20 in South Texas Plead Guilty to Insurance Fraud | TEXAS HEALTH INSURANCE

20 in South Texas Plead Guilty to Insurance Fraud

August 7, 2011


Federal authorities say 20 South Texas residents have been convicted for their roles in a scheme to defraud the American Family Life Insurance Co.

In mid-June, 36 people were indicted on accusations they participated in the scheme designed to defraud Columbus, Ga.-based AFLAC millions of dollars by filing false claims, the Associated Press reported.

According to the indictments, the defendants include a local police officer, county employees and school teachers. They purchased policies under the AFLAC Accident-Only Insurance Plan from several area insurance agents at various times beginning in July 2001 through April 2010. Under the plan, a policyholder could file a claim with AFLAC and obtain a cash benefit if he or she received treatment from a physician for a legitimate, accident-caused injury including lacerations, bruises, burns, fractures or dismemberment.

The Justice Department says on behalf of the defendants two Reynosa, Mexico, doctors filed minor injury claims thought too small to draw suspicion. In return, the border-city doctors received small kickbacks.

The physicians allegedly prepared an “accident report” for each fake injury in exchange for a cash kickback of approximately $15 per accident report, according to the U.S. Attorney’s Office for the Southern District of Texas. In each report, the indictment alleges the physicians falsely claimed they had provided treatment and prescribed medication for the purported injury. In addition, the physicians and defendants allegedly attempted to conceal their scheme in numerous ways including agreeing to use injuries such as lacerations and minor burns as opposed to more serious injuries that paid higher cash benefits and could potentially attract a greater level of scrutiny by AFLAC’s claims department.

Over time, the defendants — many of whom allegedly recruited one another to purchase policies and join the alleged scheme — submitted approximately 21,600 allegedly false and fraudulent insurance claims, each accompanied by the physicians’ accident reports, to AFLAC’s claims department in Columbus, Ga. Based on the claims, AFLAC disbursed a total of approximately $3 million in insurance proceeds to the defendants.

So far, 20 defendants pleaded guilty to wire fraud. All 20 face a possible maximum of sentence of 20 years in federal prison without parole and a $250,000 fine.

Federal investigators dubbed the case “Operation Sitting Duck,” a play on the insurer’s feathered mascot.





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