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Progressive’s Side of the Insurance Case That Blew Up on the Internet

The following is an excerpt from an article in 

The New York Times
Saturday, August 18, 2012

Progressive’s Side of the Insurance Case That Blew Up on the Internet

By RON LIEBER

It isn’t often that automobile insurance becomes the subject of nationwide outrage. So when it does happen, it’s worth a peek inside all our policies to figure out how they actually work and what the insurance companies are up to behind the scenes.

This week, a man named Matt Fisher took to his Tumblr site to call out Progressive, which insured his sister, Katie, two years ago when she died in a car accident. The company recently sent its lawyer to court — not to assist her estate but to argue that the driver of the other car, who had a suspended license and little insurance, was the innocent party.

Or, as Mr. Fisher put it, “My Sister Paid Progressive Insurance to Defend Her Killer in Court.”

The outrage on social media came swiftly, and it was brutal. Progressive’s initialpublic comments parsing the definition of “defendant” only opened up the company to further vitriol.

After several requests, I finally got Progressive to come to the phone and explain in detail, out loud and on the record, why it chose to fight Ms. Fisher’s family in court.

In the end, the saga of Ms. Fisher and her family isn’t just about whether Progressive made a needless mess of its reputation this week. And it’s not simply about whether everyone should drop their Progressive policies in protest either, as scores of people have threatened to do. We also need to take a close look at our own coverage and determine whether we have a fundamental misunderstanding of how our various auto insurance policies actually work.

Before @fishermatt became a social media phenomenon, he was a devastated older brother. His sister was just 24 when she died in Baltimore with two degrees from Johns Hopkins University to her name and nothing but promise in front of her.

The insurance machinery began its work relatively quickly. Ms. Fisher had $100,000 in liability coverage per person in this accident, and three people (and the lawyers negotiating for them) wanted a piece of it: a passenger in her car, the driver of the car that hit her and a passenger in that car.

Progressive sized up its legal risks. Three individuals thought Ms. Fisher had run a red light — the police officer who filed the accident report (but who did not witness it), Ms. Fisher’s passenger and the driver of the other vehicle. On the other hand, one eyewitness said that it was the other driver who ran the light.

At that point, Progressive chose to pay the liability claims. “If we determine that we shouldn’t pay any third parties, our insured can get sued and be responsible for any amount over the limit,” said Marcia Marsteller, the business leader in Progressive’s legal department for claims. “If we make the wrong call and don’t pay them and perhaps we should have, there is an issue for her estate.”

For more, visit www.nytimes.com.

Final Baltimore Police Officer Pleads Guilty in Towing Extortion Scheme

Final Baltimore Police Officer Pleads Guilty in Towing Extortion Scheme 
Fifteen Police Officers Have Pleaded Guilty in the Extortion Scheme in Federal Court and Another Officer Pleaded Guilty in State Court

U.S. Attorney’s OfficeMarch 22, 2012

District of Maryland(410) 209-4800

BALTIMORE—Baltimore Police officer Jaime Luis Lugo, age 36, of Aberdeen, Maryland, pleaded guilty today to conspiring to commit and committing extortion under color of official right in connection with a scheme in which brothers Hernan Alexis Moreno and Edwin Javier Mejia paid Lugo and over 50 other officers to arrange for their car repair company, Majestic, rather than a city-authorized company, to tow vehicles from accident scenes and make repairs.

The guilty plea was announced by United States Attorney for the District of Maryland Rod J. Rosenstein, Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation; and Baltimore Police Commissioner Frederick H. Bealefeld, III.

According to his guilty plea, beginning in 2010, Moreno and Mejia agreed with Lugo that while acting in his capacity as Baltimore Police Department (BPD) officer at accident scenes, Lugo would contact Moreno and Mejia for towing and repair services for vehicles even though Majestic was not an authorized tow company for the city of Baltimore. In exchange, Mejia or Moreno would pay Lugo $300 for each vehicle that arrived at Majestic. Lugo then began to refer vehicles on a regular basis to Moreno in exchange for payment, usually by contacting Moreno by cell phone.

Specifically, while on the scene of an accident, Lugo would contact Moreno and provide him with the details of the accident, including the type and extent of damage to the car or cars, insurance information, and contact information for the car’s owner. It was agreed that Lugo, while performing his official duties as a police officer, would persuade accident victims to allow their cars to be towed or otherwise delivered to Majestic by telling the victims that Majestic could tow the car, provide repair services, help with the insurance claim, assist in getting a rental car, and waive the owner’s deductible. Lugo advised accident victims that they should not call their insurance company until after they spoke to Moreno or Mejia.

Lugo also understood and agreed that Moreno and Mejia would create additional damage to certain vehicles in order to increase the vehicle insurance claims, thereby increasing the net profit for Majestic as well as covering both the cash bribe payment to Lugo and the payment of the vehicle owner’s deductible. When referring vehicles from accident scenes, Lugo often discussed with Moreno whether a particular vehicle needed more damage. Lugo also falsified his police reports on several occasions in order to make it appear that the damage added to a vehicle by Majestic had been caused by an accident so that the insurance company would not question the repairs. Moreno paid Lugo $200 in cash in exchange for falsifying a police report.

