I

103D CONGRESS

1ST SESSION H. R. 665

To amend title 18, United States Code, to provide that fraud against insurance companies will be subject to strong Federal criminal and civil

penalties.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 27, 1993

Mr. DINGELL (for himself and Mr. BROOKS) introduced the following bill;

which was referred to the Committee on the Judiciary

A BILL

To amend title 18, United States Code, to provide that

fraud against insurance companies will be subject to

strong Federal criminal and civil penalties.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Insurance Fraud Pre5 vention Act of 1993’’.
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1 SEC. 2. CRIMES BY OR AFFECTING PERSONS ENGAGED IN

2 THE BUSINESS OF INSURANCE WHOSE AC3 TIVITIES AFFECT INTERSTATE COMMERCE.

4 (a) IN GENERAL.—Chapter 47 of title 18, United

5 States Code, is amended by adding at the end thereof the

6 following new sections:

7 ‘‘§1033. Crimes by or affecting persons engaged in

8 the business of insurance whose activi9 ties affect interstate commerce

10 ‘‘(a)(1) Whoever is engaged in the business of insur11 ance whose activities affect interstate commerce and

12 knowingly, with the intent to deceive, makes any false ma13 terial statement or report or willfully and materially

14 overvalues any land, property or security—

15 ‘‘(A) in connection with any financial reports or

16 documents presented to any insurance regulatory of17 ficial or agency or an agent or examiner appointed

18 by such official or agency to examine the affairs of

19 such person, and

20 ‘‘(B) for the purpose of influencing the actions

21 of such official or agency or such an appointed agent

22 or examiner,

23 shall be punished as provided in paragraph (2).

24 ‘‘(2) The punishment for an offense under paragraph

25 (1) is a fine as established under this title or imprison26 ment for not more than 10 years, or both, except that
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1 the term of imprisonment shall be not more than 15 years

2 if the statement or report or overvaluing of land, property,

3 or security jeopardized the safety and soundness of an in4 surer and was a significant cause of such insurer being

5 placed in conservation, rehabilitation, or liquidation by an

6 appropriate court.

7 ‘‘(b)(1) Whoever—

8 ‘‘(A) acting as, or being an officer, director,

9 agent, or employee of, any person engaged in the

10 business of insurance whose activities affect inter11 state commerce, or

12 ‘‘(B) is engaged in the business of insurance

13 whose activities affect interstate commerce or is in14 volved (other than as an insured or beneficiary

15 under a policy of insurance) in a transaction relating

16 to the conduct of affairs of such a business,

17 willfully embezzles, abstracts, purloins, or misappropriates

18 any of the moneys, funds, premiums, credits, or other

19 property of such person so engaged shall be punished as

20 provided in paragraph (2).

21 ‘‘(2) The punishment for an offense under paragraph

22 (1) is a fine as provided under this title or imprisonment

23 for not more than 10 years, or both, except that if such

24 embezzlement, abstraction, purloining, or misappropria25 tion described in paragraph (1) jeopardized the safety and
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1 soundness of an insurer and was a significant cause of

2 such insurer being placed in conservation, rehabilitation,

3 or liquidation by an appropriate court, such imprisonment

4 shall be not more than 15 years. If the amount or value

5 so embezzled, abstracted, purloined, or misappropriated

6 does not exceed $5,000, whoever violates paragraph (1)

7 shall be fined as provided in this title or imprisoned not

8 more than one year, or both.

9 ‘‘(c)(1) Whoever is engaged in the business of insur10 ance and whose activities affect interstate commerce or is

11 involved (other than as an insured or beneficiary under

12 a policy of insurance) in a transaction relating to the con13 duct of affairs of such a business, knowingly makes any

14 false entry of material fact in any book, report, or state15 ment of such person engaged in the business of insurance

16 with intent to deceive any person, including any officer,

17 employee, or agent of such person engaged in the business

18 of insurance, any insurance regulatory official or agency,

19 or any agent or examiner appointed by such official or

20 agency to examine the affairs of such person, about the

21 financial condition or solvency of such business shall be

22 punished as provided in paragraph (2).

23 ‘‘(2) The punishment for an offense under paragraph

24 (1) is a fine as provided under this title or imprisonment

25 for not more than 10 years, or both, except that if the
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1 false entry in any book, report, or statement of such per2 son jeopardized the safety and soundness of an insurer

3 and was a significant cause of such insurer being placed

4 in conservation, rehabilitation, or liquidation by an appro5 priate court, such imprisonment shall be not more than

6 15 years.

7 ‘‘(d) Whoever, by threats or force or by any threaten8 ing letter or communication, corruptly influences, ob9 structs, or impedes or endeavors corruptly to influence, ob10 struct, or impede the due and proper administration of

11 the law under which any proceeding involving the business

12 of insurance whose activities affect interstate commerce

13 is pending before any insurance regulatory official or

14 agency or any agent or examiner appointed by such official

15 or agency to examine the affairs of a person engaged in

16 the business of insurance whose activities affect interstate

17 commerce, shall be fined as provided in this title or impris18 oned not more than 10 years, or both.

19 ‘‘(e)(1)(A) Any individual who has been convicted of

20 any criminal felony involving dishonesty or a breach of

21 trust, or who has been convicted of an offense under this

22 section, and who willfully engages in the business of insur23 ance whose activities affect interstate commerce or partici24 pates in such business, shall be fined as provided in this

25 title or imprisoned not more than 5 years, or both.
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1 ‘‘(B) Any individual who is engaged in the business

2 of insurance whose activities affect interstate commerce

3 and who willfully permits the participation described in

4 subparagraph (A) shall be fined as provided in this title

5 or imprisoned not more than 5 years, or both.

