FOREIGN TRADE UNIVERSITY

ECONOMICS AND INTERNATIONAL BUSINESS

DEPARTMENT

______

INSURANCE AND RISK MANAGEMENT

LIFE INSURANCE: FRAUD CASES IN US AND SOME

RECOMMENDATIONS

Nguyễn Phương Hoa- 2012150034

Vũ Hải Bình – 2012150013
Đặng Lam Bình – 2013150004
Nguyễn Thị Huyền – 2013150024
Lê Hoàng Long – 2012150055
Sami Manninen – 2290102014
Nguyễn Hoàng Nam - 2013150035

Class: TMAE308.1
Lecturer: Hoàng Thị Đoan Trang

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 TABLE OF CONTENTS
1 INTRODUCTION ................................................................................................................. 3
2 THEORETICAL BASIS ....................................................................................................... 4
2.1 Life insurance .................................................................................................................. 4
2.2 Life insurance fraud ........................................................................................................ 4
3 RESEARCH PROBLEM STATUS ..................................................................................... 6
3.1 Overview of life insurance market .................................................................................. 6
3.1.1 The history and development of Life Insurance ........................................................ 6
3.2 Overview of US Life insurance fraud ............................................................................. 8
3.3 Two cases of liffe insurance fraud ................................................................................ 10
3.3.1 Case 1 ...................................................................................................................... 10
3.3.2 Case 2 ...................................................................................................................... 18
4 RECOMMENDATIONS .................................................................................................... 26
5 CONCLUSION .................................................................................................................... 29
6 REFERENCES .................................................................................................................... 31

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1 INTRODUCTION
Life insurance is a contract between an insurer and a policy owner. A life insurance policy
guarantees the insurer pays a sum of money to named beneficiaries when the insured dies
in exchange for the premiums paid by the policyholder during their lifetime. Therefore,
life insurance acts as a safety net to protect the insured’s loved ones who may financially
depend on him after his death. For example, life insurance policy can help pay financial
obligations such as rent or mortgage costs, funeral and burial expenses, school tuition,
personal debt such as student loans or credit cards, and even, supplement the lost income,
to help pay for day-to-day expenses.

Despite the original purpose of life insurance, many people have taken advantage of it and
treated it like an “investment” to gain profit. Life insurance fraud can be in many forms,
coming from both the agency and policy owners' sides. It has unsurprisingly caused a
huge loss to society.

Therefore, our group decided to choose the topic: “LIFE INSURANCE: FRAUD
CASES IN THE US AND SOME RECOMMENDATIONS”. To be more specific, this
report will assess the life insurance fraud issues in the US market in general, investigate
two notorious cases and then give some recommendations to prevent this problem.

We would like to give our sincere thanks to our lecturer - Ph.D. Hoang Thi Doan Trang
for your constructive feedback and continuous support for us to finish this report.

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2 THEORETICAL BASIS

2.1 Life insurance

Life Insurance can be defined as a contract between an insurance policy holder and an
insurance company, where the insurer promises to pay a sum of money in exchange for a
premium, upon the death of an insured person or after a set period.

In many cases life insurance can be neccessary for policy holders’ beneficiaries for their
survival after a death occurs because the family might have for example a mortage that
they could not afford to pay anymore after a death of one family member.

After receiving the insurance money, your beneficiaries can use the money for whatever
purpose they choose. Often this includes paying everyday bills, paying a mortgage, or
putting a child through college. Having the safety net of life insurance can ensure that
your family can stay in their home and pay for the things that you planned for.

2.2 Life insurance fraud

General insurance fraud costs Americans approximately $40 billion every year. But
despite what you see in movies and read in headlines, sensational life insurance schemes
involving faked deaths and murders are rare. More common types of life insurance fraud
include purposefully misstating application information to get cheaper pricing or altering
someone else’s policy without their approval.

In less serious cases of fraud, you might be hit with higher policy premiums, a policy
denial, or cancellation of coverage. In more serious cases, life insurance fraud can be
reported to a fraud bureau and brought to court.

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There are four common types of fraud in life insurance: application fraud, death fraud,
forgery, and phony policy fraud.

a. Application fraud
Application fraud is when you knowingly provide incorrect information to your insurance
company while applying for a policy, to get cheaper premiums. This can also be called
material misrepresentation or concealment.
If you get caught doing this your insurer will either increase your final premiums or they
will deny your insurance application.

b. Claims fraud
Claims fraud is more commonly known as death fraud which occurs when someone fakes
their own death or the death of their loved one to collect a life insurance benefit.

For example, you take a life insurance for your spouse and then you guys together fake
her dissapearence by reporting her missing and wait for few years until they get declared
dead. The time that it takes for a person to be declared dead after disappearance varies
depending on the circumstances where the person went missing.

Some people have commited claims fraud is by making or buying counterfeit death
certificates. Policy holders' loved ones then use the fake death certificate to collect the
money from insurance companies. This way is considered more professional since faking
death certificates is not an easy task. Some criminals have made it their business to sell
fake death certificates.

