CORPORATE CRIME REPORTER
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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