AIDS Patients
and Fraud
Feb. 20, 2000:
The Express, a Fort
Lauderdale gay newspaper, and The Washington Blade, a prestigious gay newspaper with a
wide circulation, report that Florida officials are investigating PWAs (People with AIDS)
who are alleged to have benefited from "clean-sheeting." Clean-sheeting is a
type of fraud in which the applicant for a new life insurance policy hides the truth about
his/her health.
According to the report, at least 69
"people with HIV/AIDS conspired with certain insurance agents and viatical settlement
brokers to defraud many of the nation's life insurance companies out of millions of
dollars."
(Ed. note: Investigators do not seem
to realize that insurers won't lose for long -- they will pass on the losses in the
form of higher premiums to all who need life insurance in future years. This is a greater
injury to consumers than to insurers.)
In January the Office of the Florida
Statewide Prosecutor seized the medical records of 69 patients believed to be Gay men with
HIV. Some of these patients bought at least 200 individual life insurance polices. The
patients are located all over the nation.
According to The Blade, "Some
people bought three or more polices each, according to Lisa Porter, the chief assistant
statewide prosecutor who is leading the investigation. She said the people who bought
multiple polices purchased them from different life insurance companies."
Florida regulators are considering
charging the patients with racketeering, dealing in stolen property, and grand theft.
Convictions could result in between 5 and 30 years in prison.
Attorneys for the 69 patients, in a
Jan. 14, 2000 hearing in Broward County, Fla., Circuit Court, argued against the
confiscation of medical records as a breach of the patients' privacy rights. Judge James
Cohn, who ruled against the release of the records at an earlier hearing, ruled in favor
of the prosecutors Jan. 14, noting that a state appeals court had directed him to reverse
his earlier ruling. Cohn cited the appeals court's assertion that the patients effectively
ceded their right to privacy when they agreed to release their medical records to a
viatical firm as part of a "commercial transaction." However, Cohn required
state prosecutors to keep the records confidential.
In Texas, 28 viators pled
guilty to fraud in connection with the Southwest Viatical fraud case. All received between 4 and 5
years probation, agreed to cooperate with law enforcement), and agreed to pay a fine. (The
principals of SW Viatical went on trial
4/10/00 in Dallas.)
* * *
Ed note: I have little sympathy for PWAs who commit
fraud, when many of those who legitimately own policies have a tough time selling, or get
much smaller payments, or are unable to sell at all. It is the fault of those who commit
fraud that honest patients are having trouble. They have caused AIDS and fraud to become
linked in the minds of many investors, to the point that some companies won't look at an
AIDS policy now -- because they won't be able to resell them. This really stinks.
When I testified at the senate
hearing in Indiana I supported a provision in the proposed bill that would have extended
to 6 years the contestability period for fraud, when policies are viaticated. My sole
reason for doing this (and rejecting my own misgivings about it) was to make it safer and
easier for honest AIDS patients to sell their policies. On second thought, this bill
wouldn't help. Unscrupulous companies would continue to sell fraudulent policies to
investors who don't know better, and the investors would get stuck. The companies, their
sales agents, and the insureds who lied -- they pocket their profits up front, and leave
everyone else with an empty purse.
I understand what motivates
destitute patients to do this, and I am not unsympathetic. But I am irate when I hear
about "professional viators" -- patients who engage in a pattern of fraud. One
of these phoned me in a panic, when he thought he might go to jail. He had participated in
9 policies. He made at least $10K on each, a total of $90,000 with no sweat -- not until
now. He got much more money than many honest AIDS patients who paid premiums for years.
Unlike honest AIDS patients, he had no worry about selling his last asset for too little.
He did not agonize about getting a few thousand more, pinching pennies until all bids came
in. He just signed his name and pocketed the money.
This is like the time when I was in
grad. school. Another social work student said that she just couldn't help beating her
children, after her husband beat her, she was that frustrated. And she looked to us for
sympathy. I said, "No way. The buck has to stop someplace. You are an adult. You have
to take responsibility for your actions."
The real profiteers of fraud are the
schemers -- the insurance agents and viatical companies that solicit patients to commit
fraud. But these creeps couldn't succeed without the patients' cooperation. Together, they
have closed the door to many needy AIDS patients who have policies to sell -- legitimate
policies. That is why I am intolerant of what they did.
Fraud diverts money
from the truly needy to the truly greedy.
