ZALMA'S INSURANCE FRAUD LETTER MAY 15, 2022
ZALMA'S INSURANCE FRAUD LETTER

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Zalma’s Insurance Fraud Letter May 15, 2022
Barry Zalma, Esq., CFE

Barry Zalma, Esq., CFE

Insurance claims expert, consultant at Barry Zalma, Inc. and author/Publisher at ClaimSchool, Inc. 1,297 articles

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Quote of the Issue

“Socialism of any type leads to a total destruction of the human spirit.” - Aleksandr Solzhenitsyn
Prosecution Proper for Accident in Missouri and Fraud in Kansas

Crossing a State Line to Present a Fraudulent Claim Doesn’t Work

Under K.S.A. 2020 Supp. 21-5106(a)(1) and (b)(3), a Kansas court has jurisdiction over a crime partly committed in Kansas by a criminal actor who commits either (1) an act that constitutes a constituent and material element of the offense or (2) an act that is a substantial and integral part of an overall continuing criminal plan and the act causes an effect or consequence in Kansas close enough in time or cause to be a proximate result. Two courts found no jurisdiction but the Supreme Court read the whole statute and found jurisdiction in State of Kansas v. Ivan Rozell, No. 121, 094, Supreme Court of Kansas (April 22, 2022)

PRELIMINARY HEARING

The State’s burden of proof at a preliminary hearing is not proof beyond a reasonable doubt, only probable cause. Probable cause at a preliminary examination signifies evidence sufficient to cause a person of ordinary prudence and caution to conscientiously entertain a reasonable belief of the accused’s guilt. To determine whether the State has met this burden, a preliminary hearing judge does not pass on credibility, and, when evidence conflicts, the judge must accept the version of the testimony most favorable to the State.

FACTS

Rozell committed no acts related to the insurance fraud charges while physically in Kansas. Given that, Rozell argues the Wyandotte County District Court lacked jurisdiction to prosecute him because Kansas laws have no extraterritorial effect.

Crimes sometimes involve multistate conduct. And the United States Supreme Court has recognized that “[a]cts done outside a jurisdiction, but intended to produce and producing detrimental effects within it, justify a state in punishing the cause of the harm as if [the defendant] had been present at the effect.” [Strassheim v. Daily, 221 U.S. 280, 285, 31 S.Ct. 558, 55 L.Ed. 735 (1911).] Both the district court and the Court of Appeals disagreed with the State.

Rozell was in a minor vehicle collision with Saul Lopez at an intersection in Kansas City, Missouri. Lopez did not obey the right of way and hit Rozell’s vehicle, but any contact between the vehicles was minimal. Lopez gave Rozell insurance information. Rozell told Lopez he was fine and declined Lopez’ offer to call police.

Lopez’ father held title to and insured the vehicle Lopez was driving at the time of the accident. His father lived in Kansas City, Kansas, and was insured under a Kansas insurance policy issued by State Farm Insurance through an agent based in Kansas. Lopez also lived in Kansas City, Kansas.

Rozell faxed a copy of a hospital bill to State Farm. The bill was for services received at Research Medical Center in Missouri. The State Farm representative thought the amount of the bill-around $52,000- was disproportionate to the severity of the collision. He contacted Rozell and asked whether Rozell had submitted the correct document. Rozell confirmed he had. The representative transferred the claim to a special investigations department at State Farm.

The special investigator, Michael Haire, was based out of a State Farm office in Kansas. Haire reviewed the original medical bill Rozell had submitted to State Farm and a second one Rozell sent after his initial claim. Haire determined the first bill was for medical expenses incurred two days before the vehicle collision.

A records custodian for Research Medical Center also reviewed the original bill and noticed its discharge date did not match the hospital records. State Farm declined to pay Rozell’s claim and submitted a fraud report to the Kansas Insurance Department. The State then charged Rozell with insurance fraud and making a false information.

The preliminary hearing judge found probable cause to bind over Rozell for trial for insurance fraud and making a false information.

A different judge than the one who heard the preliminary hearing conducted a hearing on Rozell’s second motion. The judge granted the motion to dismiss based on lack of jurisdiction.

