18 U.S.C. § 1033 - Federal Insurance Fraud
Let's review the federal offense of 18 U.S. Code 1033 crimes by or affecting persons engaged in the business of insurance whose activities affect interstate commerce. Insurance fraud frequently involves using a fraudulent claim to obtain insurance benefits.
In other words, a policyholder will use deceit on an insurance provider to wrongfully obtain money. Unlawful activity by insurance companies and employees is also insurance fraud. The fraudulent activity can be prosecuted under federal law when it crosses state lines.
Insurance fraud at the federal level can involve getting benefits from governmental agencies. It can occur in many forms, such as making false claims on a form up to large criminal organizations with many people.
18 U.S.C. 1033 says, “(a) (1) Whoever is engaged in the business of insurance whose activities affect interstate commerce and knowingly, with the intent to deceive, makes any false material statement or report or willfully and materially overvalues any land, property or security—
(A) in connection with any financial reports or documents presented to any insurance regulatory official or agency or an agent or examiner appointed by such official or agency to examine the affairs of such person, and
(B) for the purpose of influencing the actions of such official or agency or such an appointed agent or examiner, shall be punished….”
The insurance industry is highly regulated in the United States. Many federal laws and regulations protect policyholders, other claimants, and insurance companies. The Federal Bureau of Investigation (FBI) says billions of dollars are lost in fraudulent claims annually.
Our law firm defends individuals and companies during criminal investigations, grand jury proceedings, and federal trials.
Insurance Fraud - Explained
18 U.S.C. 1033 has numerous prohibitions affecting “people engaged in the business of insurance,” and insurance company insiders could face federal prosecution for offenses including the following:
- Embezzlement and misappropriation of insurance company funds, premiums, and insurance credits;
- Knowingly making any false entries in any book, report, or statement with the specific intent to deceive;
- Making fraudulent representations to federal or state agencies that regulate insurance companies;
- Obstructing or impeding the proper administration of the law in any federal insurance fraud investigation or other proceeding.
Section 1033(b)(1) says, “Whoever (A) acting as, or being an officer, director, agent, or employee of, any person engaged in the business of insurance whose activities affect interstate commerce, or
(B) is engaged in the business of insurance whose activities affect interstate commerce or is involved (other than as an insured or beneficiary under a policy of insurance) in a transaction relating to the conduct of affairs of such a business, willfully embezzles, abstracts, purloins, or misappropriates any of the money, funds, premiums, credits, or other property of such person so engaged shall be punished…”
Our federal criminal defense lawyers represent policyholders, third-party claimants, providers, contractors, and insurance company employees accused of engaging in fraudulent conduct.
We also defend insurance companies against allegations of fraudulent claim denials, premium diversion, fee churning, license compliance violations, and asset diversion in mergers and acquisitions.
Further, we defend insurance companies that are accused of fraudulent behavior and under investigation by the Department of Justice (DOJ) or being audited by the Federal Insurance Office (FIO) or Federal Emergency Management Agency (FEMA).
Healthcare Insurance Fraud
The most common type is healthcare insurance, which could include patient or healthcare provider fraud. An example consists of a physician billing a patient for services never performed.
Due to complex medical codes used in billing, it is often difficult for patients to know precisely what services are charged to their insurance. Sometimes, conspiracy allegations claim a patient and health care provider are working together to defraud insurance companies.
Medicare and Medicaid fraud is another type of healthcare fraud. The Government Accountability Office (GAO) considers these programs high risk for fraud and abuse. Our law firm represents policyholders and providers accused of fraudulently seeking coverage from insurers.
What Are Some Other Types of Insurance Fraud?
Several other forms of insurance fraud could be charged as a federal offense, including the following:
- Workers' compensation fraud involves making misrepresentations by federal employees to obtain benefits. The Federal Employees' Compensation Act (FECA) pays billions for lost wages, death benefits, and medical care;
- Life insurance fraud occurs in many ways, such as alleged fraudulent representations, omissions on life insurance applications, and fraudulent coverage claims;
- Auto and home fire and flood insurance fraud involve claims for significant property damage and claims for catastrophic injury or death. Individuals and businesses can face prosecution for alleged criminal insurance fraud;
- Business insurance fraud involves commercial liability, general liability, business interruption, and insurance policies. Sometimes, businesses are accused of defrauding their insurance companies to obtain coverage or payment.
Other potential cases include auto insurance fraud, property insurance fraud, renter's insurance fraud, and unemployment fraud.
Who Conducts an Insurance Fraud Investigation?
Often, insurance fraud is investigated by private insurance companies, local police, or federal law enforcement agencies. Insurance companies have vast experience identifying fraudulent activity.
Many have complex computer models to identify suspicious claims (red flags) with certain forms of insurance, such as the following:
- Multiple claims,
- Insurers seeking a fast settlement;
- Large or suspicious claims;
- Claims for losses right after the insurance coverage goes into effect.
Insurance companies have special investigative units. If they have reasons to believe there is some fraud, they will deny the claim and report their suspicion to the police. Sometimes, citizens will report suspected insurance fraud to state or government agencies, such as the:
- National Insurance Crime Bureau (NICB);
- Government Accountability Office's (GAO);
- Federal Bureau of Investigation (FBI);
- Internal Revenue Service (IRS)
- Office of the Inspector General.
What Are the Penalties?
Suppose you are convicted of federal insurance fraud. In that case, the potential penalties will vary based on the value and extent of the fraud and the specific law violation. Most cases will carry fines, jail time, civil penalties, and restitution. An overview of the potential penalties are as follows:
- Section 1033 criminal insurance fraud involving people who are in the insurance business making false statements or using deception will face ten to 15 years in the Federal Bureau of Prisons;
- Insurance company insiders will often face prosecution under the federal mail fraud, wire fraud, and money laundering statutes, which carry significant fines and federal prison time;
- Any unsuccessful attempts of insurance fraud could be prosecuted under 18 U.S.C. 1349 attempt and conspiracy, which carries fines and jail time;
- Healthcare fraud under 18 U.S.C. 1347 involves defrauding any healthcare benefit program on services or payments and carries up to ten years in prison. Suppose the scam resulted in serious bodily injury. In that case, the penalties can increase to a maximum of 20 years in prison;
- Federal workers' compensation fraud under 18 U.S. Code 1920 involves false or fictitious statements regarding benefits, and the penalties include a fine and up to five years in prison.
What are Insurance Fraud Defenses?
Insurance fraud allegations are serious, and many people, businesses, insurance company owners, and executives are surprised to discover they are being investigated. Some receive a subpoena about an insurance claim.
Once you find out about an insurance fraud investigation, contact our federal criminal defense attorneys to review the case.
Sometimes, people under a criminal investigation consider whether or not they should cooperate with government investigators, but you should know this could expose you to criminal and civil liability. Insurance fraud cases can be typically complex, involving many alleged criminal activities that violate many state and federal laws.
Since most cases involve healthcare fraud, we provide legal representation for physicians, doctors, physician groups, hospitals, clinics, pharmacies, and other healthcare professionals. We also defend contractors accused of bid rigging, fraudulently inflating costs, and substituting inferior materials.
We also provide legal advice and representation throughout the government's investigation. Suppose you received a subpoena or search warrant. In that case, we can negotiate with the federal prosecutor for a favorable pre-filing resolution.
If you were already charged or indicted, we can develop a strategy that might result in getting your charges dismissed or negotiating a favorable plea deal. Still, we are prepared to go to trial if necessary. Contact us for a free case evaluation. The Hedding Law Firm has offices in Los Angeles, CA.