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By Susan E. Clarke
(Editor’s note: The names of some of the individuals have been changed to protect the integrity of ongoing investigations.)
“So you’re a little short of cash this month? Can I borrow your car for a little while? I think we can work something out. Oh, you do have insurance, don’t you?”
This was the scenario being used by a California woman we will call “Trixie.” It worked pretty well, too. At least until she was introduced to Detective Humberto Fajardo of the Los Angeles Police Department.
The investigation began when Trixie’s boyfriend—we’ll call him “Omar”—became upset with Trixie and contacted the police department. He met with members of the Staged Accident Unit of the Valley Traffic Detectives. Omar advised the detectives of Trixie’s activities and agreed to introduce one of the detectives to Trixie as a possible participant in a staged accident.
The staged accident units are unofficial units of the Los Angeles Police Department. There are four units operating out of various divisions of the LAPD. These units began during the summer of 1992, are unbudgeted and operate with the blessings of the four LAPD Traffic Captains. They work closely with the Los Angeles District Attorney’s Office, the National Insurance Crime Bureau (NICB) and insurance companies, as well as other state and local agencies. NICB, along with special investigative units of the companies, provides operational assistance, equipment and insurance policies to be used by undercover officers.
A few days after Omar’s visit to the police, Detective Fajardo was contacted by Trixie and a meeting was arranged. For the next month, Trixie met with Detective Fajardo to set up the plan. Although the detectives believe she was not actually aware that she was meeting with an undercover detective, she usually greeted Detective Fajardo by saying, “Hi, Mr. Policeman.” Playing along, Detective Fajardo would answer back, “I’m not the policeman. I think you’re the policeman.”
After one false start, when Trixie claimed Detective Fajardo’s car was too small to use with the other car she had in mind, she finally returned with the damaged vehicle. She gave Detective Fajardo an accident scenario and told him to report the accident to his insurance company. As soon as the accident was reported to the insurance company, Trixie handed Detective Fajardo his payment of $1,000.
Based on the information Detective Fajardo has been able to develop, 80 people have either been arrested or are currently under investigation.
The accident scenario Trixie provided was tailor-made to elicit payment without triggering too much investigation. Detective Fajardo was told to report that the accident was his fault— that he was not paying attention and ran a stop sign. He was to say that the accident happened at a specific location and that he pulled into a specific gas station to call. According to the scenario Trixie provided, Detective Fajardo was to tell his insurance carrier that he called the police and was told that there was no need for an officer to respond to the scene if there was no major injury. He was to say that he exchanged information with the other driver and that they each went their own way.
The insurance company which had provided the fictitious policy obtained statements from all of the passengers who claimed to have been in the other vehicle. Together with these statements and the video and audio tape records of the transactions between Trixie and Fajardo, the Valley Traffic Detectives were able to obtain warrants on seven people, all of whom turned out to be members of a large, extended family. The seven people for whom warrants were issued included Trixie, the four people who were reported to have been in the other car involved in the accident, and a couple of people who participated in the bartering and negotiations.
After the arrests were made, Detective Fajardo went to work with the police computer. Using only the information available to him through driving records and reports of financial responsibility, he ran the names of the people involved in the staged accident. Through this investigation, he was able to come up with approximately 120 accidents involving a total of 80 people. And, as a bonus, he was able to begin tracking the “Asher” family, another large family involved in the same type of fraud.
Trixie was ultimately convicted and sentenced. She was also ordered to pay restitution to seven different insurance companies, for a total of $292,000. Prior to her sentencing, Trixie met proudly with the district attorney and provided information in an attempt to mitigate her sentencing. At that time, she told authorities that she had participated in 11 staged accidents. Of those 11 accidents, the detectives were able to find records on seven—the seven accidents on which she was eventually ordered to pay restitution. She was also ordered to reimburse the National Insurance Crime Bureau for the time and effort they spent on the case, for the car that was provided for Detective Fajardo to use as his own, and for the insurance policy that was purchased by the NICB.
As part of her plea bargain, Trixie was sentenced to three years in prison. However, since the order for restitution would not apply if she spent over one year in jail or if she went to state prison, her sentence was changed to one year in county jail and seven years of probation.
The other participants who were arrested all plead guilty and were all sentenced to one year for providing false statements. All were released, however, on straight probation.
Trixie has now been released from county jail after serving eight months. She recently checked in with the Traffic Detectives to provide her new phone number and to advise the detectives that she would be moving back up to the Fresno area where she owned a house and a business. Part of her probation is that she must make restitution. She is aware that if she fails to make the ordered payments, she will be returned to county jail.
Based on the information Detective Fajardo has been able to develop, 80 people have either been arrested or are currently under investigation. The case is so large that the Los Angeles District Attorney’s Office has decided to pick off small clusters of participants as soon as the detectives are able to develop cases that will stand on their own merits.
