMC), agreed to pay the United States $1.56 million, and FMC’s principal owner andformer chief executive officer, Dr. Stephen F. Serbin, and its former Laboratory Director, Victoria Serbin, have agreed to pay $443,000 toresolve a False Claims Act lawsuit alleging that they submitted and caused the submission of false claims to the Medicare and TRICAREprograms. FMC is a physician-owned chain of family medicine clinics located in and around Columbia, South Carolina, whose practicesinclude Springwood Lake Family Practice, Woodhill Family Practice, Midtown Family Medicine, Saluda Pointe Family Medicine, LakeMurray Family Medicine, and the now closed Rice Creek Family Medicine.

The settlements announced today resolve allegations that FMC, as directed by Dr. Serbin, submitted claims tothe Medicare Program that violated the physician self-referral prohibition, commonly known as the Stark Law,which is intended to ensure that a physician’s medical judgment is not compromised by improper financialincentives. The Stark Law forbids a clinic from billing Medicare for certain services ordered by physicianswho have a financial relationship with the entity. In this case, the government alleged that the Stark Law wasviolated by FMC’s incentive compensation plan that paid FMC’s physicians a percentage of the value oflaboratory and other diagnostic tests that they personally ordered through FMC, which FMC then billed toMedicare. Dr. Serbin, FMC’s co-owner and chief executive, allegedly initiated this program and remindedFMC’s physicians that they needed to order tests and other services through FMC in order to increase FMC’sprofits and to ensure that their take-home pay remained in the upper level nationwide for family practicedoctors.

The settlements also resolve allegations that FMC, Dr. Serbin, and Victoria Serbin submitted and caused the submission of false claims toMedicare and TRICARE for medically unnecessary laboratory services by creating custom laboratory panels comprised of diagnostic testsnot appropriate for routine measurement, performing these tests without an order from the treating physician, implementing standing ordersto assure these custom panels were performed with defined frequency and not in reaction to clinical need, and programming FMC’s billingsoftware to systematically change certain billing codes for laboratory tests to ensure payment by Medicare.

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The allegations settled September 11, 2017 arose from a lawsuit filed by a physician formerly employedby FMC, Dr. Catherine A. Schaefer, under the whistleblower provisions of the False Claims Act. Underthe act, private citizens can bring suit on behalf of the government for false claims and share in anyrecovery. Dr. Schaefer will receive $340,510.

As part of the settlement announced today, FMC and the Serbins have also agreed to enter into aCorporate Integrity Agreement with the Department of Health and Human Services, Office of InspectorGeneral (HHS-OIG), which ensures the Serbins will have no management role in FMC for five yearsand obligates FMC to undertake other substantial internal compliance reforms, including hiring an independent review organization toconduct annual claims reviews.

Galena Biopharma Inc. to Pay More Than $7.55 Million to Resolve Alleged False Claims Related to OpioidDrug

Galena Biopharma Inc. (Galena) will pay more than $7.55 million to resolve allegations under the civil False Claims Act that it paidkickbacks to doctors to induce them to prescribe its fentanyl-based drug Abstral, the Department of Justice announced today.

The United States contends that Galena paid multiple types of kickbacks to induce doctors to prescribeAbstral, including providing more than 85 free meals to doctors and staff from a single,high-prescribing practice; paying doctors $5,000, and speakers $6,000, plus expenses, to attend an“advisory board” that was partly planned, and attended, by Galena sales team members and payingapproximately $92,000 to a physician-owned pharmacy under a performance-based rebate agreementto induce the owners to prescribe Abstral. The United States also contends that Galena paid doctors torefer patients to the company’s RELIEF patient registry study, which was nominally designed tocollect data on patient experiences with Abstral, but acted as a means to induce the doctors to prescribe

Abstral. Galena has not marketed any pharmaceutical drug since the end of 2015.