Another type of claims fraud is when a beneficiary kills the policyholder to get a payout.
Sometimes married couples may take life insurance for their spouse, only with the
intention to to kill them, so they can collect the life insurance money later. For example, a

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husband takes life insurance policy for their wife, and then kills them and collects the
money, or the other way around

c. Forgery
This type of life insurance fraud occurs when other parties, often a family member or
spouse, access the policy and change its ownership or named beneficiaries. Only the
policyowner is allowed to change the details of a policy, and someone would need to
forge documents or fake their identity to alter a policy owned by someone else. You can
have your claim denied and be prosecuted for forgery-based life insurance fraud.

d. Phony policy fraud

Scammers pretending to be insurance agents sometimes “sell” fake policies to
unsuspecting customers and pocket the premiums. The fraudsters say they work for a
recognizable, established brand to earn your trust, then request cash or direct payments
for a policy.

3 RESEARCH PROBLEM STATUS

3.1 Overview of life insurance market

3.1.1 The history and development of Life Insurance
3.1.1.1 The origin of Life Insurance in the world

The history of life insurance can be traced back to ancient Greece and Rome between 600
and 100 BCE. Gaius Marius, a Roman military general, was credited with coming up with
the concept in ancient times: Should one of his fellow soldiers be killed in battle, the
club's surviving members would come together to cover the cost of the victim's funeral,
according to legend, which was conceptualized as "burial club", a type of health and life
insurance. While the concept was first solely used by soldiers at the time, it gradually
expanded throughout ancient Rome and was embraced by common people. Later, these

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organizations developed this idea to ultimately provide a financial safety net for the
family members of those who fell in battle.

3.1.1.2 The history and development of Life Insurance in the US

The Presbyterian Ministers Fund was the very first life insurance firm in the United
States, founded in Pennsylvania in 1759 with the primary purpose of assisting
Presbyterian widows and orphans. By the early 1800s, there were successful life
insurance companies not only in Pennsylvania but also New York, Maryland, and
Massachusetts. It’s estimated that in the 1830s, American life insurance companies wrote
policies totaling around $600,000. By 1850, that amount was nearly $100 million.

Things began to change in 1840 when the state of New York passed a legislation allowing
a woman to independently purchase a life insurance policy on her husband. The widow
received a good deal of protection from creditors under the same rule. As other states and
insurance providers started to imitate New York's lead, life insurance in America quickly
saw a growth boom. Since then, the market has widened to include many more groups of
policyholders and insurance issuers. Over 340,000 people in the United States were
currently employed by the business, which had total assets worth around $7 trillion in
2018 alone.

U.S. life insurers saw their yearly direct life insurance premiums surpass $200 billion for
the first time in history in 2021, according to an S&P Global Market Intelligence analysis
of annual statutory statements.

The total amount of group and individual direct life premiums increased by 9.9% annually
to $204.7 billion in 2021. Individual life premiums increased 10.7% across the board to
$162.76 billion in 2020 from $147.01 billion in 2019.

The regulatory statements are the sole source where premiums by policy type are
available net of reinsurance. The highest year-over-year gain in net premiums among the

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main individual policy types was recorded for universal life, which soared at around 60%,
followed by variable universal life, which climbed to 23.8%. Index, whole life, and
universal life with secondary guarantees all experienced double-digit growth. On the other
hand, term life net premiums decreased by 5.8%.

Group direct life premiums grew by 7.1% in 2021, reaching $41.94 billion.

Source: S&P Global

3.2 Overview of US Life insurance fraud

Insurance fraud, especially life insurance fraud, is among the most costly and damaging
forms of fraud crimes in the United States and globally.

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The 2016 RGA Fraud Conference attendants believe that insurance fraud (excluding
health insurance) costs more than $40 billion each year or equally costs the average
American household $400 to $700 in higher premiums every year (Turner, 2021).
Life insurance fraud is estimated to approximately cost the life insurance industry as
much as $10-20 billion each year, accounting for 12-25% of the total cost of insurance
fraud in the U.S (RGA Annual Fraud Conference, 2016).
The actual cost of fraud, however, is incalculable since it goes beyond the expense of
paying inappropriate claims and the expenditures associated with setting up fraud
prevention and detection units. Fraud also stifles innovation and costs customers money
and convenience. Additionally, the earlier assessment of insurance fraud costs was based
on a technique developed in the early 1990s that ignored the impact of inflation and other
contributing variables (RGA Annual Fraud Conference, 2016).

The 2022 estimation of the cost of insurance fraud in the U.S increases to $308.6 billion,
in which $74.7 billion is the cost of life insurance fraud (The Coalition Against Insurance
Fraud Report, 2022), accounting for approximately 25% of the total fraud cost.

Source: CSU Global

The RGA further reports that, according to a study of life insurance firms, approximately
1% - 3% of claims are either subject to an investigation for fraud or misrepresentation or
are rejected outright. The contestability period, which varies from state to state but is
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typically one to two years, allows an insurer to reject a claim for serious
misrepresentation and fraud. According to internal RGA claims experience, over 20% of
life insurance claims are canceled during the contestability period. Policies with a simpler
issuance and those given to younger insureds have a higher rate (RGA Annual Fraud
Conference, 2016).
There are several factors challenging the investigation into life insurance fraud cases in
the U.S. Firstly, the process of investigating is time-consuming and requires a lot of
money which makes the related parties reluctant to take the court. Secondly, the
resistance from third parties such as claimants, doctors, etc to assist the investigation
process is also considered as a barrier to the counter-fraud of life insurance. Furthermore,
U.S data protection laws and other regulations are also negatively impacting insurers’
ability to investigate life insurance fraud as there is a growing asymmetry of information
between the insured and insurer.

