Southern California Agents Busted for Fraud

California Insurance Commissioner Steve Poizner has announced the results of enforcement actions against three Southern California defendants. The first is the Aug. 7, 2007, arraignment of Pomona insurance agent Farid Mohammed Afzali, 38, on two felony counts of grand theft.

The case was completed by the California Department of Insurance Investigations Division (CDI) and is being prosecuted by the San Bernardino County District Attorney’s Office. Afzali faces a maximum of three years in prison if convicted on both counts.

Afzali, doing business as Luxor Insurance Services in Fontana, allegedly collected and failed to remit more than $4,000 in premium payments between 2003 and 2006 from two clients seeking insurance policies. In 2003, Afzali collected $821 from a customer purchasing homeowner’s insurance. In 2005 and 2006, Afzali collected several payments totaling $3,755 from a truck driver who sought commercial truck insurance. He allegedly pocketed the customers’ premiums, leaving both victims uninsured and unaware of their financial vulnerability. CDI launched an investigation after receiving requests for assistance by both victims.

In an additional enforcement action, late last week insurance broker Jose Felipe Escalante, 45, of Los Angeles, was arrested on one count of grand theft and one count of forgery. The case is being prosecuted by the Los Angeles County District Attorney’s Office and was investigated by CDI. If convicted of both felonies, Escalante faces a maximum of three years in prison.

Escalante, while working at a Van Nuys insurance agency, allegedly collected $1,920 from a client seeking to purchase commercial liability insurance for a truck. Instead of forwarding his client’s premium funds to the insurance company, Escalante altered his client’s check by changing the payee’s name from the insurance agency to Escalante’s aunt. The funds were used to pay off a family debt, leaving the victim without any insurance coverage.

The owner of the Van Nuys insurance agency discovered the theft and forgery after the victim filed a lawsuit against his insurance agency. Fortunately, the victim’s bank made the victim whole by replacing the $1,920 taken from his bank account.

CDI is reviewing the Afzali and Escalante cases for possible disciplinary action against the defendants’ insurance licenses.

Finally, on July 17, 2007, James C. Taylor, Jr., 75, an unlicensed insurance agent and president of Smart Unique Services Corp. in Quartz Hill, was ordered to pay restitution in the amount of $223,021 to Irene Bailey and her son, Charles, owners of Bailey’s Excavating & Environmental Inc., a small Modesto-based construction company.

Earlier this year, Taylor pleaded guilty to one count of felony grand theft. He was sentenced to 180 days in the county jail, which was suspended, and placed on three years formal probation. Taylor was also fined $430 and ordered to pay $223,021 in restitution, which will cover most of the Baileys’ losses.

As a result of Taylor’s fraudulent activity, however, the Baileys not only lost money, name and reputation. Charles Bailey now works for another construction company instead of his own.

The case, which involved fraudulent construction performance/payment bonds, was investigated by CDI and prosecuted by the Los Angeles County District Attorney’s Office.

The investigation was initiated by a complaint filed by William Henson, a contracting officer for the U.S. Army Corps of Engineers. He advised CDI that he had received an individual surety construction performance/payment bond from Bailey’s to cover the $1.1 million contract they had been awarded, but questioned the bond because of the lack of proper supporting documents. When Bailey’s was unable to get the supporting documents from Taylor, Henson was forced to terminate the contract. Ultimately, the Baileys settled for a smaller portion of the contract after obtaining a legitimate bond from a corporate surety company.

Source: CDI