THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Sunday, November 19, 1995 TAG: 9511190163
SECTION: LOCAL PAGE: B1 EDITION: FINAL
SOURCE: BY MARC DAVIS, STAFF WRITER
DATELINE: VIRGINIA BEACH LENGTH: Long : 204 lines
By night, Ed Zinner was a long-haired rock 'n' roll star.
By day, he was a Virginia Beach insurance executive.
By night, Zinner ripped through Duane Allman blues riffs, mimicking his hero, shaking the rafters of Southern frat houses and bars.
By day, Zinner ripped through the bank accounts of two health insurance plans, stealing about $1 million, shaking down clients in 26 states.
Zinner's two lives came together Tuesday in a Philadelphia courtroom.
There, a judge sent Zinner, 36, to prison for ripping off the insurance plans to pay for his costly rock 'n' roll lifestyle - his Cabin Cruiser, his Corvette, his Camaro, his waterfront home in Great Neck, his Shore Drive lobster house, his Florida property, his band's lighting and sound equipment.
The judge also ordered Zinner to pay $485,000 to victims of his scam.
In his wake, Zinner left hundreds of patients with unpaid medical bills.
He also left three former friends and colleagues with criminal records - local men who helped him run his companies, then were pulled down with Zinner in the resulting racketeering indictment.
``He probably deserves what he got,'' said Jeffry C. Neal, who managed one of Zinner's companies and later pleaded guilty to criminal charges. ``He screwed a lot of people and he wasn't remorseful. A lot of people bent over backwards to do a good job for him and be his friend and he went back on them. He burned a lot of bridges. He really drug us all down the tubes with him.''
Another former colleague, William E. Moulton Jr. of Virginia Beach, agreed.
``He became greedy and berserk and couldn't face the reality that this money did not belong to him,'' said Moulton, who helped Zinner found his first insurance plan and later pleaded guilty to making false statements. ``He went in with nothing. He should go out with nothing.''
Even the judge called Zinner's crimes ``despicable.''
So how did Ed Zinner, a talented guitarist with a knack for making enemies, get so far, so fast?
Neither Zinner nor his lawyer could be reached for comment. But court records and the recollections of former friends and colleagues tell the story.
Ed Zinner was a man obsessed.
His obsession was a Southern rock legend named Duane Allman, a guitarist who made rock history by trading licks with Eric Clapton on ``Layla,'' making hit records with The Allman Brothers Band, then dying young in a motorcycle wreck.
For Zinner, life's mission was to be Duane Allman.
And by all accounts, he was very good at it.
``On the Allmans, he was awesome,'' said Tim Fodrey, a drummer in Zinner's band who quit after Zinner cheated him out of a weekend's pay. ``He ate, slept and breathed the Allman Brothers. He played it note for note. That's all he cared for.''
Dane Highfield, Zinner's former lighting man, agreed.
``As far as playing the Allman Brothers stuff, I can't take that away from him. He knew it note for note,'' Highfield said. ``But that's the only thing I ever heard him play. It was like that was the only music ever written. Everything else was garbage. This guy spent most of his life working at this thing. It was really, really excessive.''
Zinner's need for cash was also excessive.
To be Duane Allman was expensive. It required a band with lights and speakers and a van to tour in. It required roadies and engineers and bandmates, all of whom get paid.
So Zinner came up with a brilliant idea to make money.
It was an insurance plan. The details were complex, but the idea behind it was simple: A bunch of employers get together and pool their employees' health insurance premiums, then pay claims from that pool.
Best of all, such plans - MEWAs, or Multiple Employer Health and Welfare Arrangements - are exempt from some state insurance rules. They are, in effect, self-insurance pools.
So Zinner created one in 1991. It was called the Atlantic Healthcare Benefit Plan and, at first, he ran it from an office in Portsmouth.
``When this thing started off, there was no intent to defraud anyone,'' Moulton said.
Zinner's former attorney, William ``Buster'' O'Brien, agreed. ``The plan that was established was a legitimate plan,'' he said.
Zinner started selling his plan across the country, mainly in New York and New Jersey, but not in Virginia. It was attractive to companies and employees because it was cheap - 20 to 25 percent cheaper than conventional health insurance because it took only healthy employees and limited its coverage.
At first, things were great. ``Claims were paid properly and on time and swiftly,'' Neal said.
Everyone was happy. Zinner made money. Employees got paid. Medical bills were covered.
But before long, Zinner was dipping into the trust accounts. He was comingling funds between the trust account and the third-party administrator that ran the plan. Zinner controlled both, an inherent conflict of interest, a disaster waiting to happen.
Soon Moulton, who helped run the plan for Zinner, was out the door. He said he saw trouble coming. ``Ed was writing checks he didn't have money for,'' Moulton said.
O'Brien was next out the door.
Early on, O'Brien had recruited developer Edward S. Garcia to Zinner's plan. Garcia liked the idea, thought it had promise. He rented office space to Zinner and considered putting up his own money.
But then Garcia's accountant looked at Zinner's books. ``I never put up a penny for them,'' Garcia said.
He and O'Brien were gone.