6 ‘‘(2) A person described in paragraph (1)(A) may en7 gage in the business of insurance or participate in such

8 business if such person has the written consent of any in9 surance regulatory official authorized to regulate the in10 surer, which consent specifically refers to this subsection.

11 ‘‘(f) As used in this section—

12 ‘‘(1) the term ‘business of insurance’ means—

13 ‘‘(A) the writing of insurance, or

14 ‘‘(B) the reinsuring of risks,

15 by an insurer, including all acts necessary or inci16 dental to such writing or reinsuring and the activi17 ties of persons who act as, or are, officers, directors,

18 agents, or employees of insurers or who are other

19 persons authorized to act on behalf of such persons;

20 ‘‘(2) the term ‘insurer’ means any entity the

21 business activity of which is the writing of insurance

22 or the reinsuring of risks, and includes any person

23 who acts as, or is, an officer, director, agent, or em24 ployee of that business;

25 ‘‘(3) the term ‘interstate commerce’ means—
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1 ‘‘(A) commerce within the District of Co2 lumbia, or any territory or possession of the

3 United States;

4 ‘‘(B) all commerce between any point in

5 the State, territory, possession, or the District

6 of Columbia and any point outside thereof;

7 ‘‘(C) all commerce between points within

8 the same State through any place outside such

9 State; or

10 ‘‘(D) all other commerce over which the

11 United States has jurisdiction; and

12 ‘‘(4) the term ‘State’ includes any State, the

13 District of Columbia, the Commonwealth of Puerto

14 Rico, the Northern Mariana Islands, the Virgin Is15 lands, American Samoa, and the Trust Territory of

16 the Pacific Islands.

17 ‘‘§1034. Civil penalties and injunctions for violations

18 of section 1033

19 ‘‘(a) The Attorney General may bring a civil action

20 in the appropriate United States district court against any

21 person who engages in conduct constituting an offense

22 under section 1033 and, upon proof of such conduct by

23 a preponderance of the evidence, such person shall be sub24 ject to a civil penalty of not more than $50,000 for each

25 violation or the amount of compensation which the person
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1 received or offered for the prohibited conduct, whichever

2 amount is greater. If the offense has contributed to the

3 decision of a court of appropriate jurisdiction to issue an

4 order directing the conservation, rehabilitation, or liquida5 tion of an insurer, such penalty shall be remitted to the

6 appropriate regulatory official for the benefit of the policy7 holders, claimants, and creditors of such insurer. The im8 position of a civil penalty under this subsection does not

9 preclude any other criminal or civil statutory, common

10 law, or administrative remedy, which is available by law

11 to the United States or any other person.

12 ‘‘(b) If the Attorney General has reason to believe

13 that a person is engaged in conduct constituting an of14 fense under section 1033, the Attorney General may peti15 tion an appropriate United States district court for an

16 order prohibiting that person from engaging in such con17 duct. The court may issue an order prohibiting that person

18 from engaging in such conduct if the court finds that the

19 conduct constitutes such an offense. The filing of a peti20 tion under this section does not preclude any other remedy

21 which is available by law to the United States or any other

22 person.’’.

23 (b) CLERICAL AMENDMENT.—The table of sections

24 for chapter 47 of such title is amended by adding at the

25 end the following new items:
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‘‘1033. Crimes by or affecting persons engaged in the business of insurance

whose activities affect interstate commerce.

‘‘1034. Civil penalties and injunctions for violations of section 1033.’’.

1 SEC. 3. MISCELLANEOUS AMENDMENTS TO TITLE 18, UNIT2 ED STATES CODE.

3 (a) TAMPERING WITH INSURANCE REGULATORY

4 PROCEEDINGS.—Section 1515(a)(1) of title 18, United

5 States Code, is amended—

6 (1) by striking ‘‘or’’ at the end of subparagraph

7 (B);

8 (2) by inserting ‘‘or’’ at the end of subpara9 graph (C); and

10 (3) by adding at the end thereof the following

11 new subparagraph:

12 ‘‘(D) a proceeding involving the business of

13 insurance whose activities affect interstate com14 merce before any insurance regulatory official

15 or agency or any agent or examiner appointed

16 by such official or agency to examine the affairs

17 of any person engaged in the business of insur18 ance whose activities affect interstate com19 merce; or’’.

20 (b) LIMITATIONS.—Section 3293 of such title is

21 amended by inserting ‘‘1033,’’ after ‘‘1014,’’.

22 (c) OBSTRUCTION OF CRIMINAL INVESTIGATIONS.—

23 Section 1510 of title 18, United States Code, is amended

24 by adding at the end the following new subsection:
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1 ‘‘(d)(1) Whoever—

2 ‘‘(A) acting as, or being, an officer, director,

3 agent or employee of a person engaged in the busi4 ness of insurance whose activities affect interstate

5 commerce, or

6 ‘‘(B) is engaged in the business of insurance

7 whose activities affect interstate commerce or is in8 volved (other than as an insured or beneficiary

9 under a policy of insurance) in a transaction relating

10 to the conduct of affairs of such a business,

11 with intent to obstruct a judicial proceeding, directly or

12 indirectly notifies any other person about the existence or

13 contents of a subpoena for records of that person engaged

14 in such business or information that has been furnished

15 to a Federal grand jury in response to that subpoena, shall

16 be fined as provided by this title or imprisoned not more

17 than 5 years, or both.

18 ‘‘(2) As used in paragraph (1), the term ‘subpoena

19 for records’ means a Federal grand jury subpoena for

20 records that has been served relating to a violation of, or

21 a conspiracy to violate, section 1033 of this title.’’.

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