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WEEKLY FRAUD NEWS & REVIEW

FRAUD CONVICTIONS Friday, January 13, 2012 Issue #2

Two Wausau, Wiscson-area agents stole $9.7 million from more than 700 clients.
David Scholfield, who headed Manson Insurance, forged client signatures on phony
premium-finance deals and embezzled credits from insurers and fraudulently billed clients.
Under the agency’s billing system, insurers sent premium credits to the agency instead of to
policyholders when they changed coverage that generated credits. A Chevy car dealer was
credited nearly $5,800 when it reduced the number of vehicles on its policy. Scholfield sent
the money to a Manson account instead of to the dealer. The scam was repeated with other
clients. In another case, Scholfield told a staffer to draft notes for two clients who had not
requested the premium loans. He then sold the notes to a bank and deposited the money
into the agency’s account. Among Scholfield’s victims were prominent Wausau businesses
such as Award Hardwood Floors, Grand Theater Foundation, and Kolbe & Kolbe Millwork. A
federal court this week ordered Scholfield to repay $5.2 million of the loot. Scholfield
received five years in federal prison in October.

Prosecutors have awarded a staged-crash recruiter free lodging, all expenses paid, in
a federal jail cell in sunny South Florida. Franco Padron and other cronies convinced auto
owners to take part in setup crashes, says Florida’s CFO Jeff Atwater, whose fraud
investigators were part of the team that busted Padron. Padron coached the motorists how
to crash the cars, what to tell police at the crash scene, and how to claim they were hurt.
Padron then took the supposedly injured motorists to chiropractic clinics controlled by the
crash gang. He also showed them how to fill out medical paperwork, lying they were
injured, and told them what to say about their injuries and treatments if fraud investigators
interviewed them. Some motorists received no treatment or just a brief session. The
paperwork lied that they were given lengthy exams and treatment. Franco also filled out
insurance forms, mailed them to insurers via registered mail, deposited the insurance
checks, and cashed checks drawn on the accounts of the clinics. Padron avoided the
$10,000 limit that triggers federal currency-transaction reporting requirements. He
typically wrote $9,000 checks payable to different people; those were cashed on the same
day. Checks made to one person were cashed on successive days. Padron faces up to 20
years in federal prison when sentenced. So far, 15 people have been charged. NICB was
cited for its investigative work in the case.

Karina Beard said she hurt her shoulder while working as a distribution and window
clerk for the US Postal Service. The Turlock, CA, woman received workers’ comp benefits
for more than two years. Restrictions were placed on Beard's physical activities, such as no
reaching, no pushing, no pulling, and no driving for more than 20 minutes. She rode and

cared for horses, did yard work, and drove vehicles. Beard received one year in
federal prison and must repay $81,694.

Churchgoers may have been confused when Los Angeles pastors Christopher
Iruke and his wife Connie Ikpoh started buying luxury vehicles and having their home
remodeled. The husband and wife duo’s pastoral duties at the Arms of Grace Christian

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Center apparently grew to include a Medicare fraud scheme. They persuaded parishioners
to hand over their insurance info so the duo could bill Medicare for expensive power
wheelchairs and other medical equipment. The pair also hired street recruiters to dupe
other Medicare beneficiaries into giving up their insurance info in exchange for free
wheelchairs. The couple billed $6,000 for wheelchairs that cost about $900. When
Medicare threatened to audit their first company, Iruke just closed it down and opened two
new ones. Iruke received 15 years in federal prison this week and was ordered repay $6.7
million. Ikpoh will be sentenced February 27.

CRIMINAL CHARGES

At least 13 clients were bilked by a former agent who set up an unlicensed self-insured
health insurer, Oklahoma prosecutors charge. The state insurance department also issued a
cease-and-desist order against Terry Lynn McCrackin’s outfit, Eagle Actuary, based in the
Tulsa area. Client John McKeel said he paid $17,267 for health coverage for himself, his
wife and employee. McKeel later rang up more than $33,000 in medical expenses that, he
says, McCrackin did not pay. McKeel says his credit was wrecked and his business damaged
when he could not pay the bills himself. Clients paid $300-$700 a month for their coverage.
McCrackin illegally acted as the underwriter and claims department without being licensed,
the insurance department said Tuesday. He also did not have capital to ensure claim
payments, the department says.

Who had the silver set? That is what prosecutors want to know. Michael Weis claimed
his estranged wife stole a $10,000 silver set from him. The Chicago-area man received a
$10,812 insurance check. But police investigator John Sizer knew Weis had a criminal
record, including conviction for possessing a stolen auto. Sizer was investigating him on an
unrelated matter when he interviewed one of Weis’s relatives and learned that the relative
allegedly had the supposedly stolen silver. Weis faces up to seven years in prison if
convicted.

Lisa Williams told her insurer that someone stole her 2008 Kia Optima. The
Fayetteville, NC woman filed a $20,000 claim with Geico. The insurer denied her claim after
learning that Williams allegedly had sold the car to a scrap dealer. She was arrested
Tuesday and faces insurance fraud charges.

An extended vacation? Veteran Los Angeles police sergeant Juan Fernandez said he had
a job-related injury and was on leave for nearly a year. He allegedly altered a doctor’s note
to allow him to stay off work beyond the prescribed period. He also stole workers’ comp
money to which he was not entitled, prosecutors say. The department’s comp fraud unit
also helped convict a detective last year; he paid $105,000 in restitution.

