The State of RICO used against Insurance and Banking Racketeering
WAIS Document Retrieval - Text of Federal RICO Laws
On Extortion by Insurance Companies - J. Morris, M. D.
Notes #1 on RICO - J. Morris, M. D.
-
Insurance -- Civil RICO Remedy for Fraud: Forsyth v. Humana, Inc.
-
Supreme Court to hear Forsyth v.Humana - Updates
and the final GOOD NEWS!!
January 1998
-
Superman (Christopher Reeve) Takes on Insurance Companies
-
"TIRED" DOCTOR TAKES ON INSURANCE INDUSTRY
-
Bomb Victim Backs Racketeering Law
- Kenty v. Bank One (Civil use of RICO)
Insurance -- Civil RICO Remedy for Fraud
Forsyth v. Humana, Inc.,
Miller & Chevalier Public Library - Supreme Court Alert No. 34
January 1998
The Court is now approximately halfway through its term. After issuing
an order list and perhaps an opinion or two on January 26, the Court
will take a long recess before reconvening on February 23. This
four-week period enables the Court to make substantial progress on the
backlog of pending cases that have built up since October, and the
pace of opinions will accelerate after February.
We report here on three pending petitions that the Court is likely to
grant in the coming months. We also briefly note some recent
developments in the telecommunications wars, which appear poised to
move to the Supreme Court's docket. Finally, we provide an update
on the cases discussed in our previous issue, two of which have now
been decided by the Court.
Alan I. Horowitz
Gerald Goldman
James P. Tuite
Anthony F. Shelley
Significant Pending Petitions
Telecommunications -- 1996 Act
...
Insurance -- Civil RICO Remedy for Fraud
Purchasers and beneficiaries of group health insurance policies
brought suit against their insurer seeking damages for alleged
fraudulent practices. They claimed that the insurer improperly used a
"list price" to calculate the 20 percent copayment owed by the
policyholders, even though the insurer did not pay 80 percent of that
figure, but rather paid on the basis of a substantial discount that it
had secretly negotiated with the hospital provider. As a result, the
beneficiaries' contribution was substantially greater than 20
percent of the total.
This petition involves the plaintiffs' claim for damages under
the civil provisions of RICO. The defendant argued that the claim was
barred by section 2(b) of the McCarran-Ferguson Act, 15 U.S.C. Sect. 1012
(b), which prevents federal laws not specifically related to insurance
from being construed to "invalidate, impair, or supersede" a state law
that regulates insurance. The district court agreed, finding that it
would impair the state regulatory scheme to permit imposition of the
relatively draconian remedy provisions of RICO, including treble
damages and attorneys' fees, "for behavior which the Nevada
Legislature apparently did not deem worthy of such penalties." 827 F.
Supp. 1498, 1521.
The Ninth Circuit reversed and reinstated the RICO claim. Because
state insurance law and RICO proscribed the same conduct, the court
found that there was no conflict between the two statutes and hence no
basis for invoking the McCarran-Ferguson Act -- notwithstanding that
RICO introduced a private right of action and severe remedies not
found in state law.
The Ninth Circuit's ruling conflicts with decisions in other
circuits that have dismissed civil RICO claims as barred by
McCarran-Ferguson In an analogous setting, the Eighth Circuit
remarked that the "extraordinary remedies of RICO would frustrate, and
perhaps even supplant, Minnesota's carefully designed scheme of
regulation." Doe v. Norwest Bank Minn., 107 F.3d 1297, 1308 (8th Cir.
1997). See also Kenty v. Bank One, Columbus N.A., 92 F.3d 384, 392-93
(6th Cir. 1996).
Private suits alleging fraud have proliferated in recent years, with
intensifying scrutiny of the insurance industry. Allowing civil RICO
claims against insurance companies would significantly increase the
potential liability in litigation that might once have been thought to
involve no more than a contract dispute.
Forsyth v. Humana, Inc., No. 97-303; decision below, 114 F.3d 1467.
FORSYTH V. HUMANA, 94-16548 (05-23-97)
These two are "pay for" sites:
MARY FORSYTH v. HUMANA, INC. (Nov. 06, 1996)
MARY FORSYTH v. HUMANA, INC. (May 27, 1997)
ERISA -- State Regulation of Health Plans with Stop-Loss Insurance
...
