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Indictments Seen Soon in Scheme Over Settlements

New York Law Journal, September 11, 1995

By Matthew Goldstein

Indictments of a half-dozen lawyers are expected to be handed down within the next several weeks resulting from a three-year investigation by the Manhattan District Attorney into allegations of widespread fraud in personal injury claims and settlements, according to attorneys familiar with the probe. The investigation has led to two arrests in the past seven months.

The investigation has focused on alleged schemes by attorneys, insurance claims adjusters and “claims expediters” or middlemen to inflate the value of claims in personal injury suits.

Gerald McKelvey, a spokesman for Manhattan District Attorney Robert M. Morgenthau, declined to comment. The investigation, which was confirmed by Mr. Morgenthau last October, is being supervised by Daniel Castleman, chief of the office’s investigative division.

The probe has so far netted one lawyer, with the arrest and conviction this summer of Joel H. Cohen, 61, of Lawrence, N.Y., on a single count of commercial bribery. Mr. Cohen, a former solo practitioner, was arrested June 28 and pleaded guilty the following day before Acting Supreme Court Justice Leslie Crocker Snyder.

Mr. Cohen, sentenced to serve one to three years at Downstate Correctional Facility in Fishkill, N.Y., said he paid more than $1,000 in early 1994 to Salvatore Caccavale, a claims adjuster for American International Group Inc., to obtain a settlement of $90,000 in a client’s personal injury suit, according to court papers.

Jeffrey Maldonado, vice president of AIG, said he was aware of the investigation, but declined further comment. Mr. McKelvey sad no charges have been filed against Mr. Caccavale.

Mr. Cohen had been suspended for one year from law practice by the Appellate Division, First Department, due to his guilty plea to an unrelated 1990 federal tax violation. Benjamin Brafman, Mr. Cohen’s attorney and a partner in Brafman, Gilbert & Ross, said his client had pleaded guilty in the insurance case to “put this matter behind him.”

According to court papers, Mr. Cohen sought out Edward Quigley, a middleman, to deliver the bribe to Mr. Caccavale. Mr. Quigley, who was arrested on April 13 and charged with one count of commercial bribery in a personal injury case, is identified as a “confidential informant” in some of the court papers in Mr. Cohen’s case.

Bribery Scheme

Explaining the settlement scheme last October, Mr. Morgenthau said that typically a middleman approaches an attorney with an offer to help negotiate a more favorable settlement in return for a percentage of the final award. The middleman, who often is a former insurance company employee, contacts the insurance adjuster assigned to evaluate the claim to strike a deal.

The middleman and the claims adjuster split the money turned over by the attorney, prosecutors have said. Meanwhile the attorney benefits by obtaining a larger contingent fee as a result of the larger settlement.

Last year, prosecutors announced the arrest of John Prins, 63, a middleman who was charged with grand larceny by extortion for demanding a $52,000 payment from a plaintiff’s lawyer for helping negotiate a $700,000 settlement. Mr. Prins’ next appearance is set for Sept. 27 before Justice Snyder.

The investigation started after Jay B. Itkowitz, a partner with Itkowitz & Gottlieb, balked at Mr. Prins’s demand and went to the authorities. Mr. Itkowitz, a former assistant City Corporation Counsel lawyer, declined to comment.

Salvatore S. Russo, a Brooklyn attorney who is representing Mr. Prins, said his client is innocent and was set up by the prosecution and Mr. Itkowitz.