Copyright held by The John Cooke Fraud Report. Reprint rights are granted with attribution to The John Cooke Fraud Report with a link to this website.
By Leslie Kim
If you are among the fortunate, you have heard David speak. The National Insurance Crime Bureau, in a decision of sheer genius, has teamed up David (a convicted insurance fraud felon awaiting Federal sentencing) with Agent Jerry Dolan and put them on the road. They’ve been to Los Angeles, Baltimore, Chicago and Cleveland—doing a “dog and pony” show that bears no resemblance to any other. David talks to insurance company executives, claims adjusters, defense attorneys and anybody else in the industry who’s willing to listen. He tells them about insurance fraud. He tells them how he made a living at it for many years. He tells them how to do their jobs if they want to catch a guy like him. He tells it like it is—in a unique way that no one has ever told it before—from the inside.
When David talks, our industry must listen.
Because David’s been there.
Because David’s done that.
JCFR: What is your first recollection when it comes to insurance fraud?
David: I was living in Chicago. I would see people from the Kalleo family driving around in a Rolls Royce. I heard what they were doing and where the money was coming from. They fell down in restaurants; they got in car accidents; they got food poisoning, and they got paid for it. But I was a scaredy cat all my life. I was afraid I would get caught stealing bubble gum, so it took me a long time to first try it.
JCFR: And when did you finally try it?
David: I was about 27 or 28 years old. I fell down in a store one time to see if I could get money. The insurance company gave me a real hard time. They shot me down and didn’t give me any money. So I said forget this. It don’t work.
JCFR: When was the first time you did get money for an accident?
David: It wasn’t an accident. Somebody that I knew came up to me and told me to get a renter’s policy on my stuff and then say that I lost something. So I bought a State Farm policy and then broke my car window and made a police report that somebody had stolen my guitar out of my car. It was easy and in two weeks I had $1500. It was so easy that two weeks after I got paid, I tried it again.
JCFR: Same company? Same guitar?
David: Sure. I was green. But the company requested a deposition under oath and I panicked. I figured I’m going to jail. So I called a lawyer and told him what I did. I didn’t sleep for three nights. The lawyer called State Farm and the claim got dropped.
JCFR: Obviously that scare wasn’t the end of the claim career.
David: In 1978 I was a gambler and when you gambled like I did, you sometimes had to borrow money to pay off your bets. The interest on those loans is called juice and the people you borrow from aren’t very nice, especially if you’re late on your payments. I was scared and I needed the money. Then this Polish guy from out of the country, who knew a girl that I knew, told me to go rent a truck and make sure to buy the insurance. He gave me $2,000 and I rented the truck and hit him like he told me. He went after the truck rental insurance and I walked with my $2,000. That was the start. I learned the business from there. You gotta crawl before you walk. And I was under the wing of the mob. They’d break my arms and legs if I didn’t pay every week on my gambling debts.
JCFR: Would you know who the insurance company was before you staged the claim?
David: If it was a car claim being planned, we’d choose the company first, get the policy and then do the accident. There was nothing to getting an auto policy. Agents care about their commissions. Usually, if I wanted Allstate, I would go to an agent a week earlier and put a down payment on a life insurance policy. While I was there, I would tell the agent I was buying a commercial building and would need to come in to buy insurance. A week later, when I asked for an auto policy, he put it right through. I got a good life policy, a building coming up. He won’t turn me away on the car. I’m his guy. But if I were to call him for a policy just plain, he’d probably turn me away.
JCFR: What would you say to the adjuster to convince him of the validity of your claim?
David: I never tell him that all five of the people in the car were hurt. Maybe just two would be hurt and the other three were okay. Then they think it’s gotta be a real claim because in a fake claim everybody would be hurt. Then the three unhurt ones can be witnesses to tell how bad the two hurt ones were banged up.
JCFR: What’s your best trick for a slip and fall?