Two of the doctors who received remuneration from Galena were tried, convicted and later sentenced to prison in the U.S. District Courtfor the Southern District of Alabama following a jury trial of, among other counts, offenses relating to their prescriptions of Abstral.Galena cooperated in that prosecution.

The settlement resolves a lawsuit filed by relator Lynne Dougherty under the whistleblower provisions of the False Claims Act, whichpermit private parties to file suit on behalf of the United States and obtain a portion of the government’s recovery. As part of today’sresolution, Ms. Dougherty will receive more than $1.2 million. The matter remains under seal as to allegations against entities other thanGalena.

One Year and 1 Day for Conspiracy to Commit Healthcare Fraud

SUNYUP KIM, age 41, of Granada Hills, CA, was sentenced September 7, 2017 after previously pleading guilty to conspiracy to commithealthcare fraud.

U.S. District Judge Eldon E. Fallon sentenced KIM to 1 year and 1 day in prison along with $93,927 in restitution.

On June 11, 2015, KIM was indicted along with three other defendants in an 8-count indictment chargingapproximately $38 million in Medicare fraud.

According to court documents, the $38 million fraud scheme centering on the distribution of “talking glucosemeters” that were not medically necessary and were often not even requested. KIM, along with the other 3defendants, operated Care Concepts, LLC, which was based in Metairie, and Choice Home MedicalEquipment and Supplies (Choice), which was based in Chatsworth, California. KIM and the other 3defendants, paid kickbacks to workers at call centers in California and South Carolina, from which operatorswould cold-call Medicare recipients to convince them to accept talking glucose meters and related supplies.From 2007 through 2015, KIM and the other 3 defendants caused thousands of claims to be submitted toMedicare through Care Concepts and Choice, virtually all of which were fraudulent.

National Dental Clinic Chain to Pay $1.3 Million to Resolve Allegations of Overbilling Medicaid

Dental Dreams, LLC, a national dental chain with locations in Massachusetts, agreed on September 5, 2017 topay $1.375 million to resolve allegations that it improperly billed the Massachusetts Medicaid program(MassHealth) for unnecessary and unjustifiable dental procedures.

Medicaid is designed to provide health care services to some of the most vulnerable members of our societyand it’s our agency’s mission to ensure government health funds are spent properly. Working with Federal andState partners, the Department of Justice continues to hold accountable any medical professional who, just toenrich themselves, bills Medicaid for more intensive and expensive services than those actually provided.

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The settlement resolves allegations that Dental Dreams overbilled the Massachusetts Medicaid program for surgical extractions of teeth andfor a specific kind of oral examination.

The settlement resolves a lawsuit filed by a former employee under the whistleblower provisions of the False Claims Act, which permitsprivate parties to sue on behalf of the government for false claims for government funds and to receive a share of any recovery.

Leader of Multi-Million Dollar Medical Kickback Ring Sentenced to Prison for Bribing Dozens of Doctors inExchange for Scan Referrals Worth Several Million Dollars

Rehan “Ray” Zuberi, the mastermind behind a multi-million dollar medical kickback ring, was sentenced toprison September 5, 2017 for his role in bribing dozens of doctors in exchange for patient referrals to thenetwork of medical imaging centers he owned.

Zuberi, 48, of Boonton, was sentenced to eight years in state prison, including two years and eight months ofparole ineligibility, and ordered to pay $1 million in restitution by Superior Court Judge Salem Vincent Ahtoin Morris County. The former owner of Diagnostic Imaging Affiliates (DIA), an umbrella corporation thatmanaged 10 diagnostic imaging facilities in the state, was also banned for life from being a provider under theMedicaid program, or working in a Medicaid facility, and all other government health programs.

“Rehan Zuberi was the mastermind behind a criminal enterprise that treated patients like commodities to bebought and sold for profit,” said Attorney General Porrino. “This man made millions by conspiring withdoctors to deprive patients of their right to honest services based on sound medical judgment. He will nowserve a lengthy prison sentence befitting his leadership role in this appalling corruption of the medicalprofession.”