3.3 Two cases of life insurance fraud

3.3.1 Case 1

Two Elderly Women Arrested in Deadly Scam of Life Insurance

1. Case Summary:

In 2008, in Los Angeles, two senior citizens, Helen Golay, 77, and Olga
Rutterschmidt, 75, were convicted of murder. They were both sentenced to
consecutive life terms. On two separate occasions, they had taken homeless men—
Paul Vados and Kenneth McDavid—under their wings, housed, fed, and looked after
them for two years, then killed them with cars, hit-and-run style. They had also taken
out millions and millions of dollars in dozens of separate life insurance policies on
each man. The men turned up dead in still- unresolved hit and run cases; the women
were $2.2 million richer after collecting their life insurance policies.

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2. The parties of the case:
a. Plaintiff: Mutual Life Insurance Company of New York. The Mutual Life
Insurance Company of New York (also known as Mutual of New York or MONY) was
the oldest continuous writer of insurance policies in the United States.

b. The Defendants:
• First defendant: Olga Rutterschmidt, 73, is a Hungarian immigrant from
Hollywood.
• Second defendant: Helen Golay, 75, is a grandmother who owns a triplex in Santa
Monica.
Neither have criminal records, but now police suspect the women may have been
directly involved with the men's deaths.

3. The background information

a. Establishment of the case:
• Rutterschmidt and Golay befriended the two homeless guys, providing them with a
place to stay and food. But the guys had no clue that they had discreetly taken out
various life insurance policies on them and convinced them to sign policies with
the two ladies as sole beneficiaries. They had taken out more than 20 policies (on
both men) totalling more than $5 million, with plans to murder them as
beneficiaries of the insurance policy.
• McDavid is mentioned as an "investor," "business associate," "real estate investor,"
or "retired real estate investor" on several of the policies, with an annual income
ranging from $100,000 to $150,000 and a net worth ranging from $53 million to $4
million. Before being given a $500,000 insurance policy, the women would claim
that McDavid had $700,000 in assets, earned $72,000, and had earnings the year
before the application of $65,000. On one $500,000 application, Helen and Olga
fraudulently stated that McDavid had authored a $2 million movie called Checking

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 Out to demonstrate that he had an insurable interest and that they were investment
partners.
• Vados was found dead in an alley in Hollywood. Then, last June, McDavid died
under similar circumstances, and police got suspicious.
• On November 8, 1999, police discovered a man named Paul Vados' dead body
lying in the street. After Vados's death, Rutterschmidt told the manager she would
pick up Vados's belongings.
• Kenneth McDavid was then discovered dead in a dark alleyway on June 22, 2005.
His chest and skull were crushed, and he had grease stains on his clothes, leading
authorities to suspect he, too, was lying down when he was hit by a car. McDavid
had nothing in his pockets but two photo IDs, indicating that someone wanted to
inform us who he was. Golay then went to the morgue and claimed to be
McDavid's fiancee. And later, Olga Rutterschmidt, claiming to be McDavid's
cousin, arrives at the police station and requests a copy of the police report.

b. The insurance policies

Both defendants had spent in total the insurance coverage of $879,500 on Paul and
$5,700,090 on Kenneth.
i. Insurance on Vados’s life
Since 1997, at least six applications for life insurance or accidental death insurance on
behalf of Vados have been issued, with either Golay alone or both defendants named as
beneficiaries for a total of $589,125.75. Rutterschmidt received $243,801.47 in benefit
payments, while Golay received $345,324.28. The majority of the premiums were paid by
Golay. She was the single beneficiary of two insurance policies. The other was divided
with Rutterschmidt, and they split the premiums. Golay was portrayed as Vados' fiancée
in the applications and claims for benefits, and Rutterschmidt as his cousin. Among the
insurance firms that had worked with them, some had avoided them, while others had
granted them such a large sum that it was irrevocable.
The insured: Paul Vados
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On most occasions, Paul was referred to be Golay's husband or spouse, while
Rutterschmidt was referred to as his sibling to demonstrate insurable interest. Some
insurers declined the requests due to the insured's bad medical history, while others
accepted and offered policies with large amounts of insurance. If the insurance company
delayed the payment, Golay would write to them or even threaten to sue the insurance
company if the payment was delayed.

Here is the list of insurance companies that worked with Rutterschmidt and Golay:
Insurance Policyholder Contract Premium Issued Beneficiary
company value (V) amount amount
(A)
Guarantee Rutterschmidt Not given $16,724.34 $20,212.06 Rutterschmidt
Trust Life $30,318.08 Golay
Insurance
Company
Mutual of Golay $25,000 Not given $25,000 Golay
Omaha
Monumental Golay $250,000 Not given $187,500 Rutterschmidt
Life Insurance $187,500 Golay
Company
Continental Rutterschmidt $250,000 Not given $65,875 Rutterschmidt
Casualty and Golay $65,875 Golay
Insurance
Company
American Golay $250,000 Not given $63,964.41 Rutterschmidt
Bankers $63,964.41 Golay
Interstate Golay $50,000 Not given $50,416.79 Golay
Assurance

