Allstate Expands Million Dollar Philadelphia Fraud Case; Ongoing Investigation Identifies Six More Co-Conspirators

MALVERN, Pa.–(BUSINESS WIRE)–June 16, 2005–Allstate Insurance Company is expanding a 1.1 million dollar insurance fraud case that has already shut down a fraudulent Philadelphia area rehabilitation clinic.

Allstate, along with Encompass Insurance, has filed suit against a Philadelphia area doctor and two of his alleged business partners contending the three marketed computerized medical billing software that was used to create fictitious medical bills – generating more than $400,000 in fraudulent billing for the trio.

This latest suit was filed in U.S District Court in Philadelphia against Physical Medicine & Diagnostics, Ltd., Philmont Rehabilitation Associates, ISY Medical Reports, Inc. and the company’s three owners — Lawrence Schofer, Kenneth Izzo, M.D. and Alan Young. The suit alleges insurance fraud, conspiracy and intentional misrepresentation of medical services.

This case is the latest chapter in a developing fraud story that began last year.

In August of 2004 the U.S. District Court in Philadelphia awarded Allstate and Encompass $1,100,244 in a case that bankrupted a fraudulent rehab clinic — American Rehabilitation and Physical Therapy Inc. In that case, the court said American Rehabilitation and Physical Therapy and its three owners, Richard Privitera, Steven Moldover, and Dean Parker used unlicensed people to perform medical tests, subjected some patients to testing that was medically unnecessary and further conspired to defraud insurance companies by billing for tests that were never performed and over-billed for legitimate tests.

Allstate says that further investigation by its Special Investigation Unit (SIU) has revealed Schofer, Izzo and Young owned the medical billing service that allegedly provided the means for the fraud – ISY Medical Reports. Court documents filed by Allstate say the three were “co-conspirators, who agreed, aided, abetted and provided the essential means” for American Rehab to facilitate fraud.

“Allstate is serious about fighting insurance fraud. We have no tolerance for this crime. Our policyholders and consumers in general benefit from our aggressive fight against insurance fraud. Allstate’s Special Investigation Unit will continue to partner with law enforcement officials in Pennsylvania and across the country to identify and fight fraud,” said Edward J. Moran Assistant Vice President in charge of Allstate’s Special Investigations Unit.

The Allstate Corporation (NYSE:ALL) is the nation’s largest publicly held personal lines insurer. Widely known through the “You’re In Good Hands With Allstate(R)” slogan, Allstate helps individuals in approximately 17 million households protect what they have today and better prepare for tomorrow through approximately 13,600 exclusive agencies and financial professionals in the U.S. and Canada. Customers can access Allstate products and services such as auto insurance and homeowners insurance through Allstate agencies, or in select states at and 1-800 Allstate(R). Encompass(SM) and Deerbrook(R) Insurance brand property and casualty products are sold exclusively through independent agents. Allstate Financial Group provides life and supplemental accident and health insurance, annuity, banking and retirement products designed for individual, institutional and worksite customers that are distributed through Allstate agencies, independent agencies, financial institutions and broker-dealers.