23 Lawyers Arrested in Insurance Scheme
New York Law Journal, September 22, 1995
Inflating of Settlements in Tort Cases Charged
By Matthew Goldstein
A three-year investigation by the Manhattan District Attorney's Office into a long-standing practice of bribing insurance company employees to expedite and inflate settlements in personal injury cases culminated yesterday with the arrest and arraignment of 23 attorneys, 16 insurance company adjusters and eight others.
The arrests, announced at a press conference yesterday by Manhattan District Attorney Robert M. Morgenthau, have been anticipated since prosecutors revealed in October that they had served search warrants and subpoenas on dozens of personal injury attorneys and "middlemen," individuals who serve as intermediaries in settlement negotiations between plaintiffs' lawyers and claims adjusters.
Mr. Morgenthau said the six middlemen, two of whom are attorneys, had directed a conspiracy to defraud eight major insurance companies. He said the schemes led to expedited and some inflated settlement agreements in personal injury cases in which companies had paid out a combined $19 million in damages.
According to the 365-count indictment, the middlemen transmitted bribes from 21 personal injury lawyers to corrupt insurance company employees.
Some of the alleged deals were brokered in the parking lots of diners and restaurants in Queens and Long Island, according to the indictment. The middlemen and insurance employees split the bribe money and some received a share of the settlement proceeds.
All the defendants were arraigned in Criminal Court before Acting Supreme Court Justice Leslie Crocker Snyder, who presided over the grand jury proceedings.
Most of the personal injury attorneys are solo practitioners or lawyers with small firms in Manhattan. Seventeen have been charged with commercial bribery and all have been charged with participating in a scheme to defraud.
Among those arrested was Thomas S. Rybicki, 48, a former president of the Staten Island Trial Lawyers' Association and his partner in Grae & Rybicki, Fredric Grae, 57.
Others lawyers are Lance Barnett, 38; Richard Cardali, 45; Stephen Fields, 62; Melvyn Estrin, 54; Norman Ingber, 51; Edward Kaufman, 79; David Kreitzer, 47; William Lazaroni, 35; Murray Mayer, 62; Joseph Rosenzweig, 39; Gary J. Rothman, 48; Seth Rotter, 50; Edward Sacks, 68; Raymond Sales, 51; Lawrence Smith, 57; and Alan Zasky, 62, all of Manhattan, and Cyrus Wolf, 64, and Jeffrey Pomerantz, 47, of Brooklyn; and Selwyn Karp, 63 of Queens.
Mr. Rothman, whose professional license was suspended in 1988 by the Appellate Division, Second Department, was reinstated in July 1991.
The two lawyers who allegedly served as middlemen are Joseph Reynolds, 66, of Locust Valley, N.Y. and Christ Golfinopoulos of Queens. The two, along with four other middlemen, are charged with fraud, commercial bribery and conspiracy.
In a related indictment, Mr. Barnett, an attorney charged in the main indictment, and three others were charged with defrauding American International Group Inc. (AIG) by getting the company to pay out more than $800,000 on five phony personal injury claims.
Mr. Morgenthau, noting the plaintiffs in the personal injury cases were not charged with any crimes, said the insurance companies and their policy-holders were the victims. The companies, AIG; Aetna Life & Casualty Co.; GEICO Insurance Co.; Commercial Union Insurance Co.; Fireman's Fund Insurance Co.; State Farm Insurance Co.; The Continental Insurance Co. and ITT Hartford, he said, had suffered economic losses as a result of cases that were settled too quickly or for greater sums than the claims were worth.
Mr. Morgenthau was joined at the press conference by Daniel J. Castleman, chief of the office's investigative unit, and the prosecutors and investigators who worked on the case.
Several criminal defense attorneys representing the defendants disputed the claim that the alleged criminal activity had resulted in an economic loss to the insurers.
"The fact that a case was settled quickly may be beneficial to an insurance company because it cost them money, to keep files open," said Gerald 0. Lefcourt, who is representing Mr. Reynolds and, Mr. Kaufman. Mr. Lefcourt said that without proof that the insurance companies paid a higher than normal settlement for a claim, the prosecution's case appears to be overblown.
The investigation began in 1991 after attorney Jay B. Itkowitz reported to authorities that a middleman, John Prins, had offered to help negotiate a settlement on a personal injury case that Mr. Itkowitz was handling.
Mr. Morgenthau yesterday praised Mr. ltkowitz, calling him a "whistleblower."
Mr. Itkowitz, a partner with Itkowitz & Gottlieb and a former Corporation Counsel lawyer, downplayed his role and said he did what any honest citizen would do. "I don't think it's a case of one honest lawyer," he said. "I think there are lots of honest lawyers."
Mr. Prins, 63, who was indicted yesterday on conspiracy charges, was one of the first arrested in the investigation. Last October he was charged with grand larceny by extortion for demanding a $52,000 payment from Mr. Itkowitz to negotiate a $700,000 settlement.
The investigation, according to several lawyers familiar with the probe, also has relied extensively on the cooperation of Edward Quigley, a middleman indicted earlier this year on one count of commercial bribery in helping to negotiate a settlement.
Mr. Quigley, identified in some court papers as a "confidential informant," is named in yesterday's indictment as a person who worked with the six middlemen in brokering some of the alleged transactions. Mr. Quigley, however, was not formally charged in the new indictment.
Prosecutors also said they have secured guilty pleas from five individuals, but declined to disclose their identities, claiming the records have been sealed. However, according to court papers, Joel H. Cohen, a former Manhattan solo practitioner, was arrested on June 28 and pleaded guilty the following day before Judge Snyder to one count of commercial bribery. Mr. Cohen is currently serving a 1- to 3-year sentence at Downstate Correctional Facility in Fishkill, N.Y.
The other middlemen and claims adjusters arrested and arraigned yesterday were Moses Goldberg, Joseph McGrath, John Timoney, Patrick Sullivan, Allan Gelbman, Salvatore Caccavale, William Staubitzer, Ronald Haynes, Fred Duran, William Mustion, Ronald Batnick, Frederick Catlett, Carl Paulsen, James Marrinan, Gittens Burl Hosten, Philip Bontemp, Cliff Zwerie, Carl Mirarchi and Jack Sparr.