Managing Co-Owner Dismissed

Man Fined For Workers’ Comp Fraud A San Diego County Superior Court judge has sentenced Kevin Vint, 50, of Del Mar, Calif., to three years formal probation for conspiracy to commit workers’ compensation insurance fraud and payroll tax evasion. Vint was ordered to pay restitution of $119,000 to State Compensation Insurance Fund and $31,000 to the California Em-ployment Development Department.

Vint owns Kevin Vint Masonry, specializing in residential homes and commercial projects in the San Diego area. The business has been insured with State Compensation since August 2000. In 2003, a Vint employee sustained a back injury and filed a claim. During the claims investigation, an audit discovered that the injured employee’s salary had been paid in cash. State Fund forwarded its findings to the San Diego County District Attorney’s Office.

The DA’s Insurance Fraud Division discovered Vint reportedly paid employees nearly $400,000 in cash wages to avoid paying workers’ compensation premiums and payroll taxes. A grand jury indicted Vint for conspiracy to commit insurance fraud and payroll tax evasion, and Vint was convicted.

The managing co-owner in The Leavitt Group’s Albuquerque office has been dismissed for reported misrepresentations made in proposals to 20 current or former clients over a six-year period. The misrepresentations were made in annual insurance renewal proposals, in which a recommended legitimate insurance quote was contrasted with falsified comparison quotes. The falsified quotes were reportedly higher than the legitimate recommended quotes. The falsified quotes either were never issued by cited insurers, or were inflated so as to appear noncompetitive.

The problems were brought to light when a client advised the Leavitt Group’s parent company, Leavitt Group Enterprises, of irregularities in a past renewal quote. An internal investigation confirmed that misrepresentations had occurred, with respect to the reporting former client, and also with respect to additional past and present clients.

The misrepresentations were reported to the New Mexico Insurance Department.

CDI Arrests Three

The California Department of Insur-ance (CDI) has arrested three suspects-Richard Contreras, 41, his wife Jun Nigh Contreras Carrasco, 42, of Fontana, Calif., and Robert Bird, 65, of La Quinta, Calif.-for insurance fraud, grand theft, conspiracy and labor code violations for receiving consideration for referrals. The Los Angeles County District Attorneys’ Workers’ Com-pensation Unit is prosecuting the case.

The case involved a third-party administrator, Fleming & Associates, and a La Crescenta, Calif.-based company, which pro-cessed workers’ comp claims for employers and public entities that are self-insured. Fleming paid more than $1 million to seven phony companies for fraudulent billing for employee vocational rehabilitation services.

Bird owned two shell companies (Glendale P.O. Boxes only) that billed for alleged workers’ comp vocational rehabilitation services in the amount of $720,170.

Contreras allegedly generated invoices for services that were excessive, unnecessary or fraudulent, and directed the payments to Bird’s companies.

UnumProvident Enters Settlement Agreement

Three of UnumProvident Corp.’s insurance subsidiaries have entered into a settlement agreement with the California Department of Insurance, concluding a market conduct examination and investigation of the subsidiaries’ disability claims handling practices.

As part of the settlement, UnumProvident has agreed to change certain practices and policy provisions related to its California business and consistent with state case law. The settlement also incorporates claims handling practices previously covered by the multistate agreement reached last year with 48 other states, and includes certain additional claim handling changes. Additionally, the company has agreed to pay a fine of $8 million to CDI.

In entering the settlement, the company did not agree with the allegations and characterization of the company’s past claims handling practices made by the Department. Nevertheless, the company said it concluded that settling was in the best interest of its customers and the company.

Under the terms of the settlement, UnumProvident will change a number of provisions specific to California disability policies, including the definition of “total disability.” The company also will receive approval from California for the use of new individual and group disability policy forms, which will become available for sale on Nov. 1, 2005.

CDI is expected to notify all disability providers who do business in the state of its concerns about the lawfulness of certain provisions contained in present policy language, and to spell out an approach for addressing these concerns.

The settlement also incorporates the claim reassessment process and the changes in claim handling practices contained in the November 2004 multistate regulatory settlement agreement that was previously ratified by 48 other states. California claimants were included in the 2004 multistate settlement and could choose to participate in that claim reassessment process, although California did not join the multistate agreement.

Reassessment notices will be mailed to approximately 26,000 individuals whose claims were denied or terminated between Jan. 1, 1997, and Sept. 30, 2005. Additionally, an individual whose claim denial or termination is upheld in the reassessment may request an independent review by a member of a panel established for that purpose.

UnumProvident plans to amend the multistate settlement agreement to include mailing a notice of the claim reassessment process to approximately 29,500 individuals whose claims were denied or terminated between Jan. 1, 1997, and Dec. 31, 1999. Under the original multistate agreement, claimants during this period could request participation in the reassessment process, but they were not sent a notice.

Based on the settlement agreement and related matters, UnumProvident will record a charge of $75 million before tax or $51.6 million after tax ($0.16 per diluted common share) for the third quarter of 2005. The pre-tax charge is comprised of four elements: $14.3 million of incremental direct operating expenses to conduct the reassessment process; $37.3 million for benefit costs and reserves reopened from the reassessment; $15.4 million for additional benefit costs and reserves from claims already incurred and currently in inventory that are anticipated as a result of the claim process changes being implemented; and the $8 million fine.

The ongoing expenses of changing certain claim practices and policy provisions in California insurance forms will be included in the company’s operating expenses as incurred going forward. The company anticipates that the ongoing expenses will not materially affect its results of operations, and it expects its ratings will be reaffirmed.
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