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April 30, 2025
The Devil’s in The Details

A Heads I Win, Tails You Lose Story
Post 5062

Posted on April 30, 2025 by Barry Zalma

"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ­­­Perpetrators than any Other Crime."

Immigrant Criminals Attempt to Profit From Insurance Fraud

People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.

The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United States. In their hometown of Volgograd they were well-known to the local police. The brothers had conducted a crime wave in the town since they turned ten. They were involved in burglary, armed robbery, smuggling, drug dealing and prostitution.

To avoid arrest and a long sentence in a Siberian Gulag, the brothers invented a Jewish mother. They were then eligible to leave as victims of religious persecution. Their application for a Visa to the United States as seekers of religious freedom was accepted immediately. The “Save Soviet Jewry” organization, who knew nothing of their criminal background, financed their trip to the United States.

Upon their arrival in the United States they met with acquaintances from the Soviet criminal class who had also escaped to the United States. They learned that the police were quite effective at catching and prosecuting strong armed criminals, but had little concern for perpetrators of fraud.

The brothers, being dedicated criminals, realized that they must become familiar with American language and American procedures. They spent their first year in the United States, living off the money they were able to smuggle out of the Soviet Union. They studied English and American business procedure at a local high school. One of their classmates in their English as a Foreign Language class was a salesperson for Blue Sword of California, a health insurer. They bribed their classmate to sell them a health insurance policy so they could learn how the system worked. Pleasantly surprised the brothers learned that if they sent a bill from a health care provider to Blue Sword a check in the same amount would arrive in the mail. No one would telephone the provider or verify that the services had been rendered. All they needed was the proper form filled out in the proper manner.

From what they learned in their business class they created their first business entity, Mobile Medical Services. The filing of a fictitious business name statement showing that the brothers Karamazov were the owners of Mobile Medical Services was enough to put them in business.

The plan was simple: with money obtained from a Small Business Administration loan fund set up for recent immigrants, they would lease a Ford Econoline van; they would then lease various pieces of medical testing equipment from local vendors.

The fact that they had no experience or training in the operation of such equipment was irrelevant. All that was necessary was that the equipment looked real. They were immediately provided a loan from the SBA to pay the first three months’ rent.

They visited their local instant printing shop and had a flier printed using the most seductive of all advertising tools.

The flier said only, in forty-point type:

FREE MEDICAL TESTING - Only for Union Members and Government Employees

They then set their van up in a parking lot of a local grocery store and waited for the customers to come in. Each person coming in for free medical testing would fill out a form and assign all of their medical benefits to Mobile Medical Services. They would be seated on an EKG machine, weighed and have their blood pressures taken. They would then be sent on their way.

The brothers Karamazov created a totally fictional account of the medical testing performed on each of their walk-in clients. All of their clients had insurance or were military dependents covered by the CHAMPAS system. The billings were created with the assistance of their classmate, the insurance agent, and averaged between $800 and $1400. Each was justified by a diagnosis of one serious disease or another ranging from pneumonia to cancer.

The brothers sent their billings directly to the insurers of the individual customers. The billings were normally paid without question, although the insurers would reduce the amounts billed by 20% to 30%.

Every two months the brothers would file bankruptcy for the fictitious business and return the equipment to the lessor who knew better than make a claim on a bankruptcy estate. Investigation by the lessor found that the original business had disappeared and its owners were without assets. They would write off the debt.

The brothers would then start a new LLC with the assistance of a typing agency and go to another leasing agent who would find them new equipment.

The brothers, within the first two years of their fraudulent business, had managed to effect gross earnings of $5,000,000 a year. They had twenty mobile vans floating throughout the states of California, Arizona, Nevada and New Mexico. Their profits were growing exponentially.

Each van was insured. When a lessor got close to repossessing a van or its equipment, it would accidentally catch on fire on the freeway. The brothers would recover the total value of the equipment and the van from insurers. The lessors, not named on the policies, would be without recourse.

Had the brothers, from their generous earnings, honestly purchased the medical equipment and the vans, they would probably still be making millions in medical insurance fraud. The adjuster assigned to investigate the “accidental” fires had attended a class on automobile arson given by the California Conference of Arson Investigators. It became obvious that the van fire was an arson. He reported this fact to the Fraud Division of the State of California, Department of Insurance and to the local fire department arson unit.

The insurer retained counsel to examine the brothers under oath. They refused to testify. Their claim was denied since an examination under oath is a condition precedent to the insurance policy and the breach of that condition eliminates coverage. The brothers did nothing to enforce their claim, they just went on to another insurer.

At the Fraud Division, when the fire was recorded into the computer, it noted four other reports concerning the brothers. It appeared they were unrelated, but an investigator was assigned to look into the brothers Karamazov.

As the investigation proceeded, the Fraud Division learned more facts about the brothers that required a team of Fraud Division investigators. They were joined by investigators from the United States Postal Service. The team worked for three years developing a prosecution against the brothers Karamazov. When the indictments came down the investigators had established that the brothers were involved in fraud totaling over $80,000,000.

Before they could be arrested, the brothers returned, wealthy, to Russia. They were certain that they had succeeded in the fraud of the century. On their return to the former Soviet Union, they lived like kings. They considered themselves inviolable.

Confident in their skill as criminals, and tired of living in the Urals, they took a holiday to the South of France. When they arrived, their names were noted by INTERPOL who contacted the United States Marshal Service at the US Embassy. The brothers were arrested and extradited to the United States with the blessings of the French Government.

The trial, in the United States District Court, Los Angeles, was lengthy and involved the brothers and dozens of their co-conspirators. Two of the brothers pled guilty and one was convicted after trial. They are all, to this day, serving time in a federal penitentiary. They have been ordered to make restitution and pay enormous fines.