_________________________________________________________________
SOURCE: Public Library of
Miller & Chevalier
655 Fifteenth Street, N.W., Suite 900, Washington, D.C. 20005-5701
(202) 626-5800 / Fax (202) 628-0858
inquiries@milchev.com / www.millerchevalier.com
_________________________________________________________________
UPDATES
Court To Take Health Insurer Case
Filed at 11:53 a.m. EDT
June 22, 1998
By The Associated Press
WASHINGTON (AP) -- The Supreme Court today agreed to decide whether
people can use a federal anti-racketeering law to sue their health
insurer over alleged fraud.
URL: http://www.usatoday.com/news/court/nscot817.htm
Suit would use racketeering law against Humana
_________________________________________________________________
June 22, 1998
Court To Take Health Insurer Case
Filed at 11:53 a.m. EDT
By The Associated Press
WASHINGTON (AP) -- The Supreme Court today agreed to decide whether
people can use a federal anti-racketeering law to sue their health
insurer over alleged fraud.
The court said it will hear Humana Inc.'s effort to kill a
class-action lawsuit by Nevada customers who say the insurance
company got secret discounts it did not share with them.
The lawsuit was filed in 1989 under the federal Racketeer Influenced
and Corrupt Organizations Act (RICO), which allows private lawsuits
to collect triple damages for fraud.
About 84,000 Humana insurance customers say that the company in 1985
started to shift costs to customers who bought insurance policies in
which Humana paid 80 percent of a patient's expenses and the patient
paid the rest.
The lawsuit says Humana negotiated secret discounts with Humana
Hospital Sunrise in Las Vegas, in which the entire discount was
applied to the insurance company's share of the bill. The customers
said they wound up paying much more than 20 percent of the actual
cost. Humana no longer owns the hospitals, which were acquired by
Columbia-HCA.
A federal trial judge ruled that the customers could not sue under
RICO because of another federal law that seeks to preserve states'
primary role in regulating insurance companies. The
McCarran-Ferguson Act says federal laws can ``impair or supersede''
state insurance laws only when the federal law specifically involves
insurance.
The judge said the RICO law does not specifically involve insurance,
and noted that its penalties exceed those for the same conduct under
Nevada law. Therefore, the judge said, allowing customers to sue
under the federal law would impair the state law.
The 9th U.S. Circuit Court of Appeals reversed that ruling, however.
The appeals court said the differing penalties did not create a
conflict between the state and federal laws.
In the appeal acted on today, Humana's lawyers said other federal
appeals courts have reached the opposite conclusion.
Justice Department lawyers urged the justices to resolve the
conflicting rulings.
The Humana customers who sued asked the court to reject Humana's
appeal, contending that RICO penalties are intended to exist ``side
by side'' with state penalties.
The case is Humana Inc. vs. Forsyth, 97-303.
Humana Inc.
_______________________________________________________________
Copyright 1998 The New York Times Company
The information contained in this AP Online news report
may not be republished or redistributed
without the prior written authority of The Associated Press.
_________________________________________________________________
June 26
_________________________________________________________________
January 20, 1999
Supreme Court Decision: The Just and Happy Ending
_________________________________________________________________
Superman Takes on Insurance Cos.
.c The Associated Press
MONTGOMERY, Ala. (AP) - An Alabama lawyer is getting a little help from
Superman in his battle with the insurance industry.
Actor Christopher Reeve has asked court permission to file briefs against
binding arbitration required by many insurance policies. Reeve has been
paralyzed since he broke his neck in a fall from a horse in 1995.
"I have had a catastrophic injury and am now disabled," he said in court
papers. "One of the hardest things I have had to do since my disability is
to deal with insurance companies. I found them ... to try to set up any
roadblocks they can to keep from paying legitimate claims."
In January, attorney Jere Beasley filed a lawsuit challenging binding
arbitration on behalf of a client.
The arbitration requirement often means policyholders cannot sue insurance
companies.
AP-NY-06-26-98 1613EDT
Copyright 1998 The Associated Press. The information contained in the AP
news report may not be published, broadcast, rewritten or otherwise
distributed without prior written authority of The Associated Press.
_________________________________________________________________
FOR RELEASE: IMMEDIATE news release
NOTE: Photos available
"TIRED" DOCTOR TAKES ON INSURANCE INDUSTRY
BOSTON, June 24, 1998 -- A disabled emergency room doctor who has been
denied long term disability (LTD) insurance benefits is playing David and
Goliath with the largest LTD insurer in the U.S., and in doing so has built
up a grass-roots movement, including scores of other insurance policy
claimants and attorneys who are outraged with the treatment they've
received from insurance companies. Now Judy Morris, M.D., has formed
"JudyDoc for Justice," a campaign to expose what she says is "conspiracy,
fraud, extortion and racketeering," perpetrated by LTD insurance companies.