Zuberi pleaded guilty in 2015 to charges of first-degree money laundering and second-degree conspiracy to commit commercial bribery.Zuberi admitted to spearheading the commercial bribery ring in which he, his wife, and numerous other DIA associates paid hundreds ofthousands of dollars in kickbacks to dozens of medical practitioners, including doctors and chiropractors, in return for patient referralsworth several million dollars to DIA facilities throughout northern and central New Jersey.

“The investigation of Zuberi and his criminal cohorts revealed how easily corruption and greed can spread like a cancer through themedical field,” said Acting Insurance Fraud Prosecutor Chris Iu. “The investigation alsodemonstrated our commitment to rooting out and eradicating that cancer to protect New Jerseypatients and ensure the integrity of our insurance industry. Any healthcare professional tempted touse their patients as cash cows should ask themselves if they’re prepared to do time in prison.”

Zuberi and his DIA associates were arrested in “Operation RayScam” in 2014. The investigationrevealed that from 2008 to 2014, Zuberi and various owners/operators, officers, managers andaccountants of the DIA organization paid kickbacks to medical practitioners in return for patientreferrals to DIA testing centers for expensive diagnostic tests such as MRIs and PET scans.

These kickbacks were paid from “shell” corporations created by the Zuberi enterprise and were delivered in the form of cash, checks, giftcards, lavish dinners and expensive vacations. The Zuberi enterprise also disguised the payment of kickbacks by providing doctors services(e.g., patient transportation and office renovations). By obtaining referrals through the alleged kickback scheme, the Zuberi enterprise mademillions of dollars in illegal profits. Under state law, medical practitioners are not permitted to accept a benefit in exchange for a referral.

The investigation further determined that Zuberi financially facilitated the criminal enterprise by making numerous structured cashwithdrawals to circumvent the statutory reporting requirements that are triggered by large cash withdrawals.

Five of Zuberi’s DIA associates have pleaded guilty in the scheme and were sentenced:

Humara Paracha, 41, of Boonton Township, Rehan Zuberi’s wife and president of DIA. Pleaded guilty to third-degree conspiracy tocommit commercial bribery and was sentenced to two years of probation and ordered to pay $1 million in restitution jointly and severallywith Zuberi.

Faisal L. Paracha, 34, of Fords, Zuberi’s brother-in-law and president of DIA’s American Imaging Center ofWest Orange. Pleaded guilty to second-degree commercial bribery and was sentenced to three years in stateprison and ordered to pay $1 million jointly and severally with Zuberi.

Baber “Bob” Eskar, 52, of Pompton Lakes, Zuberi’s close associate and chief operating officer of DIA.Pleaded guilty to third-degree tampering with public records and was sentenced to two years of probation.

Jose Lopez, 55, of Passaic, Zuberi’s driver. Pleaded guilty to third-degree commercial bribery and third-degreemoney laundering and was sentenced to three years of probation.

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Abid Syed, 40, of East Hanover, administrator and financial controller of DIA. Pleaded guilty to third-degree falsifying records and wassentenced to two years of probation.

Three other DIA administrators were admitted into the Pre-Trial Intervention program.

Zuberi is awaiting sentencing in connection with charges stemming from a separateinvestigation by the Office of Insurance Fraud Prosecutor. In 2015 he pleaded guilty tosecond-degree conspiracy to commit theft by deception receiving reimbursements from insurersfor repairs well in excess of what he had actually paid, thus receiving more than $100,000 inoverpayments.

Of the medical practitioners charged in connection with Zuberi’s criminal enterprise, six ofthose defendants were sentenced to probation or entered the Pre-Trial Intervention program.Two defendants, Budd Lake chiropractor Dr. Alexander Dimeo, and Totowa chiropractor Dr.

Ronald Hayek, pleaded guilty to third-degree conspiracy to commit commercial bribery in connection with Zuberi’s enterprise.