David: Remember, I’m just the stager. So I’d get three guys:
one to fall down and two witnesses—each would have an out-of-state address and phone number. So, a guy in Chicago falls down and the two witnesses are from Texas and California. The adjuster thinks it’s gotta be real, what with witnesses from that far away.
JCFR: But what happens when he calls the witnesses?
David: Anybody can call American Voice Mail or a place like that, and for $12 to $15 you can get a listed phone in any city in the US. They’re either voice messages that sound like a home answering machine or the calls are forwarded. So I answer and act like the witness.
JCFR: How does an adjuster know if this is happening?
David: If you can never reach your witnesses without going through an answering machine, it’s a bad sign. Try late at night and see if you get the same recording. Or when he calls you back, as soon as you hang up, call him back.
JCFR: What kind of communication network is there between professional gypsy claimants?
David: First, adjusters gotta know that it’s not just gypsies doing this. Everybody is in the claims business. Serbians, Iraqis, Syrians, everybody. The only person not doing it is your straight American Joe or maybe the farmers or square people. Everybody else does it to you. Then, how do people in the claims business communicate? It goes like this. If my guy falls down at a place and the company treats us real bad, like they say that they will only pay what the medical bills are and no more, then I take the two thousand for the medical bill and run. Then the word goes out on the streets that this certain company will give you the medical bill amount and the next guy who walks in the door to fall down knows to give them a five thousand dollar medical bill. You see what I’m saying? If the company woulda paid me five thousand on the first (two thousand bill) claim, the next guy wouldn’t have to come up with such a big bill to get the same money.
JCFR: So you keep lists on what company will pay how much?
David: Not just on the companies. Sometimes on each of the adjusters. Then we can get the best adjuster the next time we have an accident.
JCFR: How can you choose an adjuster?
David: Some companies give all the, let’s say, “A” and” B” name claims to one adjuster and all the “C” and “D” ones to another adjuster. If I know the first guy is easier, the next time I hit that company, my name is gonna be Adams or Burke or something else with those letters.
JCFR: What do you think of a company that pays a fast nuisance settlement?
David: To us, it’s like hanging a sign on the door that says, “Free Money – a thousand bucks for filling out a piece of paper or making a phone call.” The company thinks they’re real smart and got away with something. The truth is, we got away with something. Worse, we’d come back a week later and get another quick thousand bucks. Those guys are like money trees.
JCFR: Do claims fraud gypsies do insurance fraud as a primary source of income or as a secondary source?
David: Primary. None of them work a real job. At a wedding, when somebody shows up with a new car or a new suit, the questions everybody asks are, “How much did you collect?” and “Who was the company?” And then they ask you, “Know anybody who can come to my new house and fall on the steps?” That’s the kind of talk that goes on at a big family wedding.
JCFR: So what’s the easiest scam to get away with?
David: An auto accident. Rear-end is 100 percent liability. Maybe use a guy with a broken nose to be one of the injured people.
JCFR: But adjusters are smartening up. A newly broken nose will usually bleed all over the place.
David: We know that, too. So before the accident, we take some blood from the guy’s arm with a disposable needle. Then, at the crash scene, he puts it all over his face and pours some up inside his nose. The paramedics just see fresh blood and then make sure it’s stopped—which it has. And the three guys who I told to say they’re not hurt are even better witnesses. They tell the adjuster, “Joey hit his face on the dash real hard, and there was blood all over the place.”
JCFR: So what’s this Joey guy’s next step?
David: He goes to a doctor, any nose doctor, and he gets an estimate to fix the nose. Doctors are like sales people. They all want to do the surgery on the nose. So they’ll give you a letter saying you need it—even if you don’t—and say how much it will cost. This is maybe, I think, 70 percent of all nose doctors.
JCFR: How many of these claims would you do in a given time frame?
David: Me? I like to do just a couple. You get crazy trying to keep track of too many people. I was the promoter and I worked with maybe two car accidents at a time.
JCFR: Who’s in on the split? And how does it work?
