Franky O., another businessman and three attorneys were indicted by a federal grand jury in Philadelphia for racketeering, fraud and theft as part of a “massive health care fraud scheme” that cost 560 small businesses more than $5.7 million according to J. W. De La Rosa, who was inspector general of the U. S. Department of Labor. Adding further insult to the direct aspects of this fraud, some of the victims were subsequently unable to then get health insurance because of pre-existing conditions or serious illnesses contracted while the scam was in progress.
All five defendants were reportedly associated with several related but now defunct firms once based in Denver, Colorado including Cabot Day Insurance Co., Morgan-Puttmann Insurers Ltd. and Equity Med-Kare Plan Trust, authorities said. None of these firms were licensed to sell insurance, according to the grand jury, yet managed to conduct business in 14 states. To avoid a lengthy prison sentence, Franky O. reportedly turned state’s evidence and began working undercover for the U.S. Organized Crime Task Force while continuing to also commit massive civil fraud.
On two separate occasions over the next few years I was retained by judgment creditors to help recover their significant losses. With the help of an outstanding and extremely aggressive Denver civil attorney, we were able to recover 100 percent for both judgment creditors.
I was then contacted by another client who said he had lost $200,000 to Franky O. in another fraud. This client was uncertain if he should pursue criminal or civil remedies. With the client’s permission, I called Andrew L. Quiat, Esq., the civil attorney I previously worked with on two Franky O. cases. We invited Franky O. to join us for Saturday brunch at a local country club. Over brunch, I explained my new client’s situation. After reflecting on our previous success and the possibility of facing up to treble damages on a judgment up to $600,000, plus legal fees, costs and interest, Franky O. thought it best to just settle with our client out of court for $250,000 cash.
After reaching a mutually agreeable civil settlement agreement, Andy and I asked Franky O. why he chose this line of work considering the fact that he obviously was well educated and very bright.
Franky O. shook his head, grinned from ear to ear and asked for my yellow pad and pen so he could explain the economies to us. He drew the following inverted pyramid and explained:
As Franky O. so eloquently points out, the risk of getting caught and having to pay restitution is simply a cost of doing business for many career fraudsters.