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According to the Collins English Dictionary 10th Edition fraud can be defined as: "deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage".[1] In the broadest sense, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation. Defrauding people or entities of money or valuables is a common purpose of fraud, but there have also been fraudulent "discoveries", e.g. in science, to gain prestige rather than immediate monetary gain
*As defined in Wikipedia

Saturday, October 23, 2010

Goldman Sachs and "Jargon and Double Talk"

Here we go again! Goldman Sachs Group and Blackstone Group are caught up in new shenanigans. These groups bought health insurance companies which used "unfair competition and false advertising" in order to defraud consumers. These charges certainly do not help to polish GS's image. Goldman has a long way to go to rehabilitate its image from its purely greedy one to one of fair play. At this rate, it may never happen.

Health Insurance Scam Alleged in California

LOS ANGELES (CN) - The HealthMarkets group of insurance companies uses deceptive and illegal methods to sell "junk insurance," hiding their policies' many "exclusions and limitations" behind jargon and double-talk, leaving sick policyholders without coverage, the Los Angeles City Attorney's Office says. Prosecutors say co-defendants the Blackstone Group and Goldman Sachs bought the companies knowing that they "sell junk insurance products by whatever means it took."
Prosecutors say the companies actually train their agents to use "impressive sounding but meaningless jargon."
The People of California sued Texas-based HealthMarkets Inc. and its affiliates in Superior Court, alleging unfair competition and false advertising.
"For more than a decade, the HealthMarkets defendants have engaged in a scheme to defraud consumers, including California consumers, through the sale of 'junk insurance' - individual, family and small group health insurance coverage that is marketed as comprehensive insurance but, because of hidden or obscure exclusions and limitations, leaves policyholders without coverage when they need it most," the complaint states.
The city attorney also sued the Blackstone Group and Goldman Sachs Group, which purchased control of the insurance companies in 2006 and have since "ratified the HealthMarkets defendants' fraudulent conduct and have permitted that conduct to continue to the present day," according to the complaint.
The insurers have a sales force of 1,200, who are encouraged to do "whatever it takes" to make a sale, and are trained to "reveal as little information as possible" about policies and to respond to questions "with impressive sounding but meaningless jargon," the complaint states.
Agents "routinely misrepresent to prospective policyholders that the policy they are considering purchasing will pay most of the costs associated with major illnesses and medical events, such as cancer, heart disease and pregnancy," the complaint states. But "in fact, policyholders are often left to pay all or most of large medical claims that they had been falsely lead to believe would be covered by their policy."
Among the HealthMarkets affiliates named defendants are three nonprofits: the National Association for the Self-Employed, the Alliance For Affordable Services, and Americans For Financial Security Inc., all of Texas.
They all are HealthMarkets alter-egos, but are held out as independent to attract customers, prosecutors say. But "in reality ... [they] are affiliated with and have been acting in concert with the HealthMarkets Defendants in furtherance of the scheme to defraud consumers."
Also sued are HealthMarkets affiliates Mega Life and Health Insurance Company of Oklahoma, and the Mid-West National Life Insurance Company of Tennessee.
The Blackstone Group and the Goldman Sachs Group bought control of HealthMarkets and its affiliates in 2006 for $850 million, knowing full well how the insurance companies operated, the prosecutors say.
"Blackstone and Goldman are investment banking institutions that would never have invested $850 million in a company without first diligently researching its operations and revenue sources," according to the complaint. "But even a basic Google search in 2006 would have revealed that the only 'powerful competitive advantage' they stood to gain from acquiring UICI was a sales force eager to sell junk insurance products by whatever means it took."
Prosecutors want the defendants fined $2,500 for each violation of state law, and enjoined from doing business in this manner.

The article is found here


Anonymous said...

Warning to Mr. Robert Rubin and Management

"On November 3, 2007, I sent an email to Mr. Robert Rubin and three other members of Corporate Management... In this email I outlined the business practices that I had witnessed and attempted to address. I specifically warned about the extreme risks that existed within the Consumer Lending Group. And I warned that there were 'resulting significant but possibly unrecognized financial losses existing within Citigroup.'"

And now taxpayers own 75% of Citi, and our losses to them are huge. They are going to get worse, as we will see.

JR said...

The above link doesn't seem to be working. Could you re-post it?

Anonymous said...

Warning to Mr. Robert Rubin and Management

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