David: Because I owed them money, the guys who were behind the gambling and the loans saw that I was making money to make the payments. These guys decided to cut in on my action so they started giving me leads, people with cars and insurance policies, and I’d arrange for some accidents to happen. In those cases, I had to give 50 percent of the insurance money to the bosses. Then the rest of us would get a share of what was left. If I found both halves of the accident, I would take either half or a third for myself, depending on who was in on it.
JCFR: The mob guys were one source of clients for you. Where did you find the others?
David: It just goes on and on. The community talks. This one needs money, that one needs money.
JCFR: Was it just a money thing or was there a certain thrill, a sense of winning?
David: For me, just a money thing. My main concern was to get the money. But I tell you this: if an adjuster was smart, I’d just get smarter, and I always won. I could tell how sharp he was from the first “Hello, how are you?”
JCFR: Would you rather deal with a man adjuster or a woman adjuster?
David: I love women adjusters. Generally they are more naive about fraud. They trust you easier. The worst for me to deal with were the black male adjusters. They came up through the streets and they knew the score. They are not naive. They are tough. It’s like they’d say, “Don’t con a conner.”
JCFR: Did you ever involve an attorney?
David: Only in cases where the names are reputable. If people were who they were. If the adjuster is a real jerk, I would get an attorney just to save face and to keep the adjuster away from my house. To make him stop digging until I can move on. I might have two other claims that are almost ready to settle, and I have to slow down this one trouble maker who is getting too close. So I hire just any old attorney, just to buy time.
JCFR: Would the attorney know the accident was bogus?
David: No. I only wanted him as a shield for a little while. When I left the location I was using, I would leave him holding the claim.
JCFR: Would you use fake identification in claims?
David: All the time. I can get birth certificates, baptism certificates, voter cards, a drivers license, credit cards, anything. Ten days, sometimes less. Or maybe I might befriend a bum on the street, a wino, take him to dinner and borrow his ID. But the crazy thing is, most of the time you don’t need ID’s except to cash the check. The companies just don’t do a good job when it comes to ID’s.
JCFR: What should the companies do?
David: Make the guy show you some ID. Look at the license. Is it a 46-year-old man who just got his license two weeks ago? Ask yourself why? And is the social security card brand new? And when you talk to the witness, tell them you need to ask identification questions like “What is your mother’s maiden name” and “What is your social security number?” and “Where do you work?” And if they can’t answer those kinds of questions, what does it tell you? Keep your mind open and think!
JCFR: Whew. Anything else?
David: Yeah. Medical reports! Sometimes a guy will tell an adjuster that he (claimant) will drop off his medical report. This is a guy who wants to get in fast and get out fast. The adjuster says, “No, we will order our own medical records.” Lemme tell you, that’s really dumb! Tell the guy, “Yeah, bring it over. You’ll save me a lot of trouble because now I won’t have to get it myself.” Then when he shows up, pull out the medical authorization and have him sign it. And then use that authorization to order the records from the doctor and compare them. It helps three ways. It gives you a chance to compare—because sometimes we like to add a little bit ourselves, like a fracture, at a Kinko’s. Also, he’s speeding, eager, and this is a flag. And you always want to keep him going. Never let him know you’re on to him. Keep him hanging and give him sweet nothings and he won’t keep coming back to your company.
JCFR: What about the claimant who always has a husband, father, uncle or brother call for them?
David: A definite flag. I know the business. I know what they want to hear. I was the husband, the father, the brother or the uncle. Adjusters should watch out for the charmer on the telephone. The charmer is a sign of conning. Too much charm, when you’re talking money, is always a flag.
JCFR: Has the climate changed from when you started 20 years ago to when you quit, two years ago?
David: I think the system was sharper in the old days. The system today is more naive. They want everything in the mail. They think if we send it by mail or fax, it must be okay. So they don’t even ever see us in person. It’s a claim artist’s paradise.
JCFR: Do fraud artists have favorite companies? Favorite adjusters? Companies they hate? Adjusters they don’t ever want to talk to again?
