The International Association of Special Investigation Units(IASIU) awarded its Investigator of the Year Award to ProgressiveInsurance's Beth Shroat during its annual conference, which isbeing held this week in Atlanta, Ga.

Shroat won the award by identifying and investigating amulti-million dollar “straw buyer” auto-theft scheme thatultimately led to the dismantling of a violent criminalenterprise.

According to a release from IASIU, the investigation begansimply enough. By conducting an organized medical investigation in2003, Shroat observed an interesting trend associated with severalvehicles. Not only were there questions regarding vehicleownership, but funds were also being drawn from one bank account tosecure multiple policies for different people. She determined thatthere was no connection between the different policyholders.Additionally, the vehicles were all newly purchased, high-endvehicles with lien holders. Based on these initial findings, herinvestigation took a whole new direction.

Shroat began her roadwork with interviews of the agents whowrote the policies and field canvasses for the addresses on eachpolicy. It was revealed that neighbors had never seen the vehiclesin question. The interviews of the insureds revealed that theycould not identify the vehicle for which a claim was being filednor explain where it was located.

Shroat began developing and piecing together significantinformation in regards to participants, vehicles, and generalintelligence. What she had discovered was an elaborate scheme thatused “straw buyers” to purchase high-end vehicles, insure them forlower rates, and hide the true identities of the owners. In manycases, these straw buyers were individuals who either had excellentcredit or who had used stolen identities. The vehicles were thenleased or sold to parties with poor credit, no credit, and in manyinstances, no legal or identifiable source of income. In manyinstances, the individuals who ended up with the vehicles hadhorrible driving records and no drivers' licenses. Some of thesevehicles were used in illegal and questionable activities. This wasevidenced by the fact that several claims involved the repair ofbullet holes.

A significant break in the investigation occurred during anexamination under oath of an individual who was identified as astraw buyer. This individual, whom Shroat had determined purchased14 vehicles under one name, testified that a fictitious companyrented out the vehicles for an exorbitant fee, which covered thepayment to the straw buyer. Shroat was able to get this person tocooperate and provide information on the inner workings of thisscheme. Basically, the ringleaders were using multiple aliases toattract and set up straw buyers.

Based on the information and scheme profile developed throughthe investigation, Shroat began to proactively data mine in orderto identify new policies linked to the straw buyers and thefictitious corporation. Through this technique, she was able toactively investigate the policy information. Where theinvestigation revealed another straw buyer and determinedmisrepresentations, the policy was voided ab initio.

Shroat referred her case to the local FBI office and met withthem to explain her findings. It was soon learned that lawenforcement was very aware of the group linked to this scheme;however, they were unaware of this aspect of their criminalenterprise. She learned that this group was part of a dangerousorganized crime ring linked to drug dealing, extreme violence, andgangland executions. She continued identifying policies on a weeklybasis and utilized link charts to track and organize this growingenterprise. This newly developed information was shared with lawenforcement on a weekly basis.

Ultimately, after Shroat's five years of continuous casework,the final 11 defendants who led this nationwide scheme weresentenced in March 2008. It was determined that this fraud ringobtained 224 high-end vehicles worth more than $11 million throughthe use of 50 straw buyers. The straw buyers, at the direction ofthe organizers, used falsified employment and income information toobtain the vehicles and secure insurance. The straw buyers wereinstructed to purchase as many vehicles as possible in 30 days toprevent prospective lenders from learning of the scheme via recentloan information on their credit reports from previouspurchases.

As part of an “underground economy,” the vehicles were thenturned over to the organizers, who then provided these vehicles toothers with a need to conceal their identities. When payments tolenders stopped and repossession efforts began, the vehicles couldnot be located through the original straw buyer. Lenders ultimatelylost more than $2.4 million due to this scheme. The 100 insurancepolicies linked to Progressive represented a potential exposure ofmore than $1 million.