A month in review: Rounding out California's latest fraudsters
Fraud will always be a problem in the insurance industry, especially in a state as densely populated as California.
Fraud will always be a problem in the insurance industry. Someone, somewhere, will always try to game the system to their advantage. In a densely populated state like California, there will never be a shortage of individuals who are willing to engage in illegal activity.
But few criminals ever elude the law forever. California’s Department of Insurance, in conjunction with law enforcement agencies and other concerned parties, works to weed out such individuals.
With this in mind, here is a timeline of incidents that happened in California during the month of October.
The timeline
Oct. 3, 2019
Kenneth X. Huang was sentenced to two years in federal prison, three years supervised release, and ordered to pay $259,594 after a joint investigation by the California Department of Insurance, Employment Development Department and U.S. Department of State, Diplomatic Security Service exposed his complex unemployment insurance fraud scheme.
The restitution order included $128,753 to Great American Insurance Company doing business as IncomeAssure and $130,841 to the California Employment Development Department. Huang was ordered to self-surrender by Nov. 8, 2019, to begin his federal prison term.
The investigation revealed that Huang used a false passport, Social Security card and fabricated proof of employment documents in order to obtain multiple insurance policies, each under a different name, then bided before submitting fraudulent claims in order to meet the eligibility requirements of the policies and to escape detection. In total, he received $128,753 from his fraudulent insurance policies.
Oct. 21, 2019
Herbert Allen Kelly III, owner of Kelly Roofing Company, was arrested on six felony counts of workers’ compensation fraud after allegedly underreporting his business’ payroll and number of employees, resulting in a loss to his insurer of $50,000.
On Jan. 12, 2015, while employed with Kelly’s company, a worker slipped and fell from a roof at a jobsite. As a result of the employee’s injuries, a workers’ compensation claim was opened with Kelly’s insurer, State Compensation Insurance Fund (SCIF). Following the incident, Cal/OSHA conducted an inspection of the jobsite with Kelly, who advised the three employees.
During the SCIF audit for the policy period 2015, when the accident occurred, Kelly reported he had no employees, despite having a workers’ compensation claim in January 2015. Kelly alleged he only paid the injured worker $500 for a single day of work and did not have payroll records for him.
Department of Insurance detectives served search warrants on both Kelly and his company’s bank accounts and conducted an audit of bank records. Detectives discovered approximately $89,781 in total audited payroll with up to 15 possible employees. The department confirmed Kelly Roofing Company had employees during the period when Kelly claimed he had no employees and no payroll. The audited payroll was ultimately forwarded to SCIF, who determined the company owed approximately $50,000 in past unpaid premiums.
Oct. 22, 2019
Insurance agent Richard Valdriz has been charged with 13 felony counts, including identity theft, forgery and grand theft, after an investigation by the California Department of Insurance found that he had allegedly used the identity of policyholders to renew their auto insurance policies without their knowledge or consent to receive $4,555 in commissions.
Valdriz’s clients’ insurance policies had lapsed, and they had not requested a renewal. Without his clients’ knowledge or consent, Valdriz renewed his clients’ canceled policies by electronically forging their signatures in order to submit and obtain a renewal of the insurance policy. He then submitted bogus premium payment receipts to the insurance carrier in order to collect commissions.
An arrest warrant was issued on Oct. 17, and Valdriz turned himself into the Los Angeles County Superior Court on Oct. 21.
Oct. 24, 2019
Insurance agent Stephen Mark Gomez was arraigned on eight felony counts of grand theft and embezzlement after allegedly collecting over $148,000 in insurance premium payments from a client but failing to place insurance coverage on the client’s properties. The alleged crime was discovered after the victim’s property suffered a fire, and the victim subsequently discovered he was uninsured.
“Gomez allegedly violated his fiduciary responsibility as a licensed agent and left his victim uninsured when he needed insurance the most,” Insurance Commissioner Ricardo Lara said in a statement. “We will continue to use every resource available to stop unscrupulous agents from preying on customers. Criminal acts of those looking to degrade the trust of professional agents will not be tolerated.”
The Department of Insurance has initiated action against Gomez’s insurance license. An early disposition hearing is set for Nov. 25, 2019.
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