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Company
Guarantee Golay $11,000 $996.84 $16,000 Golay
Reserve Life
Insurance
Hollywood Rutterschmidt $50,000 Not given Not given Rutterschmidt
Rubber Stamp and Golay
Company

ii. Insurance on McDavid’s life

Defendants individually and together made 17 applications for life insurance on McDavid
from November 2002 to March 2003. These policies totalling $3,700,040 were issued.
Benefit payments were made to Golay for $1,540,767.05 and to Rutterschmidt for
$674,571.89. Golay paid the majority of the premiums. She was the single owner of eight
policies. Rutterschmidt was the only beneficiary of Globe Life Insurance Company and
Mutual of Omaha policies, for which she paid the premiums.
The insured: Kenneth McDavid
Golay is named as McDavid’s partner in the insurance applications, while Rutterschmidt
and he are listed as policyholders. Because the defendants did not want to meet with an
agent in person, her application was primarily completed by mail. Kenneth was indicated
in numerous policies to be Rutterschmidt's cousin and Golay's spouse, with a claimed
yearly income of $65,000. In various situations, he was referred to as a real estate
investor, a screenwriter, and a man with a net worth of $1,250,000. When the claim was
not paid, Golay threatened a lawsuit, even though the insurer discovered evidence of
fraud, such as stamped signatures and other insurance policies on McDavid.

Here is the list of insurance companies that worked with Rutterschmidt and Golay:
Insurance Policyholder Contract Premium Issued Beneficiary
company value (V) amount amount

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 (A)
Mutual of Rutterschmidt $1,000,000 Not given denied Rutterschmidt
New York and Golay
(MONY)
insurance
company
Globe Life Golay $20,000 Not given denied Golay
United Golay $100,000 Not given denied Golay
Investors Life
Empire Golay $500,000 Not given $251,575 Rutterschmidt
General $251,575 Golay
AARP Group Golay $75,000 Not given $75,796.51 Golay
Life
AAA Golay $800,000 Not given $810,556.39 Golay
Insurance
Company
Garden State Golay $100,000 Not given denied Golay
Life Insurance
Company
Great West Golay $150,000 Not given Not given Golay
Life Annuity
Insurance
Company
First Penn Golay $800,000 Not given $402,000 Rutterschmidt
Pacific $402,000 Golay
Insurance
American Golay $150,000 Not given denied Golay
Life Insurance

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Company of
New York

4. Case analysis:
a. How did the Insurance company find out about the fraud?
Following Kenneth's death, Mutual of New York (MONY) investigator Ed Webster began
investigating the policies that were taken out on Kenneth, and he quickly discovered
several anomalies. Webster immediately realizes that the information provided by the two
women to the police about their relationship with McDavid does not match. He attempts
to set up a meeting with them. Ed Webster, an insurance investigator, was the key reason
this got known, solved, and became a story in the first place.

The parallels between the death of Paul Vados in 1999 (pictured) and McDavid are too
close for comfort. Two homeless men with sizable life insurance policies run over and are
crushed to death in two different alleys with the same two women as benefactors. After
searching their houses, they discovered large quantities of zolpidem and hydrocodone,
various documents about the two men, a stolen driver's license, and a post-it note with a
license plate number that was linked to a 1999 Mercury Sable station wagon. A search of
both Rutterschmidt and Golay’s homes reveals a lot — original checks were written to
pay insurance premiums, rubber stamps of both McDavid’s and Vados’s signatures.

b. What is this kind of fraud? What specific principles in Insurance had these women
violated?
This is an application fraud case. Application fraud occurs when a person deliberately
submits inaccurate information to their insurance provider while applying for coverage.
This is also known as substantial misrepresentation or concealment. In this situation, if
the insurance firm had known about the homeless men who lacked both property and
money, they would never have agreed to participate in that coverage.
The actions of the two women violated many core principles in Insurance and Indemnity:

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 • Insurable interest: According to the premise of insurable interest, the insured must
be financially vulnerable if a covered loss happens. Because Ogla and Helen had
no intimate contact with the two men (Paul and McDavid), it is illegal for these
two women to get insurance for the two males. Ogla pretended to be their fiancée
or spouse, while Helen pretended to be one of their close siblings.
• Utmost good faith: Both parties to an insurance contract are required to be more
honest than participants to other contracts. In truth, the ladies had misled to the
insurance company about Paul and McDavid's current and projected wages. They
had made false Representations, which are assertions made by the applicant for
insurance, by falsifying David's alleged yearly earnings of $65,000 and also
reporting that he had no additional insurance. If the insurance company had known
the truth, they would not have issued the coverage.

c. What leads to the fraudulent action’s incentive?

Life insurance is one of the exceptions to the insurance Indemnity principle. A life
insurance contract is not an indemnity contract, but rather a valued policy that pays a
specified sum to the beneficiary upon the insured's death. In reality, a specific quantity of
life insurance must be bought before death to plan for personal and business needs, such
as the need to provide a defined amount of monthly income to the deceased's dependents.
As a result, someone takes advantage of this grey area and makes fraudulent promises,
resulting in insurance fraud.

