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The Charles Keatings Of Insurance

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Four years ago, Southern California physician Jay Weitzbuch discovered that his malpractice insurer had surgically removed his wallet. After Weitzbuch was hit with a $250,000 malpractice judgment, his insurer refused to cover it--even though Weitzbuch had faithfully paid $100,000 in premiums over seven years. To pay up, Weitzbuch had to remortgage his home and deplete his kids' college funds. "I'm still angry, still bitter," he says. "I wake up in the middle of the night, and my wife and I talk about it and can't get back to sleep."

Weitzbuch is one of perhaps 100,000 doctors and nurses nationwide who were pulled into what the Federal Bureau of Investigation says may be the largest insurance scam ever to hit the medical profession. All of the health-care professionals were conned by a shadowy network of offshore insurers controlled by members of a single Maryland family.

UNKINDEST CUT. Operating under such names as International Bahamian Insurance and Trans-Pacific, the FBI says, Norman Bramson and sons Leonard and Martin collected at least $20 million in premiums--and possibly many times that. Maryland officials figure they walked away from at least $66 million in court awards against policyholders. Many doctors have declared bankruptcy in the face of huge awards that weren't covered, leaving patients shortchanged.

The Bramsons are out of business now. On Feb. 15, Norman Bramson, a 71-year-old optometrist, was sentenced to 33 months in prison after pleading guilty to money-laundering. He joins Leonard, an attorney jailed after a plea agreement on money-laundering charges in 1991. Two aides are slated to be sentenced on Feb. 24. Martin, a lawyer and pharmacist who investigators say was the brains of the operation, remains at large after escaping house arrest in 1991.

Leonard Bramson's attorney, Jerome A. Ballarotto, says the family never set out to commit fraud; the illegal activity, he says, came as it attempted to rein in a business wildly out of control. But the FBI sees the Bramsons' scam as part of a disturbing rise in insurance fraud. Much of the illicit activity is in such risky segments of the insurance market as amusement parks and asbestos removal, where established carriers have pulled out or jacked up rates. Most vulnerable are those who have to be insured to conduct business: Doctors, for instance, must have malpractice insurance to admit patients at most hospitals. These high-risk segments "are going to be one of the big problem areas for fraud over the next 10 years," predicts James H. Vaules, an FBI supervisory special agent who helped bust the ring.

According to investigators, the Bramsons were to insurance what Charles Keating was to banking. Above all else, they were niche marketers par excellence. Government agents raiding their offices in Columbia, Md., in 1991 found a marked-up copy of a study by a Ralph Nader group that identified nearly 7,000 doctors who had been disciplined by medical boards--and presumably had trouble getting coverage from established insurers. To peddle individual policies, the Bramsons used mailing lists from professional groups and ran ads in trade journals, the FBI says.

MAZE. Nothing was quite so brazen, though, as the Bramsons' tactics for avoiding big claims. Unbeknownst to doctors, the Bramsons sometimes asked a court in the Caribbean island of Saint Vincent, where some of their companies were domiciled, for an order declaring a policy void after a claim was filed. When physicians didn't contest the request, judges would issue the order.

Even when state regulators grew suspicious, investigators often got lost in a maze of mail drops and phone numbers that forwarded calls to offices in other states. When regulators cracked down on one company, the family simply shifted assets to another of the 53 offshore companies they created, often using aliases for owners and officers.

The Bramson case illustrates the trouble that underfunded state insurance regulators have in coping with increasingly complex fraud schemes. The Bramsons were able to operate for a decade after the first state, Illinois, challenged them. "The state system doesn't work," says Arnold Kalman, a lawyer for an insurer called Trans Pacific. He helped the government crack the ring to protect his client's reputation. Con artists, he says, "are free to act with impunity."

A big break in the case came when Maryland officials received a tip that the Bramson family was part of a group that bowled together. Agents scoured bowling alleys around Columbia until they found a score sheet for a league with the names of many of the corporate officers--and even some of the aliases. The Bramsons' scam ended in 1991 after FBI agents ran a sting posing as representatives of a group of physical therapists looking to buy a group policy. When the agents said they wanted to cut a deal that would benefit them at the expense of the group's other members, the Bramsons apparently thought they had found kindred souls--and spilled the beans on how they operated.

Although the ring has been broken, the chances that victims will recover significant damages are slim: Investigators believe that Norman and Martin cleaned out their Swiss bank accounts. A government-appointed receiver, James A. Gordon, has found 365 bank accounts belonging to the Bramsons, but he has recovered only $6 million--enough to cover just a fraction of the 1,200 outstanding claims. So, like Weitzbuch, a lot of doctors--and some of their patients--won't be sleeping well for years.Dean Foust in Baltimore, with Edwin Black in Rockville, Md.

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