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The more insurance fraud changes, the more it stays the same.

For 30 years, hard-working and creative swindlers have been cooking up new schemes to bilk policyholders using new corporate structures, new domiciles, new ways of exploiting -- and getting around -- government insurance regulators.

In the property/casualty business, scams have ranged from crooked agency operations to fraudulent U.S.-domiciled insurance companies to fleets of bogus offshore insurers and reinsurers serviced by equally suspect management firms.

Some of these swindlers more recently saw solid gold opportunities in the health care field and seized on loopholes in federal employee benefit law to set up phony multiple employer welfare arrangements and fraudulent union health plans.

Through all these schemes' mutations, though, one thing hasn't changed: The scams always involve taking your money now for a promise to perform later.

Insurance is, and always has been, tailor-made for thieves.

The insurance-buying public got its wake-up call on the extent of the fraud problem in 1982 with the collapse of Illinois-domiciled Kenilworth Insurance Co.

Picking up the pieces of shattered Kenilworth, regulators discovered that the same loose-knit band of agents, brokers and reinsurance intermediaries had looted a series of U.S. insurance companies in schemes dating back to 1971.

The Kenilworth case, the latest in the series, was a classic of the genre: In 1981, a group of men led by convicted felon John V. Goepfert secretly took control of Kenilworth, then a struggling auto insurer with a few million dollars in surplus (BI, Dec. 6, 1982).

Mr. Goepfert had talked his way into the company with the promise of a huge influx of new business, and he was true to his word: Almost instantly, Kenilworth was tapped into by a network of producers who swamped the tiny company with tens of millions of dollars of high-risk surplus lines and London market reinsurance business.

Kenilworth was fleeced on this business in a dizzying variety of ways, Illinois regulators later found.

For example, agents employed the "Christmas tree" scam, using master policies to issue multiple insurance certificates on unrelated risks that were never reported to Kenilworth.

The swindlers also stripped off excessive commissions and billed phony inspection fees and additional premiums that never found their way to the company.

Kenilworth's own reinsurance, meanwhile, was directed to companies such as Universal Casualty & Surety Co. Ltd. of the Cayman Islands, operated by a man -- Vishwa P. Shah -- later convicted of wire fraud in an unrelated case. Universal Casualty itself collapsed in 1984 (BI, Dec. 17, 1990; July 6, 1987).

When it was all over, Kenilworth faced more than $30 million in claims it couldn't pay; state guaranty funds covered only about a third of these.

Mr. Goepfert and several others, including Kenilworth's former president, were eventually convicted on a variety of federal fraud charges stemming from Kenilworth's collapse (BI, Dec. 8, 1986; May 12, 1986).

Agency frauds may have reached their apogee with the near-destruction of Omaha Indemnity Co. by one of its managing general agents, Royal American Managers Inc.

Looking to expand its property/casualty business, Omaha Indemnity, a unit of Mutual of Omaha Insurance Co., entered into MGA agreements in the early 1980s with Kansas City, Mo.-based RAM and a predecessor MGA, World American Underwriters Inc.

Under the RAM agreement, the MGA had authority to bind Omaha Indemnity to surplus lines and assumed reinsurance risks, arrange Omaha Indemnity's own reinsurance and handle claims.

By 1985, the insurer realized what a catastrophic mistake it had made, but it was too late: RAM had processed $196 million in premiums, reporting only $61 million to Omaha Indemnity and actually remitting only $7 million.

Much of the unreported premium was funneled to RAM-affiliated reinsurers in the Turks & Caicos Islands and at the now-defunct Insurance Exchange of the Americas in Miami; these reinsurers had nowhere near the financial capacity to handle the business and, in fact, already were insolvent by year-end 1985, Omaha Indemnity later charged (BI, April 28, 1986).

RAM diverted millions more in unreported premiums into a "loss fund," only a small portion of which was ever used for its purported purpose of paying claims, the insurer alleged.

Meanwhile, RAM principals James R. Wining and Willie A. Schonacher Jr. were living well: Both men collected salaries of up to $600,000 a year, maintained Mercedes Benz, Jaguar, Porsche and BMW company cars and bought themselves beachfront homes in the Turks & Caicos, Omaha Indemnity lawyers charged.

It didn't last, though. In 1989, Omaha Indemnity won a $225 million arbitration award against RAM; it was believed at the time to be the largest such award in history. RAM and its affiliates have since folded (BI, June 12, 1989).

In 1992, Mr. Wining and Mr. Schonacher pleaded guilty to federal conspiracy charges; Mr. Schonacher was sentenced to two years in prison, but Mr. Wining got only five years probation (BI, May 23, 1992).

In all, Omaha Indemnity absorbed more than $200 million in net losses and would have gone under without massive support from its parent.

