Extinguishing an arson fraud

CFEs gather evidence to thwart house insurance fraud

 


 

NovDec-arson-fraud    
  
After Soviet Armenia booted career criminal Gagik Levonian out of the country, he took his small fortune and settled in the U.S. When he needed some ready cash to give to an Armenian anti-Turkish political party, he decided to blow up his house and claim the insurance money. A savvy investigative team gathered the evidence that eventually foiled his fraud.


Gagik Levonian, a career criminal in then-Soviet Armenia, was offered the choice of prison or emigration to the U.S. He came to the States as a “refugee” with 300 carats of diamonds, many antique icons, jewelry, Caucasian and Persian rugs and a large bank account in the Cayman Islands. He used what he brought with him to open a wholesale jewelry store and purchased three gas stations.

His obligations to the Soviet Union died with its demise. He became a U.S. citizen, purchased a 4,000-square-foot house in the hills over Los Angeles and became an officer of the Los Angeles Armenian Businessman’s Association. 

However, Levonian never lost his Armenian patriotism. He hated everything Turkish because of what he called the Armenian genocide carried out by the Turkish government at the beginning of the 20th century. At one point a representative of an Armenian political party (whose purpose was to kill Turkish diplomats) approached him for a contribution. He wanted to donate to the cause, but his wealth was locked up in property. Right around this time, he decided to up the insurance on his house and its contents … just in case something were to happen. 

His insurance agent, Hrant Aratian (a friend of Armenian descent who shared his attitude toward Turks) went to a representative of Goodfaith Insurance Company and acquired a policy for Levonian that insured the house for $2 million, its contents at $1 million and an itemized schedule of antiques and fine art he valued at $970,000. Goodfaith received an application signed by Levonian that represented the values of the property, that he had never had a claim before and that he had never had a policy canceled or non-renewed. Goodfaith didn’t inspect the property but — in good faith — accepted Levonian’s word.

Two weeks after the Goodfaith policy went into effect, Levonian’s house on the hill exploded into flames. A fire department helicopter saw the explosion and quickly dropped water on the property and put out the flames. City arson investigators determined the cause of the fire was arson. The next evening the house caught on fire again, and it was totally destroyed. The firefighters called it a “rekindle,” but the arson investigators concluded the second fire was also intentional.

After the second fire, Levonian presented a claim to Goodfaith. The adjuster, Martha Andrews, asked for my assistance as a consultant, investigator and CFE because she was facing a potential $3 million claim shortly after the policy was issued. I immediately contacted Levonian and made an appointment to meet with him at the fire scene.

BACKYARD BARBECUE

I met with Levonian at the burned-out hulk of his house. I brought an Armenian language interpreter and a certified shorthand reporter with me to take a statement from Levonian about the insurance and the loss. 

The interpreter introduced me to a large man who could speak Armenian and Russian fluently and knew some English. He commanded any room he entered. His round, rosy-cheeked face was marred by a large birthmark on his bald head that looked like a map of Texas and a bloated, red nose from overconsumption of Armenian brandy. We sat on rocks outside his swimming pool with a broken sculpture that had been blown into the pool staring back at us. Levonian was drinking from an eight-ounce glass mixed 50/50 with brandy and orange juice at 10 in the morning.

“Why are you here?” he asked.

“To help you prove your claim to Goodfaith Insurance Company,” I responded.

“You can see the house is destroyed. Where is my check?”

I explained the insurance he had purchased and the process of a claims investigation. I explained that because the fires were intentionally set, Goodfaith was required by law to conduct a thorough investigation and that a detailed statement from him was the beginning of that thorough investigation.

“I paid a lot for this insurance,” he said. “My house is burned to nothing. I want my money.” 

His face began to flush red with anger and brandy. I calmed him down as best I could with the help of the interpreter and finally convinced him to sit back on the rock and answer my questions. I had the shorthand reporter take everything down but didn’t ask her to issue an oath since this was to be a preliminary statement; I was only getting his basic background and what he and other members of his family were doing at the time of the fire.

After I finished the statement, I explained to him that Goodfaith would pay to rent a similar $1 million house for his family while we investigated. Satisfied, he left the scene to me and a private fire cause-and-origin investigator whom I had asked Goodfaith to retain. I was concerned about some facts that Levonian gave me that he thought were inconsequential, including:
  1. One of the family’s Dobermans had been at the vet the night of the fire.
  2. The second Doberman had been with his 18-year-old son and the son’s date at a drive-in movie the night of the fire.
  3. The Goodfaith policy was the first time he had ever had a schedule of his fine art and antiques.
  4. His 14-year-old son had been with him and his wife at an Armenian Businessman’s Association dinner the night of the fire.
  5. The family cat and a coop of rabbits died in the fire.
  6. The fire happened after midnight.
  7. He had out-of-focus photographs of all the scheduled items that he took and provided to me.
  8. He accused the fire department arson investigators of theft of diamonds stored in a floor safe in the master bath.
  9. His eldest son was at a nightclub the night of the fire and was now visiting his grandmother in Yerevan, Armenia.
  10. His prior insurer had canceled insurance because of a claim.
I immediately called Andrews and obtained her permission to retain competent coverage counsel and a fine-arts appraiser to review the little debris available, as well as to report the claim to the fraud division of California’s Department of Insurance. 

