Insurance Sales Associate Charged with $4 Million Disability Insurance Scheme
|U.S. Attorney’s Office October 11, 2012|
SANTA ANA, CA—A former sales associate with the American Family Life Assurance Company, or AFLAC, was arrested today on mail fraud charges involving the defrauding of $4 million in disability benefits from AFLAC in a fictitious employer scheme. This indictment was part of a crackdown in the last year on fictitious employer schemes that deplete federal, state, and private unemployment and disability insurance program resources, at a time when such resources are most needed.
Fictitious employer schemes target federal, state, and private unemployment and disability insurance programs, which provide benefits to workers who are out of work through no fault of their own or suffer non-work related injuries and are unable to work. In a fictitious employer scheme, co-schemers register fictitious businesses that do not do any business and have no real employees. After registering the fictitious businesses, co-schemers file claims as fictitious employees of the fictitious businesses who lost their jobs or are injured and collect a stream of unemployment and/or disability insurance benefit checks, which are sent by mail.
Patricia Diane Smith Sledge, 56, of Irvine, was charged by a federal grand jury with four counts of mail fraud for her part in a scheme to submit fraudulent disability insurance claims to AFLAC for fictitious businesses with fictitious injured employees. According to the indictment, Sledge was a sales associate at AFLAC who sold disability policies to co-schemers with fake businesses and solicited fake employees for such businesses, including Litetouch Investments and Blue Diamond Services. Soon after obtaining the policies, the fictitious employees claimed fake injuries, and AFLAC sent disability benefit checks by mail to the claimants. Sledge allegedly received a portion of the illegally obtained proceeds from the claimants. AFLAC terminated Sledge in October 2011 after conducting its own internal investigation.
“Disability and unemployment insurance fraud is shameful conduct that wastes both taxpayer and insurance company dollars by siphoning away money from the people who actually need these benefits, such as the unemployed and the disabled, and diverting it to the greedy,” said United States Attorney André Birotte, Jr. “Partnership and teamwork are required to effectively police our disability and unemployment insurance programs, and I commend all of the agencies who demonstrated those qualities in working together to bring this case.”
“Today’s indictment highlights the importance of this multi-agency investigation to identify fraud in benefit programs, such as the U.S. Department of Labor’s Unemployment Insurance Program. We will continue to work with our law enforcement partners to investigate these types of allegations,” stated Abel Salinas, Special Agent in Charge of the Los Angeles Regional Office of the U.S. Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud Investigations.
“Unscrupulous life agents who allegedly commit crimes by creating ghost businesses and non-existent employees to game the system will be apprehended and prosecuted,” said California Insurance Commissioner Dave Jones. “A disability insurance fraud scheme such as this drives up the cost of coverage and premiums for both consumers and providers, and the department is committed to rooting it out.”
This case is related to two other charged cases involving the same fictitious employer scheme, and is the ninth in a sweep of charged fictitious employer cases in the last year. On November 30, 2011, Navesia Samuels, 33, from Orange County, was charged with mail fraud for her involvement in fictitious employer schemes that defrauded multiple state workforce agencies, including California’s Employment Development Department (EDD) and AFLAC, with a total loss of approximately $400,000 in unemployment and disability benefits. On March 28, 2012, the grand jury indicted four related cases and a total of seven defendants with fictitious employer schemes involving the defrauding of federal and state unemployment and disability insurance programs, as well as AFLAC. Bobby Langley, 46, from Los Angeles, was charged with mail fraud for his involvement in fictitious employer schemes that defrauded multiple state work force agencies, including California’s EDD and AFLAC, with a total loss of approximately $113,000. Ray Blaylock, 45; Dameon Crandle, 42; Chad Emanuel, 44; and Joseph Hollins, 43, all from Los Angeles, were charged with mail fraud for submitting fraudulent unemployment and/or disability insurance claims to California’s EDD as fictitious employees of fictitious business Tranquil Communications, with a total loss to EDD of approximately $164,000. William Samuels, 25, was charged with mail fraud for submitting fraudulent unemployment insurance claims to EDD as a fictitious employee of Couture Recovery Services, with a total loss to EDD of approximately $25,000. Finally, Marilyn Jones, 49, from Los Angeles, was charged with mail fraud for participating in the fictitious employer schemes by signing the doctor’s certification section of the fictitious employees disability claim forms in exchange for money, with a total loss to EDD and AFLAC of approximately $106,000.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty.
Each count of mail fraud carries a statutory maximum sentence of 20 years in federal prison.
This case is the product of a joint investigation by the Department of Labor-Office of Inspector General, the Federal Bureau of Investigation, the Social Security Administration-Office of Inspector General, the California Employment Development Department, and the California Department of Insurance. AFLAC fully cooperated in the investigation.