New York Organized Crime Arrests Reining In Auto Insurance Fraud Rings

The report is prepared by the National Association of Independent Insurers, Insurance Services Office Inc. and National Independent Statistical Service.

"This may be the clearest indicator that we are getting the upper hand on fraud that is taking place in the state," Mr. Serio said.

It is no easy job gaining that advantage. Mr. Serio said that among the challenges that New York law enforcement officials confront is "a more elaborate criminal enterprise here– and more specifically, Russian organized crime."

He said that Russian organized crime units are "deeply involved in auto insurance fraud."

"They provide the medical mills and other resources to execute schemes and help move the schemes to different locations."

Additionally, Mr. Serio noted there is evidence that money obtained by such groups is being funneled back to Russia.

The organized crime element is also turning what was primarily a financial scam that victimized only insurers into an activity with a rising level of physical violence, he said.

Mr. Serio noted that staged accidents involving innocent motorists had led to injury and death. Medical providers seeking to end their participation in the schemes, he said, are forced to continue with the threat of violence. The organized fraud rings, according to Mr. Serio, often operate with a turf mentality that sometimes results in gangland warfare.

"We are arguing that it is becoming an increasingly violent sport," he said.

Michael Fella, National Insurance Crime Bureau director of operations for New York and New Jersey, said that in comparison with the traditional Mafia and other ethnic groups that operate in New York, the Russian organized crime element stands out with a higher level of financing and management.

Robert M. Bryant, president and chief executive officer of the National Insurance Crime Bureau based in Palos Hills, Ill., explained that among organized crime groups now involved in auto injury scams there are former drug traffickers who have moved to insurance fraud. The reason–"Because they are people of opportunity and go the lowest enforced crime with the least jail time."

In New York, officials said, getting jail time for perpetrators of insurance fraud is hampered by the fact that individuals who act as "runners," securing participants for staged accidents and shuttling them to clinics that fake diagnoses and treatment, are not subject to felony charges. Proposals to upgrade the crime are stalled in the legislature.

Currently, Mr. Serio said that prosecutors, in order to bring charges, must show a detailed orchestration to commit fraud. This requirement, however, has not deterred their latest crackdown.

In August, the Suffolk County District Attorneys Office on Long Island announced it had broken the largest fraud ring ever in the state, indicting 500 persons for a scheme that involved physicians, psychologists, chiropractors, attorneys, medical clinic owners and others in staged auto accidents.

The ring accounted for $48 million in phony claims against State Farm alone, it was charged.

Robert Clifford, a spokesperson for the Suffolk County DAs office, said another 25-to-30 more indictments have been unsealed and investigations continue.

On Sept. 29, the Brooklyn District Attorneys office announced the arrest of 51 people in the first phase of what it called "Operation Gateway," an investigation into an organized fraud ring of medical clinics and other participants that had been in existence for seven years.

New York City Police Commissioner Raymond W. Kelly said in a statement that more than 100 people involved in the schemes remained at large. The New York State Insurance Department said the scam claimed "tens of millions of dollars."

The schemes in Brooklyn and Suffolk County involved traditional auto injury fraud methods. Participants were paid to fake injuries and visit one of the rings medical providers after a staged auto accident. Participating lawyers filed claims, and cooperating clinics provided phony billing for bogus tests and other treatments.

Part of New Yorks recent successes have come from a growing partnership between the insurance industry-funded NICB working with state and local law enforcement agencies.

Mr. Fella said, in the Suffolk County investigation on Long Island, the NICB laid the groundwork for the indictments based on in-formation from member carriers. He said NICB has 22 more big busts it is working on.

NICB operates a medical fraud task force that looks for patterns in billing that make repeated connections between the same injury claimants, attorneys and medical providers.

The NICB New York-New Jersey effort operates from a war room in Melville, Long Island, that coordinates the work of investigators whose activities range from surveillance to "dumpster diving" for evidence and interviewing witnesses.

"The unit is unique in that it is taking a proactive approach to mine the trends and patterns," Mr. Fella noted.

Mr. Fella said NICB investigators serve as a liaison between companies and law enforcement and work to lay the groundwork for prosecutors and police putting together evidence that can lead to indictments.

The latest success in New York at uncovering fraud, officials said, is also the result of state resources being dedicated to focus on fraud. Besides NICB, the state has a fraud investigation unit, and in both New York City and Suffolk, there are special insurance fraud investigation units dedicated to the task.

In Suffolk County, District Attorney Thomas J. Spota, who once worked for an insurance company, has elevated the Insurance Crimes Unit to bureau status, giving it a higher profile and more resources.

Mr. Serio said the states efforts have also been helped by a tightening of rules regulating auto injury claim reporting. The change has shortened the time period for reporting accidents and submitting bills from 180 days to 90. The rules revision only came after a court battle and is under appeal by trial attorneys and some medical provider groups.

Mr. Serio said the fraud fight that is underway, while succeeding in the high population areas in and around New York City, still has some difficulty with the allocation of resources.

In the metro area, he explained, NICB and local and state law enforcement investigators and prosecutors are available to find and ar-rest those who commit fraud. In upstate New York, "theres just us," he said, referring to the fact that the sole agency to take on insurance fraud is his departments investigative office.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, October 24, 2003. Copyright 2003 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.