The chance of the insurers ever recovering any of the $80,000,000 they admit they stole is minuscule. Whatever remains of the assets they took with then to Mother Russia as well protected in banks in the Cayman Islands and Switzerland.

For the brothers Karamazov, the extent of their greed was their downfall.

Crime paid very well for three years and now they are paying for their crime in the federal penitentiary knowing that when they are released they will still be wealthy since the U.S. Government was unable to track down their assets.

(c) 2025 Barry Zalma & ClaimSchool, Inc.

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July 15, 2025
Zalma’s Insurance Fraud Letter – July 15, 2025

ZIFL – Volume 29, Issue 14
Post 5118

See the full video at https://lnkd.in/geddcnHj and at https://lnkd.in/g_rB9_th, and at https://zalma.com/blog plus more than 5100 posts.

You can read the full 20 page issue of the July 15, 2025 issue at https://lnkd.in/giaSdH29

THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL

This issue contains the following articles about insurance fraud:

The Historical Basis of Punitive Damages

It is axiomatic that when a claim is denied for fraud that the fraudster will sue for breach of contract and the tort of bad faith and seek punitive damages.

The award of punitive-type damages was common in early legal systems and was mentioned in religious law as early as the Book of Exodus. Punitive-type damages were provided for in Babylonian law nearly 4000 years ago in the Code of Hammurabi.

You can read this article and the full 20 page issue of the July 15, 2025 issue at https://zalma.com/blog/wp-content/uploads/2025/07/ZIFL-07-15-2025.pdf

Insurer Refuses to Submit to No Fault Insurance Fraud

...

00:08:27
July 14, 2025
Insurer Refuses to Submit to No Fault Insurance Fraud

Man Bites Dog Story

Insurer Defeats No Fault Fraudsters
Post 5117

See the full video at https://lnkd.in/gupBvGSv and at https://lnkd.in/gt35hZCG, and at https://zalma.com/blog plus more than 5100 posts.

In State Farm Fire And Casualty Company v. 123 Medical Group, P.C. D/B/A OPEN MRI, et al, Index No. 151183/2025, 2025 NY Slip Op 32297, Supreme Court, New York County (June 30, 2025) plaintiff sought a declaratory judgment that plaintiff is not obligated to pay no-fault benefits for the medical treatment of Darrel Branch Andy Celeste et al for injuries they allegedly sustained in a motor vehicle collision based upon plaintiffs’ founded belief that the collision at issue staged as part of an insurance fraud scheme.

DISCUSSION

In order to establish its entitlement to a default judgment plaintiff must submit proof of:

(1) service of the summons and complaint;
(2) the facts constituting the claim; and
(3) defendants’ default in answering or appearing.

Finally, plaintiff has provided proof ...

00:06:45
July 11, 2025
KISS – Keep it Simple, Stupid

Breach of Contract is not a Tort

It Doesn’t Pay to Over Charge a Suit Against an Insurer
Post 5116

Read the full article at https://lnkd.in/geM76MRe, see the full video at https://lnkd.in/gRWJRk9u and at https://lnkd.in/gVfRpfA5, and at https://zalma.com/blog plus more than 5100 posts.

In Kole Westwood and Keeley Westwood v. The Travelers Home And Marine Insurance Company and Aaron Harrigfeld, No. 2:24-cv-00719-JNP-DBP, United States District Court, D. Utah (June 30, 2025) the case against the engineer failed completely and the case against Travelers was limited to the claim that the insurance contract was breached.

CASE BACKGROUND

Plaintiffs Kole and Keeley Westwood are homeowners in Utah whose home was damaged in a severe winter storm. The roof buckled under the weight of snow and ice, causing water damage to the house.

Their insurer, Travelers, denied their claim based on an engineering inspection report prepared by Defendant Aaron Harrigfeld. The Westwoods allege that the report contained false representations about the history ...

00:07:19
3 hours ago
There is no Tort of Negligent Claims handling in Alaska

Rulings on Motions Reduced the Issues to be Presented at Trial

Read the full article at https://lnkd.in/gwJKZnCP and at https://zalma/blog plus more than 5100 posts.

CASE OVERVIEW

In Richard Bernier v. State Farm Mutual Automobile Insurance Company, No. 4:24-cv-00002-GMS, USDC, D. Alaska (May 28, 2025) Richard Bernier made claim under the underinsured motorist (UIM) coverage provided in his State Farm policy, was not satisfied with State Farm's offer and sued. Both parties tried to win by filing motions for summary judgment.

FACTS

Bernier was involved in an auto accident on November 18, 2020, and sought the maximum available UIM coverage under his policy, which was $50,000. State Farm initially offered him $31,342.36, which did not include prejudgment interest or attorney fees.

Prior to trial Bernier had three remaining claims against State Farm:

1. negligent and reckless claims handling;
2. violation of covenant of good faith and fair dealing; and
3. award of punitive damages.

Both Bernier and State Farm dispositive motions before ...

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May 15, 2025
Zalma's Insurance Fraud Letter - May 15, 2025

ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional

See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.

Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:

Health Care Fraud Trial Results in Murder for Hire of Witness

To Avoid Conviction for Insurance Fraud Defendants Murder Witness

In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...

May 15, 2025
CGL Is Not a Medical Malpractice Policy

Professional Health Care Services Exclusion Effective

Post 5073

See the full video at https://lnkd.in/g-f6Tjm5 and at https://lnkd.in/gx3agRzi, and at https://zalma.com/blog plus more than 5050 posts.

This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.

In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:

Insurance Coverage Dispute:

Travelers issued a Commercial General Liability ...

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