[Congressional Record Volume 140, Number 45 (Thursday, April 21, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: April 21, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                            INSURANCE FRAUD

                                 ______


                           HON. EARL POMEROY

                            of north dakota

                    in the house of representatives

                        Thursday, April 21, 1994

  Mr. POMEROY. Mr. Speaker, the National Association of Insurance 
Commissioners [NAIC], in April 1991, initiated the call for a Federal 
fraud statute aimed at white-collar insurance fraud. Founded in 1871, 
the nonprofit NAIC is our Nation's oldest organization of State 
officials. The NAIC is comprised of the chief insurance regulatory 
officials from the 50 States, the District of Columbia, American Samoa, 
Guam, Puerto Rico, and the Virgin Islands. At that time, I was proud to 
be the Commissioner of Insurance for North Dakota and the immediate 
past president of the NAIC.
  The NAIC's proposal included the basic elements--false reports or 
overvaluing of land, property, or security; embezzlement or theft; 
false entries; and obstruction of regulatory proceedings--incorporated 
in the conference report to the omnibus crime bill from the 102d 
Congress. On January 27, 1993, Representatives Dingell and Brooks 
introduced H.R. 665, the Insurance Fraud Prevention Act of 1993, a 
freestanding insurance-fraud provision, which the Committee on the 
Judiciary has included in H.R. 4092, the omnibus crime bill. I 
congratulate Representatives, Dingell and Brooks for sponsoring H.R. 
665, and I note that they introduced a similar bill in the 102d 
Congress, Further, I applaud the efforts of Representative Schumer for 
moving this legislation through the Subcommittee on Crime and Criminal 
Justice.
  While insurance should remain state regulated, there is certainly a 
role for the Federal Government to play in concert with the State 
insurance departments and the NAIC. The NAIC proposed this statute 
because the Federal Government has unequaled clout, reach, and 
investigatory and law enforcement resources. The State insurance 
departments are ready and willing to investigate and prosecute 
insurance fraud, often in cooperation with Federal law enforcement 
agencies. In certain circumstances, the States have not been able to 
prosecute wrongdoers--extradition, for example, can pose a formidable 
barrier--and this has motivated the State insurance departments and the 
NAIC to seek Federal assistance. Federal criminal statutes, with the 
law enforcement and judicial authority and resources of the United 
States behind them, offer both deterrence and punishment. While 
reasonable people may disagree over the need for Federal regulation of 
the business of insurance, I think we can all agree that a Federal 
criminal statute should be viewed as enhancing, not superseding, State 
law enforcement. Indeed, in a recent op-ed piece in the New York Times, 
March 11, 1994, Maryanne Trump Barry, a Federal district judge in New 
Jersey and the chairwoman of the Criminal Law Committee of the Judicial 
Conference of the United States, while criticizing too wide of an 
extension of Federal criminal jurisdiction, acknowledged that ``U.S. 
courts have traditionally handled complex cases with nationwide impact: 
serious interstate offenses, organized crime and major drug 
enterprises, white-collar crime, State and local corruption and 
international offenses.'' Surely, complex, white-collar insurance 
fraud, often perpetrated by sophisticated, international criminals, 
should be a Federal crime.
  Mr. Speaker, I am pleased that the NAIC's original proposal called 
for stiff fines and long prison terms. As it would appear that the 
Federal Sentencing Guidelines determine the length of prison terms, I 
am not prepared to argue that the higher NAIC prison terms should have 
been adopted, though an argument can be made that including a 
substantial prison term in a statute provides a concrete indication of 
the importance Congress places on a particular crime. For example, the 
bank fraud statute, on which the NAIC modeled its insurance fraud 
proposal, provides for 30-year prison terms. The statute passed today 
provides for 10-year prison terms, which can be increased to 15 years 
when the safety or soundness of a financial institution is jeopardized. 
I continue to believe, along with the NAIC, that the fines should be 
increased to $1 million, rather than the fines in the proposed statute 
of $250,000 for individuals and $500,000 for organizations.

  Finally, I will note that in the 102d Congress one word was added in 
the conference committee, and included in H.R. 665, that remains 
troubling to those of us interested in the best possible regulation of 
the business of insurance. The adjective ``financial'' was added before 
``reports and documents'' submitted to regulators or examiners, as in 
proposed Sec. 1033(a)(1)(A). As a former insurance regulator, I believe 
this is a troubling addition. The insurance-fraud proposal does not 
include a definition of ``financial'' or of ``financial reports or 
documents''. A number of reports and documents are not explicitly 
``financial'' in nature, but are nevertheless extremely important to 
effective insurance regulation. In ``Failed Promises: Insurance Company 
Insolvencies,'' a report by the Subcommittee on Oversight and 
Investigations of the House Committee on Energy and Commerce, Committee 
Print 101-P, February 1990, the Subcommittee on Oversight and 
Investigations suggested there were abuses connected to such 
nonfinancial information as applications for licenses; filings on 
holding company transactions; filings on parent-subsidiary 
transactions; and filings on mergers, consolidations, and acquisitions. 
With the addition of one word--``financial''--it is quite possible that 
fraudulent activities in these areas would not be covered as Federal 
offenses. Based on my 7 years of experience as the commissioner of 
insurance for North Dakota, I happen to believe that these are rather 
significant activities. I believe that this legislation, without an 
adequate definition of ``financial'', should not include that 
adjective.
  Mr. Speaker, the Senate has already passed an omnibus crime bill that 
includes an insurance-fraud statute. With our action today, I hope the 
103d Congress will soon pass this provision. By making white-collar 
insurance fraud a Federal offense, we will give State insurance 
departments a strong weapon in their fight against insurance fraud.

                          ____________________