David: Yes. I learned to stay away from The Travelers. I think they’re very sharp. They know the game and from all my experience with The Travelers, I think they have it all put together. They have a certain system. Usually it runs in a certain pattern, due maybe to a national manager who decides how to run his whole ship.
JCFR: So, who’s the easiest company?
David: XXXXXXXX. (Editor’s note: As XXXXXXX is one of our larger bulk company subscribers, and because the intent of this interview is to educate—not to embarrass—I have chosen to delete the actual company reference. If you are a company executive and have even the slightest inkling that David may have mentioned your company by name, we respectfully suggest that you copy this article and make it required reading for every member of your staff!) They love to pay and pay and pay and pay. If I needed real easy money, I always made sure it was their policy.
JCFR: But what about slip and falls in stores? How do you know you’re not going to do the fall and then find out that it’s a company you don’t want to mess with?
David: I’m a con man. I’d call the store on the phone and talk to the manager. “I’m Fred Jones with XYZ Insurance Company and we have an insurance policy on your location—and I got a note here with a number that’s not ours. Do you maybe have another policy, too?” He’d look in the desk and say, “You must have made a mistake. We have our policy with ABC Insurance Company, not XYZ.” I always made it my business to know who the insurance company would be before I had somebody fall down someplace.
JCFR: What did you use for addresses and phone numbers?
David: Usually a Mail Boxes, Etc. address and a hooked-up voice mail. Sometimes, if a number of us were traveling together, we’d rent a cheap little studio apartment for a few weeks—right out of the newspaper.
JCFR: When was your last claim?
David: The last money I received was in December of 1992. I had about five or six live claims going when Jerry Dolan of The National Insurance Crime Bureau took the Kalleo family down in February of 1993. Then, in April of 1993 I walked in to the FBI and gave myself up.
JCFR: Why? Were you afraid they were going to come get you?
David: No. I really don’t know if they had enough to get me or not. But I was just sick of it all. So I sat with my wife and my son and my daughter and we talked. I couldn’t take the pressure of the mob—I didn’t want to challenge them. I thought I’d rather go down and cooperate. It was a matter of time, I knew, and our only concern was for my family’s safety.
JCFR: Did your wife know the true nature of your business?
David: Not for a very long time. I was a big gambler. I’m a handicapper, and every day, I went to the track and bet big. She thought I was making my money on the horses. Then one day she put a few things together and made me tell her. Her parents were both from the old school, just like mine were. If you weren’t a musician, you were a bum. She said “Go get a job.” But how could we live on $200 a week? And how could I keep my family safe from the mob if I couldn’t pay? She hated it and we were not close. Shame on me for getting in the business. Shame on me for doing the crime. But once I was in it, I was stuck. I was a bad guy for ripping off the insurance companies and I lived that way for 15 years. Finally, I was sick of all of it. I was sick of paying juice to the mob. I was sick of being muscled. I was always a scaredy cat when it came to police, but I was the type of guy who’d rather pull a con than stick up a bank. And I knew that sooner or later, Jerry Dolan would get me because Jerry is feared by all the Chicago area claim artists.
JCFR: How did it all change when you walked into the FBI offices?
David: In February 1993 the FBI told me I wasn’t worth anything if I was in any more trouble. And they can give me a polygraph any day and ask me, “David, have you been doing insurance scams?” and if I don’t pass, I got big trouble. I’m done with all that. I’m never going to do that again. Never. And ever since that day in February, everything’s changed dramatically. My wife and daughter are proud of what I am doing to help the insurance companies. We are a closer family now. Most of all, for the first time in as long as I can remember, I am proud of what I am doing.
JCFR: Do you think that your talking to insurance industry people is having a measurable effect?
