Arrests for January 2010
These arrests were made possible through the cooperation of the Frauds Bureau, law enforcement, the insurance industry and the public.
To report suspected incidents of insurance fraud, call 1-888-FRAUDNY
CAUGHT!
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- SENTENCED
James Kernan, former president of Oriska Insurance Company, and his wife, Marlene Kernan, former president of monument Agency which acted as the agent for Oriska, had pleaded guilty on 3/20/09 to one count of knowingly and willfully permitting Robert “Skip” Anderson, a three-time convicted felon, to be engaged in the business of insurance. In addition to Oriska, James Kernan ran two other insurers and an agency from headquarters in Oriskany, NY. On 1/29/10, he was sentenced to five years’ probation, 400 hours of community service and a $250,000 fine. Marlene Kernan was sentenced to two years’ probation and a fine of $182,708. Anderson pleaded guilty in July 2008 to conspiracy to commit mail fraud and wire fraud and awaits sentencing. James Kernan and Anderson were indicted on 1/30/08 on charges that they schemed to collect millions of dollars in premiums from professional employer organizations (PEOs) on behalf of Oriska in Arizona, California and Pennsylvania, where they are not licensed, for workers’ compensation policies that provided no real coverage. Both men have claimed that the policies were issued in New York, where Oriska is licensed, and transferred by the PEOs to affiliates in other states. In July 2006, the FBI raided Kernan’s offices in Oriskany and a motel that Anderson was using as a business office. Within several days, the Superintendent of the New York Insurance Department took over Oriska with court approval. However, the company was returned to Kernan by the New York Supreme Court. Kernan subsequently resigned his positions as CEO and member of the boards of directors of the three insurance companies. Oriska and one other insurer were given over to new management and the third company was sold.
On 1/27/10, Joseph DeVito and his wife, Mary Ann Palladino-DeVito, were sentenced to 1 2/3-to-5 years in prison. They were arrested on 7/1/09 and charged with stealing more than $1 million from clients of the title insurance agency they operated. They accepted payments for mortgage fees, mortgage taxes, customer fees, real property filing fees and escrow account funds and misappropriated the funds for their own purposes. They were also charged with failing to pay New York State personal income taxes from 2002 through 2004. They had pleaded guilty to grand larceny in the 2nd degree and allocuted to failure to pay income taxes for 2002, 2003 and 2004 on 1/19/10.
- TOO MANY FIRES
Arrested on 1/29/10
Charged with arson in the 3rd degree
An investigation by the Frauds Bureau resulted in the arrest of an upstate woman charged with setting fire to a dwelling on 9/22/09. Investigators learned that she recently reported a fire at her current residence that was extinguished before significant damage occurred. Furthermore, records showed that her mobile home in Pennsylvania had been destroyed by fire in 2005 and another mobile home in Schoharie County was destroyed by fire in August 2007. The cause of both those fires was undetermined.
- OWNER GIVE-UP
Arrested on 1/28/10
Charged with insurance fraud in the 3rd degree, grand larceny in the 4th degree, falsely reporting a crime in the 3rd degree, offering a false instrument for filing in the 2nd degree and false written statement
A Staten Island couple was arrested in connection with an owner give-up case. At 5:55 a.m. on 7/8/09, the couple reported to the NYPD that their 2008 Lincoln MKX SUV had been stolen. However, an investigation by the Frauds Bureau, the NYPD’s Auto Crime Division and the FDNY Fire Marshals revealed that units from the FDNY responded to a vehicle fire at 10:18 a.m. on 7/7/09. The vehicle was identified as the SUV that had been reported stolen by the couple. The couple was charged with deliberately setting fire to the vehicle in an effort to collect an insurance payment.
- IDENTITY THEFT
Arrested on 1/28/10
Charged with forgery in the 2nd degree, identity theft in the 2nd degree and insurance fraud in the 5th degree
A Rochester man sought treatment at a local health center on 2/6/09 and later submitted a claim to MVP Health Insurance. MVP issued a check for $933.15 to the medical provider in payment of the claim. However, an investigation by the Frauds Bureau and the Monroe County Sheriff’s Office revealed that the defendant had used the insurance identification card of the ex-husband of an acquaintance for the medical treatment. The acquaintance subsequently gave a statement to investigators admitting that she had given the insurance card to the defendant.