In the insurance industry, there is no central index and no information sharing between
firms that offer life insurance. So there's no way to call a government office and find out
if someone has three different plans and is a beneficiary of others. There is nothing like it.
It was a perplexing scenario. So the breach allowed Helen and Olga to do what they did.
They were well-educated in this profession and knew things that the average person
would not. And Helen and Olga knew it, which is why they put these gentlemen up in an
apartment, paid their bills, and gave them some spending money for two years. They put a

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lot of money into each of these guys. And they were staring at them, smirking at them,
knowing they were fattening them up like livestock.

5. The Decision of the Court:

On March 18, 2008, Helen, who was now 77, and Olga, who was now 75, were charged
with two counts of first-degree murder and conspiracy to commit first-degree murder.
One month later, they were both found guilty of conspiracy to murder and the first-degree
murder of Paul. Only Helen was convicted of the first-degree murder of Kenneth. They
were sentenced to consecutive life terms without the possibility of parole.

6. Conclusion of the Case:

If the investigation had ended with the Paul case, Rutterschmidt and Golay may have
gotten away with the crime due to the great confidentiality of user information in the
United States. Identity, relationship status, and income records are among the user data
for which governments and corporations guarantee the privacy and safeguard against
information leakage. Furthermore, the non-linkage or secrecy of information between
insurance firms has assisted inmates in carrying out their plans and evading the gaze of
specialists simply by utilizing their personal seals to alter their identity. for identification
and signatures All of this provides credit crooks with an unintentional chance to profit
from insurance and perpetrate crimes against innocent victims. Human avarice and
carelessness, on the other hand, led to Rutterschmidt and Golay's demise. The overlapping
circumstances and parallels between Paul and Kenneth's situations have pushed them into
the realm of insurance firms, investigators, and detectives. The evidence is progressively
disclosed, and the suspects' indecisiveness in their statements is proof against them.
Insurance ransom is only unlawful in the United States and across the world.

3.3.2 Case 2
Queens Man and Woodside Woman Arrested in Conspiracy to Kill Guyana
Immigrants for Insurance Money

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 1. Case summary
James, 46, and Mallay, 61, were charged with orchestrating the poisoning and shooting
deaths of four victims, two in a close-knit Guyanese community in Queens and two in
Guyana since the early 1990s. The defendants treated their victims “like meat”, Assistant
U.S. Attorney Robert Capers had told the jury during the trial. “They put prices on their
heads.”
Prosecutors had said that Mallay took out a US$400,000 insurance policy on his own
brother-in-law before hiring a 'hit-man’ to gun down his relative in Queens in 1993.
Mallay’s nephew, a witness for the government, testified that his uncle later said he was
happy the victim was left “dying in the street like a dog.”
Among the murdered, according to prosecutors, was 42-year-old Basdeo Somaipersaud,
who was found dead in 1998. Subsequent autopsy results showed that the man died from
lethal doses of chlorpromazine injected into his system.
In another case, $300,000 was collected from the death of Mallay’s own nephew in
Guyana, Hardeo Sewnanan. Sewnanan was poisoned in June 1999. He died after drinking
what investigators believe was alcohol and ammonia during a dinner with Mallay at a
restaurant in Berbice. The other two victims were Vern `Dilly’ Peter, the husband of an
accused co-conspirator, and Alfred Gobin.

2. Parties involved
a. Plaintiff:
• US Federal agents, prosecutors.
• MetLife – an insurance company among the largest global providers of insurance,
annuities, and employee benefit programs, with 90 million customers in over 60
countries.
b. Defendants:
• First defendant: Richard James, 46, a Guyanese immigrant in Richmond Hill,
Queens, New York as well as a well-known insurance agent in the Queens
Guyanese community.

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 • Second defendant: Betty Mallay, 61, a Woodside woman.

3. General Information
The following is a brief summary:
a. The murder of Vernon Peter
In 1991, Mallay was a postal carrier for the United States Postal Service. He was arrested
and convicted of theft from the postal service. He was sentenced to 15 months
imprisonment. While he was incarcerated, his mother died of a heart attack. Mallay
blamed these problems on Vernon Peter ("Dilly"), because Mallay believed Dilly assisted
in the investigation leading to his convic-tion. He then contacted his sister, Betty Peter,
who was married to Dilly, and told her as much. Mallay advised Peter to stay up-to-date
on the insurance policies on Dilly's life because he intended to get even.
Following Mallay's release from prison in 1993, he had a conversation with Baskinand
Motillal, his nephew. Mallay gave Motillal what Motillal believed was an invitation for
him to kill Dilly.
Motillal declined the offer. However, Motillal subsequently introduced Mallay to
Davindras Dass ("Dass"). Mallay offered Dass $10,000 for the hit. Dass agreed but said
he needed money to purchase a gun; Mallay then gave him $500. Dass recruited his
friends, Camuldeen Allie ("Allie"), "Barry" and "Fingers" to assist him. Dass was to be
the triggerman, Allie and Barry the lookouts, and Fingers was to be the driver of the get-
away car. When Dass procrastinated, Allie agreed to be the shooter instead.
On the morning of July 28, 1993, Das, Allie, Barry and Fingers drove to Dilly's home,
using Allie's car. Dilly came out of his home and Allie came behind him and shot him
several times in the head. The four then fled in Allie's car. It was reported that someone
saw the license plate of the get-away car. Allie decided that he would burn this car and
then tell the police that it was stolen. In the process of burning the get-away vehicle, Allie
suffered burns to his face and hands.
Allie told Dass he needed his share of the "hit money" immediately because his burns
could link him to the arson and subsequently the murder. Dass met with Mallay later that