Disaster struck around June 1992. Claims were outstripping premiums. A third-grader could figure out what that meant: The company was bleeding money.
Worse, some of the money coming in wasn't finding its way into the trust account.
``I can't tell you what he did with the money,'' said Neal, a trustee of the Atlantic plan. ``All I can tell you is it never got to the trust.''
Then Zinner stopped paying some claims. ``He would tear up the checks, or throw them in the trash can, or send a letter saying, `We're not paying this claim,' '' said Philadelphia prosecutor Pamela Foa.
Finally, Zinner sold the insurance plan to an acquaintance in California - and made money again.
At the time, the insurance plan had assets of $496,0000, including $253,000 cash. Zinner got $453,000 for the sale. In effect, he got nearly all the money that the insurance plan was holding for beneficiaries.
He left behind about $500,000 in unpaid medical claims.
``He liked to wheel and to deal,'' said Foa, the prosecutor. ``He liked the image. He's just not as good at it as he'd like to think.''
Meanwhile, Zinner the rock star was making his move.
It began at a Cinco de Mayo celebration at Chi-Chi's in 1993.
Zinner was doing his Allman thing. Highfield was doing the lights.
Zinner had a proposition: Could Highfield get a big, expensive light set for his new band, Southern Legend? Yes, indeed, Highfield said.
``It was a $50,000 light system, which is huge for a band doing bar-type touring,'' Highfield said. ``But he had the bucks and he wanted all the toys.''
More toys followed. A $20,000 sound-mixing board. A $30,000 studio demo for the band. A $65,000 tour bus.
It was no mystery where the money came from. By now, Zinner had formed a new health insurance plan and had hired his band buddies to help run the place.
``The books were straight,'' said Fodrey, the drummer. ``But Ed was putting IOUs in there for $50,000, $100,000.''
And he was working the band hard. The group, which played only Allman Brothers tunes, was touring around the South, playing college fraternity houses and blues bars.
``He became a nightmare to be around,'' Highfield said. ``The guy is a loose cannon. You never know what he's going to do or what he's going to say. And if he's drinking, look out . . .
``One time we were doing a big fraternity at (Alabama) Crimson Tide and after a very successful show, they asked the band to come in and do an acoustic set. So I grabbed the crew and set up in a big room. The whole time Ed is sitting there screaming about how bad the crew sucks, at 2 in the morning, and the whole time the crew is doing this extra work. And he was just lit.''
Zinner showed the same disdain for many of his insurance customers.
Joseph Marinelli, 30, was recovering from testicular cancer in Long Island, N.Y., and Zinner was playing games with his medical bills.
One day, Marinelli's wife, Janice, called Zinner in Virginia Beach and lit into him. Zinner hit back. ``He cursed me out and he called me a bitch, among a number of other choice words,'' Janice Marinelli recalled. ``And then he hung up on me.''
The Marinellis were stuck with $11,000 in unpaid bills.
A former acquaintance who asked to remain anonymous summed up Zinner's personality: ``Almost every person he ever came in contact with he made an enemy.''
On Jan. 24, 1995, Ed Zinner was indicted in Philadelphia's federal court for racketeering, mail and wire fraud in connection with the two health plans.
The government seized many of his most prized belongings, claiming they were proceeds of an illegal operation - the New England Lobster and Clam House on Shore Drive, a 1994 Corvette, a 1994 Camaro, a 24-foot boat named ``My Lauren,'' an office building near Mount Trashmore, a house lot in Palm Coast, Fla., a record company named Trashmore Records. Many were mortgaged to the hilt.
On March 11, Zinner pleaded guilty to racketeering.
In a memo to the judge, prosecutor Foa said Zinner was the worst sort of crook.
``Mr. Zinner . . . infected the business of health care benefits by stealing the most valuable protection an individual can have: the right to be covered by health care protection at the time they need it most,'' Foa wrote.
Moulton, Zinner's former colleague, wrote the judge a letter.
``I have never known anyone like Edward Zinner,'' Moulton wrote. ``He does not have compassion for anyone. To my knowledge, he has lied to and cheated anyone connected with (the company). I feel the court should give him the same compassion he gave everyone, which is none.''
On Tuesday, Judge John Padova sentenced Zinner to 68 months in federal prison and ordered restitution of $485,000. The government already has collected $410,000 through forfeiture. Zinner will report to prison Jan. 3.
The irony, former acquaintances said, is that Zinner could have been a very rich man if he had just run the insurance plans legally.
``If he had been a little more honest, he could have provided a service to the public and it would have worked well for him,'' Garcia said. ``But greed got the better of him. It's a shame.'' ILLUSTRATION: Color photo
As a guitar player, Ed Zinner mimicked Duane Allman at frat houses
and bars. Last Tuesday, Zinner was sentenced to 68 months in prison
for racketeering.
Photo
Ed Zinner, shown playing the guitar, was obsessed with rock legend
Duane Allman. This obsession was expensive. It required a band with
lights and speakers and a van to tour in. It required roadies and
engineers and bandmates, all of whom get paid. So Zinner came up
with a brilliant idea to make money.
KEYWORDS: INSURANCE FRAUD ARREST TRIAL
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