The ongoing investigation that resulted in charges being filed against the then-president of the Otsego County Chamber in 2011 led to the arrest of a Westchester County man Tuesday, according to a media release from the state Department of Financial Services.
Norman J. Michaels Jr., 61, of Katonah, was arrested on second-degree grand larceny charges for allegedly taking $62,000 in commissions from the enrollment of more than 400 people in a phony category of insurance, according to a spokesman for the state agency. Michaels was released on his own recognizance.
Michaels is accused of conspiring with Robert “Rob” Robinson, who allegedly created a phony Chamber membership category that made the scheme possible, according to the release. Robinson was fired from his position soon after his arrest.
A source close to the investigation said Michaels came up with the original idea for the scheme.
There is no allegation that Robinson personally benefited from the scheme, the source said. However, it defrauded people who bought the insurance. The chamber allegedly benefited from the sale of policies and membership fees, the source said.
Robinson, 58 at the time of his arrest, was charged with second-degree insurance fraud, two counts of second-degree grand larceny, first-degree falsifying business records and first-degree scheme to defraud. He was also released on his own recognizance.
Otsego County District Attorney John Muehl is prosecuting both cases. He said Wednesday a final offer to resolve the Robinson case was sent to his attorney, James Hartmann of Delhi. Hartmann had no comment when contacted Wednesday.
Muehl said he could not disclose what the offer was at this stage in the procedure. If he does not get a response, Muehl could present the case to a grand jury in May.
No new evidence has been developed that led to the new arrest, he said. Instead, when insurance investigators looked over the evidence, they decided there was enough to file the new charge.
Michaels is accused of stealing the commissions from MVP Health Care of Schenectady as the result of the improper enrollment of individuals into small group and sole proprietor health plans insured by MVP and offered through the Otsego County Chamber, according to a release from the agency.
The insurance policies were sold to downstate residents who were purportedly enticed to buy them on the basis that the coverage was less expensive than health insurance in the New York City area.
However, in most cases, individuals must reside or work in the geographical area where a health insurance plan is offered to be eligible.
The insurance policies of all of the 400 people were canceled after it was discovered they were ineligible to join the plan.
Financial Services Superintendent Benjamin Lawsky said in the release: “If this scheme had been left uncovered, it could have led to higher premiums for people living in Otsego County. Their premiums could have begun to reflect the health care costs of people obtaining more costly services in New York City.”
The scheme was discovered after MVP noticed an unusually high spike in new enrollments and saw that a large number of enrollees were from downstate. MVP paid nearly $1 million in health care costs associated with the improperly enrolled individuals.