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Glass Shop Owner Cites Cautionary Tale: Be Ever Vigilant
April 9, 2009

"I've had better months," says Tom Lee Jr., president of Lee and Cates. You could hear the sadness in his voice during an exclusive interview with AGRR/glassBYTEs.com™ this morning. The third-generation owner of the powerful multi-location glass chain based in Jacksonville, Fla., is caught in every glass shop owner's worst nightmare.

"We were notified by State Farm in September of last year that our company was under investigation for fraud," says Lee. "They met with us once and told us they had found an anomaly in the billing practices at two of our locations."

"We launched our own investigation immediately and found that some employees at two of our shop locations had manipulated our software to allow customers to be billed for dealer items as opposed to NAGS pricing," he said. "Those individuals were fired and we cooperated full in the investigation."

Lee says the state's department of financial services (which includes insurance oversight) also began an investigation and provided information to the local press that surfaced yesterday (Stories appeared on Jacksonville's Channel 4, the First Coast News and Jacksonville.com. The Department of Financial Services’ Division of Insurance Fraud also issued a press release about the investigation.) "Their investigator has been publicizing this and that's been hard for us. The numbers they are bantering about in local news reports are outlandish. They are way, way exaggerated … and they are implying that glass is inferior and we all know the difference is the logo and the price, not the quality," says Lee.

Local news reports cited a bonus plan for employees as a motive for the fraud. "All glass companies have incentive programs for their employees, and ours in no different," says Lee. "Our employees were bonused [based] on the profit of their location. We did not anticipate what dishonest employees would do to manipulate the program. Once we found out, we ended the incentive program. It's done. We are regrouping and will announce a new program in the future."

Lee says his negotiations with State Farm are not over yet either. "If you read State Farm's O&A you'll see that it allows them a $1,000 penalty fee for each and every fraudulent claim. Not a lot of glass shop owners know this. And that's what State Farm wants. We are still negotiating with them now. The penalties are vastly higher than the amount of fraud that took place."

"We are an 83 -year-old company founded on strong principles. This has just been a horrible thing to go through and I am really kicking myself that it happened. You do a lot of second-guessing on what you could do differently or better to keep it from occurring," he adds, stating that one of the employees involved is a 30-year veteran of the company.

When asked if he had any suggestions for other glass shop owners, Lee offered some. "Sadly, you have to look at everything, every little thing and you can't assume honesty. 'Trust but verify' is the best advice I have. Multiple location companies bring special challenges for management and require a lot of controls. Don't ever think it can't happen to you, because it can."

 

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