A Division of Insurance Hearing Officer, Jean F. Farrington, Esq., has entered an Order revoking the resident producer license of Jay Seitz, 68, of Gloucester, MA.
The hearing officer found that Mr. Seitz had made material misrepresentations on his producer license application concerning his prior criminal convictions and the surrender of his professional license as a psychologist. The hearing officer ordered Mr. Seitz to dispose of any interests in Massachusetts as a proprietor, partner, stockholder, officer, or employee of any licensed insurance producer and fined Mr. Seitz $4,000.00 pursuant to General Laws Chapter 176D § 7 and G.L. c. 175, § 194.
Application for Massachusetts license does not disclose criminal conviction for no-fault insurance fraud, professional license proceedings, or court judgments
Before Mr. Seitz attempted to enter the insurance business as a producer, he had been a psychologist licensed to practice in the state of New York.
In 2014, after a six-day jury trial in the Manhattan federal court, he was found guilty of mail fraud and health care fraud. The federal fraud charges against him arose from his participation in a multi-year, no-fault automobile insurance fraud scheme.
As alleged and proven in his trial, Mr. Seitz signed treatment notes for clinics that described psychological diagnoses he purportedly made and services he purportedly provided to patients treated at these clinics. These treatment notes were used to generate claims that were submitted to no-fault insurance companies for reimbursement.
These no-fault insurance claims sought payment for psychological services allegedly provided by Mr. Seitz. However, Mr. Seitz did not diagnose or treat the patients on whose behalf claims were submitted to the no-fault insurance providers. Although the patients at the clinics with which Mr. Seitz was associated sometimes received psychological screening and treatment, this treatment was provided by individuals who were not licensed psychologists or licensed social workers.
Before the two professional corporations associated with Mr. Seitz were put out of business, no-fault insurers had paid the two companies almost $3 million in fraudulent claims.
Following his conviction, the federal court sentenced Mr. Seitz to serve a 24-month sentence in federal prison as well as to pay restitution to the insurers in the amount of $2,703,000.00 and to forfeit $584,089.92 to the United States.
Mr. Seitz’s federal fraud convictions made him unemployable by the insurance industry without pre-approval of the commissioner of insurance
Under the “Violent Crime Control and Law Enforcement Act of 1994.” (18 USC § 1033), it is a federal crime for a person to engage or participate in the business of insurance if that person has ever been convicted of a state or federal felony involving dishonesty or breach of trust.
Section 1033 lists the crimes which involve dishonesty or breach of trust that trigger the statute’s application. Number one in the statute’s listing is a conviction for “Any fraud, including insurance fraud, mail fraud, mortgage fraud.”
Under § 1033, any agency, insurer, or person involved in the business of insurance commits a separate crime by knowingly allowing or permitting “the participation of such a person in the business of insurance.” For a detailed summary of §1033, and its application to insurance agencies and insurance, see Agency Checklists’ article of September 26, 2017, “Insurers And Agents Cannot Be Good Samaritans In Hiring Under Federal Law.”
The Massachusetts Division of Insurance Bulletin “1998-11 The Federal Violent Crime Control and Law Enforcement Act of 1994” sets out the procedures for a person applying for a waiver to work in the insurance business.
Absent this approval, a person convicted of both mail fraud and insurance fraud, like Mr. Seitz, cannot legally work in the insurance industry in any capacity.
Mr. Seitz becomes a resident producer without disclosing his prior mail fraud and insurance fraud convictions
Notwithstanding his criminal convictions, Mr. Seitz received his Massachusetts resident insurance producer license on November 6, 2018, from the Division of Insurance after making his application through the National Insurance Producer Registry (“NIPR”).
On the producer application he submitted, Mr. Seitz did not disclose his convictions. Instead, he answered, “No” to the question which asked whether:
(1) had he ever been convicted of a misdemeanor.
(2) convicted of a felony.
(3) involved in a party in any administrative proceedings regarding any professional occupational licenses and registrations or
(4) found liable in any lawsuit, arbitration, or mediation involving allegations of fraud. Mr. Seitz answered no to these questions.
