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Insurance Fraud

In: Business and Management

Submitted By skylerm123
Words 961
Pages 4
Frauds and Schemes

Introduction
This paper is about the lies and deceits of people, and how they take advantage of everyone around them. We will be looking at two major insurance frauds and a major ponzi scheme between a father, son, and a small town in rural Utah. All of the people involved in these insurance frauds and ponzi schemes represent poor business ethics.

Frauds and Schemes
At the beginning of the economy going under some people weren’t sure where to turn to when their houses started to go into foreclosure, or they were so far in dept that they didn’t know what to do. A large number of those people got an idea that they could “accidently” start their house on fire, or make it look like a fault of some sort that they could collect their insurance money and life would go back to normal. Well they were wrong that just landed them a hefty fine and quite a few years in federal prison. A great example of this is an incident that happened to a man by the name of Marc Thompson. He was a high living executive of a Chicago grain company that went under and put him deeply into debt. In desperation, he torched his home for the $730,000 in insurance money. To make it appear like a suicide, he led his 90-year-old mother Carmen downstairs, doused the basement with accelerant and tossed the match. Marc Thompson was sentenced to 190 years in federal prison. (Quiggle)
People all over the U.S. want to have health insurance that will cover their doctor’s visits and hospitalizations. So what if there were people out there that sold fake policies? That would mean that you paid money to these people for health insurance and when you received a bill none of it was covered. Your insurer was a fraud and now you are stuck paying for all of it on your own. These people that make up these scams are very believable. They use fake names and draw up policies that look to be real. They even send you your insurance cards and all the paper work to be filled out and sent back. They make it so believable that hardly anyone would ever notice until it is too late. James Lee Graff was a man who robbed some 30,000 people of more than $40 million in stolen health insurance premiums. These poor people were left to pay all their medical bills out of pocket. (Quiggle, insurance fraud) The ponzi scheme is named after Charles Ponzi, who became well known for using the technique in 1920. However Mr. Ponzi did not invent the scheme, but his operation took in so much money that it was the first to become known throughout the United States. Mr. Ponzi's original scheme was based on the arbitrage of international reply coupons for postage stamps; however, he soon diverted investors' money to make payments to earlier investors and himself. (ponzi scheme)
In Utah one of the two largest financial frauds just recently happened. It involved a father and a son that ran a major ponzi scheme. They managed to take more than $200 million dollars from about 225 investors. A law suit was filed by federal regulators on the 8th of December 2011. Named in the lawsuit were Wendell A. Jacobson and Allen R. Jacobson both from Fountain Green in Sanpete County in central Utah, and their company, Management Solutions Inc. (Harvey, 2011) They solicited investors who were told that they were buying multifamily apartment complexes with low occupancy rates, and then transform and improved them along with their management before selling them at a significant profit in three to five years. The investors were promised a return of generally 5 percent to 8 percent per year, but were told that Management Solutions’ track record had produced returns of up to 15 percent per year, and that a related entity had never done worse than a 13 percent return, enticing the investors to advance and purchase in other projects. (Harvey, 2011) But according to the lawsuit the two failed to invest the 50 percent of their own money as promised and wrongly said that their apartment complexes had never lost money. The investors money that was supposed to stay in limited liability companies formed for each project instead was used to pay the returns to make the investors believe that the companies were making a profit thus where the allegations for a ponzi scheme came from as stated in the lawsuit. The two were still paying out returns and taking in new investments up to as recently as November 2nd where an investor put in $2 million. In conclusion there are many people out there that think they can get away with using people and get rich fast schemes. They may be getting rich fast but they will get caught sooner or later, but what they don’t care about is all of those people that they hurt and left with all of their bills and or lost investments. It will take these poor people generally a long time to fix the damage that those other people caused in their lives.

References
Bibliography
Harvey, T. (2011, December 15). Retrieved from salt lake tribune: http://www.sltrib.com/sltrib/money/53124909-79/investors-lawsuit-utah-investor.html.csp#disqus_thread ponzi scheme. (n.d.). Retrieved January 16, 2012, from wikipedia.com: http://en.wikipedia.org/wiki/Ponzi_scheme
Quiggle. (n.d.). insurance fraud. Retrieved from bankrate.com: http://www.bankrate.com/finance/insurance/8-extreme-cases-of-insurance-fraud-2.aspx
Quiggle. (n.d.). insurance fraud. Retrieved from bankrate.com: http://www.bankrate.com/finance/insurance/8-extreme-cases-of-insurance-fraud-5.aspx

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