The State appealed arguing Kansas courts had jurisdiction. Rozell did not file briefs or appear during the appeal. The Court of Appeals affirmed the dismissal, holding the State had not established jurisdiction. The State timely petitioned for review, which the Supreme Court granted.

ANALYSIS

The issue presented to the district court was whether the State presented sufficient evidence at the preliminary hearing to establish probable cause that Kansas had jurisdiction. Resolving this issue required the Supreme Court to interpret the statutes.

Legal Framework for Proximate Cause Jurisdiction

Rozell focused on constitutional and statutory provisions about a defendant’s right to have a trial in the county or district where the crime, or one or more elements of the crime, were committed. Consistent with Strassheim, 221 U.S. at 285, the United States Supreme Court has held that this Sixth Amendment provision does not defeat a state’s territorial jurisdiction over a crime partly committed in multiple states. The Court considered United States v. Rodriguez-Moreno, 526 U.S. 275, 281, 119 S.Ct. 1239, 143 L.Ed.2d 388 (1999) which held that “‘[W]here a crime consists of distinct parts which have different localities the whole may be tried where any part can be proved to have been done.’”).

For a Kansas court to have jurisdiction under K.S.A. 2020 Supp. 21-5106(b)(3), there must be a direct connection or nexus between the defendant’s act or acts outside Kansas and the result in Kansas.

The State charged Rozell with crimes that do not necessarily require someone, or something, to suffer harm. Rozell can be found guilty of both charged crimes even though the insurance company denied his claim.

Under K.S.A. 2020 Supp. 21-5106(a)(1) and (b)(3), a Kansas court has jurisdiction over a crime partly committed in Kansas by a criminal actor who commits either (1) an act that is a constituent and material element of the offense or (2) an act that is a substantial and integral part of an overall continuing criminal plan and that act causes an effect or consequence in Kansas close enough in time or cause to be a proximate result.
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Insurance Fraud

The crime requires that a person:

communicates information to an insurer, here communications about medical records and bills alleged to be related to treatment for injuries incurred in the automobile accident;

knows the communication contains materially false information, here, for example, the alleged alteration of the date on which Rozell received medical care;

submits the false information in support of an insurance claim or benefit or insurance application, here Rozell’s claim against Lopez’ father’s insurance; and

acts with the intent to defraud, which a reasonable person might infer from Rozell’s submission of the allegedly altered bill.

The State argues that “it is indisputable that the insurance company that issued the policy is harmed when it is subject to a fraudulent claim.” State Farm’s investigator in Kansas, testified to steps he took in Kansas to investigate the claim, which included interviews with Lopez and Lopez’ father and taking photographs of the damage to the car Lopez drove. The referral of the fraud investigation to the Kansas investigator and the follow-up appointment with the Kansas insured both occurred within one month of the accident and directly flowed from Rozell’s submission of paperwork documenting his claim. And these actions were integral to State Farm’s review of Rozell’s claim. A reasonable inference may be drawn in the light most favorable to the State that Rozell’s submission of an allegedly fraudulent claim was an act that caused proximate results in Kansas.

Making A False Information

The evidence at the preliminary hearing was sufficient to establish the allegedly altered paper made its way to Kansas where the investigating agent drew conclusions about whether State Farm should pay or deny Rozell’s claim. This evidence is sufficient to cause a person of ordinary prudence and caution to conscientiously entertain a reasonable belief Rozell’s actions led to the consequence or result in Kansas of attempting to influence Haire to approve Rozell’s claim.