From at least October 2010 to February 2011, Moreno and Mejia paid Lugo $6,000 in cash for vehicles that he had referred to Majestic. Those payments, plus the cost of the additional damages that Moreno and others inflicted upon various accident vehicles in the form of insurance claims paid by the various insurance companies, caused a total loss of between $120,000 to $200,000.

Lugo faces a maximum sentence of five years in prison for the conspiracy, and a maximum of 20 years in prison and a fine of $250,0000 or twice the amount of the gross gain or loss for extortion. U.S. District Judge Catherine C. Blake has scheduled sentencing for July 10, 2012 at 9:00 a.m.

Hernan Alexis Moreno, age 30, of Rosedale; and Edwin Javier Mejia, age 27, of Middle River, pleaded guilty to the extortion conspiracy and face a maximum sentence of 20 years in prison. Their sentencing has not yet been scheduled.

Fifteen Baltimore Police officers have pleaded guilty to their participation in the extortion scheme in federal court and one officer pleaded guilty in state court.

United States Attorney Rod J. Rosenstein praised the FBI and the Baltimore Police Department for their work in the investigation. Mr. Rosenstein thanked Assistant United States Attorneys Tonya N. Kelly and Kathleen O. Gavin, who are prosecuting the case.

2 Doctors & 4 Nurses Added to Health Care Fraud Case

Two Doctors and Four Nurses Among 11 New Defendants Added to Case Alleging $20 Million Home Health Care Fraud Conspiracy, Medical Kickbacks, Money Laundering, and Income Tax Evasion 

U.S. Attorney’s OfficeMarch 07, 2012

Northern District of Illinois(312) 353-5300

CHICAGO—Two physicians and four registered nurses are among 11 new defendants who were added to a federal indictment against a suburban Chicago man who operated two home health care businesses for allegedly swindling Medicare of at least $20 million over five years, federal law enforcement officials announced today. Nine of the 11 new defendants allegedly conspired with the initial defendant, Jacinto “John” Gabriel, Jr., to submit millions of dollars in false claims for reimbursement of home health care services purportedly provided to Medicare beneficiaries, which allegedly were never provided or were not medically necessary so that they could profit from the fraudulently-obtained funds. Gabriel and his co-schemers allegedly used the proceeds for various purposes, including using cash to gamble at casinos in the Chicago area and Las Vegas; to buy automobiles, jewelry; to purchase real estate in the United States and the Philippines; to perpetuate the businesses by paying his employees and providing them with gifts; and to bribe physicians and pay kickbacks to others in exchange for patient referrals.

Gabriel, 44, of Berwyn, who had no formal medical training, medical degrees, or licenses to practice as a health care professional, was charged in the new indictment with one count of health care fraud conspiracy, 43 counts of health care fraud, 11 counts of money laundering, and four counts of federal income tax evasion in a 69-count superseding indictment returned yesterday by a federal grand jury, announced Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois. Gabriel was arrested on preliminary charges in February 2011 and was charged alone in a 15-count indictment last summer. He pleaded not guilty to the original charges and is free on bond.

According to the indictment, Gabriel did not identify himself as an owner, but in fact exercised ownership and control over Perpetual Home Health, Inc., based in Oak Forest, and Legacy Home Healthcare Services, which was located on the city’s north side. Both firms have ceased operating and no longer receive Medicare payments. Between May 2006 and January 2011, Perpetual submitted more than 14,000 Medicare claims seeking reimbursement for services allegedly provided to beneficiaries. As a result of those claims, Perpetual received more than $38 million in Medicare payments. Between 2008 and January 2011, Legacy submitted more than 2,000 claims for Medicare reimbursement and received more than $6 million. Neither Perpetual nor Legacy had any sources of revenue other than Medicare funds, the indictment states.

The new defendants are:

Jassy Gabriel, 42, of Berwyn, John Gabriel’s brother, the nominal majority owner of Perpetual and its president, as well as a registered nurse. He was charged with one count of health care fraud conspiracy and one count of filing a false federal income tax return.

Stella Lubaton, 46, of Midlothian, a minority owner of Perpetual and an officer and administrator, as well as a registered nurse. She was charged with one count of health care fraud conspiracy, 16 counts of health care fraud, one count of filing a false federal income tax return, and one count of violating the medical anti-kickback statute.

Nessli Reyes, 35, of Elgin, part-owner of Legacy and its president, as well as a registered nurse. She was charged with one count of health care fraud conspiracy and nine counts of health care fraud.

Charito Dela Torre, 71, of Berwyn, a physician, was charged with one count of health care fraud conspiracy, 12 counts of health care fraud, and three counts of federal income tax evasion.