20
day and Mallay gave him $7,000' in cash. Mallay told Dass, "you see the way the mother
fucker [Dilly] lay down like a dog in the street? You did a good job. I'm going to have
something else for you later on."
The Court notes that there has been inconsistent testimony regarding amount of money
offered for Dilly's murder. While Allie claims it was $7,000, Motillal testified that the
amount was $10,000, with $3,000 paid upfront and $7,000 after the murder was
committed. However, this discrepancy is of no consequence to the instant motions.
Peter collected $400,000 in insurance proceeds following the death of her husband, used
the money to purchase a house in her daughter's (Anjanee Motillal) name, and loaned
Mallay at least $60,000. Peter's daughter, Anjanee Motillal ("Anjanee") maintained a
bank account in the name of her brother Balram Motillal, who was illiterate. Anjanee
collected rent, cashed checks and made loans (including checks from and loans to Mallay)
through this account.
b. The Murder of Alfred Gobin
In September 1993, three months after Dilly's death, Richard James and Ronald Mallay
met at the home of Gulabie Gobin ("Gulabie"), Mallay's mistress of 27 years. At the time,
James was an insurance agent for Metropolitan Life ("MetLife"). James and Mallay
convinced Gulabie to take out insurance on her father, Alfred Gobin ("Alfred"). Two
policies were obtained. One named Alfred's ten children as beneficiaries, although it was
later changed to name Balram Motillal, Mallay's nephew in whose name the
Motillal/Peter family bank account was held, as beneficiary.
On January 6, 1996, Alfred Gobin was murdered in Guyand. Although Gulabie and her
siblings never made a payment on her father's policies, they received at least $200,000 as
beneficiaries. Gulabie subsequently lent James and Mallay almost $60,000.
c. The Murder of Basdeo Somaipersaud
Also after the murder of Dilly, James encouraged his friend, Satyanand Arjun ("Arjun") to
partake in "investment opportunities" involving life insurance policies. Arjun had a friend,
Basdeo Somaipersaud ("Somaipersaud"), who drank a lot and who lived with Arjun but
spent a lot of time on the streets. James encouraged Arjun to take out a policy on

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Somaipersaud's life. In October 1994, *7 without Somaipersaud's knowledge, James
created a $100,000 policy on him, naming Virma Kassim, James' sister, as the
beneficiary. The policy provided that in the event of an accidental death, an additional
$100,000 would be paid to the beneficiary.
In the fall of 1997, Mallay approached Kenrick Hassan ("Kenrick ''), a member of
Mallay's extended family, and offered him $10,000 to kill Somaipersaud. Kenrick
declined the offer.
On January 23, 1998, Somaipersaud was found dead in a park in Queens. James informed
Arjun of Somaipersaud's death, which Arjun found unusual since the two were not well
acquainted and James' relation to Somaipersaud did not extend beyond negotiating the
insurance policy. James also attempted to collect money from Arjun for Somaipersaud's
funeral but Arjun refused.
Somaipersaud died of a mixture of acute alcoholism and chlorpromazine. Maline
Ramnarine, James' girlfriend, and Arjun, among others, received some of the proceeds
from the policy.
d. The Murder of Hardeo Sewnanan
In October 1996, James negotiated and witnessed two $250,000 life insurance policies for
Hardeo Sewnanan ("Sewnanan"), Mallay's nephew. Lazina Mallay (Mallay's wife), Betty
Peter (Mallay's sister), and Anjanee Gobin (Mallay's * mistress, Gulabie Gobin's
daughter) were named as beneficiaries. The policy was paid by "William Mallay," an
individual who gave as his address as the same address as Ronald Mallay. In 1999,
Mallay again asked Kenrick Hassan to commit murder, this time asking him to murder
Sewnanan, who he described as an "alcoholic bum." Hassan declined but referred Mallay
to his brother Derick Hassan ("Derick"), who lived in Guyana. Mallay traveled to Guyana
to meet Derick. Mallay identified his nephew Sewnanan to Derick and gave him $10,000
for the project. However, Derick Hassan later backed out of the deal. On January 8, 1999,
Sewnanan died in Guyana of poisoning. Mallay subsequently told Derick Hassan that he
hired others in Guvana to kill Sewnanan. Mallay received $400,000 from the policy for
Sewnanan.