- HIRED TO SET FIRE
Arrested on 1/26/10
Charged with insurance fraud in the 3rd degree and falsely reporting an incident
A joint investigation by the Frauds Bureau and the Buffalo Police and Fire Departments resulted in the arrests of two defendants in this case. Defendant #1 reported to the Buffalo Police that his car had been stolen and filed a $2,900 claim with GEICO Insurance Company for the loss. However, investigators found evidence that he enlisted defendant #2 to burn the car and offered to pay him $900 from the insurance payout. During an interview, both defendants confessed to the scheme. GEICO never paid the claim.
- FRAUDULENT CLAIM
Arrested on 1/26/10
Charged with insurance fraud in the 3rd degree
An investigation by the Frauds Bureau led to the arrest of an upstate woman for attempting to defraud State Farm Insurance Company. The suspect reported that her garage was broken into and an ATV, a John Deere tractor and four snow tires were stolen. She subsequently filed a claim for the loss and in support of the claim, she submitted a $4,800 receipt for the purchase of the tractor. However, investigators found that Deere & Company had no record of the purchase. When shown the evidence, the suspect admitted that the receipt was fraudulent.
- CAUSED ACCIDENTS
Arrested on 1/25-1/20/10
Charged with grand larceny in the 4th degree, insurance fraud in the 4th degree, falsifying business records in the 2nd degree and offering a false instrument for filing in the 2nd degree
An ongoing no-fault fraud investigation resulted in the arrest of two men – one on 1/20 and the second on 1/25 – who were charged with intentionally crashing their vehicles into other vehicles. Rental Insurance Services was subsequently billed for more than $7,000. Nineteen other defendants have previously been arrested in connection with this investigation which is being conducted by the Frauds Bureau and the NYPD’s Fraudulent Accident Investigation Squad.
- NOT HIS WIFE
Arrested on 1/25/10
Charged with insurance fraud in the 3rd degree and grand larceny in the 3rd degree
A Rochester man was arrested for falsely naming his live-in girlfriend as his wife on the Excellus Health Plan insurance he received through his employer. The woman, who was not arrested, used the insurance to pay for $13,700 in medical, dental and prescription drug benefits she was not entitled to receive.
- FORGED FORMS
Arrested on 1/23/10
Charged with offering a false instrument for filing in the 1st degree and possession of a forged instrument in the 2nd degree
A woman who was the companion of a man who was collecting workers’ compensation benefits falsely claimed to the State Insurance Fund that she was his wife. She told the Fund that Work Activity Report forms had been lost and requested replacement forms. When she was told that her “husband” would have to request the forms personally, she had a man call the Fund, identify himself as the claimant and request the forms. She subsequently completed the Work Activity Reports, forged her “husband’s” signature on the forms and submitted them to the Fund. She stated on the forms that the claimant was not in jail when in fact he was incarcerated from 7/10/08 to 11/6/08. He therefore received benefit checks to which he was not entitled. An investigation by the Frauds Bureau and the State Fund led to her arrest.
- PHOTO OP
Arrested on 1/21/10
Charged with insurance fraud in the 3rd degree
When his 2007 Toyota Scion was involved in an accident, the owner took photos at the scene and then brought the car to a Brooklyn body shop for repairs. He was given an estimate of $1,000 for the repair work. However, the eventual charge for the repairs was $6,000 and in addition, the car was unsafe to drive. With the photos as evidence, a worker at the body shop was arrested and charged with enhancing the damage to the car. An investigation by the Frauds Bureau and the NYPD led to the arrest.
- COVERAGE AFTER THE FACT
Arrested on 1/21/10
Charged with insurance fraud in the 4th degree and attempted grand larceny in the 4th degree
When the defendant in this case contacted GEICO Insurance Company on 7/25/09 to file a claim for damage to his 1995 Ford Contour, the insurer informed him that he did not have comprehensive coverage. On 7/26/09, the defendant added comprehensive coverage to his policy and on 8/9/09, he filed a second claim with GEICO for the exact same damage he had reported on 7/25. An investigation by the Frauds Bureau and the Niagara Falls Police Department led to his arrest.
- MISCLASSIFIED
Arrested on 1/20/10
Charged with insurance fraud in the 2nd and 3rd degrees, grand larceny in the 3rd and 4th degrees, conspiracy in the 4th degree, falsifying business records, scheme to defraud in the 1st degree and petit larceny
An investigation by the Frauds Bureau, the Queens DA’s Office, the DMV’s Office of Fraud Investigation and the New York Auto Insurance Plan resulted in the arrest of a licensed insurance broker who worked out of his home on Long Island. According to the charges, he and another person not yet apprehended conspired to file fraudulent paperwork with several insurance companies. The defendant was accused of intentionally classifying 21 commuter vans, known as dollar vans, as vanpools. Vanpools cost thousands of dollars less to insure than dollar vans. As a result, he allegedly defrauded the insurers out of more than $150,000 in owed premiums.
