Fraud of the Month: Politicians misappropriate insurance proceeds

Tony Matula wants his job back. He was a councilman for the city of Lebanon, Pa. Then panic and greed derailed his career when he made a false damage claim after crashing his car into a utility pole.

Matula says he’ll run for re-election to the council in 2020. He resigned when prosecutors leveled the fraud charges in 2016.

Elected or appointed, our political leaders take office to solve civic problems and build prosperity. Yet some politicians like Matula badly stub their toes while in office. They lodge bogus insurance claims just like unwise constituents do. Usually these politicians resign or are quickly fired.

Some politicians sink even deeper into corruption. They blatantly exploit their office and insider power to steal insurance money and enrich their bank accounts. Often these politicians engage in cozy double-dealing with insurance insiders, using their positions to funnel each other ill-gotten money.

No matter how it happens, insurance fraud can corrupt political leaders who lack the will to hold office honestly — betraying the trust of the citizens they serve.

Hit-and-run crash: Truth or lie?

As for Matula, he drove his 2014 Volkswagen into a utility pole across the street from his home. He moved the car, then lied that a hit-and-run driver struck his car while parked directly in front of his home. Matula then changed his story when investigators grew skeptical.

A friend told him her husband drove into his car after falling asleep at the wheel, he said. Yet Matula would not identify the claimed driver. Matula then contacted police a third time. A friend moved Matula’s car without his knowledge and struck the utility pole, he said.

The stories didn’t hold up. Matula finally admitted he rammed the pole and moved his car to the front of his house the next morning. He resigned from the city council, and was given two years of probation plus two months of house arrest.

Matula paid his debt to society and is running for council again because he wants to help the community, he says. His conviction bars him from public office. He’s applied for clemency with the state pardons board, and is ramping up his campaign while the board considers his request.

Bribed head of N.J. school district

One of the most-flagrant insurance-bribery scandals circled around Michael Ritacco, the longtime and powerful head of the Toms River (N.J.) school district. It was the state’s fourth-largest school district

Insurance broker Francis X. Gartland bribed Ritacco up to $2 million to keep funneling Gartland the school district’s lucrative workers-compensation insurance policies without competitive bidding. Taxpayers were on the hook. Gartland padded the district’s insurance premiums by hundreds of thousands of dollars. He took his bribe money from that bloated premium honeypot.

Bribery was good to Ritacco for years. He drove a $100,000 Mercedes, lived in a home by the shore, had a Florida condo, and bought girlfriends expensive watches. Ritacco and Gartland both were ushered into federal prison for 11-year sentences.

Corrections commissioner ends up in prison

Mississippi agent Guy “Butch” Evans bribed Christopher B. Epps, the head of the state’s prison system, with $19,200 in exchange for exclusive access to sell insurance to the system’s employees. Evans received about $4,300 a month in sales commissions, and paid Epps $1400-$1,700 a month for access.

Bribery came at a price. Evans received six months in federal prison.

No doubt, many inmates took gleeful notice when they learned the head of their prison system would join them in the chow lines. Epps netted 20 years in a wider bribery scandal, of which Evans was one player.

Looted family agency

U.S. Rep. Rick Renzi represented Arizona’s largest congressional district, and held a coveted seat on the House Intelligence Committee. The GOP member earned a not-so-coveted seat in federal prison for three years.

Renzi looted his family’s insurance agency, stealing client premiums to help fund his first congressional campaign. He also tried to cover up the crime by lying to federal investigators. Renzi was sentenced for looting the agency and other scandals.

Corrupt insurance brokers also have bribed politicos to steer them lucrative government insurance contracts.

The illegal deals can bring the brokers millions of dollars in commissions, while honest competitive bidding flies out the window. Local governments are saddled with insurance policies that may be overpriced. They may also offer government employees fewer benefits than policies offered by competing brokers.

Maybe Epps said it best: “It comes back to greed. I made some stupid mistakes I will regret for the rest of my life,” he admitted at his sentencing.

Dennis Jay (dennisjay@insurancefraud.org) is the executive director of the Coalition Against Insurance Fraud.