Dimeo and Hayek also pleaded guilty to charges of conspiracy, commercial bribery, money laundering, and failure to pay taxes inconnection with an investigation by the Division of Criminal Justice Financial & Computer Crimes Bureau. That investigation centered ona kickback scheme involving Mohammed Shamshair, a Sayreville man who pleaded guilty to acting as a middleman for Zuberi’skickback scheme. Shamshair also pleaded guilty to charges stemming from the Division of Criminal Justice Financial & Computer CrimesBureau investigation, as did South Amboy pain management specialist Dr. Manoj Patharkar, and Irfan Raza, a certified publicaccountant in Valley Stream, N.Y.

The cases of Dimeo and Hayek led to the formation of the Attorney General’s Commercial Bribery Task Force in January 2016. The taskforce includes deputy attorneys general and detectives from the Division of Criminal Justice Financial & Computer Crimes Bureau and theOffice of the Insurance Fraud Prosecutor.

Other Insurance Fraud Convictions

Agent Sentenced to 4 Days in County Jail for Insurance Fraud

Valerie Ann Verdugo, on September 6, 2017, pleaded Nolo Contendere to one misdemeanor count ofinsurance fraud in Kern County Superior Court. Verdugo was sentenced to four days in county jail, threeyears court probation, 80 hours of community service, $11,000.35 restitution to the victim carrier and $570 incourt fines. Verdugo’s license has been suspended. The department is taking appropriate action to revokeVerdugo’s license.

Verdugo, 38, of Bakersfield, was charged with obtaining insurance coverage without paying the carrier onthose policies for more than a decade. Verdugo allegedly used her position as a licensed insurance agent totake advantage of her insurer, which also happened to be her employer.

Verdugo, a licensed agent, surrendered herself to the Kern County Sheriff’s Department and was booked onone felony count of grand theft and one felony count of embezzlement. An investigation by the Department ofInsurance’s Investigations Branch uncovered evidence that while working for an insurance agency inBakersfield, Verdugo would allow her own personal auto and homeowner policies to lapse when premiumswere due and then simply write a new policy with minor changes to avoid detection by auditors. When the premium was not paid and thepolicy lapsed again, Verdugo would allegedly repeat the transaction scheme.

Evidence revealed Verdugo did the same for a number of friends and family, ultimately allowing more than 70 policies to lapse and thenrewriting them. According to investigators, Verdugo’s scheme not only provided her with insurance coverage she did not pay for but led toFarmers insurance losing more than $11,000 in uncollected premiums for insurance coverage the company provided.

The Kern County District Attorney’s Office is prosecuting this case. Department of Insurance investigators served Verdugo with a licensesuspension order on April 16, 2016.

The court should bow its head in shame for a four day sentence for an admitted insurance fraud perpetrator who used her license as aninsurance agent to defraud her employer and her insurers.

Agent Sentenced for Embezzling Over $100K

Suren Hovhannisyan, a former insurance agent, was sentenced in Los Angeles County Superior Court to 180 days in jail and five years offormal probation after pleading no contest to three felony counts of Grand Theft.

Hovhannisyan was also ordered to pay $48,190 in restitution to his victims. The California Department of Insurance has revokedHovhannisyan’s insurance license.

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Hovhannisyan, 27, a licensed insurance agent from North Hollywood was arrested last year at his residence onmultiple felony counts of burglary, grand theft, and unauthorized use of access cards after allegedly schemingto embezzle over $100,000 from his employer and clients for his personal use.

Hovhannisyan reportedly offered fictitious discounts to policyholders if they paid him in cash for theirautomobile insurance. Rather than remitting the cash payments to his employer, Hovhannisyan allegedlydeposited the money into his mother’s bank account for his personal use.

Hovhannisyan was also accused of using the credit cards of some clients without their permission to pay theautomobile insurance premiums of those who paid him with cash. One victim’s credit card was charged 145

times to pay a total of $45,545 in insurance premiums for 80 other policyholders.