- DELIBERATELY SET
Arrested on 1/14-15/10
Charged with grand larceny in the 2nd degree, insurance fraud in the 2nd degree, arson in the 3rd degree, reckless endangerment in the 1st degree, criminal mischief in the 2nd degree and conspiracy in the 3rd degree
At 4:30 a.m. on 12/21/09, a fire occurred at a diner in the Bronx causing major damage to the floors and walls. The fire escalated causing severe damage to two adjoining buildings and minor damage to a third building. The fire was declared incendiary by the FDNY Fire Marshals. Investigators interviewed a handyman who worked part-time at the diner. After being read his Miranda rights, he admitted that he was paid by the owner to set fire to the diner because business had declined. He stated that he poured gasoline on boxes in the basement and ignited it. Both the owner and the handyman were arrested. The investigation was conducted by the Frauds Bureau and the Fire Marshals.
- FAILURE TO DISCLOSE
Arrested on 1/13/10
Charged with insurance fraud in the 3rd degree, grand larceny in the 3rd degree and violation of the Workers’ Compensation Law
An upstate man began collecting workers’ compensation benefits following a work-related back injury in 2007. However, an investigation by the Frauds Bureau, the State Insurance Fund and the Workers’ Compensation Board’s Office of the Fraud Inspector General found evidence that he falsified a medical examination by failing to disclose a similar injury that had occurred in 2001. As a result, he was granted full wage-replacement benefits rather than the 50% of full benefits the State Fund would have granted had they known about the previous injury. He thereby fraudulently collected $6,600 in benefits. In 2003, this suspect pleaded guilty to insurance fraud and workers’ compensation fraud for exaggerating the extent of a disability caused by the 2001 injury and was sentenced to pay $8,400 in restitution, serve 60 days in jail and five years’ probation.
- INFLATED CLAIM
Arrested on 1/12/10
Charged with insurance fraud in the 4th degree
On 11/6/08, a Rochester man reported to Merchants Mutual Insurance Company that he was involved in an auto accident two days earlier, causing front-end damage to his 2007 GMC Sierra. On 7/6/09, he submitted a receipt to the insurer stating he paid $2,296 in cash for repair work. However, an investigation by the Frauds Bureau uncovered evidence that the suspect had actually paid $837 for the repairs and had altered the receipt to show the higher amount. He was arrested and charged with insurance fraud.
- FALSE REPORT
Arrested on 1/12/10
Charged with insurance fraud in the 3rd degree
An investigation by the Frauds Bureau and the NYPD resulted in the arrest of a Queens man charged with insurance fraud. Evidence indicated that he falsely reported his 2004 Nissan stolen. In fact, he had lent the car to his cousin who had an accident while driving it.
- OBSERVED
Arrested on 1/8/10
Charged with insurance fraud in the 3rd degree, offering a false instrument for filing in the 1st degree and violation of Section 114 of the Workers’ Compensation Law
Following a work-related injury, the defendant in this case began collecting workers’ compensation benefits. However, surveillance conducted during an investigation by the Frauds Bureau observed him driving a livery cab on numerous occasions. Moreover, records and a statement from the livery cab company corroborated his employment status. As a result of the fraud, he collected $7,650 to which he was not entitled.
- INFORMATION CONCEALED
Arrested on 1/7/10
Charged with violation of Section 114-1 of the Workers’ Compensation Law
An investigation by the Frauds Bureau and the State Insurance Fund resulted in the arrest of a Suffolk County man who allegedly concealed payroll and sales information from the Fund in order to reduce the amount of his workers’ compensation premium. He submitted documents to the Fund stating that he did only plumbing work, had no workers on his payroll and reported $235,000 in gross sales for the period from 7/4/06 to 4/7/08. However, an audit of a general contractor who was a Fund policyholder revealed that the contractor had paid the defendant $660,000 for carpentry work during that time period, thus defrauding the Fund of $76,677 in premiums.
- RECYCLER CAUGHT
Arrested on 1/7/10
Charged with insurance fraud in the 3rd degree and violation of the Workers’ Compensation Law
Following a job-related injury on 1/5/01, the defendant in this case began collecting workers’ compensation benefits. Between 7/9/05 and 7/31/09, he submitted 13 Work Activity Reports stating that he was not working in any capacity. However, an investigation by the Frauds Bureau, the State Insurance Fund and the Workers' Compensation Board’s Office of the Fraud Inspector General found evidence that from June 2005 to November 2009, he was operating a scrap metal recycling business for which he earned nearly $68,300. As a result, he collected $47,969 to which he was not entitled.