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The Plot to Murder John Narinesingh
Derick Hassan was persuaded by his brother, Kenrick, to come to the United States from
Guyana to act as an informant. Wearing a hidden recording device, he met with James in
May of 2001, inquired as to the nature of the Mallay Enterprise and whether there was
any work he could do. James identified a "bum" in Harlem named John Narinesingh
("Narinesingh") and offered Derick $25,000 to kill him. James told Derick that there was
a policy on Narinesingh for $250,000 and admitted he had a policy on another man's life
that was scheduled to mature *9 the following week. James admitted he had to "diversify
his thinking" and select "easy targets" (i.e.. single men who drank heavily) because they
often sleep outdoors, and have no wife, children or connections. In these conversations,
James explained the logistical aspects of the Mallay Enterprise. Specifically, James told
Derick that, while many people were interested in being involved a twn-wear
commitment was repaired so that the policies could mature hewand the contestability
period. James also told Derick that a policy can be maintained for as "cheap" as $1,000
per year. James admitted that he did not sell policies for commissions but, presumably,
for the benefit of collecting on the proceeds. James expressed discontent with Mallay for
proceeding with the Sewnanan murder prior to the end of the two-year contestability
period. James stated that Mallay was deeply in debt, "borrows 20 for every 10" he makes,
and is being "killed by the stress." Finally, James instructed Derick to poison Narinesingh
during the July 44 week-end, when there is more activity in the streets, and asked Derick
to cash an insurance-related check for him, or to find someone who could.
4. Case analysis
a. Revelation of the fraud case
MetLife, one of the companies for which James wrote insurance, had received an
anonymous tip alleging that the accused was involved in a conspiracy to kill insured
people for the proceeds. Reports said further that the life insurance policies were allegedly
procured through James, described in the complaint as an “insurance account

23
representative working, among other things, in the Guyanese community for several
insurance companies” since around 1991.
The federal investigation reportedly found that Hardeo Sewnanan had died in Port
Mourant, Guyana from ingestion of alcohol and ammonia. James was the agent and
Mallay the beneficiary on at least two policies written on Sewnanan’s life, according to
the complaint.
James, held since his arrest by federal agents in June, also produced a Guyanese cultural
programme featured on cable television. The complaint stated that MetLife then analyzed
policies written by James and reportedly found that “the rate of death claims of
individuals insured under policies written by James was approximately 318 percent higher
than expected or by chance and that a large number of the deaths were violent or under
unusual circumstances.” According to a federal official who requested anonymity, they
expect to have a large number of victims and because murder for hire is alleged, the case
could involve the federal death penalty.
A MetLife spokesman said company officials could not comment on Tuesday night. As
news of the arrest of James circulated throughout the Richmond Hill community on
Tuesday, many people who knew him said they were shocked. Some are reported to have
said that he exhibited a tough, aggressive attitude but few thought he could plot the crimes
of which he is accused.

b. Fraud classification. Principles violated

This is a claims fraud case. The situation happens when a beneficiary kills the
policyholder to get a payout. Sometimes married couple may take life insurance for their
spouse, only with the intention to kill them, so they can collect the life insurance money
later.
• Insurable interest: Normally, however, someone buying a policy must show an
“insurable interest” in the well-being of the person insured, usually by virtue of
marriage, a blood relationship or economic factors.

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 • Utmost good faith: buying life insurance on other people without their knowledge
is not very difficult, at least for a criminal, but collecting a benefit on the insured
person’s death, however, is more difficult
Most policies name relatives as beneficiaries, but it is not unusual for a non-
relative such as a business partner to be named. Presumably, it’s going to raise
suspicions if (the insurance company) gets a death claim shortly after the policy is
issued, especially if it’s a big amount.”

c. Chasm in insurance policy

There is no central index or information sharing among life insurance providers in the
insurance sector. Therefore, there is no way to call a government office and ask if
someone is a beneficiary on other plans and has three distinct plans.
One of the exclusions to the insurance indemnity rule is life insurance. A life insurance
contract is not an indemnity contract; rather, it is a valued policy that, in the event of the
insured's demise, pays the beneficiary a certain amount. In actuality, it is necessary to get
a specified amount of life insurance prior to passing away in order to arrange for personal
and professional demands, such as the requirement to pay a specific monthly income to
the deceased's dependents. As a result, someone exploits this ambiguity and offers false
promises, which leads to insurance fraud.

5. Jury Verdict (Decision of the court)

On July 2, 2007, defendants James and Mallay were found guilty on several counts of the
indict-ment. James was found guilty of Racketeering (Count One), Racketeering
Conspiracy (Count Two), Conspiracy to Murder and Aid of Racketeering as to Sewnanan
and Somaipersaud (Counts Five and Eight), Murder in Aid of Racketeering as to
Somaipersaud (Count Nine), Solicitation to Commit *1 Murder for Hire as to Narinesingh
(Count Twelve), Attempted Murder for Hire as to Narinesingh (Count Thirteen),
Conspiracy to Commit Mail Fraud (Count Fourteen), and Conspiracy to Commit Money
Laundering (Count Sixteen). Mallay was found guilty of all fourteen counts charged

25
against him in the indictment: Racketeering (Count One), Racketeering Conspiracy
(Count Two), Conspiracy to Murder in Aid of Racketeering as to Sewnanan and
Somaipersaud (Counts Five and Eight), Murder in Aid of Racketeering as to
Somaipersaud (Count Nine), Conspiracy to Commit Mail Fraud (Count Sixteen),
Conspiracy to Commit Money Laundering (Count Fourteen), Conspiracy to Commit
Murder For Hire as to Alfred Gobin (Count Three), Murder for Hire as to Alfred Gobin
(Count Four), Conspiracy to Commit Murder for Hire as to Sewnanan (Count Six),
Murder for Hire as to Sewnanan (Count Seven), Conspiracy to Commit Murder for Hire
as to Somaipersaud (Count Ten), Murder for Hire as to Somaipersaud (Count Eleven),
and Mail Fraud (Count Fifteen).

