Fraud Units Target Auto Clinic Laundering

Authorities pursuing the medical mills that specialize in treating phony auto injuries are ramping up attacks on such groups for money laundering activity, law enforcement sources say.

In addition to suspicious financial maneuvers, investigators say they are also paying attention to a rise in organized crime involvement.

One part of the country for this new focus is Floridas Dade County, where auto injury fraud has blossomed with a proliferation of shady medical facilities. “We are looking at aspects of money laundering involving clinics in Miami,” revealed Capt. John Askins with Floridas division of insurance fraud.

Capt. Askins said that the division recently began conferring with the State Attorney Generals Office to attack the illicit cash transactions. In looking into illicit medical group operations, “we believe some payments going out have been disguised,” he said.

Investigators said much of the cash is being washed to pay “steerers” or “runners” who provide the patients used to generate phony medical treatment costs.

Capt. Askins said investigators see laundering statutes as a useful tool because they carry tough minimum mandatory sentences.

The captain explained that up to now there has been a problem “not having enough leverage to get first-time offenders. A lot of them wind up getting probation. We need laws to have some teeth.”

In Brooklyn, N.Y., Assistant District Attorney Jay Shapiro, who heads the boroughs rackets bureau, said the clinic operators, once they generate income from phony billings to insurers, want their accounts to look legitimate. Rather than drawing out cash to pay accomplices, “they open up accounts in the names of companies that sound like they are medically related and write checks to them.”

The secondary companies are merely shells used to cash the checks, he said.

“They want to show a zero balance for tax purposes,” explained Michael A. Fella, a supervisory special agent for the National Insurance Crime Bureau field office that includes New York.

Checks are issued to doctors who are paid off for the use of their names, as well as to bogus firms purporting to be in business to rent medical equipment, provide patient transportation, cleaning service and rent facility space.

Examining such corporations, Mr. Fella said, investigators generally identify links to the clinic principals and find there are no assets “and the corporation is set up as a shell from the outset.”

Mr. Fella said that in investigating medical mills, “we see a large amount of money laundering taking place to pay cash to runners”–referring to the operatives who arrange for and steer bogus claimants to the medical operations.

The money comes in to the medical provider in the form of a check and they have to form write-offs, he said, explaining that runners are generally getting $1,500 to $2,000 per claimant they bring in.

Claimants in the phony accident schemes are usually paid no more than $200 to $500. Meanwhile, the medical facilities generate charges of $25,000 to $50,000 after claiming they have provided expensive treatment involving such items as $1,800 magnetic resonance imaging tests, investigators said.

In Florida, as is the case elsewhere, Capt. Askins said his unit has found that the fraud operations prey on low-income people who they persuade to act as claimants, “but the winners are the clinic owners, doctors, chiropractors and lawyers.”

The problem is compounded, he said, by “exorbitant” attorney fee awards by judges, many of whom were once personal injury lawyers themselves.

Phony accident scams are endemic to every major city in the nation, with corrupt doctors and lawyers working together to defraud insurers, he said.

Capt. Askins division has found that sometimes fraud ring operators arrange for car crashes and the people who submit the injury claims are not even inside the vehicles when the collision is staged. “They call the police and send the people to their clinics,” he said.

The captain said that his investigators uncovered one ring that was so massive that they stopped at 135 arrests when cases could have been made against perhaps as many as 700. Each accident claimant file can run two- to three-inches thick–a paper landslide that overworked prosecutors can't handle, he noted.

Mr. Fella said that with medical mill operations, “I would safely say that almost every one of them has to be involved in money laundering. They need cash to pay runners out on the street and pay doctors, massage therapists and other unscrupulous professionals.”

The large amounts of money involved, he said, have acted as a magnet to draw in every organized crime group in New York. Mob involvement in the clinic operations, he said, has led to “homicides related to this environment.”

Indeed, Mr. Fella said the NICB has intelligence that in some cases runners have been killed because they failed to produce.

The link between organized crime and money laundering was demonstrated in a case that federal authorities concluded this year in Brooklyn. The accused ringleader in that case, Boris Kotlyarsky, a businessman whose operations included a suspect medical clinic in Brooklyn, pled guilty to money laundering and was sentenced to 18 months in prison.

Mr. Kotlyarsky and eight associates were indicted after two FBI undercover agents posing as drug dealers arranged to use his services to launder $2.7 million in cash. According to the indictment, the Kotlyarsky operation sometimes employed transfers from bank accounts in both New York and Switzerland.

Mr. Kotlyarsky, according to FBI affidavits that were filed in the case, had ties to two alleged associates of the Genovese organized crime family and membership in a Russian organized crime group.

Mr. Askins said that there were indications that Russian organized crime groups were now moving into Floridas crooked clinic scene. His division has shared intelligence with Brooklyn authorities and “its safe to say the Russians are coming–or they are here,” he said.

“Its fairly recent and we have a lot of ongoing investigations,” Mr. Askins revealed.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, September 10, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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Fraud Units Target Auto Clinic Laundering

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