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The Contractor  

Barry Zalma, Esq., CFE presents videos so you can learn how insurance  fraud is perpetrated and what is necessary to deter or defeat insurance  fraud.  

The Failing Fire Reconstruction Contractor  Fire reconstruction is a competitive trade. Work, rebuilding burned out  businesses, commercial structures and homes requires specialized skill.  Obtaining payment from insurers for this specialized work requires a  gregarious personality, a talent at marketing, and the skill to do the  work to perfection.  Willis Rafter was not gregarious, had no talent at marketing and was a  sloppy and unskilled builder. For Willis to be successful as a fire  reconstruction contractor required imagination and a lack of morals.  Willis found he obtained few construction jobs because of his lack of  skill. He never received repeat business. He anticipated bankruptcy.  Rafter Construction was dying. 

His best friend in the business, an  adjuster, advised him tell the adjuster that he will give you 10% of the  next job I bid he will receive the job. on will I get it?\\u201d  \\u201cOf course, silly, I though you would never catch on.\\u201d Louise responded,  giggling.  He found, although slightly more expensive, additional sources of  referral in the community of Public Insurance Adjusters. When he  obtained referrals from them, he found it necessary to increase his unit  costs to cover the extra fee. Rafter Construction became a power in the  fire reconstruction business in his community. He had ten estimators  working for him and always operated with four to ten construction  projects going twelve months a year. He cursed his own stupidity for not  learning the simple fee-based method of obtaining business.  Louise, as his best friend in the business \\u2014 the person who taught him  how to be a success \\u2014 always received an annual $5,000 bonus.  Willis was shocked when, after a routine IRS audit \\u2014 six years into his  business career as a successful fire reconstruction contractor \\u2014 he was  arrested for tax evasion. The IRS concluded that since the payments to  the adjusters and supervisors were illegal in California [a violation of  California Penal Code \\xa7 550] he could not deduct them as business  expenses. 

 ZALMA OPINION  

Insurance fraud is fairly easy. Willis, by paying a 10% bribe to  adjusters saved his business. Although not a big time criminal, like Al  Capone, his scheme was brought to an end by the IRS because they found  he deducted the bribes as a business expense.  

(c) 2022 Barry Zalma & ClaimSchool, Inc.