A Kettle of Rotten Fish

Indictment by Grand Jury for Insurance Fraud Carries a Presumption of Validity

Life insurance agents get very large commission, often exceeding the first year’s premium paid by the insured. As a result the insurance producer is faced with the temptation to create fake insurance policies to defraud the life insurer by receiving a commission as great as or greater than the first premium paid. By financing the premium little money from the insured or the dishonest insurance producer is small compared to the commission received.

In State of New Jersey v. Evan Pescatore, Frank Pescatore, and Janice Pescatore, DOCKET NO. A-0472-18T2, Superior Court of New Jersey Appellate Division (June 26, 2019) New Jersey appealed from the Law Division’s dismissal of an indictment charging defendants Evan Pescatore, and his father, Frank Pescatore, with: (1) first-degree conspiracy to commit financial facilitation of a criminal activity; (2) second-degree conspiracy to commit theft by deception; (3) second-degree conspiracy to commit insurance; (4) second-degree financial facilitation of a criminal activity; (5) second-degree insurance fraud; and (6) second-degree theft by deception. In addition to the aforementioned charges, Evan was also charged with first-degree financial facilitation of a criminal activity. Finally, Janice Pescatore, Evan’s mother, was charged with first-degree conspiracy and second-degree financial facilitation of a criminal activity.


Evan is a licensed insurance intermediary in New Jersey. Between 2011 and 2015, he worked as a life insurance agent for numerous life insurance companies, including Allianz Life Insurance Company (Allianz). During that time period, Evan placed eighteen life insurance policies with eight insurance companies involving thirteen insureds.

The Division of Criminal Justice, Office of the Insurance Fraud Prosecutor investigated Evan, Frank, and Janice after receiving a referral from Allianz reporting that it believed a policy brokered by Evan was “rebated.” Rebating occurs when something of value is given in order to sell a policy that would not have been provided in the policy itself, such as cash, a gift, service, or employment.

Allianz alleged that an insured misrepresented that he was not offered “inducement in the form of free insurance,” by falsely informing Allianz on the application, as well as in a telephonic interview, that he would be paying the premium himself when, in fact, a third-party financing company had been arranged to pay the premium.

Seven other insurance companies that issued insurance policies originating with Evan also claimed he offered “rebated” policies. After speaking with representatives from the eight companies, the investigation revealed that Evan placed eighteen insurance policies that contained material misrepresentations regarding how the premiums were paid, similar to the false information contained on the Allianz application. The insurers advised the prosecution that had they known that the eighteen insureds did not intend to pay their own insurance premiums, the insurers would have declined to make effective any policies for any of the eighteen applications for life insurance.

“Frank and/or Evan” discussed the opportunity to obtain “free” insurance with the proposed insureds, and met with the individuals to fill out the life insurance applications. Most of the insureds reported that they never read the applications and merely signed the application where and when Frank and/or Evan instructed him or her to do so.

All of the insureds reported that they did not intend to pay the premiums themselves.  The insureds also were ready to testify that they would not have applied for life insurance with Evan or Frank if they had to pay the premiums themselves.

The documentary evidence presented to the grand jurors included the insurance applications that Evan signed while Frank, who was not a licensed insurance producer, did not sign the applications, but he helped prepare all eighteen applications.

Once the insurance companies received an application, other necessary documentation, and the premium payment, they paid Evan a commission as the originating insurance agent. The eight insurance companies reported that agents, like Evan, are paid an initial commission payment of 70% to 120% of the policy’s first year premium.

By the time of the grand jury proceeding, only six of the eighteen insurance policies were still in effect, two of which were in a grace period due to non-payment of premiums owed on the policies.

Defendants successfully moved to dismiss the indictment claiming primarily that the State: (1) failed to inform the grand jurors that premium financing is legal in New Jersey; and (2) improperly referred to defendants collectively, rather than individually. After hearing oral arguments, the court granted the motion.


The decision whether to dismiss an indictment lies within the discretion of the trial court, and that exercise of discretionary authority ordinarily will not be disturbed on appeal unless it has been clearly abused. However, if a trial court’s discretionary decision is based upon a misconception of the law, a reviewing court owes that decision no particular deference.

The grand jury’s role is not to weigh evidence presented by each party, but rather to investigate potential defendants and decide whether a criminal proceeding should be commenced. A prosecutor seeking an indictment is required to present a prima facie case that the accused has committed a crime. An indictment should not be dismissed “as long as ‘some evidence’ on each of the elements of the offenses is presented and there is nothing that detracted from the fairness of the grand jury proceeding. Additionally, grand jury proceedings carry a presumption of validity, as prosecutors enjoy broad discretion in presenting a matter to the grand jury.

Prosecutors have a limited duty to present exculpatory evidence to a grand jury. Further, in determining the sufficiency of the evidence to sustain the indictment, every reasonable inference is to be given to the State.

The appellate court agreed with the State that it was under no obligation to present the grand jury with information that third-party financing is legal in New Jersey, as such evidence is neither clearly exculpatory, nor does it directly negate any of the defendants’ guilt. Contrary to the motion court’s conclusion, the State’s theory of the Pescatores’ crimes was fairly simple. Essentially, the State presented a prima facie case, giving it all reasonable inferences, that Evan, with Frank’s and Janice’s knowledge and participation, placed the eighteen policies for one0 simple reason – to ensure the receipt of commissions that would not otherwise have been paid if the insurers had not been misled by false, material misstatements of fact concerning the policies.

Evan and/or Frank told certain insureds that they would be receiving “free insurance,” which Evan then falsely stated about when asked by the insurance companies in thirteen of the applications. In addition, the evidence before the grand jury showed that Evan and/or Frank arranged for third-party financing for each insured, lied about that fact, and further hid that the policies were being financed by taking secretive steps to funnel the third-party payments into the insureds’ bank accounts before having the insureds pay the premium.

As the State alleged that defendants were acting collectively to engage in a conspiracy to commit various offenses; the State’s references to defendants together with respect to their joint actions were appropriate, and not improper. Further, the State presented sufficient evidence to support each of the charges against Evan and Frank.

The State presented evidence at the grand jury proceeding that Evan, a licensed insurance broker, signed the eighteen insurance applications, certifying that the information represented therein was true and accurate. The State demonstrated that the applications contained material misrepresentations regarding whether the premiums would be paid by third-party financing, and whether the insureds were offered free insurance. The State further presented financial records showing that Evan received unwarranted commission payments from the insurance companies, and then reimbursed the third-party lenders for the premiums.

The decision of the motion court was reversed and remanded for entry of an order reinstating the indictment and for further proceedings consistent with our opinion.


The appellate court cured a clear judicial error by reinstating the indictment since there is no question that defendants were engaged in rebating to gain commissions by creating false insurance policies, collecting large commission, and then financing the premiums that were not to be repaid or were repaid in part out of the commissions. Those facts were sufficient probable cause to allow the prosecution to go forward.

© 2019 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

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 50 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 51 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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