Convicted of Massive Insurance Fraud by Vendor to Insurance Industry
In The People v. Cornel Lucaci, E072740, Court Of Appeal Of The State Of California Fourth Appellate District Division Two (December 23, 2020) a case that should give honor to all insurance fraud investigators and claims personnel, after a thorough investigation, a jury found defendant and appellant Cornel Lucaci guilty of multiple crimes. The convict included convictions for (1) arson of a structure (Pen. Code, § 451, subd. (c)); (2) burglary (§ 459); (3) nine counts of insurance fraud (§ 550, subds. (a)(1)), (a)(5) & (b)(1)); (4) two counts of grand theft (§ 487, subd. (a)); and (5) passing off as true a false lease (§ 470, subd. (d)). The jury found true the allegations that (A) in the arson, defendant used a device designed to accelerate the fire or delay ignition (§ 451.1, subd. (a)(5)); (B) the amount of defendant’s theft exceeded $100,000 (§ 1203.045, subd. (a)); and (C) defendant’s pattern of criminal conduct resulted in the taking of more than $500,000 (§ 186.11, subd. (a)(2)). The trial court found true the allegation that two of defendant’s crimes were committed while he was on bail. (§ 12022.1.) The trial court sentenced defendant to prison for a term of 17 years.
The defendant appealed on all couts.
Defendant and his business partner, Johnny Borsca, owned companies that cleaned buildings following water or fire damage. The companies included IJF Contractors, Vortex Fire and Water Restoration, South Coast Cleaning, and South Coast Cleaning Construction.
Defendant had a “magic toilet,” which was a defective toilet that he obtained from one of his jobs. Defendant’s wife (Wife) overheard a conversation between defendant and Elena Gherman. Gherman complained to defendant that her insurance would not pay for all the water damage to her house. Defendant told Gherman that he would bring the “magic toilet” to Gherman’s house so “when the inspector c[a]me; and he would check that toilet [then] he [would] see that the toilet is defective.”
In February 2010, defendant and Wife lived in a house in Corona. Around February 22, 2010, Wife was away for the weekend. When Wife returned home, defendant was there, and the house was flooded. In the master bedroom, on the second floor, Wife saw a hose coming through a sliding balcony door. The hose was pouring water into the house. Wife saw items in the house that had not been there when she left for the weekend. The new items included a china cabinet, dining table, and rugs. The china cabinet belonged to Gherman.
People will sometimes pad insurance claims to obtain more money from an insurance company; they will also add items such as expensive rugs and china cabinets to the list of damaged property in order to raise the amount of the insurance payout. The water damage to the house was so severe that Wife had to move out of the house. Wife did not move in with her brother. However, there was a false lease reflecting Wife and defendant rented a home from Wife’s brother at the rate of $3,475 per month.
Defendant had a renter’s insurance policy with Stillwater Insurance Company (Stillwater). In February 2010, defendant filed a claim with Stillwater for water damage at his house. Defendant told an adjuster that the house was uninhabitable so he was staying with family. Defendant sent the false lease to Stillwater in support of his assertion that he had moved out of the house. Defendant and Borsca’s company, IJF, provided an invoice or an estimate of $75,000 for mitigation work on defendant’s house, and that document was given to Stillwater. Stillwater paid over $100,000 for defendant’s claim.
As to the 2010 Stillwater claim, the jury found defendant guilty of (A) presenting a false insurance claim (§ 550, subd. (a)(1)) (Count 9); (B) preparing a document in support of a false insurance claim (§ 550, subd. (a)(5)) (Count 10); (C) making a false lease and passing it off as genuine (§ 470, subd. (d)) (Count 11); and (D) grand theft (§ 487, subd. (a)) (Count 12).
In 2012, Armen Megerdichian’s dental business experienced a significant financial decline. In May 2013, Megerdichian listed for sale his dental practice and the building in which the practice was located. Megerdichian owed $315,000 on the building mortgage and $400,000 on a loan to the practice. By March 2014, there had been two offers from one potential buyer, but no sale.
