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Criminal Prosecution of Insurance Producers

A criminal proceeding in the Northern District of California serves as a reminder of the importance of vigilant underwriting to protect against unscrupulous producers seeking fraudulent commission payouts. In U.S. v. Halali, et al., Case No. 14-0627 (N.D. Cal.), five producers (Behnam Halali, Ernesto Magat, Kraig Jilge, Karen Gagarin, and Alomkone Soundara aka Alex Soudara) engaged in a fraudulent scheme that generated more than $2.5 million in commissions on policies that were canceled within months of issuance.

To effectuate the scheme, the defendant-producers solicited individuals to take medical exams and provide personal information as part of a fictitious health study. The defendant-producers thereafter applied for life insurance in those individuals’ names, typically without the individuals’ knowledge. The defendant-producers also created fraudulent driver’s licenses for the purpose of taking the medical exams themselves, purporting to be the individuals in the applications. The defendant-producers even opened bank accounts and created telephone numbers using Google Voice to answer calls from the insurers seeking to corroborate information in the applications. In all variations of the scheme, the defendant-producers collected commissions and canceled the policies several months later.

In late 2016 and early 2017, two of the defendants entered plea deals. In March 2017, the remaining three defendants were found guilty of 1) conspiracy to commit wire fraud, 2) wire fraud, and 3) aggravated identity theft. The court denied the defendants’ post-trial motions on July 28, 2017, and will impose sentences in September 2017.

Insurers should continue to be vigilant to combat such fraudulent business. As part of anti-fraud initiatives or general training, it would be prudent to arm underwriters with information regarding producer fraud, including examples of past schemes perpetrated by unscrupulous producers. It may also be prudent to work with the distribution chain to ensure producers’ ongoing compliance with company guidelines.

©2017 Drinker Biddle & Reath LLP. All Rights Reserved

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About this Author

Katherine Villanueva, litigation, attorney, Drinker Biddle
Associate

Kate Villanueva is an associate in Drinker Biddle’s insurance department, with experience representing clients in a variety of commercial disputes.  Kate has represented clients at the trial and appellate levels in state and federal courts nationwide. Kate has handled all aspects of civil litigation and has extensive appellate experience, including participating in appellate arguments and drafting numerous petitions for certiorari in the United States Supreme Court.

In addition to commercial litigation, Kate focuses her...

215-988-2535
Loesing, DrinkerBiddle, portrait
Associate

Jessica E. Loesing represents clients in life insurance disputes, particularly in matters relating to the secondary market for life insurance, insurance fraud, and policy lapses.

While in law school, Jessica served as a judicial extern for the Honorable Anne Lazarus of the Superior Court of Pennsylvania and the Honorable Sandra Mazer Moss of the Philadelphia Court of Common Pleas. Jessica received both the Justitia et Fides in Lex Scholarship and the Helen Cohen Levitt Award from Rutgers University.

215-988-2524