How to Defeat Insurance Fraud

Defeat fraudPhoto byBarry Zalma

Insurance Fraud Scheme Born After Business Failure

Barry Zalma

Sep 7, 2023

Read the full article at https://lnkd.in/g6P2Guvr and see the full video at https://lnkd.in/gzpYtuDp and at https://lnkd.in/gE_ruhfY and at https://zalma.com/blog plus more than 4600 posts.

This is a Fictionalized True Crime Story of Insurance Fraud from an
Expert who explains why Insurance Fraud is a “Heads I Win, Tails You
Lose” situation for Insurers.

The Ben-Cohain brothers, quite by accident, came upon an imaginative
fraud. The Los Angeles County District Attorney, after a lengthy
investigation, charged them with violation of Penal Code § 550,
insurance fraud, among others related crimes.

The Ben-Cohain brothers operated a small furniture assembly facility
in Los Angeles County. They imported knocked-down children’s furniture
(made of composition wood and Formica laminates) from Israel. They hoped
to sell it to wealthy people in Beverly Hills and West Los Angeles who
wished to support the State of Israel. The quality of the merchandise,
however, was not high and the Ben-Cohain brothers had difficulty making a
profit.

In 2019 the rains came to Southern California and a skylight in their
industrial building leaked some water onto a small amount of their
composition board furniture. They called their insurance agent, reported
a claim, and with invoices for most of the merchandise they presented
and received $75,000 for their actual water damage loss.

The Ben-Cohain brothers purchased the salvage from their insurer for a
small deduction in their total claim and sold it shortly after
receiving payment. With the proceeds, one brother purchased a used
Mercedes sedan and the other a used BMW.

They were soon short of money since they still could not sell the low quality knocked-down merchandise.

They sought out the services of Mr. Rosenberg, a public insurance
adjuster, who attached a nylon rope to sprinkler head thirty feet above
the warehouse floor and yanked it out of its fitting. The water flowed
for fifteen minutes until the fire department came and turned off the
sprinkler system. The fire department, with its usual efficiency,
vacuumed out the water and protected the furniture.

After the fire department was gone, the brothers, noting that
insufficient damage had been done by the water from the sprinklers,
ordered their two laborers to form a bucket brigade. The laborers poured
twenty-five buckets of water from the restroom on the stored furniture
effectively making all of their inventory unsaleable.

Shortly thereafter they called the insurer and a claim was presented
for $1,000,000. The insurer, unsuspecting, retained salvors to inventory
the damaged furniture and determine if any had a value in salvage.
While the salvors were doing their work, one laborer came up to him and
whispered:

“Senior, no es accidente!”

Fraud Detected

Although the salvor spoke no Spanish he understood what was said to
him. He reported the statements to the insurer. The insurer, American
Indemnity Insurance Company, immediately assigned the case to
investigator Steve Thomas of its special investigation unit. Mr. Thomas
retained the services of Spanish speaking investigators who met with the
laborers and obtained the full story of the fraud.

American Indemnity then retained counsel to take the sworn
examination of the laborers. Counsel, provided instructions for further
investigation and later examined the insureds under oath at the request
of the insurer.

American Indemnity, although suspicious, wanted to complete the fair
and thorough investigation required of it by California law. During the
examination under oath it seemed the brothers Ben-Cohain had blatantly
lied. They lied about the cause of the incident. They lied about what
was destroyed. They lied about where the things destroyed were
manufactured. They lied about the quality of the knocked-down furniture.
They lied about the financial condition of their business. They lied
about everything.

The brothers provided invoices and shipping documents they intended
to prove the value of the damaged furniture. The documents proved that
the support for their claim was false and fraudulent. They testified
that none of their furniture was purchased domestically. At the time,
they did not know that their laborers had introduced American Indemnity
to the local manufacturer.

The examinations under oath filled more than four days of sworn
testimony. When the testimony was completed American Indemnity denied
the claim and declared the policy void because of fraud. American
Indemnity, following California law, reported the claim to the fraud
division of the Department of Insurance.

The fraud investigator, Martin Sandiego of the Department of
Insurance fraud division, commenced the criminal investigation that
resulted in a presentation of the case to the Los Angeles County
District Attorney’s Office. After considerable work by American
Indemnity, its counsel and almost a year of detailed investigation by
the Fraud Division, the Los Angeles County District Attorney filed seven
felony counts against each brother for insurance fraud and grand theft.

They arrested both brother’s Ben-Cohain while they were parked
illegally near a night club on Sunset Boulevard in West Hollywood. After
spending a weekend in the County Jail, the brothers were released on
$75,000 cash bonds. They left town and forfeited bail.

ZALMA OPINION

The Fraud Division of the State of California Department of
Insurance, the Los Angeles District Attorney’s Office, and American
Indemnity Insurance Company deserve commendation for their dedication,
hard work and courage in thwarting an attempt at a major fraud.

The two laborers, although fearing deportation as illegal aliens, did
the right thing and stopped what could have been the perfect crime.

As long an honest people refuse to stand by and let criminals succeed
there is still hope for this country and its insurance industry.

I know things are changing. In the first twenty-five years I had been
involved with attempts to defeat or deter insurance fraud I could count
ten people, out of the thousands I have investigated, who were arrested
for insurance fraud. In the last twenty-five years cases in which I
have been involved in dealing with insurance fraud readers of my twice
monthly newsletter, Zalma’s Insurance Fraud Letter, can see that
convictions for insurance fraud across the country, seem to be
increasing. The increase is either due to serious effort to defeat fraud
or an increase in fraud that is so serious that it cannot be ignored by
prosecutors.

I sincerely hope that the new insurance commissioners and prosecutors
across the country will redirect the efforts of their local Fraud
Division and attorneys general to prosecute insurance fraud.

Besides million dollar frauds, like that attempted by the Ben-Cohain
brothers, effort must be made to bring to justice those fraudsters who
avoid attention by committing insurance fraud for small amounts of money
repeatedly.

The bail bondsman travelled to Israel to collect the $150,000 his
company was required to pay when they defaulted and escaped to Israel.
He found them only to have his demand for money met with two UZI machine
guns threatening his life. Applying good common sense the bail bondsman
returned to California and wrote off the debt on his tax return.

In 1990 Moshe Ben-Cohain and Menashe Ben-Cohain started a course of
conduct that led to their arrest for insurance fraud. They failed to
appear after posting bond and are, along with their co-conspirator, Raz
Rosenberg, fugitives.

Adapted from my book Insurance Fraud Costs Everyone Available from Amazon.com.

(c) 2023 Barry Zalma & ClaimSchool, Inc.