Morris, 40, had to leave her position as an ER doctor after she became
disabled by Chronic Fatigue and Immune Dysfunction Syndrome (CFIDS), an
immunologic condition that causes flu-like and neurologic symptoms, as well
as other incapacitating problems. Once considered a "designer disease,"
CFIDS is now recognized by the medical community and the Center for Disease
Control (CDC) as a serious, debilitating disease.
After UNUM Corporation denied disability benefits for Morris, telling her --
among other things -- that she is not disabled from her own occupation
because she can still drive her car, Morris began investigating. "It's
a racket, and in fact falls under the legal definition of racketeering,"
says Morris. "As I learned of other people's experiences, I found I was
far from alone. A lot of people had incredible stories about the treatment
they received from their LTD insurance companies. That's when I developed
my mission: to Fight Corporate Crime in Healthcare."
At a recent Social Security Administration Videoteleconference, Dr. Morris
arrived in a conservative suit, but at one point peeled off her suit to
reveal her "JudyDoc for Justice" costume -- a caped outfit emblazoned with
the letter "J" for Justice, and stood on her chair holding a sign reading:
"UNUM: Unethical / Nasty / Underhanded / Mean."
"I know it looks wacky, but sometimes you have to shout to be heard,"
Morris says, "especially in a multi-billion-dollar industry with one of the
largest lobbies in Washington. There is virtually no one to speak for
disabled workers who can't get insurance benefits," she adds, "The people
whose stories I've heard were normal working Americans before they became
disabled and disenfranchised by their insurance companies. These are people
who had jobs and LTD insurance policies that promised benefits to them
should they become disabled."
Claimants are not just angry about being denied, even though they had
satisfied their policies' requirements for being disabled. They are
outraged about the tactics insurance companies use to deny claims, and
perhaps most important, about ERISA, the Employee Retirement Income
Security Act, a 1974 federal law intended to protect working Americans from
fraud and mismanagement in their benefit plans. Instead, an unintended
loophole in the law denies claimants the right to hold HMOs or LTD
insurance companies accountable to state consumer protection laws. Most
Americans who receive their healthcare and disability insurance through
their employer are subject to ERISA laws.
"Under ERISA, insurance companies can deny any claims they want; they can
use fraudulent, immoral, and cruel tactics to deny people. They can't be
sued for punitive or consequential damages, so there's no incentive to make
them honest," says Morris.
Not all insurers play dirty, Morris says, but the problem is still
widespread and pervasive in the industry. "They sent private investigators
to videotape me as soon as I applied; they ran background checks on members
of my family, my friends, and healthcare workers. Plus they tried to
convince my doctor that my physical problem was psychological, and then
lied to me about my doctor's response. And yet they said they did not
suspect me of fraud; they said that this is just part of their usual
procedure."
But Morris says her story is far from the worst. For each member of her
group, there is an LTD horror story. Some concern insurance companies other
than UNUM, such as Standard Insurance and Provident. Morris has collected
them by the dozens. "Decisions and appeals are often delayed for long
periods of time," she says, "so that by the time claimants can file a
lawsuit, many have been out of work for a year or more, have gone through
their savings, and can't afford the costs charged by attorneys who will
take ERISA cases. UNUM was sued over 1,044 times from January 1994 to
November 1996, but that's a small representation of people whose claims
have been denied. Some accept greatly reduced benefits and sign a gag
order, but most just give up. Meanwhile UNUM paid its employees
$18 million in bonuses in 1996 as part of its results sharing program,'
which means they were paid to deny claims."
Some do fight and win, but at what cost? A disabled law firm executive sued
UNUM and won, but his legal fees were more than $175,000. No punitive
damages were awarded because of ERISA, and UNUM has appealed the decision.
"Right or wrong, no matter what, they want to turn your benefits down," he
says. "Then they hope you don't have the financial well-being to fight
them."
Federal judges are also frustrated, feeling that their hands are tied
because of ERISA's loopholes. Says Federal Judge J. Spencer Letts,
"..for benefit plans funded and administered by insurance companies,
there is no practical or legal deterrent to unscrupulous claims practices.