Ten Years for Leading Auto Fraud Ring

Michael Charles Young, 30, of Sacramento, the leader of a large auto insurance fraud ring was sentenced recently to more than 10 yearsin state prison for bilking insurance companies out of an estimated $500,000 by filing fraudulent insurance claims.

Detectives are seeking three at-large suspects with outstanding warrants and asking for the public’s help finding them—Jazlyn LadanaBurrell, 20, of Vallejo; Lavina Louise Nunally, 26, and Desiree Patricia Vasquez, 22, both of Sacramento.

An investigation by detectives with the California Department of Insurance and the California Highway Patrol(CHP) uncovered evidence Young and several co-conspirators filed multiple insurance claims totaling anestimated half a million dollars after crashing cars into each other or filing claims on vehicles with existingdamage—known as paper collisions. The case is being prosecuted by the Sacramento County DistrictAttorney’s Office.

According to detectives, Young’s ring operated in the Sacramento area between 2014 and early 2016 filingdozens of claims ranging between $5,000 and $40,000 with a number of insurance companies.

In most cases, false identities were used to register and insure the vehicles used to file claims and accompliceswere provided scripts to use when communicating with insurers. Some defendants allowed their identities tobe used for compensation and then cashed checks issued in their names. The ring grew as friends and familymembers were recruited.

Young was arrested in April 2016, and charged with numerous felonies, including insurance fraud, possession of stolen vehicles, identitytheft, and possession of firearms by a convicted felon.

False Drug Advertising Violates Insurance Frauds Prevention Act

Novo Nordisk will pay the California Insurance Department $1.1 million to settle allegations that Novo Nordisk’s drug Victoza wasextensively promoted for uses not approved of by the Food and Drug Administration, which violates the Insurance Frauds Prevention Act.The settlement stems from allegations in a whistleblower lawsuit filed by Peter Dastous, an Endocrinology Diabetes Care Specialistformerly employed by Novo Nordisk.

Victoza was approved by the FDA for the treatment of adults with Type II diabetes. Dastous, represented by Phillips & Cohen, LLP,alleged Novo Nordisk inappropriately marketed Victoza for use with pediatric patients with Type II diabetesand adult patients who did not have Type II diabetes. The FDA did not approve the use of Victoza for thetreatment of pediatric patients, due to the lack of pediatric studies.

“Illegal and unethical pharmaceutical marketing practices puts patient health at risk in exchange for higherprofits,” said Insurance Commissioner Dave Jones. “The alleged marketing of the drug Victoza to pediatricpatients with Type II diabetes and adults without Type II diabetes not only violated patients’ trust but it’s alsoagainst the law.”

In approving Victoza, the FDA issued a warning that the medication had a risk of tumors caused by MedullaryThyroid Carcinoma (MTC). Victoza’s marketing was inconsistent with the labeling instructions and warningsconcerning the risk of MTC tumors.

The settlement also addresses allegations that Novo Nordisk officials provided its sales force with informationused to create a false or misleading impression, which minimized the importance of the FDA warning concerning the risk of tumors causedby MTC. Certain Novo Nordisk sales representatives allegedly made false or misleading statements designed to circumvent therequirements of the warning issued through the FDA.

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Insurance Agent Told to Stop Conducting Insurance Business

Mark Lauderdale, whose insurance license expired four years ago, continued collecting payments forinsurance policies, but failed to forward all of the money on to insurance companies. The scheme left some ofhis clients without coverage for years. Oklahoma Insurance Commissioner John D. Doak issued a cease anddesist order to a former insurance agent in Cushing.

The Oklahoma Insurance Department reported that investigators discovered that scams like this are extremelyupsetting. We have people making their premium payments like they’re supposed to, thinking they’reprotected from financial disaster, but in reality, they’re not. If a fire burns their home to the ground, they’ll beout on the street because the insurance policy they are paying for doesn’t actually exist. This is completelyunacceptable.”