On November 5, 2018, the day before the Division approved his Massachusetts producer license, Mr. Seitz submitted to The American Family Life Assurance Company (“AFLAC”) for an appointment as an agent. AFLAC had its own questionnaire in which it asked if the applicant, Mr. Seitz had any criminal history or civil judgments, or other legal judgments against him. Mr. Seitz answered, “No” to that question.
The Division moves to revoke Mr. Seitz’s license and fine him for misrepresentation in his license application
On February 6, 2020, the Division filed an administrative complaint (Sometimes designated, “order to show cause”) based upon Mr. Seitz’s failure to disclose in his resident producer license application to the Division neither his criminal convictions nor administrative actions involving his psychologist’s license. Besides seeking the revocation of his license, the complaint also sought fines and orders for him to cease any insurance business and divest himself of any ownership of any insurance entities in Massachusetts.
The Division supported its complaint with documents evidencing:
1. Mr. Seitz’s criminal convictions in the United States District Court for the Southern District of New York in August 2014 for insurance fraud and mail fraud and Mr. Seitz’s sentence to 24 months in prison and the $2 .7 million restitution order to 20+ no-fault insurers and the $500,000 forfeiture to the United States.
2. The record of two misdemeanor convictions of Mr. Seitz in the Criminal Court of New York City for stalking and harassment against two different women.
3. Documents from New York showing that Mr. Seitz had surrendered his professional psychologist license in that state.
4. Documents from the state of Arizona evidencing that a state board had denied Mr. Seitz a license as a psychologist.
5. Mr. Seitz’s employment application with American Family Life Insurance Company (“AFLAC”) on November 15, 2018.
6. Decisions from North Dakota and North Carolina denying Mr. Seitz his application for nonresident insurance producer licenses because of his criminal convictions.
Mr. Seitz responds to the Division’s order to show cause claiming he never violated the law
Mr. Seitz filed a letter responding to the allegations in the Division’s complaint, in contrast to many respondents who do not respond to orders to show cause. Mr. Seitz’s letter response did not deny the facts concerning his criminal convictions or the loss of his psychologist licenses that the Division documented in its complaint against him.
His response, as recounted in the hearing officer’s decision, only included a copy of a letter that he had sent to the United States Attorney’s Office in New York dated December 10, 2018, “acknowledging the litigation but continuing to assert that he was not responsible for violating the law.”
On the misstatements about prior criminal convictions appearing on the AFLAC application, he claimed that he was not responsible for the answers appearing there.
The Division moves for a summary decision by the hearing officer
The Division’s answer to Mr. Seitz’s response to its complaint seeking revocation of his insurance license was to move immediately for a summary decision.
Under the Administrative Procedure Act applicable to license revocation hearings at the Division of Insurance, a party can seek a summary decision based on the undisputed facts, when they can show they are entitled to a decision in their favor as a matter of law.
In Mr. Seitz’s case, the Division claimed the right to a summary decision because Mr. Seitz did not dispute his prior criminal convictions nor that he had failed to disclose them on his original producer application to the Division.
In its motion, the Division pointed out that Mr. Seitz’s statements in his letter to the United States Attorney had no legal standing since the documented evidence of Mr. Seitz’s established the violations of the statutes in question.
Also, the Division’s motion for summary decision focused on Mr. Seitz failure to deny that he did not disclose the administrative proceeding in New York where he surrendered his psychologist’s license in response to the producer’s licensing application’s question concerning licensing denials and the surrender of licenses.
On Mr. Seitz’s claim that he had not been involved in filling out the employment application, the Division noted that the personal information required to complete the form established that he had participated in the process.
Mr. Seitz responded to the Division’s motion with a copy of his prior submission and:
1. A copy of a belated request that Mr. Seitz submitted on November 19, 2019, a year after he first obtained his producer license, requesting the commissioner to allow him to engage in the business of insurance under § 1033, notwithstanding his insurance fraud and mail fraud convictions.
2. A letter dated April 1, 2020, from Mr. Seitz to William Barr, the then United States Attorney General.
4. A Letter dated March 10, 2021, to Mr. Seitz from the Division denying his application to renew his producer’s license.