Without these incentives, there is no counter-balance to insurance
companies' interest." Another federal judge says that he was forced to
"slam the courthouse doors in [the plaintiff's] face and leave her
without any remedy."
But JudyDoc is undeterred and her supporters are cheering her on. Though
not well enough to work in a high-stress, germ-laden emergency room
environment, she is outraged and determined enough to fight, working at
her computer for a few hours when she can, resting in between. She was
recently successful in having one of UNUM's "physician consultants"
investigated by the Maine State Board of Medicine. "This doctor not only
ignored the reports of specialists I've seen, but made medical decisions
about my health condition without examining me. And another doctor working
for UNUM who regularly made decisions regarding my case doesn't even have a
licence to practice medicine in the state in which these decisions were
made," she reports.
Morris plans to file her lawsuit in the next few months, and although she
wants to win her case, she intends to see justice done for other claimants
as well. Meanwhile UNUM has threatened to "take action" against Morris, but
she claims her right to free speech, writing in a letter to UNUM, "I know
very well that I am accusing a $4 billion corporation of some serious
charges. Am I scared? Let me ask you, should I be?"
###
For more information contact: Genie Williams: 415-621-6345
e-mail: geniewil.aol.com, or
Dr. Judy Morris: 413-267-3606
e-mail: Judydoc@the-spa.com
July 17, 1998
Bomb Victim Backs Racketeering Law
COMMENT: Racketeering is racketeering in however "inconvienient"
a place it may be found, Mr. McCollum.
______________________________________________________________
Filed at 2:39 p.m. EDT
By The Associated Press
WASHINGTON (AP) -- Victims of violent protests need the legal
recourse of a federal racketeering law, a victim of a January
abortion clinic bombing told Congress today. But supporters of a
bill to nullify part of that statute say it has been used to
violate the free-speech rights of advocacy groups.
The bill, sponsored by Rep. John Shadegg, R-Ariz., would make it
harder for victims of violent protests to punish those responsible,
said Emily Lyons, a nurse who lost the use of an eye and suffered
other serious injuries from an explosion that ripped through the
New Woman All Women abortion clinic in Birmingham, Ala., Jan. 29.
``What happened to me was an act of violence, not free speech,''
Lyons told the House Judiciary subcommittee on crime. ``How could
you take away a law that would help prevent this from happening to
someone else in the future?''
Eric Robert Rudolph, 32, has been formally charged with the clinic
bombing and is wanted for questioning in three Atlanta-area
bombings, including the Olympic Park explosion in 1996.
As some 200 federal authorities searched for him in the wooded back
country of western North Carolina, Lyons displayed her maimed legs,
arms and face to the House panel.
``I am asking you to help us keep a tool to stop this violence from
continuing to occur,'' Lyons said.
The legislation was introduced Monday in reaction to a U.S.
District Court decision in Chicago that several anti-abortion
groups used threats and violence in a nationwide extortion scheme
designed to shut down clinics.
It was the first nationwide class-action lawsuit filed against the
anti-abortion movement under the RICO act, a 1970 law originally
aimed at organized crime.
``It was never the intention that ... (the law) be used against
advocacy groups,'' said Rep. Bill McCollum, R-Fla., who chairs the
crime subcommittee. Such lawsuits, he said, threaten the
free-speech rights of peaceful protesters. ``I am committed to
preventing a statute created to punish true criminal wrongdoing
from being used to chill the expression of a viewpoint with which
some people may disagree,'' he said.
Shadegg's bill drew support from some advocacy groups.
``The RICO Act is being perverted from a tool designed to fight
organized crime into a sword poised at the throat of public debate
on important social issues,'' said Jeff Kerr, general counsel to
the People for the Ethical Treatment of Animals, which last year
settled a RICO lawsuit against it by a New Jersey-based animal
laboratory.
``Ironically, RICO itself is being manipulated in an effort to
extort silence from advocacy groups who investigate and uncover
wrongdoing,'' he said.
The Justice Department staunchly defended the extortion provision
of the law as a crucial tool in punishing, for example, organized
crime groups that corrupt labor unions.
The bill ``would grievously impair the United States' ability to
combat organized crime's corrupt influence over labor unions and
labor-management relations,'' said Frank Marine, acting chief of
the department's organized- crime and racketeering section.
_________________________________________________________________
Copyright 1998 The New York Times Company
The information contained in this AP Online news report
may not be republished or redistributed
without the prior written authority of The Associated Press.
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Created: June 22, 1997
Last Updated: May 28, 2000