Dodgy insurance claims for thousands of injureddrivers and passengers flooded auto insurers during a reign ofterror by a Russian-American crime ring working the New York Cityarea. Mikhail Zemlyansky masterminded the largestno-fault auto scheme ever charged and New York’s streets musthave seemed like a giant bumper-car ring.

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His crooked assembly line churned out $279 million worth offalse injury claims from real and phantom carwrecks until his ring was destroyed. He was federally convicted inMarch 2015, and is scheduled for sentencing in December.

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Zemlyansky is a Ukrainian native with his ring mainly comprisingpeople of Russian-American descent. They included 10 doctors andthree lawyers who sold out their professions for lucrative bribesto rubber-stamp bogus crash treatments and claims. His gang is ahyper-steroidal icon of organized crime’s growing infiltration ofinsurance fraud — staged crashes, Workers’ Compensation,private health and Medicare-Medicaid.

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Largely ethnic fraud rings and other outfits have milkedinsurers for decades. What’s new is the apparently increasingspread of alpha kleptocracies. There appears to be deeperpenetration with more and larger organized fraud rings structuredto steal ever-bigger volumes of insurance money. Large swaths ofinsurance fraud are being corporatized, creating a potential newnorm for many fraud fighters.

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Online automobile policy sales and claims encourage anonymityand ease of scamming. Similarly, the anonymity of the Dark Web maybe a breeding ground for trafficking in high-value, stolen medicalidentities by rings.

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Even defining organized insurance crime is a slippery exercise.Generally, such fraud rings are larger than most, have somestructure and sophistication, and their operating core frequentlycomprises an ethnic group.

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Hard data is difficult to pin down. According to a 2014 surveyon how insurers are using anti-fraud technology conducted by theCoalition AgainstInsurance Fraud (with assistance from SAS), more than half ofthe 48 property-casualty insurers said uncovering complex ororganized fraud was a major benefit of anti-fraud solutions. Morethan 20% of insurers also use technology for uprooting moneylaundering, which is commonly associated with more sophisticatedring-level activity.

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global crime

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Photo: Hyena Reality/Shutterstock

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Multi-national fraudsters

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Organized rings are a polyglot landscape. Eurasians such asRussians, Armenians, Albanians and Estonians are varsity-levelplayers.

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Ring members often learned to siphon the former Sovietgovernment apparatus and exported those criminal career skills tothe U.S. Some Eurasian gangs are franchises of the mob back intheir home country. Some are freestanding U.S. operations.

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Many Spanish-speaking and Caribbean rings control largebeachheads in Southern California, South Florida and New York.Haitians, Jamaicans, Mexicans all are active. Cuban rings are majorplayers in Medicare thievery.

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West African rings are established as well. Some immigrants seekillegal riches in the U.S. after fleeing violence and upheaval intheir home nations. Nigerian criminals, for example, are known forhome-healthcare schemes in certain urban areas of Texas.

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Staged-crash rings are high-value profit centers for ringsspanning numerous ethnic groups. Fake and setup wrecks proliferatedensely packed urban regions such as South Florida, Tampa, New YorkCity and Southern California. Crash rings also are moving intoMinnesota, perceiving law enforcement and insurers as softtouches.

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Organized crime goes global

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Organized crime is also restructuring. There are fewer tightlyhierarchical gangs like the old-style Italian-American Mafiafamilies. Many ethnic rings are more loosely structured and lesspyramid-shaped. A single ring also may traffic in multiple lines ofinsurance like Medicare and auto.

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Mirroring the surge of organized crime globally, rings can betransnational — comprising players from and scheming acrossmultiple nations. Insurance fraud may also just be part of a largeportfolio that could include credit cards, money laundering, drugs,extortion, human trafficking and other serious offenses.

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“These organizations are using part of this money for otherthings. It’s been documented through investigations of this moneyleaving the county, leaving the state of Florida, whether it isback to Cuba, Mexico, the Cayman Islands, [or] Costa Rica. So it’sa lot bigger than what a lot of people understand, and the fact isthat it’s not just a staged crash and it’s not just insurancefraud,” Det. Ronnie Cooper, a special investigator with theHillsboro, Fla. sheriff’s office said in testimony about organizedcrime to the Florida state legislature.