6. Conclusion of the Case

The government had stated that MetLife Inc. discovered the scheme after noticing that 21
death claims had been filed on policies written by James within a few years.
The rate “was approximately 318 percent higher than expected (and) … a large number of
deaths were violent or under unusual circumstances,” court papers had stated. The
insurance company fired James in July 2000 and notified authorities. The defendants were
arrested in 2002.
Identity, relationship status, and income records are examples of user data for which
governments and organizations provide privacy and protect against data leaking.
Furthermore, by using their personal seals to change their identities, inmates have been
able to carry out their plans and evade the scrutiny of specialists thanks to the non-linkage
or secrecy of information between insurance companies. for signatures and identification
All of this gives credit fraudsters an unintended opportunity to make money off insurance
and commit crimes against defenseless individuals.

4 RECOMMENDATIONS

26
With all of the problems life insurance companies face, we have some recommendations
for them to prevent and detect insurance fraud.

Data Analytics

Though the application of data analytics for fraud detection remains more common with
disability claims, life insurers are exploring and implementing new approaches to connect
data points and identify combinations indicating potential fraud. Data scientists at life
insurers continue to make progress, and it will be an area to watch in the coming years.

There are 5 main steps to leverage data analytics (Deloitte, 2021)

Effective fraud response and timeline

An early warning system and response to any potential events are made possible by
proactive use of technology to identify fraud risk indicators. To respond quickly,
effectively, and precisely, effective predictive analytics and assessment are essential. In
order to allow for focused resourcing, a major goal would be to decrease the number of
false positives found.

Secure data reviews and analyis

Utilising proven technologies to provide a secure platform for secure review of

documentation, data and evidence.

Sound evidentiary management principles and admissibility

Keeping digital evidence safe is an essential step in the investigation process. The
effectiveness of securing hard copy documented evidence is also required, which raises
issues with the evidence management standards.

To guarantee that competent evidence management is implemented and that such

evidence is indeed admissible should prosecution proceedings ensue, these risks must be
evaluated and adequately managed.

Informed proactive fraud detection initiatives

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Utilizing data helps with fraud detection, prevention, and response. Data should be used
to conduct proactive fraud detection initiatives in addition to the effective focus on
resource and cost management that is required. It would not be optimal to only take a
reactive stance on fraud because the core causes of such fraud would not always be fully
understood.

This is especially crucial if one takes into account the possibility that a particular product
may be more vulnerable to fraud simply due to its design and marketing. Utilizing fraud
analytics to analyze trends from the perspectives of new business, claims, and clients may
provide further insights into the fraud propensity connected to particular products.

Enhanced internal procedures as a result of effective data analysis

Any business still places a premium on customer service and good client communication.
To ensure that clients are served in accordance with specified and/or agreed timetables, it
is essential in an insurance setting to respond quickly to client inquiries and claim
submissions. By utilizing technology and data analysis to their fullest potential, fraud
could be prevented, detected, and responded to while also necessitating fewer manual
(human) interventions. This might help shorten turnaround times for particular
transactions.

Consistenly train and educate claims team to stay current

Fraudsters always evolve and adapt to discover new opportunities to take advantage of.
While this is going on, claims examiners frequently just receive initial training in fraud
prevention with no ongoing support. As a result, they might not be knowledgeable about
the most recent scams and lack the skills necessary to spot new warning signs. Consistent
training combined with attention to detail in monitoring fraud trends are necessary for
effective preparation.

Ensure everyone in your organization, not just claims and underwriting, is aware of
fraud schemes and can identify red flags.

28
Employees across the whole organization, including call center agents, specialists in
policyholder services, and others, frequently spot strange conduct that may signal fraud.
For instance, a member of the accounting team may spot inconsistencies in the names on
checks or even the fact that the payee of a beneficiary check has no insurable interest in
the decedent.

Attend conferences

Attendees at industry gatherings, like the next RGA Fraud Conference, can exchange
expertise about difficulties, best practices, and lessons gained. The sector must cooperate
if it is to stay ahead of those trying to cheat it.

Collaborate with business units

From the time of application to claim settlement, information on a policyholder is

collected at every stage of the customer experience. It is possible to recognize and
connect probable fraud red flags by dismantling information silos and freely exchanging
this knowledge, along with tools and procedures. With the adoption of updated
underwriting standards during the COVID-19 pandemic, communication between
underwriting and claims is even more crucial. As an added precaution, claims teams
should cooperate with underwriters to be aware of policies issued with lenient standards
for future claim processing.

5 CONCLUSION

In conclusion, through assessing the overall life insurance fraud issues in the US market,
it can be seen that life insurance fraud has gained more and more popularity, alongside the
growth of insurance. In 2022, life insurance scams are expected to cost $74.7 billion in
the US.

Moreover, life insurance fraud has many forms, which are committed both by the
agencies and the policyholders. It can either be in the form of application fraud, claim

29
fraud, forgery, or phony policy fraud. In both two cases we analyze, the defendants
intentionally killed the insured to gain benefit from the insurance payouts.

Life insurance fraud has unavoidably brought out a huge loss to the US market. As a
result, firm steps should be taken to avoid this problem. In this case, we recommend that
the companies should have a proactive approach toward fraud detection by applying data
analytics, training the claims team and employees across the whole organization
consistently, attending industry conferences, and collaborating with business units for
more information.

30
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