"If (insurers) really believe that an MGA's first thought is for the company, that's really a study in futility," Mr. Goepfert himself once observed of agency fraud. Allowing MGAs to handle claims, he added, is "the kiss of death." (BI, Nov. 6, 1989).

Messrs. Wining and Schonacher were not the only swindlers at the Insurance Exchange of the Americas. For a while, it also was the home of a man who would build a network of fraudulent companies still unmatched in its scale and breadth: Alan Teale.

Mr. Teale -- by many accounts an arrogant and high-handed man -- sported a resume already marked with insurance company casualties and damaged policyholders when he began organizing an offshore empire in the mid-1980s.

From relatively humble beginnings as a British broker, he served as president of the IEA until 1984. He went on to become a top officer and MGA for Atlanta-based Victoria Insurance Co., which was found after its 1988 collapse to have had no real capital and surplus (BI, April 29, 1991).

As Victoria neared the brink, Mr. Teale and several cohorts turned their attention to the International Underwriting Assn., a group of about a dozen offshore insurers, several based in the Turks & Caicos, that began writing direct surplus lines business in the United States (BI, July 25, 1988).

Over the next several years, this network expanded to comprise, at various times, more than two dozen insurers and reinsurers based from the Caribbean to Ireland to Belgium, along with a mind-boggling maze of affiliated management firms, reinsurance intermediaries, claims adjusters and consultants.

The network wrote everything from auto insurance to coverage for Fortune 500 property risks to group health reinsurance. The business came from a vast array of agents and brokers; Mr. Teale and his wife, Charlotte C. Rentz, even formed purchasing groups under the federal Risk Retention Act to serve as funnels for small commercial liability risks (BI, May 1, 1989).

In a 1991 report, U.S. Senate investigators found that tens of millions of dollars in premiums disappeared into this network. At least 13 insurance-related companies operated from Mr. Teale's Atlanta headquarters -- one of them alone representing 19 alien insurers -- and the same bookkeeper managed 86 bank accounts for those companies, moving money in so many directions that tracing premiums became impossible.

The foundation of Mr. Teale's operation was the network of offshore insurers, some of which he formed himself but many of which were set up by other swindlers and merely managed by Mr. Teale.

The insurers were invariably in places where regulation was slight to non-existent -- Belgium and Ireland, for example, do not regulate reinsurers -- and where corporate secrecy laws forestalled curious regulators and disgruntled claimants.

(For real convenience, though, nothing beats having your own domicile: Several insurance swindlers, not including Mr. Teale, made use of the Dominion of Melchizedek, a fictional province dreamed up by convicted felon Mark L. Pedley. At least one con man based his purported insurance and banking empire there, while another capitalized his companies with Melchizedek "government bonds" (BI, Jan. 6, 1997; March 29, 1993). Depending on which swindler you asked, the dominion was in Antarctica, the South Pacific or an island off the coast of Colombia.)

To attract business, these companies also had to present an illusion of financial strength, and that meant producing audited financial statements showing millions of dollars in assets.

Mr. Teale and others in his network did this with varying degrees of credibility: Some balance sheets appeared plausible enough, while others barely withstood the light of day.

Two of the network's members, for example -- Helensburgh Ltd. of Dublin and Euroam-Re Reinsurance Co. of the Netherlands -- claimed to be capitalized with "treasury bills" issued by the Sovereign Cherokee Nation Tejas, a purported Indian nation created by a retired U.S. Air Force colonel in the 1970s on a sand bar in the Rio Grande River.

Dallas Bessant, a British citizen who said he was adopted by the group and given the name "Wise Otter," owned both insurers and is scheduled for trial on federal fraud charges in January 1998.

Several other Teale-managed companies were capitalized with virtually worthless over-the-counter stock that had been "rented" from securities swindlers and placed on the insurers' balance sheets at grossly inflated values.

One group of Teale companies, for example, secured its reinsurance obligations with valueless OTC stocks they claimed were worth $6 million. These included shares in a company that sold sports trading cards from a private home and the stock of a shell company associated with convicted insurance con man Arthur A. Blumeyer III.

Other bogus assets were tougher to spot: Mr. Teale, for example, helped a now-defunct Florida MEWA forestall its insolvency by lining up an infusion of Government National Mortgage Assn. securities. While the Ginnie Maes later proved phony, Senate investigators found it is virtually impossible to confirm the actual ownership of Ginnie Maes because of the way they are traded and held (BI, Oct. 21, 1991).

For all his hard work, Mr. Teale finally attracted too much attention: In January 1993, 18 months after they invoked their Fifth Amendment right against self-incrimination at a Senate hearing, Mr. Teale and his wife were indicted on federal fraud charges. They pleaded guilty; Mr. Teale died in prison in 1994, and Ms. Rentz still is serving a 13-year sentence in federal prison.