Ricardo Gonzales, 75, of Orland Park, a physician, was charged with one count of health care fraud conspiracy, 19 counts of health care fraud, and one count of violating the medical anti-kickback statute.

Rosalie Gonzales, 42, of Chicago, a registered nurse and Ricardo Gonzales’ daughter, was charged with one count of violating the medical anti-kickback statute.

James Davis, 37, of West Chicago; Francis Galang, 27, of Crest Hill; and Michael Pacis, 38, of Homer Glen, all data entry employees of Perpetual, were charged with one count each of health care fraud conspiracy.

Regelina “Queenie” David, 58, of Joliet, a Perpetual quality assurance employee, was charged with one count of health care fraud conspiracy.

Kennedy Lomillo, 44, of Mundelein, who provided bookkeeping and payroll services to Perpetual and also prepared a corporate tax return for Perpetual, as well as an individual return for Lubaton, was charged with two counts of aiding and abetting the preparation of false income tax returns.

The indictment also seeks forfeiture of $20 million against the Gabriel brothers and Lubaton.

As part of the conspiracy, Gabriel, acting in various combinations with the nine co-conspirators, allegedly obtained personal information of Medicare beneficiaries to bill Medicare without the beneficiaries’ knowledge or consent; paid bribes and kickbacks in cash and by check, directly and indirectly, to physicians and others in exchange for referrals of patients to Perpetual and Legacy; created false patient files to support fraudulent Medicare claims and submitted false claims based on those records; used Medicare proceeds to pay themselves and others who assisted in carrying out the scheme; and concealed the fraud proceeds by directing Perpetual and Legacy to issue checks payable to fictitious entities, John Gabriel’s friends and associates.

Among other details, the indictment alleges that John and Jassy Gabriel, Lubaton, and Reyes authorized Perpetual and Legacy to pay various amounts, ranging between $200 and $800, to employees and others, including indirectly to Ricardo Gonzales, for each patient they referred and enrolled in home health care services. John Gabriel and others also cold-called Medicare beneficiaries to try to persuade them to enroll with Perpetual and Legacy.

As part of allegedly falsifying patient records, John Gabriel directed Perpetual and Legacy employees, including Davis, Galang, and Pacis, to systematically complete standard forms by listing the same false diagnoses, including arthropathy (joint disease) and hypertension, which enabled them to claim a higher level of Medicare reimbursement, according to the charges.

In addition to the fraud counts, the money laundering charges allege that between October and December 2010, Gabriel cashed 11 checks in amounts under $10,000—usually $9,000 and all involving fraud proceeds—to avoid federal currency transaction reporting requirements.

The four tax evasion counts against John Gabriel allege that for calendar years 2006 through 2009, he failed to pay taxes totaling approximately $889,062 on gross income totaling more than $2.82 million. The three tax evasion counts against Dela Torre allege that for calendar years 2005 through 2007, she failed to pay taxes totaling approximately $158,405 on gross income totaling more than $560,000.

Lubaton was charged with filing a false tax return for 2007 for allegedly failing to report all of her income, which was in excess of the $546,442 that she reported, and Lomillo was charged with aiding and abetting the preparation of her false return. Jassy Gabriel was charged with filing a false tax return for 2007 for allegedly failing to report all of his adjusted gross income, which exceeded the $603,974 that he reported, and Lomillo was charged with aiding and abetting the preparation of his false return.

Health care fraud conspiracy and each count of health care fraud carries a maximum penalty of 10 years in prison and a maximum fine of $250,000, or an alternate fine totaling twice the loss or twice the gain, whichever is greater, as well as mandatory restitution. Each count of money laundering carries a maximum 20-year prison term and a maximum fine of $500,000. Violating the medical anti-kickback statute carries a maximum penalty of five years in prison and a $250,000 fine. Each count of tax evasion carries a five-year maximum prison term, while each count of filing a false income tax return carries a three-year maximum, and a $250,000 fine. In addition, defendants convicted of tax offenses must pay the costs of prosecution and remain liable for any and all back taxes, as well as a potential civil fraud penalty of 75 percent of the underpayment plus interest. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

Mr. Fitzgerald announced the charges together with Lamont Pugh III, special agent in charge of the Chicago Region of the U.S. Department of Health and Human Services Office of Inspector General; Robert D. Grant, special agent in charge of the Chicago Office of Federal Bureau of Investigation; and Alvin Patton, special agent in charge of the Internal Revenue Service Criminal Investigation Division. The Railroad Retirement Board Office of Inspector General also participated in the investigation, which is continuing. The investigation is being conducted by the Medicare Fraud Strike Force, which expanded to Chicago in 2011, and is part of the Health Care Fraud Prevention and Enforcement Action Team (HEAT), a joint initiative between the Justice Department and HHS to focus their efforts to prevent and deter fraud and enforce anti-fraud laws around the country.

The government is being represented by Assistant U.S. Attorneys Brian Havey, Raj Laud, and Tony Iweagwu, Jr.

The public is reminded that charges are not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.