EXPANDING THE TEAM

The day after my interview with Levonian in his backyard, Andrews and I met with attorney Bill Abogador. Abogador had more than 20 years of experience dealing with insurance fraud and arson-for-profit cases for Goodfaith and dozens of other insurers.

After introductions Abogador asked to see the policy and reviewed it carefully, cover to cover, before saying anything:

“How do you spell porcelain?” he asked me.

“P-o-r-c-e-l-a-i-n,” I responded, confused.

“Did you notice that the schedule of fine arts in this policy spelled it procelane?

“No. Do you think it was a typo?”

“I would have thought so until I saw Meisen spelled Mason and Lalique spelled Lalik. Do you have the underwriting file with the appraisal on which this schedule was agreed to by Goodfaith?”

Andrews reached into her briefcase and pulled out a copy of the underwriting file, flipped through the pages and opened the copy to the original appraisal.

“Here it is,” she said. “Do you know Matthew Krooner, the appraiser?”

“Yes. I represented an insurer with regard to an armed robbery at Krooner’s auction house three years ago. We refused the claim when he was arrested and convicted of insurance fraud.”

“Oh, my!” exclaimed Andrews. “What do we do now?”

“First, Barry should immediately visit the offices of the retail insurance agent and the underwriter and obtain detailed recorded statements concerning the placement of this insurance. I will review the information in the claim file, the transcript of Gagik’s statement, the underwriting file, the policy wording and the local law. If, after my review, I find grounds to suspect fraud, I will recommend to Goodfaith that Gagik Levonian be required to submit to an examination under oath. I also recommend that Goodfaith retain the services of an appraiser to review the conclusions of Krooner, who — although he had a problem with receiving and selling stolen property — knew how to spell porcelain and Meisen. After meeting with an expert, Barry should also interview Krooner.”

Andrews and I left, and I began following Abogador’s instructions including consulting with a fine-arts appraiser. 

My first stop was at the office of the retail insurance agent, Hrant Aratian, who sold Levonian his policy. Aratian was cooperative and provided me with copies of photographs he had received from Levonian of each of the items described in the appraisal signed by Krooner. He advised me that Levonian had been his client for five years and that he had written insurance on Levonian’s home and his car, his wife’s car and the cars operated by two of his sons. 

“In the five years you have worked with Levonian, has he ever made a claim to an insurer?

“Yes, he had a water leak in his roof last year, and Strong Hands Insurance paid to repair his house. Two years before his downhill neighbor sued him because of a mudslide. Strong Hands defended him but I don’t know how the case resolved.”

“Why did he move from Strong Hands to Goodfaith?”

“After the second claim, Strong Hands sent out a notice of non-renewal so I had to find another market to protect him.”

“Can I have copies of your files on both the Strong Hands and the Goodfaith policies?”

“Of course, everything I do is open to the insurers with whom I do business.”

After the copies were made, I met with Dean Hale, an art appraiser, to review the appraisal and the photographs. Hale and I had worked together on several investigations involving fine art in the past. His office was above a garage in the Hancock Park area of Los Angeles. It was filled with auction catalogs and books on fine arts from the Dark Ages to the day before yesterday.

Hale greeted me with a mug of hot, black coffee and a gleaming, white smile escaping from the cover of a thick ginger-colored beard. While I drank my coffee, Hale sat silently reviewing the photographs and the appraisal carefully before speaking.

“Who is this Krooner person?” he asked.

“He’s an auctioneer in Sherman Oaks dealing in antiques, art work and goods with an often questionable provenance,” I replied.

“That makes sense,” Hale noted, “because if this man is an appraiser he was imbibing in some illicit drugs at the time.”

“Why do you say that?”

“Because none of the descriptions make sense, the artists are not well known and all the values seem to have had at least one extra zero added to them. I can’t be certain because the photographs are all out of focus, although they appear to depict items similar to those described. Finally, the spelling is atrocious. Do you have any of the remains?”

“No. The fire was almost total, but you and I can visit the scene to see what we can find.”

“I’ll get my coat and loupe.”

Hale and I drove to the scene of the fire. The destruction was almost total but there were shards of pottery, pieces of glass, metal that had been attached to the icons and small unburned pieces of rugs.

After an hour at the scene Hale exclaimed: “This is a fraud. The pottery shards are not Meisen as described but Mexican pottery bought at Olvera Street downtown for $5, and the Persian carpet remnants are nylon not wool or silk and were probably bought in a shop in Chinatown. You need to do a great deal more investigation.”  


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