CORPORATE CRIME REPORTER
Bourhis:
Spitzer Left His Balls in the Parking Lot
19 Corporate Crime Reporter 22(1), June 2, 2005
In October 2004, New York Attorney General Eliot Spitzer announced that UnumProvident,
the nation’s largest disability insurance company, would pay a $15 million
fine to settle accusations that the company had inappropriately denied claims
for benefits.
At the time, Spitzer said that the settlement “sends a strong message
to disability insurance companies that improper denials of disability claims
will not be tolerated.”
Ray Bourhis, the San Francisco trial attorney who was instrumental in bringing
the problem to Spitzer’s attention, is not impressed.
“Spitzer left his balls in the parking lot,” Bourhis told Corporate
Crime Reporter. (See Interview with Ray Bourhis, 19 Corporate Crime
Reporter 23, 10-16 print edition only, June 6, 2005).
“Spitzer fined the company $15 million – which is like fining you
and me 45 cents. It is totally ridiculous,” Bourhis said. “It sounds
good for the press release, but it is bs. This is a multi-billion company and
they have billions at stake. If you ask a company that has financial inducements
in the hundreds of millions and possibly billions of dollars and you fine them
$15 million – that’s like paying your monthly phone bill, or your
rent, or taking out advertising – it’s a cost of doing business.
It is not going to have any deterrent effect whatsoever – none, zero,
nada. It’s bs. It is a bs fine.”
Bourhis has built his law firm, Bourhis & Wolfson, suing UnumProvident for
denying claims in bad faith.
And he has written a book – Insult to Injury: Insurance Fraud and
the Big Business of Bad Faith (Barrett -Koehler, 2005) – in which
he details his adventures in confronting the Chattanooga, Tennessee based insurance
giant.
As part of the settlement, Spitzer ordered the company “to reassess approximately
200,000 claims that previously had been denied.”
But Bourhis says by allowing the company to investigate itself, “Spitzer
is handing to the company on a silver platter the opportunity to say –
we reviewed these claims and find that most of them are correct – and
then everybody will say – okay, most of them were correct.”
Bourhis says that UnumProvident has to deny only 2,000 claims a year to rip off a cool $1 billion a year.
“What they don’t say is this – you take an average claim of
$4,000 a month,” Bourhis explained. “That’s worth $50,000
a year. The person is 55 years old. And the life of the claim is ten years.
And you multiply that by 2,000 – that’s $100 million a year that
you are going to save every year for the next ten years. And that is only based
on the claims that you have terminated in 2005. So, year one you are saving
$100 million. Year two you are saving $200 million, because you now have a new
2,000 terminated claims. Year three, you are saving $300 million. By year ten,
the year that you phase out the first claims that you terminated, you are saving
$1 billion a year. And that is only based on 2,000 claims.”
Bourhis said that his firm was nailing UnumProvident in courtrooms around the
country – including a $5 million punitive damage award in the Joan Hangarter
case, which is profiled in his book.
“We were winning lawsuit after lawsuit, getting punitive damage awards
in the trial courts,” he said. “The awards were being upheld by
federal judges who the company thought were going to overturn them. And then
conservative courts of appeal, including the Ninth Circuit, that the company
thought for sure was going to overturn these awards – instead unanimously
upheld the awards. And then one of Eliot Spitzer’s investigators called
me and wanted to know what we had on UnumProvident. They wanted to investigate
the company. We gave them a ton of documentation – internal memos, deposition
transcripts, trial transcripts, court opinions, rulings and everything else.
And Spitzer then folded like an accordion.”
Bourhis says that Spitzer’s reputation of being a tough white collar crime
prosecutor “is as phony as a three dollar bill.”
“Spitzer either didn’t get it, or doesn’t get it, or he threw
in the towel and capitulated to UnumProvident and their big money,” Bourhis
said. “I don’t know what kind of a deal was made. And nobody is
going to tell me. But anybody who is as good as Eliot Spitzer who thinks it
is okay to fine this company $15 million so that the company can investigate
itself is missing something. Spitzer isn’t stupid enough to miss it.”
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