Everyone understands the cost associated with paying for insurance and the related cost of not having insurance. Given the associated cost for insurance coverage, many people are looking for cheaper insurance. This can create a kind of desperate atmosphere, which can lead to negative results. This is the scenario that led to a former New Jersey resident being convicted for a large insurance fraud scheme.
The former New Jersey resident and a co-conspirator allegedly created a complex insurance fraud scheme that earned $16 million in fraudulent profit. The insurance fraud scheme involved false claims for group life insurance for hundreds of employees of a large company. Police say that the alleged scheme began by enticing employees with free life insurance and claimed the life insurance would be paid by a finance company.
The employees were told the life insurance was free in exchange for benefits sharing. The finance company paid a $15 million premium to a trust without a final policy in place. The third aspect involved a factoring company into the scheme. A factoring company is a company that purchases the accounts receivable from other companies. The factoring company paid $1 million in connection for accounts receivable that did not exist.
The former New Jersey resident involved in this fraud scheme pleaded guilty to conspiracy to commit wire fraud. In connection with this conviction, he is required to pay almost $1 million in restitution. The other man involved has pleaded guilty but is still waiting for the related sentencing.
Source: NJ.com, “Former N.J. man involved in $16M insurance fraud scheme gets 2 years in jail,” Ryan Hutchins, March 22, 2012