David: There was this girl named Grace at one of the seminars. She came up to me afterwards, when a bunch of us were in the hotel bar after the talk, and she looked at me. I said to her, “You’re mad at yourself because you don’t understand how you can like a scam artist.” Her eyes opened wide and she asked me if I was a mind reader. Then she said, “You think you are a $%@*&# little celebrity here? People are flocking to you and making you a star when you ripped us off for millions of dollars!” I told her that talking was the only way I had to pay even a little bit back. And then she started to cry. That exchange had a major effect on me and played a major part in my heart. Then, weeks later, she called me and told me that she had found six or seven bad claims all because of what she learned that day. So am I having an effect? Yeah, I know I am. Is it enough? It’s something. And when the people come up to me and shake my hand and wish me good luck, it feels good. I finally feel good about who I am and what I am doing.
JCFR: Now that you have started working with the insurance industry and telling the secrets of claims professionals, do you ever feel that you are being used?
David: The insurance industry thinks they’re using me—until they hear me. They trust me—maybe only 25 percent—because I’m a criminal. They don’t like what I did for so many years. One lady, at one of the seminars, said, “How do we know that you’re not here to con us?” And I said, “Hey, lady. Who is teaching who? Are you asking me questions or am I asking you questions? You’re not telling me anything. I’m telling you!”
JCFR: What is the very best message that you can hope to get across when you are speaking?
David: Fraud is an American way of life. It’s not only happening to the insurance companies in the big cities, but to companies everywhere. A company adjuster from Rockford, Illinois, raised his hand at one of the seminars and said, “I’m from Rockford. Do we have to worry about this stuff down there?” And I said, “You have to worry about it the most – because you don’t know you have to worry about it.”
JCFR: Is there an answer?
David: Yes, a single word. Education.
JCFR: David, you’re being sentenced in just a few days. When all is said and done, how do we know that you’re not coming back?
David: If I come back, shame on me. But if you let me do it, shame on you.
* * *
And that’s what David had to say to The John Cooke Fraud Report. To round out this Chat With David article, we also asked Jerry Dolan, the other half of this new team, to say a few words. Here they are:
“I took the opportunity to work with David when he suggested talking to the insurance industry. It was the day he pleaded guilty to Federal charges in Chicago.
He asked for nothing in return, save a letter from me to his judge, outlining what he (David) was doing. Since that time, David and I have made presentations to approximately 1600 people.
What makes the program so interesting for me is that when people first hear what the program is about, they are skeptical. They aren’t sure what they are going to hear. They walk in with some preconceived ideas about what David is going to say. I get a kick out of watching the faces of some very experienced adjusters and underwriters who, for the first time in their careers, are presented with an opportunity that they might never have again—the opportunity to ask questions of a guy who has made a lucrative income taking advantage of the weaknesses of the system.
I make a point to follow up with everyone who has requested having David come in and talk to their people. Some of the responses I have heard are interesting. I had one SIU person tell me that she has been preaching fraud awareness for the last two years and, after David came in, she said, “In the last two weeks I’ve gotten fraud referrals from adjusters who, pre-David, had never seen a fraudulent claim before.” Another claim manager told me that people were turning in suspected fraud files with notes saying things like, “Remember what that fraud guy said…”
I have been fortunate to have an FBI case agent named Jim Applebaum – who has worked harder on David’s portion of this case than anyone, myself included. I know David likes to give me commercial recognition, but it was David who turned himself in to the FBI—and — I am not feared by any claim artists. And that’s the whole truth.”
* * *
Editor’s Note: Personally, I was one of the lucky ones that got to see David as he “worked” a crowd of nearly 300 insurance industry personnel in Los Angeles. Having attended more training seminars, etc., in the last few years than I can toss a stick at, I can unequivocally attest that David’s “show” is the most EFFECTIVE, the most EDUCATIONAL, and the most LEAVE ‘EM WITH THEIR MOUTHS HANGING WIDE OPEN performance I’ve ever seen.
David’s rare ability to deliver this insider’s view of claims fraud has the potential to save the insurance industry untold millions of dollars.
When David talks, our industry must listen.
Because David’s been there.
And because David’s done that.
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