Lauderdale, whose clients include a small town in Payne County and a senior citizen activity center, hasn’thad a valid insurance license since May 31, 2013. Investigators found he created false documents to convincehis clients that they were insured, when in fact they were not. Despite not having a license, Lauderdaleadvertised his services in the Cushing phone book. He told investigators he had between 300 and 400 activeclients.

Lauderdale was fined $5,000 in 2003 for misappropriation of insurance premiums. His license was suspended onMay 31, 2013 when he failed to submit an application for renewal.

Former Louisiana Police Officer Guilty of Insurance Fraud

Donald W. Malray, a former Louisiana police officer has pleaded guilty to his role in a vehicle fraud theft andinsurance scheme.

Acting U.S. Attorney Alexander C. Van Hook, in a news release, said that 52-year-old Malray entered the pleabefore U.S. Magistrate Judge Mark Hornsby to one count of mail fraud conspiracy.

Hook’s office says Malray, a former Homer police officer, and another person planned the scheme and then filedan insurance claim to collect the money on the allegedly stolen property’s value. The insurance company paid thepair about $13,000.

Malray faces up to 20 years in prison, three years of supervised release and a $250,000 fine. Sentencing is set forDec. 6.

Zalma Insurance Consultants Provides the Following Services to its Clients:

Acting as a consultant or expert witness on behalf of insurers and insureds in litigation.

Acting as a consultant to the insured in the presentation of a first partyclaim.

Analysis of claims file material to allow the party to present evidence toestablish and document bad faith or the existence of a genuine disputebetween the insurer and insured.

Review of policy wording and claims files to determine if there is a basisfor payment or denial of a claim.

Analysis of insurance litigation for the insurer and the insured.

Consultation with insurance claims personnel on methods to avoid chargesof bad faith.

Consultation with insurers and insureds on insurer compliance with FairClaims Practices laws and regulations.

Training on insurance and insurance law for all insurer

Acting as a mediator to help resolve insurance claims short of litigation.

Analysis of insurance policy wording.

Litigation advice to defense or plaintiffs’ counsel.

Consultation from Zalma Insurance Consultants can save you or your client thousands of dollars inthe defense or prosecution of an insurance dispute. Zalma Insurance Consultants will find a solutionto your insurance claims dispute that is fair, intelligent, beneficial and Economical.

If you only need an opinion letter I will review your entire claim file and policy wording and preparea coverage opinion letter for the flat fee of $4,000.00. Otherwise, my services are billed at $500.00per hour, portal to portal.

Zalma Insurance Consultants provides expert advice to counsel for insurers and plaintiffs’ counsel.Advice from Zalma Insurance Consultants is indispensable to the resolution of insurance disputes.Consultation from Zalma Insurance Consultants can save you, your counsel or client hundreds of hours of investigative and legal work.Call Barry Zalma at 310-390-4455 or e-mail at zalma@zalma.com.

Zalma's Insurance Fraud Letter -- Page 15 of 17

Books from the American Bar Association

The Insurance Fraud Deskbook

Barry Zalma, Esq., CFE, 2014 Paperback, 638 Pages, 7x10

The Insurance Fraud Deskbook is a valuable resource, peer reviewed by the American Bar Association, for those who are engaged inthe effort to reduce expensive and pervasive occurrences of insurance fraud. It explains the elements of the crime and the tort toclaims personnel, and it provides information for lawyers who represent insurers so they can adequately advise their clients.Prosecutors and their investigators can use this book to determine what is required to prove the crime and win their case.

The full text of decisions from courts of appeal and supreme courts across the country are provided so the reader can understand whathappens after the investigation is completed and can apply that information to undertake their own thorough investigations. It allowclaims personnel and their lawyers to understand what errors would cause a defect or a not-guilty verdict.

