By Christina Bramlet Property Casualty 360
Following an investigation spanning two years, dozens of witness interviews, and examination of thousands of documents, a Calif. Grand Jury has indicted 22 suspects on more than 100 felony counts.
California Insurance Commissioner Dave Jones reported that the indictments were handed down by a Contra Costa County, Calif. Grand Jury on September 22, 2011 and that bail for the suspects has been collectively set at $18,650,000.
Meanwhile, investigators are still unraveling the extent of damage inflicted on the insurance industry as a direct result of the alleged fraud schemes. The current loss projection, which encompasses both tangible and potential damage amounts, ranges between $300,000 and $500,000.
Commissioner Jones noted that Geico, Allstate, State Farm, Balboa, Homesite, Progressive, Farmers, American Bankers, 21st Century, Travelers, and Unitrin Insurance Carriers, and the National Insurance Crime Bureau (NICB) were instrumental in executing the investigation.
After publicly thanking those entities, Jones also commended the CDI fraud division detectives, California Highway Patrol investigators, Contra Costa County district attorney’s office for a job well done.
Despite these very notable strides, it bears mention that the investigation is still ongoing and that additional suspects may be detained, pending further developments.
Seeds of Suspicion
In July 2009, fraud detectives with the California Division of Insurance (CDI) began a probe into a suspected insurance fraud ring operating in the San Francisco Bay area. Detectives focused on a group of subjects who were submitting suspicious insurance claims. The claims in question represented a possible smorgasbord of criminal acts. Detectives reported claims involving vehiclethefts; theft of personal property from vehicles and residences; traffic collisions; personal injury; wage loss; and vandalism. In examining these cases, investigators learned that the subjects filed police reports and submitted documents to various insurers to try to corroborate the claims.
CDI detectives obtained and reviewed thousands of documents, interviewed dozens of witnesses, and served search warrants for records, together with investigators from the California Highway Patrol and Contra Costa County district attorney’s Office. The collective investigation revealed that the group appeared to be involved in several insurance fraud schemes.
According to Commissioner Jones’ office, one scheme involved the purchase of jewelry, high-end electronics, and other merchandise. Investigators suspected that once purchased, the subjects returned the items to the retailer and retained the sales receipt. Members of the group shared the receipts of the returned items and presented them as evidence of property ownership in numerous insurance claims. Additionally, authorities believe that in certain cases, receipts were altered and used several times by different subjects when filing their claims. The group also used garment “pull tags” on un-purchased clothing as evidence of ownership in the insurance claims.
Meandering Trail of Fraud
The trail of deception didn’t end there. Other variations entailed signed declarations stating the subjects “owned” property believed to have been stolen. The suspect(s) would then photograph themselves wearing these items to keep the stream of fishy claims flowing.
Moreover, investigators found that group members may have filed insurance loss claims for alleged traffic collisions, stolen vehicles, and vehicle vandalisms. Allegedly, the incidents repeatedly involved the same suspects with the same damage to their vehicles. In select cases, the members subsequently submitted injury claims and professed to have lost wages because of the collisions (despite evidence to the contrary).
As of now, all suspects in the case have been charged with more than 100 felony counts for violating section 1234.45 of the insurance code and for multiple felony counts for violations of grand theft and burglary. In addition to corralling various suspects in the Bay area, authorities took an out-of-state suspect into custody, who will be extradited to Calif. That person, along with the others, will face prosecution by the Contra Costa County district attorney.
The criminal indictment is believed to be the largest of its kind in the Calif. county’s history. Jones believes the operation will send a message of caution to others considering committing insurance scams.
“The sheer magnitude of this case demonstrates the extreme degree of conspiratorial lengths that these suspects colluded to perpetrate,” he said in a press release.
“In these tough economic times, legitimate law-abiding businesses and consumers need real protection from those seeking to scam the system, which can lead to higher insurance rates and premiums that many can’t afford,” added Contra Costa County District Attorney Mark Peterson. “We hope that inter-agency cooperation between law enforcement teams will lead to even more successful operations like the one today.”