|TRENTON – Attorney General Christopher S. Porrino and the Office of the Insurance Fraud Prosecutor (“OIFP”) announced that a Monmouth County insurance agent and his parents have been charged with conspiracy and money laundering in an alleged scheme that provided insurance applicants with free life insurance and caused various insurance companies to disburse more than $4 million in commissions.
Evan Pescatore, 35, of Highlands, and his parents Frank Pescatore, 70, and Janice Pescatore, 64, of Asbury Park, were charged with first-degree conspiracy to commit money laundering, and two-counts of second-degree money laundering in an indictment handed up by a state grand jury yesterday.
Evan Pescatore was also charged with first-degree money laundering; and he and his father were also each charged with insurance fraud, theft by deception, conspiracy to commit insurance fraud, and conspiracy to commit theft by deception, all in the second degree.
The trio allegedly engaged in a scheme to provide free high-value, life insurance policies to applicants in order to obtain commissions from the insurance companies. Eighteen policies –with face values totaling $61.5 million – were caused to be issued by eight insurance companies in the alleged scheme.
This process of providing applicants/insureds with an inducement to apply for life insurance policies by paying their premiums, known as “rebating,” is prohibited by the insurance industry as well as state law.
“This family allegedly conspired in a criminal plot to file more than a dozen fraudulent insurance applications that cost numerous insurance companies millions of dollars in ill-gotten commissions, rebates, and free-short-term insurance,” said Attorney General Porrino. “Though the alleged scheme was complicated, the defendants carefully shepherded illicit funds through a series of transactions, knowing that they would reap hundreds of thousands of dollars in undeserved commissions along the way.”
“Rebating fraud is a costly problem for insurance companies but the ultimate victim is the consumer. They’re the ones who pay the price in the form of higher premiums,” said Acting Insurance Fraud Investigator Christopher Iu. “These indictments should serve as a warning that we will not allow criminals to get rich by cheating the insurance system and driving up costs for honest policy holders.”
According to the indictment, Evan Pescatore and his father “approached and recruited” 13 applicants by offering them “free insurance” and the option to sell their policy in the future for profit.
In submitting or causing to submit the life insurance applications, the two co-conspirators misrepresented to the eight insurance companies that the applicants/insureds would be paying for their own policies and that no “free insurance” or rebates had been offered.
In fact, Evan Pescatore took out loans from a third-party lender to pay for the premiums on the policies, which ranged from $15,000 to $582,520, according to prosecutors.
The polices were issued by AXA Equitable Life Insurance Company, Minnesota Life Insurance Company, Lincoln Benefit Life Insurance Company, Allianz Life Insurance Company of North America, Zurich American Life Insurance Company, Genworth Life Insurance Company, Royal Neighbors of America, and Banner Life Insurance Company.
When the insurance companies disbursed agent commissions to Evan Pescatore – more than $3 million in total - he and his parents transferred or assisted in transferring the commission funds to the lending sources in order to repay the loans for the insurance premiums, according to the indictment.
The insurance companies also paid commissions totaling more than $1 million to Evan Pescatore’s hierarchy. At least $500,000 of the commission funds that were disbursed to his hierarchy were allegedly passed along to Evan Pescatore soon thereafter.
The indictment is merely an accusation and the defendants are presumed innocent until proven guilty. First degree crimes carry a sentence of 10 to 20 years in state prison and a fine of up to $500,000. Second-degree crimes carry a sentence of five to 10 years in state prison and a criminal fine of up to $150,000. Third-degree crimes carry a sentence of three to five years in state prison and a criminal fine of up to $15,000.
Deputy Attorney General Kelly Levy and Assistant Attorney General Robert Grady presented the case to the grand jury. Detectives Natalie Brotherston, Taryn Seidner, and Matthew Armstrong coordinated the investigation with assistance from analyst Kelly Celenza.
Acting Insurance Fraud Prosecutor Iu noted that some important cases have started with anonymous tips. People who are concerned about insurance cheating and have information about a fraud can report it anonymously by calling the toll-free hotline at 1-877-55-FRAUD, or visiting the Web site at www.NJInsurancefraud.org. State regulations permit a reward to be paid to an eligible person who provides information that leads to an arrest, prosecution and conviction for insurance fraud.
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