Others in the network, including insurance company operators, agents and securities vendors, have since been convicted of participating in the fraud.

Toward the end, a growing part of Mr. Teale's business was health insurance fraud, particularly MEWA scams. He was not alone: It has been big business for many swindlers for more than two decades.

Under the pre-emption provision of The Employee Retirement Income Security Act of 1974, small employers could band together to insure worker accident and health risks, either by buying insurance on a group basis or by setting up a self-funded trust.

Con artists seized on self-funded plans, setting up their own trusts and raking in millions of dollars of contributions by offering cut-rate coverage to small businesses desperate to save money. The trust operators would typically pay a few claims early on but would set aside little or no money for reserves; buy no reinsurance, or reinsure with other fraudulent companies; and siphon off huge percentages of the trusts' funds in fees and expenses.

A wave of these bogus trusts collapsed in the late 1970s and early 1980s, their operators insisting to the end that ERISA's pre-emption provisions barred state insurance regulators from interfering with their business.

Congress amended ERISA in 1983 to make clear that self-funded MEWAs are subject to state insurance regulation. The change didn't do much immediate good, though, as MEWA swindlers engaged in stalling campaigns, suing insurance departments and launching other delaying tactics that could tie up regulatory action for months. By the time these tangles were resolved, bogus MEWAs might already have gone under or moved on to other states (BI, May 21, 1990).

Life was getting harder for MEWA crooks, though, as regulators and law enforcement officials took a tougher line -- and as court after court affirmed state regulatory authority.

Thus, in the early 1990s, the swindlers shifted gears again, taking advantage of another ERISA loophole: union benefit plans.

Even with its MEWA amendment, ERISA continued to exempt union-sponsored health plans from state control. Seeing another good thing, the swindlers set up their own phony unions and convinced small employers to have their workers join, making them eligible for coverage under self-funded "union" welfare plans.

Employers didn't mind, because the coverage was cheap and the "unions" agreed to do nothing inconvenient, such as engage in real collective bargaining on wages and working conditions. The crooks were happy, too, because the union offered new conduits for siphoning away money through "dues" and other union-related fees and expenses.

Perhaps the biggest and most audacious of these frauds was the National Council of Allied Employees, a bogus union set up in Glen Head, N.Y., by William Loeb, then a five-time convicted felon (BI, May 18, 1992).

Falsely claiming an affiliation with the AFL-CIO, Mr. Loeb ran the NCAE as a franchise operation, selling charters for NCAE "local" unions to other swindlers across the country and collecting a cut of their revenues.

At least five of these locals operated more or less independently in the early 1990s, collecting millions of dollars of premium and triggering injunctive lawsuits or cease-and-desist orders from regulators in half a dozen states. One of them, Local 555 in Encino, Calif., took over a block of former MEWA business and reinsured it with companies in Anguilla and Ireland that later failed to pay claims. Another, Local 615 in Tempe, Ariz., was run by a former Loeb associate who falsely claimed the health plan was insured by a licensed Kentucky insurer. Both plans later collapsed, leaving millions of dollars of unpaid claims.

For his part, Mr. Loeb ignored the regulatory actions and filed his own federal lawsuit against seven state insurance departments, charging them with violating NCAE's constitutional rights.

He was indicted in 1992 for embezzling nearly $500,000 from Consolidated Local Union 867, another phony labor group he operated before forming the NCAE. Captured in Arizona after he jumped bail, Mr. Loeb was convicted and sentenced to 71 months in jail (BI, Dec. 13, 1993).

Several other operators of NCAE plans also were convicted of criminal charges or reached settlements with the U.S. Department of Labor barring them from acting on behalf of benefit plans.

The Labor Department later developed new rules to address the problem of phony unions (BI, Aug. 7, 1995).

Whenever Congress changes federal benefit laws, though, it seems to open new avenues for con men. Legislation passed in 1996, for instance, allows the formation of tax-advantaged medical savings accounts, and state regulators are now eyeing former MEWA swindlers who are reportedly developing MSA plans.

Trying to combat illegal property/casualty and health insurance schemes, regulators in the past decade have developed new anti-fraud laws and have become more aggressive in pursuing wrongdoers. Most agree, though, that nothing short of jail time slows down a committed swindler for very long.

One might conclude in looking at the most egregious cases that the perpetrators usually go to prison. This isn't so, though: For every swindler caught and convicted, a dozen or more may escape to engineer another scam.

Law enforcement and regulatory officials hope 1994 federal crime legislation -- which for the first time made insurance fraud a federal crime -- will lead to more prosecutions. It remains to be seen, though, how effectively this law is enforced.

Meanwhile, the oldest advice is still the best: "Let the buyer beware."