On March 26, 2014, Borsca and Megerdichian communicated with one another via their cell phones, and Borsca and defendant communicated with one another via their cell phones. On the night of March 26, 2014, defendant set Megerdichian’s building on fire. It appeared the fire was accelerated by fuel that had been poured onto cardboard boxes in different areas of the building. The building became engulfed in flames and collapsed.
Megerdichian’s building was insured by Liberty Mutual. As a result of the fire, Liberty Mutual paid $379,479.60 for the loss of the building and personal property. The policy also allowed $25,000 for debris removal. Defendant’s and Borsca’s company, Vortex, was hired for the debris removal.
As to the 2014 arson, the jury found defendant guilty of (A) arson of a structure (§ 451, subd. (c)) (Count 1); (B) burglary (§ 459) (Count 2); (C) causing to be presented a false insurance claim (§ 550, subd. (a)(1)) (Count 3); and (D) causing to be presented a false statement in support of an insurance claim (§ 550, subd. (b)(1)) (Count 4).
On August 2, 2015, defendant’s house flooded. Defendant said he spent the night at a friend’s home and when defendant returned to his house there was “water coming down from his ceilings inside the lower level of the house.” Defendant said a toilet bowl overflowed due to an obstruction in the bowl and a torn flapper in the tank that caused the water to continue running.
Approximately two weeks later, defendant hired a public insurance adjuster, Hratch Zuhrae Ghazarian, to assist him with his insurance claim. Defendant said Diamond Construction performed the mitigation work on defendant’s house. Defendant submitted two bills from Diamond Construction to Ghazarian. One bill was for $18,000, and the second bill was for $7,000 or $8,000. Ghazarian questioned the invoices because they lacked a contractor’s license number and did not identify the author. Ghazarian spoke with Stelian Onufrei of Diamond Construction and corrected the problems on the invoice. Onufrei was one of defendant’s business partners. Ghazarian submitted the invoices to Pacific.
Ninety percent of all insurance claims in the United States are included in the ISO database. If a person has a high number of claims, then that is “an indicator that [a claim] needs to be looked into further.” Wife told the insurer the water damage “was staged and fraudulent.” Wife said there was furniture in the house after the 2015 flood that had not been in the house before the flood. Wife said furniture she did not recognize had also been in the house after the 2010 flood.
In December 2015, Pacific requested that defendant submit to an examination under oath in order to evaluate defendant’s claim. The examination occurred in March 2016. During the examination, defendant said Diamond Construction did not perform the mitigation work on his house; rather, defendant performed the work with the assistance of day laborers. Defendant also said that he and Onufrei agreed to share the insurance money. Pacific denied defendant’s claim due to fraud.
Xente Baker is a fire investigator for the Corona Fire Department. Baker investigated the 2014 fire at Megerdichian’s building. As part of the investigation, Baker looked for “a history of fraud or fire insurance losses.” On March 24, 2017, the Riverside County District Attorney’s Office filed a felony complaint against defendant in case No. RIF1701070. The complaint pertained to the March 2014 arson.
A theft conviction on the theory of false pretenses requires proof that (1) the defendant made a false pretense or representation to the owner of property; (2) with the intent to defraud the owner of that property; and (3) the owner transferred the property to the defendant in reliance on the representation. Pacific did not rely upon defendant’s representation. Rather, Pacific suspected defendant’s representation was false and spent money to prove defendant’s representation was false. Therefore, substantial evidence does not support a finding that Pacific relied on defendant’s representation.
Attempt consists of (1) a specific intent to commit a crime and (2) a direct but ineffectual act done toward its commission. For grand theft, the jury was instructed that, in order to find defendant guilty, defendant must have “knowingly and intentionally deceived a property owner” and that “defendant did so intending to persuade the owner or the owner’s agent to let the defendant or another person take possession and ownership of the property.”
In finding defendant guilty of grand theft, the jury found defendant intended to defraud Pacific and deprive Pacific of its property. Defendant’s intent to defraud and deprive equates with a specific intent to commit a crime in that it shows defendant intended to use false pretenses to take Pacific’s property. By submitting the false claim to Pacific, defendant took a direct but ineffectual act toward commission of the crime. Accordingly, we will reduce defendant’s conviction in Count 8 to attempted grand theft.
