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.

  1. Insurance -- Civil RICO Remedy for Fraud: Forsyth v. Humana, Inc.
  2. Supreme Court to hear Forsyth v.Humana - Updates
    and the final GOOD NEWS!!

    January 1998
  3. Superman (Christopher Reeve) Takes on Insurance Companies
  5. Bomb Victim Backs Racketeering Law
  6. 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



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.
     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
     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
     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

   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
   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
   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
   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:, or
                                                                                                                   Dr. Judy Morris:  413-267-3606

     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
     ``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