Jan 13, 2020

Insurance Fraud: Lessons from the Bucks County Risoldi Case

David M. Augenbraun, Office of the PA Attorney GeneralMonique M. Ericson, CPA, CFE, CVABy David M. Augenbraun and Monique M. Ericson, CPA, CVA, CFE

Claire Risoldi’s mansion, known as “Clairemont,” caught fire for the third time in about four and a half years on Oct. 22, 2013. The previous fires in Bucks County, Pa., occurred June 17, 2009, and Aug. 16, 2010. The cause of each was ruled “undetermined” by the Buckingham Township fire marshal. The fires all have been the subject of insurance claims filed by the Risoldi family with AIG insurance. The claim for the 2009 fire was settled for about $1.8 million; the claim for the 2010 fire was settled for about $8 million; and AIG paid out about $10.4 million in connection with the 2013 fire. The Risoldi family filed proofs of loss with AIG, demanding an additional $18.9 million. This figure was based on about $8 million for alleged damage to the contents of the home and the structure, as well as over $10 million for an alleged theft of jewelry by volunteer firefighters who extinguished the fire.

Statue of JusticeAIG refused to pay these additional claims in connection with the 2013 fire after concluding that the Risoldis had engaged in fraud and misrepresentation with respect to the claims. Carl Risoldi and his sister Carla Risoldi were the title owners of Clairemont and the named insureds at the time of all three fires. Carl and Carla’s mother, Claire, was covered under the policies as a resident of Clairemont.

In December 2013, Claire reported to the Buckingham Township police department that jewelry she valued at over $10 million had been stolen during the Oct. 22, 2013, fire. The matter was referred to the Pennsylvania Office of the Attorney General by the Bucks County district attorney for investigation, based on conflict resulting from the Risoldi family’s prominence in Bucks County politics. The case was submitted to a grand jury, which issued Presentment No. 58 detailing its findings:

  • The Risoldis had been funding their extravagant lifestyle for decades by engaging in an ongoing course of insurance fraud.
  • The Risoldis concocted the story that the firefighters had stolen Claire’s jewelry and that no such theft had occurred.
  • The Risoldis had inflated multiple aspects of the 2013 claim.

The evidence presented to the grand jury established that Claire Risoldi conspired with Carl and others to file the fraudulent and inflated claims.

How Was Claire Risoldi Discovered?

There were several items of evidence that raised red flags and ultimately led to the arrest and conviction of Claire Risoldi for insurance fraud. Here are a few:

  • Suspect jewelry appraisals – Defects included the misspelling of the word “jewelry” and that there were no photographs of the items appraised.
  • Prior insurance claims – The same items of jewelry claimed in the 2013 loss had been claimed in 1984, 1993, and 2002.
  • Suspect invoices in support of the $2 million claim for window treatments – The name of the drape vendor was misspelled on the invoices, and the majority of the invoices had no description of the merchandise purportedly purchased.
  • A forged lease – The lease submitted in support of a claim for additional living expenses (ALE) inflated the cost of a rental property from $4,000 a month to $13,000 a month. The Risoldis ultimately used the proceeds from the inflated ALE to purchase homes through a straw purchaser, concealing the transactions from AIG.
  • Fraudulent receipts – In support of a claim to restore murals depicting the Risoldi family that were damaged by the fire, the receipts inflated the cost of restoration from $50,000 to over $900,000.
  • Bank and financial records – Records indicated that the Risoldis were diverting proceeds of insurance claims to fund their extravagant lifestyle – such as spending on luxury items and high-end motor vehicles – rather than repairing the damaged home.

So, what lessons can CPAs and those in the insurance industry take away from this recent case?

CPAs should analyze the information they receive, and present that information and their findings in a way that anyone can understand. The books and records tell a story. The CPA needs to work with what they are given and be sure to communicate their work effectively. In addition, the CPA should be cognizant of what is needed for the specific analysis. For example, a detailed analysis of net worth is helpful in some instances, but was not necessary in this case and was not included. This resulted in a less complex narrative that was easier for a layperson to understand.

For those in the insurance industry, the most obvious lesson is to carefully examine and investigate all documentation submitted in support of a claim. Something as minor as a misspelling can be a tipoff.

Also, require detailed appraisals that include photos, where appropriate, for jewelry and other high-value items that are the subject of scheduled coverage. In the case of a suspicious claim, review the claimant’s claim history in detail. Always be on the lookout for inconsistencies in a claimant’s statements about the loss and how it occurred.

Explaining Financials to a Jury

When explaining financial transactions, it is important to use terms most people will understand. For the Risoldi trial, the transactions to various entities were broken down and summarized as if it were a checkbook. This is something most jurors would be familiar with, since, in all likelihood, they have one.

It was important to eliminate transfers between accounts, which could mislead a casual observer into believing the Risoldis were wealthy. This was challenging and detailed work. Each matched check and electronic transfer had both a withdraw from and a deposit to account. Ultimately, there were checks paid to cash and cash deposits that were included in either deposits or withdraws because they could not be matched.

It was important to see the entities individually and the accounts as a whole. By examining the cash flow of the entities alone, it was clear that they had insufficient and unsustainable cash flows. By viewing the accounts as a whole, the overall sources and uses of funds became clear.

After eliminating withdrawal transfers, the uses of the funds were categorized, as one might do in a general ledger. This revealed several large categories of expenses that were unsupported by noninsurance type income. Among those were sums spent on vehicles, fabrics and curtains, and other items. These were consistent with the initial findings in the grand jury presentment. It also showed how little was actually spent on renovation after the 2013 fire.

This analysis also demonstrated that usual income sources – wages, Social Security, and retirement income – could not sustain the Risoldis’ spending. There was a category of unknown source deposits – these were cash and other unidentified sources. The amount in this category was insufficient to support spending and rebutted the defense that there was some other source of funds that could have been used to purchase the vehicles, curtains, etc. Analysis of the most recent time period for which records were available revealed that the Risoldis were selling some of the assets acquired with insurance proceeds.

When preparing the report, the steps taken to arrive at the conclusion were described and quantified so that the reader could recreate those steps with the information provided. The report included a written discussion, a table, and a graph so that the reader (the jury) could see the results expressed in a multitude of ways.

David M. Augenbraun is senior deputy attorney general of the Pennsylvania Office of the Attorney General’s Insurance Fraud Section. He was a member of the Risoldi prosecution team.

Monique M. Ericson, CPA, CVA, CFE, is a senior forensic accountant of the litigation support section of the Pennsylvania Office of Attorney General. She is a member of PICPA’s Forensic & Litigation Services Committee.

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  • Carla V Risoldi | Apr 29, 2020
    Anyone interested in the facts can go to: https://www.facebook.com/search/top/?q=all%20criminal%20charges%20against%20carla%20risoldi%20have%20been%20dismissed

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    Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of PICPA officers or members. The information contained in herein does not constitute accounting, legal, or professional advice. For professional advice, please engage or consult a qualified professional.