5. A March 15, 2021 letter from Mr. Seitz to the Commissioner of Insurance appealing the Division’s refusal to renew his producer’s license; and,
6. A copy of his producer’s license.
While Mr. Seitz’s response opposed the motion for summary decision, it also raised issues relating to his separate appeal from the letter from the Division advising him that they would not renew his producer’s license. The hearing officer ruled that she would not entertain matters relating to the Division’s nonrenewal letter. The Division’s complaint and the motion for summary decision before her only related to events that had occurred before the denial of Mr. Seitz’s license renewal, and therefore the only material facts concerned those events.
After an additional submission by the Division countering Mr. Seitz’s further allegations, the hearing officer allowed Mr. Seitz an opportunity to respond further. After Mr. Seitz failed to respond, the hearing officer ruled on the Division’s motion for summary decision.
The hearing officer’s rulings on the Division’s motion for a summary decision against Mr. Seitz
The hearing officer began her decision stating that the evidence submitted by the Division established the requisite basis for disciplinary action to revoke a license because of a person providing “incorrect, misleading, incomplete or materially untrue information in a license application.”
The hearing officer found the documents the Division had submitted concerning Mr. Seitz’s failure to disclose his prior misdemeanor and felony convictions warranted her allowing the Division’s motion for summary decision.
The hearing officer also found that Mr. Seitz’s failure to disclose the surrender of his New York psychologist’s license following mail fraud and insurance fraud convictions also constituted a material misstatement. The standard producer application included having a license surrendered to resolve an administrative action, which occurred in Mr. Seitz’s case, as a required disclosure.
While Mr. Seitz admitted that the answers to his original license application were incorrect, he argued they were not significant because he had previously reported to the National Insurance Producers Registration Board his criminal convictions. However, the hearing officer found that the application that Mr. Seitz signed and submitted to Massachusetts in 2018 was the operative document for this administrative proceeding. The question, therefore, before the hearing officer was whether Mr. Seitz had made a material misstatement on that application concerning his criminal history, and the answer from the hearing officer was, “Yes.”
In addition to other arguments the hearing officer rejected, Mr. Seitz argued that in his November 19, 2019 application to the commissioner under Title 18, § 1033 to work in the insurance industry, he had made full disclosure of his criminal convictions and that that was sufficient to rectify his failure to answer questions correctly on his 2018 producer license application truthfully.
The hearing officer gave this argument short shrift. She noted that granting a producer license on an application is materially different from a request to the commissioner for permission to work in the insurance business under Title 18, § 1033. Permission granted by the commissioner for the convicted felon to work in the insurance business does not equate to granting a producer license. Allowance of a §1033 request permits an otherwise prohibited person to work in the insurance industry in a capacity that does not require a license. The license application procedure is separate and distinct and requires the full disclosure of any criminal history, which in Mr. Seitz’s case did not occur.
The hearing officer revokes Mr. Seitz’s producer license and fines him $4,000.00.
Thus, based on the undisputed evidence in the record, the hearing officer allowed the Division’s motion for a summary decision to revoke Mr. Seitz’s producer license and to enter orders prohibiting him from transacting any insurance business, directly or indirectly in Massachusetts and for him to dispose of any interest that he might have in any insurance business in Massachusetts. She also imposed fines under the Unfair Insurance Practices Act, G.L. c. 176D, § 7, and under G.L. c. 175, § 194, totaling $4000.00.
The final orders entered by the hearing officer:
ORDERED: That any and all insurance producer licenses issued to Jay Seitz by the Division are hereby revoked; and it is
FURTHER ORDERED: that Jay Seitz shall return to the Division any licenses in his possession, custody, or control; and it is
FURTHER ORDERED: that Jay Seitz is, from the date of this order, prohibited from directly or indirectly transacting any insurance business or acquiring, in any capacity whatsoever, any insurance business in the Commonwealth of Massachusetts; and it is
FURTHER ORDERED: that Jay Seitz shall comply with the provisions of M. G.L. c. 175, §166B and dispose of any and all interests in Massachusetts as a proprietor, partner, stockholder, officer, or employee of any licensed insurance producer; and it is
FURTHER ORDERED: that Jay Seitz shall pay a fine of Four Thousand Dollars ($4,000) to the Division within 30 days of the entry of this order.