Jurisdiction

The Supreme Court concluded that the State presented sufficient evidence to establish probable cause that Rozell’s actions of submitting an allegedly false claim, which he supported with allegedly altered documents, with the alleged intent to defraud State Farm caused a consequence or effect in Kansas close enough in time or cause to the alleged criminal acts of insurance fraud and making a false information to qualify as a proximate result that allows Kansas to exercise jurisdiction.
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ZIFL OPINION

The Supreme Court of Kansas found that the two lower courts allowed a technicality – an activity in the sister-city of Kansas City, Missouri to Kansas City, Kansas defeated criminal jurisdiction although the investigation and expenses incurred by State Farm happened in Kansas, was an act of form over substance. Rozell will be tried for insurance fraud in Kansas and should be convicted since the medical bills submitted were obviously fraudulent and for services provided before the accident.
Wisdom

“So long as the people do not care to exercise their freedom, those who wish to tyrannize will do so; for tyrants are active and ardent, and will devote themselves in the name of any number of gods, religious and otherwise, to put shackles upon sleeping men.” —Voltaire

“The man who moves a mountain begins by carrying away small stones.” – Confucius

“The simplest acts of kindness are by far more powerful than a thousand heads bowing in prayer.” ― Mahatma Gandhi

“[Judges’] minds should not be distracted with jarring interests; they should not be dependent upon any man, or body of men.” —John Adams

“The ultimate authority ... resides in the people alone. ... The advantage of being armed, which the Americans possess over the people of almost every other nation ... forms a barrier against the enterprises of ambition, more insurmountable than any...” — James Madison

“One of the most pathetic — and dangerous — signs of our times is the growing number of individuals and groups who believe that no one can possibly disagree with them for any honest reason.” —Thomas Sowell

“No loss by flood and lightning, no destruction of cities and temples by hostile forces of nature, has deprived man of so many noble lives and impulses as those which his intolerance has destroyed.” — Helen Keller

“To curtail free expression strikes twice at intellectual freedom, for whoever deprives another of the right to state unpopular views necessarily deprives others of the right to listen to those views.” — C. Van Woodward

“From the saintly and single-minded idealist to the fanatic is often but a step.” —Friedrich August von Hayek

“Only in Congress do people adjust to economic adversity and growing deficits by spending more money.” —Thomas Sowell

“The censor’s sword pierces deeply into the heart of free expression.” —Earl Warren

“The natural cure for an ill-administration, in a popular or representative constitution, is a change of men.” —Alexander Hamilton
Doctor Who Defrauded Health Insurers Tried to Back Out of Plea Deal

In State Of New Jersey Amgad A. Hessein, No. A-0983-20, Superior Court of New Jersey, Appellate Division (April 26, 2022) Dr. Amgad A. Hessein, a physician facing a thirty-eight-count indictment alleging billing fraud related to his medical practice, was on the verge starting his trial after completion of jury selection when he pled guilty to second-degree theft by deception, N.J.S.A. 2C:20-4(a), and second-degree health care insurance claims fraud, N.J.S.A. 2C:21-4.3(a).

As part of the plea agreement, the prosecutor gave a gift to Dr. Hessein by dismissing the remaining thirty-six counts because defendant entered into a consent order requiring forfeiture of $2,000,000 and directing that he pay restitution in the amount $235,093.75.

Prior to sentencing defendant to an aggregate eight-year prison term and ordering forfeiture of funds and restitution, Judge John M. Deitch denied defendant’s motion to withdraw his guilty pleas.
FACTS

In March 2020, defendant filed a motion to withdraw his guilty pleas and vacate his sentence. Before the motion was heard, defendant filed a verified petition for post-conviction relief (PCR) alleging trial counsel was ineffective by permitting him to enter guilty pleas including “an illegal civil consent order . . . forfeit[ing] property and money without . . . a restitution hearing,” and by allowing him to plead guilty “to second [-] degree health [] care insurance fraud instead of proceeding on a theory third[-]degree reckless health[ ]care insurance fraud.”

Defendant also made claims against appellate counsel, contending ineffective assistance of counsel by not challenging: the legality of the forfeiture consent order and the lack of a restitution hearing; and the factual basis of the guilty plea to second-degree health care insurance fraud. Judge Deitch issued an order denying defendant’s motion and his PCR petition without an evidentiary hearing.
DISCUSSION

To withdraw a guilty plea after sentencing a defendant, to establish vacation, it is necessary to correct a manifest injustice. In considering whether relief is appropriate, the motion judge must weigh the four factors identified in State v. Slater, 198 N.J. 145, 157-58 (2009):