Three Bay Area insurance agents employed by American Income Life Insurance Company were convicted at trial of conspiracy, wire fraud, and aggravated identity theft and sentenced to 5, 4, and 3 years in prison respectively, for submitting hundreds of fraudulent life insurance policy applications using stolen identities and stolen funds to pay premiums, causing $2,837,792 in restitution to AIL.

American Income Life Insurance Company (Bay Area Agents) — Mass Identity Theft Insurance Fraud Scheme (2013–2016)

Outcome: Three Bay Area insurance agents — Behnam Halali (5 years), Ernesto Magat (4 years), and Karen Gagarin (3 years) — were sentenced in 2017 following a jury conviction for conspiracy, wire fraud, and aggravated identity theft, and ordered to pay $2,837,791.93 in restitution to their former employer, American Income Life Insurance Company.

Behnam Halali, 32, of San Jose; Ernesto Magat, 35, of Hayward; and Karen Gagarin, 32, of San Jose, were all former agents of American Income Life Insurance Company (AIL) in the San Francisco Bay Area. Between approximately 2013 and 2016, they and their co-conspirators executed a scheme to submit hundreds of fraudulent life insurance policy applications using the stolen identities of real individuals who had no knowledge their information was being used.

The scheme required physical infrastructure to circumvent underwriting controls. Because life insurance applications typically require medical examinations to confirm the applicant's identity and health status, the conspirators arranged for co-conspirators to take medical exams while posing as the named applicants — using phony driver's licenses as identification. This allowed fraudulent policies to pass through AIL's underwriting process as if the named insured had personally applied.

To fund the premium payments on the fraudulent policies, the conspirators opened hundreds of bank accounts under the stolen or fabricated identities, using those accounts to pay one to four months of premiums before allowing policies to lapse. The pattern — short-term funded policies that quickly lapse — is consistent with a scheme designed to generate fraudulent agent commissions rather than to maintain long-term coverage.

The jury convicted all three defendants on March 13, 2017, following a four-week trial before U.S. District Judge Susan Illston in San Francisco. The restitution of $2,837,791.93 was payable to American Income Life Insurance Company, the entity that had paid commissions on the fraudulent policies and sustained the direct financial loss.

Primary Source: DOJ NDCA — Bay Area Insurance Agents Sentenced