John Plunkett Jr. pretended he was a doctor, prescribing meds and giving injections to
an elderly lady whose confidence he had gained, Greenwich, CT, prosecutors charge.
Plunkett allegedly helped the unnamed 68-year-old woman with her insurance paperwork.
He claimed he was a surgeon who could not operate because he had the same medical

condition that she had. Plunkett became her caretaker and accessed her medical
history, insurance, and Social Security info, prosecutors allege. He prescribed a
regimen of medicines and even injected her, prosecutors charge. She became
suspicious after reading that someone named Johnathan H. Plunkett was charged
with identity theft and forgery in a separate case. He allegedly stole his father’s

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identity and made dozens of fraudulent medical insurance claims. Plunkett received more
than $50,000 that he allegedly had sent to him instead of his father.

RELATED NEWS

The year’s biggest insurance crooks, conmen, and clowns have been inducted into the
Insurance Fraud Hall of Shame. The No-Class of 2011 features some of America’s most
brazen, vicious, or plain klutzy insurance schemers. Like William Craig Miller, who
massacred five people to rub out witnesses to his home insurance arson. Or the hapless
diamond dealers whose own security cameras busted their setup robbery for insurance
cash. Or the cop who shot himself in a comp scam. The masters of mayhem are enshrined
for all time in the Coalition’s online cellblock. The Hall of Shame actually has a serious goal
— put a human face on a costly crime that many consumers think is white collar and
harmless. So read on, get mad, laugh (but only a little), and remember why we fight this
crime.

Swindlers have turned a limited-use spinal medical procedure into an insurance money
machine via inflated injury claims in all lines of insurance, Massachusetts insurance-
litigation attorney Adam Brand writes in the latest issue of the Journal of Insurance Fraud in
America (JIFA). “Like a greedy genie, the model is out of the bottle. Knowing what to look
for — and having the will to fight — remain more than half the battle,” Brand writes.
Thermal Intradiscal Procedures (TIPS) are medically questionable procedures involving an
energized “wand” to relieve pressure on a supposedly injured disc. “But the bills are grossly
inflated, and the con is growing...this phenomenon has spread nationwide and continues to
evolve and adapt to insurance-industry pushback,” Brand writes. JIFA is a leadership
quarterly that covers fraud trends and issues.

Cars were burned and spray painted with swastikas and “KKK” in a seeming hate crime.
The rampage took place in a mainly Jewish neighborhood in Brooklyn, but the spree may be
an insurance scam, investigators think. A person of interest may have tried to destroy one
of those cars for insurance money, police say. The owner of one burned car did not live in
the neighborhood. Beer bottles found at the scene also were wiped clean of fingerprints.
This suggested someone who was meticulous, not an emotional hate arsonist, officials say.
No arrests, however, have yet been made. The burned cars were discovered the day after
the 73rd anniversary of Kristallnacht, a 1938 anti-Jewish attack by Nazis that left 91 Jews
dead, damaged more than 1,000 synagogues, and wrecked thousands of Jewish-owned
businesses.

A businessman bidding to revive an abandoned New Orleans lot is being scrutinized for
a prior fraud conviction. Joseph Mori and a cohort are pitching the city to build a theme
park. But Mori earlier was convicted of hacking into a Wappingers Falls, NY, agency’s
computer system to obtain an insurance certificate for his part-time snowplow business.
Mori also was a self-employed computer consultant for the agency at the time. He says he
had a long-standing agreement with the agency that he could write his own certificates. He

received two years of probation. Mori and RCS Entertainment want to build Crescent
City Amusement Park, a theme park like Busch Gardens or Cedar Fair. The company
is one of two finalists the city is considering in a competition to hire a developer.

A doctor who traded sex for pain pills was among the targets snared by a federal
dragnet that hauled in 22 South Florida docs suspected of peddling pills at dozens of

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illicit clinics. Operation Pill Nation seized $2.2 million and some exotic cars. This and
another undercover operation have shut down 40 pain clinics and seized nearly $20 million
in assets. Cesar Deleon received seven years for trading the drugs for sex or cash.

LEGISLATION

Motorists who claim injuries in a crash could receive no-fault benefits only if they go to
a legitimate emergency room that would initially assess the purported injuries, says a
prominent bill aiming to reform Florida’s troubled no-fault auto system. This measure would
work to eliminate the shady clinics that now are a key element in the fraudulent claims
flooding the insurance system. The House insurance committee has approved HB 119, part
of a larger proposal that would radically change the state’s no-fault system by replacing PIP
with so-called “emergency care coverage.”
Among the other no-fault reforms in Florida:

 SB 1860 keeps the current PIP system and toughens the licensing requirements for
clinics that treat purportedly injured motorists. It also sets up an agency to support
the investigation and prosecution of auto fraud. The agency could accept donations
to fund the effort. In a companion bill (SB 1862), the donations would remain
confidential and not covered by the state’s open-records law.

 HB 523 also would toughen clinic licensing and create the support agency but goes
one step further, yanking licenses of clinics that fraudulently treat auto passengers.

New York's AG has released a report urging a statewide, real-time database to target
the state’s prescription drug crisis. In tandem, A8320/S5720 would expand New York’s
prescription-monitoring program with the real-time database. This would "streamline
communication between health care providers and pharmacists to better serve patients,
stop prescription drug trafficking, and provide treatment to those who are addicted," AG Eric
Schneiderman says in his report. That document dovetails with the Coalition's landmark
report Prescription for Peril, which highlights the role of insurance fraud in America’s drug-
diversion epidemic.

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