True Crime of Insurance Fraud Video Number 42

Shoes on Melrose

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. This Video Blog of True Crime Stories of Insurance Fraud with the names and places changed to protect the guilty are all based upon investigations conducted by me and fictionalized to create a learning environment for claims personnel, SIU investigators, insurers, police, and lawyers better understand insurance fraud and weapons that can be used to deter or defeat a fraudulent insurance claim.

How Avoiding Taxes Can Cost a Merchant

It was a successful, trendy, shoe store on Melrose Avenue, West Hollywood, California. Stocked with electric yellow combat boots and pink platform shoes his was the most popular shoe store on the Avenue. The beautiful people provided a good income for Albert Benvenitti, the owner.

Albert was an honest man. He treated his customers fairly. He never questioned them when they brought shoes back. Manufacturers admired him because he paid for his merchandise within 10 days of invoice. Like all small businessmen, Albert was certain he was overtaxed. Half his income went to state and federal taxes. No matter how hard he worked it seemed he made less money every year.

Albert fought back in the only way he could, he didn’t record every cash sale. The shoes sold for cash simply stayed on his inventory sheet as unsold merchandise. By putting the cash sales in his pocket his profit margin — on the books — went down but the real money he took home increased. By fighting the government, he reduced his tax burden from 50 to 30% of the true net income.

When he became the victim of a burglary his books failed to show the inventory he actually lost.

Avoiding Taxes Destroyed a Legitimate Insurance Claim

Although Benvenitti knew that he lost — from his first-hand knowledge of the business — more than $30,000 in shoes he agreed to a $5,000 settlement and promised to cancel his policy and never insure with that insurer again.

The Insurer, on the advice of its counsel, fulfilled its duty as a citizen and reported the fraud to the I.R.S. Benvenitti was audited the next year and paid, with penalties and interest added, the taxes he should have paid.

He learned an important lesson: it does not pay to lie to the IRS and that it is important to keep accurate business records.

Benvenitti was pleasantly surprised that he was not prosecuted.

(c) 2022 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and [email protected].

Over the last 54 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created a library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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