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Zemlyansky highlights in uber form the structure and stealingpower of many modern-day organized insurance rings.

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He erected a string of sham medical clinics that claimed totreat crash injuries. He was the puppeteer, illegally maneuveringclinic operations. He installed a crooked doctor named TatyanaGabinskaya as the stooge owner and operator of seven clinics. Shehad bolted from the former Soviet Union with a medical degree fromLeningrad University to make it in America. She got greedy and tookhome a cool $10,000 each month just to sign paperwork that tried tofool insurers into paying false claims.

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Zemlyansky also bribed personal-injury lawyers to sue autoinsurers after coaching patients how to fake injuries. And he paida cadre of recruiters $2,000 to $3,000 for each real or fake crashpatient they brought in.

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Clinics mass-produced injury claims. They saw up to 150 patientsa day. Patients received the same “modality treatments,” includingphysical therapy or acupuncture, often up to five times a week perpatient. It was the same with useless MRIs, X-rays, orthopedics andmedical supplies such as neck braces.

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Zemlyansky lived the good life — limousines, jewels,shopping sprees at Louis Vuitton and Saks 5th Avenue, plus luxuryvacations to Mexico and Atlantic City. He faces up to 100 years infederal prison when sentenced.

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fraudsters in jail

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Photo: Joseph Sohm/Shutterstock

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Medical fraud runs rampant

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Armen Karazian is another cautionary tale. He was a vor, oroverlord, of a vast Armenian cartel in Southern California. Thesprawling ring was led from bases in New York and Los Angeles. Itsoperations extended throughout the U.S. and internationally.

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Karazian erected an archipelago of 118 sham medical clinicsspanning 25 states. He looted insurers with $160 million in claimsfor worthless medical treatment.

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He staged crashes to generate bogus injury claims. The gangbribed an employee of a New York City hospital to steal the namesand identities of patients. They were recruited for uselesscrash-injury treatments. Some patients received painfulnerve-conduction tests.

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Karazian — who drove a $350,000 Rolls Royce — also bledMedicare, long a favorite of organized rings. He masterminded oneof the larger attempted Medicare heists in history — about $163million in false claims.

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Many clinics were shams. No patients came for treatment and nodoctors were on staff. He simply invented patients and treatmentsand then slid the bills through Medicare’s payment system. One“clinic” in New York was merely a small office over an auto-bodyshop in Coney Island. Karazian received three years in federalprison.

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The Cuban connection

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Cuban rings are a high-profile presence in South Florida. Theiractivities have a growing diplomatic impact. Permissive U.S.immigration laws have encouraged a thriving pipeline of Cubans whoreach the U.S. with minimal scrutiny. All-told, Cuban gangsterssteal hundreds of millions of dollars that feed the impoverishedisland nation’s economy — possibly with state consent.

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Until now, Cuba was a safe harbor for lack of an extraditiontreaty. A big question is whether Cuba will ship fraud fugitivesback to the U.S. now that diplomatic channels are beingreestablished.

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A Cuban-run gang in South Florida lodged at least $20 millionworth of treatments for fake injuries and vehicle damage from setupand phony crashes. The takedown was called Operation Sledgehammerbecause ring members often banged cars with sledgehammers to mimiccrash damage.

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Most of the nearly 60 federally charged ring members have pledguilty. Ringleader Joel Antonio Simon Ramirez received nine yearsin prison in December 2014. Five other ringleaders fled toCuba.

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Cuban rings also are America’s dominant health-insuranceoffenders. They comprise less than 1% of the U.S. population, yetinclude 41% of the healthcare fraud arrests nationwide, a SunSentinel analysis of federal records revealed.

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wire fraud
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Photo: Ase/Shutterstock

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Fraud knows no boundaries

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Transnational rings are also growing insurance fraud players.They may draw operatives with special skill sets and connectionsfrom around the world, forming loose, project-driven alliances.

