Anti-Mob Tactics Used To Hit N.Y. Insurance Fraud

"We have begun to attack the issue in a different way," he said. "The metaphor I use in the way we are attacking this issue is the way we attacked organized crime 15 to 20 years ago. There was a sense then that organized crime, and the tentacles of organized crime, had made its way into many significant New York City industries.

"Rather than have a few soldiers on the street, we needed to work our way to the Capos and the real leadership of the five families," he said. "We did that. We used sting operations; we used wire taps; we used long-term investigations; we generated informants; and over time, we had a genuine impact."

Most of the organized crime in the city that existed then is gone today, he said. His plans call for doing the same thing with insurance fraud. He said the industry must continue to be a partner in this effort with the prosecutor's office, supplying information with the aid of technology which indicates patterns of fraud.

He said since the attorney general's office was put in charge of prosecuting insurance fraud under a special prosecutor's office, a small group of attorneys are now in charge of unearthing and bringing to justice the perpetrators of this fraud.

The office is bringing cases against not only the low-level thieves, but also the professionals who are the center of the rings, including doctors and lawyers.

"That is going to be a significant shift in the way these cases are prosecuted," he said.

"We are absolutely dedicated to doing this," Mr. Spitzer continued. "I think if we keep working at this it will work."

However, to what degree the fraud will be reduced in the next few years, he cautioned, is tough to say because prosecutors are still learning what type of criminal element they are dealing with. He said either this is a crime, like drugs, where the people who are committing the act are quickly and easily replaced, or the fraud is more like the traditional organized crime family, which becomes undone as the leaders are removed.

"We don't know the answer to that question, but we are going to find out, and we are going to be dedicated to pursuing it as aggressively as we should be," he said.

Discussing the corporate scandals of the last few years, Mr. Spitzer said that the checks-and-balances of corporate governance were out of balance. The revelations of the past few years show that those responsible for oversight of the corporate heads (board of directors, auditors, outside auditors and institutional shareholders) did not do their job to enforce proper governance.

He was especially critical of institutional shareholders who "abdicated their responsibilities" and did not speak up to question corporations over their reports.

Board members, auditors and investors are beginning to recognize their role once more and, because of this, "things are getting better."

Mr. Spitzer said there will be more cases of corporate scandals, but the worst examples are past.

"We are making real progress," he said, "and I think things are getting better. The bad news is there will be more cases because prosecutors work backward and uncover fraud. We will continue to uncover improprieties in years past. But the rate of fraud committed today has decreased because we are catching people, and when you send a few people to jail it scares people, and board members understand their responsibility and are flexing their muscle."