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Indictment of 21 Lawyers and Others New Jolt for Downtown Legal Circles

Downtown Express, September 26, 1995

By Josh Rogers

Back in 1991, attorney Jay B. Itkowitz reported secretly to the Manhattan District Attorney's Office that he had been pressured to pay part of an insurance settlement he had won to a so-called middleman who had taken no part in the proceedings.

That began a more than three-year undercover invest that has now resulted in the indictment of 21 attorneys, 16 claims adjusters, six middlemen, and four others in an insurance fraud scheme said to involve $19 million in illegal payments.

The sight of the accused, marshaled in pairs, being paraded across the street to the Criminal Courts Building for arraignment on Sept. 21 was one more jolt for an already troubled Downtown legal community and its associated businesses. In addition, District Attorney Robert Morgenthau has said that the investigation is continuing.

Some of the defendants worked for Downtown insurance firms like American International Group Inc., the former Continental Insurance Co. (now part of CAN), and Firemen's Fund Insurance Co. The indictment charges the six middlemen, also known as "ten percenters," with arranging bribes from the 21 personal injury attorneys to 16 claims adjusters who expedited settlement payments.

The probe was initiated after Itkowitz told Morgenthau's office he was approached by a middleman, John Prins, who wanted a percentage for a settlement Itkowitz had won without Prins' assistance.

Itkowitz began taping meetings with Prins in 1991.

"I was nervous, especially the first time when they showed up 15 minutes before the subject came and started taping things to my back," he said.

On the other hand, he said the nervousness "wasn't any different if I was doing an argument in court. I wanted to do the right thing."

Itkowitz, who worked in the Koch administration as assistant corporate counsel from 1978-1982, said he didn't feel any special need to defend the reputation of lawyers.

"There are crooked people in every walk of life," he said. "Some of these people happen to be lawyers and insurance people." In a second indictment, adjuster Patrick Sullivan, formerly of A.I.G., was charged with setting up five fictitious claims. Morgenthau said: "This indictment states a case of straight-out fraud. None of the injuries on which the claims were made actually occurred. Nevertheless, Sullivan approved the payment of more than $800,000 as settlements." He is charged with insurance fraud, grand larceny and tampering with physical evidence, and he faces up to 15 years.

The rest of the adjusters are charged with taking bribes to expedite claims which may have been legitimate. Attorney Lance Barnett, who works downtown at 277 Broadway, is charged with working with Sullivan on one faulty claim. Barnett said: "No comment. You can speak to my attorney." Barnett's attorney, Joel Stein, did not return a call to his office.

Barnett also faces 15 years, along with two charged for filing false claims, Andrew Kirshner and Robert Colbert.

The rest are charged with differing combinations of commercial bribing, commercial bribe receiving, scheming to defraud and conspiracy. They face up to four years. Their next court date is Oct. 19.

We have evidence the same illegal practice is underway throughout the metropolitan area, and we will continue our investigation to bring these corrupt individuals to justice," said Morgenthau.

He also said the insurance firms were victims and thanked them for helping in the investigation. Geico Insurance Co., State Farm Insurance Co., America Insurance Co., and Avis were among the companies he thanked.

"These payoffs defrauded the insurance companies because they were financed by the payout of the settlements," he said. "Equally disturbing is the fact that the insurance companies were victimized by their own employees, who they had a right to expect would deal with the attorneys at arm's length. What they got instead were adjusters lining their own pockets at the expense of the insurance companies and their policyholders, who ultimately pay the price of this ultimately illicit conduct."

He said some of the 16 adjusters almost doubled their salary and collected over $300,000 combined and the six middlemen collected over $500,000 in bribes.

He also said the "ten percenters" respected "each other's turf" and had their own set of lawyers and adjusters. From 1991 to 1994 the middlemen secured $39 million in claims, but only $19 million is connected to the indictment.

Last October, a search warrant at 49 locations, the defendants' offices and safe deposit boxes, yielded close to $1 million in cash.

John Kozero, spokesperson for Firemen's Fun Insurance Co., said: "We had been cooperating with the F.B.I. for two years on this matter. The only suspects that emerged were one employee who had been with us less than a year and is no longer with us, and a second who is on leave. The rest have been cleared. We expect no further action." He said the two worked on Long Island.

A.I.G. would not comment beyond a statement written by spokesperson Joe Norton which said: " AIG has cooperated fully with the district attorney's investigation over the past year, which culminated in the announcement today that five former employees of AIG Claim Services, Inc. have been indicted . . . An intensive internal investigation undertaken by AIG in conjunction with the District Attorney's office has concluded that these criminal activities related to a very small number of insurance claims at AIG member companies. AIG has and will continue to protect its customers from the consequences of such actions." Police Detective John Sekulo and Sgt. Steven Marron, assigned to the D.A.'s office, made the arrests and worked on the cases, along with investigative accountant John Driscoll, investigative analyst Beverly Sturr, and A.D.A. Daniel Alonso.

Prosecutors Suzanne Elovic, John McNamara, and Andrew Curtin argued the case before the grand jury.

The defendants:

The middlemen were all charged with First Degree Scheme to Defraud, Fifth Degree Conspiracy, First Degree Commercial Bribing and Bribe Receiving, and other misdemeanors. They were Moses Goldberg, Christ Golfinopoulos, Joseph McGrath, John Prins, Joseph Reynolds and John Timoney.

The attorneys were all charged with First Degree Bribing and First Degree Scheme to Defraud. They were Lance Barnett, who was also charged with Second Degree Insurance Fraud and Second Degree Grand Larceny, Richard Cardali, Stephen Fields, Melvyn Estrin, Fredric Grae, Norman Ingber, Selwyn Karp, Edward Kaufman, David Kreitzer, Murray Mayer, Jeffrey Pomerantz, Joseph Rosenzweig, Gary J. Rothman, who was also charged with Commercial Bribe Receiving in the First Degree, Seth Rotter, Thomas Rybicki, Lawrence Smith, Cyrus Wolf, and Alan Zasky. Attorneys William Lazaroni, Edward Sacks, and Raymond Sales were charged with First Degree Scheme to Defraud.

The adjusters were all charged with First Degree Commercial Bribing and First Degree Scheme to Defraud. They were Patrick Sullivan, who was also charged with Second Degree Insurance Fraud, Second Degree Grand Larceny, and Tampering with Physical Evidence, Alan Gelbman, Salvatore Caccavale, William Staubitzer, Ronald Haynes, Fred Duran, William Mustion, Ronald Batnick, Carl Paulsen, James Marrinan, Gittens Burl Hosten, Philip Bontempo, Cliff Zwerle, Carl Mirarchi, and Jack Sparr.

Both Andrew Kirshner and Robert Colbert were charged with Second Degree Insurance Fraud and Second Degree Grand Larceny. Edward Horn and Ira Rogovin, affiliated with two attorneys, were both charged with First Degree Scheme to Defraud and Second Degree Commercial Bribing.