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One transnational outfit defrauded more than 70 U.S. insurerswith a focus on Workers’ Compensation theft. The gang set upheadquarters in Dubai. Members were Palestinians, Iranians,Germans, Filipinos, Mexicans and Armenians.

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The ring made more than $11 million in false claims for phantomdiagnostic testing of phony injuries. Operatives erected a networkof 19 sham clinics which were mostly post office boxes or emptystorefronts. The medical identities of thousands of people werestolen to provide names for illegally billinginsurers. Doctors’ identities also were heisted to forgemedical reports.

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Bogus check-cashing firms laundered stolen insurance moneythrough Dubai, Armenia and the Philippines. U.S. prosecutors havesince dismantled the cartel.

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State-sponsored insurance crimes are another order of organizedscamming. Cash-poor North Korea allegedly has used fraud to helpfill its coffers. In one incident, a North Korean ferry sank offthe coastal city of Wonsan, killing 129 people. The North Koreansclaimed all passengers automatically received insurance when theybought tickets. The reinsurance claim reached $6 million, thoughthe regime allegedly denied the reinsurers’ own divers access tothe wreck.

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fraud investigation

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Photo: Tashatuvango/Shutterstock

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Fighting fraud

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Fraud fighters are vigorously responding. Irate federal courtsare imposing stiffer Medicare jail terms. Miami-based LawrenceDuran was handed 50 years for masterminding an attempted $205million ransacking.

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Strike forces propelled by the U.S. Justice Department andHealth and Human Services (HHS) are scuttling Medicare and Medicaidrings in urban hotspots such as Detroit, New York and SouthFlorida.

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HHS also is imposing new rules, making it easier to kickcheaters out of Medicare and block shady operators before theyenter the system.

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And Medicare is dumping its antiquated pay-and-chase strategy.Many insurers are installing predictive analytics, giving them thepotential to detect billing anomalies in nearly real time — beforethe suspicious bills are paid and money disappears.

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Strike forces and multi-agency cooperation have proven effectivein taking down complex rings. Yet broader conceptual frameworks areneeded to further out-pace the dramatic morphing of contemporary insurance crime.

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One promising initiative is the Healthcare Fraud PreventionPartnership (HFPP). It brings together HHS, Department of Justice(DOJ) and the HHS inspector general, plus major health plans andtop anti-fraud associations. The Coalition Against Insurance Fraudis a founding member.

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The HFPP is creating a new business model and speaks to a largerpicture of fraud fighting. It is working to erode silos andencourage more collaboration among public and private fraudfighters and among insurers across key lines. Auto, private health,Workers’ Comp and Medicare have a joint interest in derailingmedical schemes.

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Private insurers have large bodies of insight and leads aboutauto and health scams, and known crooks. The feds also have largepools of information about Medicare and Medicaid cons.

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HFPP members are sharing strategies, best practices and fieldintelligence and robust data sharing has begun. It is helpingidentify rings earlier in their crime sprees, thus stemming of flowof lost claims money. Hundreds of millions of dollars in suspiciousclaims already have been identified.

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This highly integrated approach will unearth far morewell-hidden crimes, case leads and evidence than each sector canworking alone. And with so many organized-crime gangs workingmultiple crimes such as insurance, banking and credit card fraud,the concentric circles of collaboration should extend outward toother defrauded industries and related government agencies bothdomestic and international. If transnational fraud is on the rise,so too should be transnational anti-fraud operations.

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Organized fraud rings may not use Tommy guns,but they steal more money than Al Capone ever knew existed. Onefederal prosecutor’s summary of Karazian spoke volumes: “His guiltyplea sends a strong message to international gangsters all over theworld that if you commit crimes in this country, we will find youand we will prosecute you to the full force of the law,” saidManhattan-based Preet Bharara.

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Dennis Jay is the executive director of the CoalitionAgainst Insurance Fraud. More information is available atInsuranceFraud.org.

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