- BLACK MARKET PURCHASE
Arrested on 1/6/10
Charged with identity theft in the 1st degree and grand larceny in the 3rd degree
A Columbia County woman – who admitting buying a Social Security number on the black market to create a false identity when she entered the U.S. from Mexico more than a decade ago – was charged with fraudulently collecting more than $12,000 in workers’ compensation benefits. Following an injury she sustained while working as a laborer in 2001, the defendant began collecting benefits and continued to accept the benefits even after gaining employment with a medical clinic as a driver and interpreter for Spanish-speaking immigrants traveling to medical appointments. She worked at this job using an alias and the stolen social security number which belonged to a deceased person. An investigation was initiated after the State Insurance Fund conducted a routine check and discovered she was working. The Frauds Bureau, the State Fund and the Workers' Compensation Board’s Office of the Fraud Inspector General pooled resources in the investigation.
- NO THEFT OCCURRED
Arrested on 1/6/10
Charged with insurance fraud in the 4th degree
The Middletown Police Department contacted the Frauds Bureau requesting assistance in obtaining a case file from Erie Insurance Company involving an Orange County man who reported to the insurer that a digital diagnostic automobile computer had been stolen from his home. In support of the claim, he included a receipt as proof of purchase. A Frauds Bureau investigator was instrumental in arranging for the PD to interview a potential key witness who had moved to Florida. The interview was necessary before an arrest could be made. The investigation subsequently revealed that the suspect did own such a computer but it was never stolen and the receipt was in fact fraudulent.
- FULLY EMPLOYED
Arrested on 1/5/10
Charged with offering a false instrument for filing and violation of the Workers’ Compensation Law
A cook from Sullivan County sustained an on-the-job injury and began collecting workers’ compensation benefits. While collecting these benefits, she submitted a Work Activity Report stating that she was unable to work. However, an investigation by the Frauds Bureau, the State Insurance Fund’s Division of Confidential Investigations and the State Police revealed that she was fully employed at a local diner while collecting benefits to which she was not entitled.
- JUST THE FACTS PLEASE
Arrested on 1/5/10
Charged with insurance fraud in the 3rd degree and false written statement
An upstate laborer reported to his insurer that his car had been stolen from his work place and filed a claim for the loss. He then reported to the Dutchess County Sheriff’s Office that the car had been stolen from his driveway. He later informed the Sheriff’s Office that the car had been stolen from a gas station when he left it running while he paid for gas. Some time after, he told the Sheriff’s Office that he had found the car parked on a local street and that it had not been stolen at all. He had simply forgotten where he had parked it. He was arrested at his home where he admitted that he had lent the car to a drug dealer before originally reporting it stolen. The Frauds Bureau assisted the Sheriff’s Office in this investigation.
- TRUMPED UP TESTIMONY
Arrested on 1/5/10
Charged with perjury in the 1st degree, grand larceny in the 3rd degree and violation of the Workers’ Compensation Law
Following a work-related injury, the defendant in this case began collecting workers’ compensation benefits. During the benefit period, she testified at two Workers’ Compensation Board hearings that she was not working in any capacity. However, an investigation by the Frauds Bureau, the State Police and the State Insurance Fund’s Division of Confidential Investigations uncovered evidence that she was employed as a sales manager at a real estate company. As a result, she fraudulently received $8,000 in benefits.
- TASK FORCE AT WORK
Arrested on 1/4/10
Charged with violation of Section 1347 of Title 18 of the U.S. Code
An investigation by the Western New York Health Care Fraud Task Force (of which the Frauds Bureau is a member) led to the arrest of a podiatrist in Buffalo who was charged with repeatedly billing Medicare and private insurance companies for expensive treatments. In fact, he was providing only routine foot care.
PRIOR SUPPLEMENTS
December 2009
- NO BOAT
Arrested on 12/29 09
Charged with conspiracy in the 4th degree
Two suspects were arrested in November and a third on 12/29/09 on charges that they conspired to defraud Markal Insurance Company. They allegedly participated in a scheme in which they filed bogus paperwork to obtain an Alabama title to a nonexistent high performance race boat. Once the title was obtained, one of the suspects insured the boat through Markal. He subsequently reported the boat stolen in an attempt to collect a $160,000 insurance payment. The Frauds Bureau conducted the investigation that led to the arrests.