The elements generally necessary to find a violation of Penal Code section 550 are (1) the defendant’s knowing presentation of a false claim, (2) with the intent to defraud. The crime is complete when a false claim for payment of loss is presented to an insurance company or a false writing is prepared or presented with intent to use it in connection with such a claim whether or not anything of value is taken or received. It is not necessary that anyone actually be defrauded or actually suffer a financial, legal, or property loss as a result of the defendant’s acts.
Insurance fraud is concerned with the act of fraud. It is not concerned with whether the fraud succeeds. Thus, the insurance fraud statute applies to completed, as well as attempted, fraud. That means the crime of insurance fraud is always applicable when a person makes a false claim to an insurance company, whether the insurance company pays or denies the claim. If the person’s false claim results in the insurance company paying more than $950, then the crime of insurance fraud overlaps with grand theft.
The difference between insurance fraud and grand theft is not any additional culpable act by defendant, but an additional act by the victim. For example, in thia case, defendant was charged with insurance fraud for making a false claim, and he was charged with grand theft because Stillwater paid the claim. Defendant did not commit any additional acts—Stillwater did.
People committing insurance fraud are likely to succeed a certain amount of the time, as defendant did. That means when people commit insurance fraud, payment by defrauded insurance companies will be something that commonly occurs. Accordingly, a violation of the insurance fraud statute will commonly result in a violation of the grand theft statute.
In regard to inadequate legal theories, jurors are not generally equipped to determine whether a particular theory of conviction submitted to them is contrary to law—whether, for example, the action in question fails to come within the statutory definition of the crime. When, therefore, jurors have been left the option of relying upon a legally inadequate theory, there is no reason to think that their own intelligence and expertise will save them from that error. The prosecutor’s theory of the case was that Megerdichian, Borsca, and defendant conspired in the arson and insurance fraud. Thus, defendant had Megerdichian’s permission to enter the building and burn it. Because burglary must be committed by a person who has no right to be in the building.
According to statute, a person is guilty of burglary if he or she enters a building or other structure listed in the statute with intent to commit grand or petit larceny or any felony. Based on common law precedent, our Supreme Court has clarified the statutory element of ‘entry’ by explaining that the crime of burglary involves ‘entry that invades a possessory right in a building, and must be committed by someone who has no right to be in the building.
At the sentencing hearing, when the prosecutor spoke of defendant’s likelihood of reoffending, he said, “He’s going to—you know, he has no money. He’s got a huge restitution. I mean, there’s ample evidence for motive and ability to re-offend.”
The appellate court concludedante that defendant’s Count 8 conviction must be reduced from grand theft to attempted grand theft. It also concluded that defendant’s burglary conviction and grand theft conviction must be reversed. Given that the sentences for those counts were all stayed, it is unlikely that a different sentence would be imposed if the matter were remanded for a full resentencing hearing. The court only required that the trial court resentence defendant on Count 8, given the reduction in the crime where attempt is punishable by one-half the term of imprisonment for the completed offense.
The trial court will also need to issue documentation reflecting that defendant does not owe $194,223.34 to Liberty Mutual and that defendant now has 12 convictions rather than 14, so the amount of the “per count” fees will need to be reduced accordingly.
Trial and appellate courts are simply not happy to deal with insurance fraud cases. This lengthy opinion, highly edited by ZIFL, decision, is an example where the prosecution charged many crimes, withdrew some, and overreached on another. Regardless, after a thorough analysis, the court removed the right of an insurer to receive restitution – probably uncollectible – and reduced one of the crimes. The victory the Defendant obtained was Pyrrhic since he was still required to serve a 17 year term. Insurance fraud and arson are both serious crimes; for the crimes to be committed by a vendor to insurers, even stooping so low as to use a magic toilet to support the claim, work with arsonists to profit from their crime, and other creating floods at his home twice, deserved the lengthy sentence and proved that it is easy to catch the insurance criminal who is greedy, lazy and probably stupid for continuing to create multiple fraudulent claims.
© 2020 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and email@example.com.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
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