The effort to reduce insurance fraud requires the assistance of both civil and criminal courts. The Insurance Fraud Deskbook can helpthe prudent fraud investigator, insurance adjuster, insurance attorney, insurance Special Investigation Unit and insurance company

management to attain the information needed to deal with state investigators and prosecutor. Available from the American BarAssociation at:

http://shop.americanbar.org/eBus/Default.aspx?TabID=251&productId=214624; or orders@americanbar.org, or 800-285-2221.

Diminution in Value Damages How to Determine the Proper Measure of Damage to Real and Personal Property

This book was written to provide sufficient information to those who became interested in the issue since the GeorgiaSupreme Court decided State Farm Mutual Automobile Insurance Co. v. Mabry, 274 Ga. 498, 556 S.E.2d 114 (Ga.11/28/2001) and includes cases dealing with the use of diminution in value as a method of determining the amount ofloss incurred by a plaintiff seeking indemnity for damage to real or personal property.

Zalma's Insurance Fraud Letter -- Page 16 of 17

Because confusion has reigned across the United States concerning the proper measure of damages for property damage to property that has beenrepaired, Diminution In Value Damages assists the reader in answering the questions concerning the proper measure of damage in each of the fifty UnitedStates and federal United States jurisdictions

This edition has been totally rewritten and expanded, providing the most extensive and detailed coverage of the issue and a thorough explanation of howto apply diminution in value damages to losses to property.

ISBN: 978-1-63425-295-8, Product Code: 5190524, 2015, 235 pages, 7 x 10, Paperback

Available at http://shop.americanbar.org/eBus/Store/ProductDetails.aspx?productId=203226972

Zalma’s Insurance Fraud Letter

© 2017 by Barry Zalma & ClaimSchool, Inc.

4441 Sepulveda Blvd, CULVER CITY CA 90230-4847

http://www.zalma.com # zalma@zalma.com # http://zalma.com/blog

ZIFL is made available by the publisher for educational purposes only as well as to give you general information and a generalunderstanding of the law, not to provide specific legal advice. By using ZIFL you understand that there is no attorney client relationshipbetween you and the publisher. ZIFL should not be used as a substitute for competent legal advice from a licensed professional attorney inyour state.

The Legend

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award, in 2016.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant and expert witness specializing ininsurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers andpolicyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in Californiafor more than 44 years as an insurance coverage and claims handling lawyer and more than 49 years in the insurancebusiness.

Check in on Zalma’s Insurance 101 – a Videoblog – that allows your people to learn about insurance in three to fourminute increments at http://www.zalma.com/videoblog.

The American Bar Association, Tort & Insurance Practice Section has published Mr. Zalma’s book “The InsuranceFraud Deskbook” available at http://shop.americanbar.org/eBus/Store/ProductDetails.aspx?productId=214624, or

800-285-2221 which is presently available and “Diminution of Value Damages” available athttp://shop.americanbar.org/eBus/Store/ProductDetails.aspx?productId=203226972

Mr. Zalma’s new e-books Heads I Win, Tails You Lose, The Law of Ethical Insurance Claims, the Insurance Law Handbook, CaliforniaInsurance Rescission Law Handbook, Random Thoughts on Insurance - Vol. IV, and Insurance Fraud & Weapons to Defeat Fraud wererecently added and are available at http://www.zalma.com/zalmabooks.html.

Look to National Underwriter Company for the new Zalma Insurance Claims Library, at www.nationalunderwriter.com/ZalmaLibrary Thenew books are Insurance Law, Mold Claims Coverage Guide, Construction Defects Coverage Guide and Insurance Claims: AComprehensive Guide.

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The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly orindirectly, of the use and application of any of the contents of this blog. The information provided isnot a substitute for the advice of a competent insurance, legal, or other professional. The Informationprovided at this site should not be relied on as legal advice. Legal advice cannot be given without fullconsideration of all relevant information relating to an individual situation.

Zalma's Insurance Fraud Letter -- Page 17 of 17