Alleged Scammers Had the System Down Cold

A pair of elderly women accused of fraudulently collecting more than $2 million in life insurance on two homeless men demonstrated a remarkable knowledge of the intricacies of life insurance policies, officials said, and aggressively used this expertise in pressing their claims.

Insurance industry experts familiar with the prosecution’s case said that Helen Golay and Olga Rutterschmidt took advantage of a provision that makes a policy valid after two years even if it was obtained using fraudulent information on the application.

When it was time to collect, officials said, Golay and Rutterschmidt took a hard-line stance.

“They were bullying the insurance companies into making sure they paid off, threatening a lot of lawsuits,” said Marty Gonzalez, chief investigator for the fraud division of the California Department of Insurance. “In one instance, they filed a complaint with the Department of Insurance, saying their claims were not being handled properly. They knew how to deal with these companies. They were very comfortable trying to collect on the money they felt they had coming to them.”

In 2001, the family of one of the homeless men took the pair to court, suggesting that foul play was involved in Paul Vados’ death in a Hollywood alley and that the women should not receive proceeds from the life insurance.

The women fired back in court papers: “The sole issue before the court ... is whether admissible evidence that Rutterschmidt and Golay feloniously and intentionally killed Paul Vados has been produced. It has not!”

Now, Rutterschmidt, 73, and Golay, 75, face trial on federal mail fraud charges and are under investigation in the deaths of Vados and the second man, Kenneth McDavid. Both men were killed in hit-and-run accidents that remain unsolved.

Authorities said they don’t know how the pair came up with the idea of taking out the policies, though detectives said Golay may have a background in insurance work in addition to being a former real estate agent. Golay has been a party in dozens of insurance-related lawsuits over the last two decades and has filed multiple cases trying to collect insurance money.

According to documents filed by federal prosecutors, the women paid the rent on apartments for Vados and McDavid in order to keep track of the men’s whereabouts for two years. In McDavid’s case, the court documents say, Golay approached him at church and offered to get him off the streets in exchange for his signing an application for a $500,000 life insurance policy.

The women also allegedly invented elaborate family and business connections to the men in an effort to justify their role as beneficiaries and avoid suspicion on the part of insurance companies.

Although authorities said the women had no family relationship to Vados or McDavid, the pair were listed on insurance applications as the men’s aunts or cousins or business partners, and Golay as a fiancee. In all cases, prosecutors said, they carefully picked relationships that would qualify them to be beneficiaries under life insurance rules.

When one of the men brought a roommate in to live with him, the court papers allege, Rutterschmidt came to the apartment with an armed man and evicted the interloper. She also changed the locks on the apartment, according to the documents.

Insurance companies said that once the life insurance policies had been in place for two years, there was little insurers could do to challenge them.

“In most cases, the insurance company is stuck if the death occurs more than two years after the policy was taken out,” said Stephen H. Galton, who represented Garden State Life Insurance in its efforts to prevent Golay from claiming $100,000 after McDavid’s death. “Two years had gone by, and I guess they felt they could cash in on these policies.”

State Insurance Commissioner John Garamendi said Monday that his office is working with the Los Angeles Police Department and federal investigators on the case, which he said has larger implications for the state’s insurance industry.

“These were sophisticated people,” Garamendi said. “They knew what the insurance system was all about, and how to manipulate that system.”

Authorities believe that in all, the women took out at least 19 life insurance policies on the two transients before they died in hit-and-run pedestrian accidents in Los Angeles. Authorities said they are trying to determine whether they took policies out on other homeless men.

Vados was struck by a car and killed in an alley off La Brea Avenue in Hollywood on Nov. 8, 1999. McDavid was found dead in an alley off Westwood Boulevard just south of Wilshire on June 22, 2005. Both men died of multiple traumatic injuries to their upper bodies, according to coroner’s reports.

The insurance industry does not maintain a central registry to look out for possible life insurance fraud. By contrast, the industry has systems in place designed to detect fraud involving people who take out multiple auto insurance policies on a single vehicle.

Marc S. Maister, a partner in the insurance and litigation division of the Los Angeles law firm Irell & Manella, said that life insurance companies generally don’t cooperate with one another for reasons of competition as well as privacy.

“People don’t want their medical information shared, and federal laws prevent it,” said Maister, who added that insurance companies usually are willing to conduct extensive investigations only on very large potential payments. “There is not a lot of scrutiny of the smaller payouts.”

Though elaborate life insurance scams are unusual, they are not unheard of.

In 2002, an Alabama man was sentenced to life in prison for taking in seven alcoholics and drug addicts, securing more than 100 life insurance policies on them and then trying to collect claims worth $8.6 million after they died.

In Los Angeles, detectives said they’re still sifting through a mountain of evidence as they investigate the deaths of Vados and McDavid. Individually, both cases stumped officers. But several months ago, when detectives by chance compared notes, they realized the women were the insurance beneficiaries in both cases. And LAPD Det. Dennis Kilcoyne said he doubts that’s just a coincidence.