One of the groups under investigation is the “Asher” family. The mother, father and son have all been arrested and are in county jail awaiting trial. The son’s wife is also known to have been involved, but she has not been arrested because she has a small child and is also providing care for the two younger children of her jailed in-laws. In investigating this particular extended family, the detectives discovered that the Ashers and their accomplices had been involved in 20 of the 120 staged accidents Detective Fajardo had discovered while investigating the Trixie case. Another ten accidents were eventually found to have involved this family; and of the 30 total accidents in which the Asher family was known to have participated, Trixie and her group were involved in 15. In some of the accidents that did not involve the Trixie group, members of the Asher family claimed to have been in both cars and used false identities to submit their claims.
As a result of the Asher family investigation, the detectives have made several other arrests. They expect to arrest a total of 30 people from this extended family.
In addition to the NICB, the Staged Accident Unit works with the major fraud unit of the Los Angeles District Attorney’s office. All filings are made through the district attorney’s office. Some of the deputy district attorneys handle only fraudulent claims such as these.
“I’m a firm believer that insurance companies could stop about half of this if they just had a databank of customers.”
Detective Robert Uber
LAPD, Valley Traffic
According to Joy Pagenkopp, Special Agent with the NICB, these claims were not picked up for investigation because most were not detected and referred to the NICB for tracking. The information that allowed the investigation to proceed was discovered solely through DMV records. But the people who participate in these cases are smart enough to use other names or to alter the spelling of their names by adding, transposing or dropping letters.
In addition, according to Special Agent Pagenkopp, claims are assigned to different branch offices by various insurance companies, so that even within a single company it is not detected that there are multiple claims for the same person. For example, some companies assign claims by the location of the policy holder’s permanent address. Because Trixie’s permanent residence was located in the Fresno area, these companies assigned claims to branch offices located in central California. Other companies assign claims by the accident location. Since Trixie and her group worked in the Los Angeles area, mostly in the San Fernando Valley, claims for these companies were assigned to branch offices in Southern California. If a single insurance company has problems tracking multiple claims within itself, the problem is compounded when companies do not have the capability to share information.
Detective Robert Uber of the Staged Accident Unit agreed. “I’m a firm believer that insurance companies could stop about half of this if they just had a databank of customers,” he stated. As an example, he described another scheme that is becoming popular, the straight collision damage claim. The scammer will obtain as many as 20 to 25 policies on a single car. The car will be involved in a staged accident and the person will then collect on each of the policies.
One of these multiple-coverage collision damage schemes was uncovered earlier this year when two different insurers did compare notes. The companies found that a mutual client had reported multiple claims on his nearly new Cadillac and brought the situation to the attention of the NICB. The staged accident unit, working with the NICB, were able to catch the policy holder by convincing him they had a mobile claims service and that they had to pay claims within a specified period of time. They told the insured that company policy dictated that they could not mail his checks but had to physically hand them to him. The agents told him that they were working out of a trailer located in a parking lot because of the recent southern California earthquake. If he would come to the trailer, they told him, they would hand him his checks.
The detectives and NICB agents met the policy holder and his friend at the agreed location. They had multiple checks made out for his claimed collision damage. Once he signed for the checks the proof of fraud was established and he and his friend were taken into custody. According to Detective Uber, the two men were already out of jail on $20,000 cash bail each before the paperwork was even completed, never to be seen again. They walked away from a total of nearly $50,000, including the bail money, the nearly new Chevrolet they were driving (not the car they were using for the scam), $4,000 in cash and their cellular phones. Subsequent to the arrests, a search warrant was issued for the man’s post office box where detectives later found evidence that the car used for the fraudulent claims was covered by about 25 different insurance policies. The insurance companies involved were contacted, but most had already paid the claims on the vehicle. Each company had paid between $2,000 and $6,000.
The Trixie case actually involved a fairly short expenditure of manpower. The extra restitution she was ordered to pay for the cars, the insurance policies and the NICB agents’ time amounted to only about $10,000 or $15,000. One other case the detectives are working has been going on for about a year. In connection with this investigation, the detectives and agents have participated in seven staged accidents. They keep extending the investigation because with each new accident they have been sent to a new doctor or attorney. And with doctors, the agents explained, the investigation depends on the claim for treatment being submitted to the carrier in order for fraud to be shown. This means waiting for the doctor’s billing cycle to generate the bill which will constitute the fraudulent claim.
According to the NICB Agents and the detectives we contacted, insurance companies have other specific problems in trying to deal with this type of fraud. Although insurance companies are supposed to actively pursue investigations of suspected fraud, often by pursuing the investigation too vigorously, they run the risk of a bad faith settlement, making the carrier liable for up to ten times the amount of the claim. As the agents noted, if the big insurance company ends up in court against little Mom and Pop Smith, the award almost invariably goes to the little guy.
The agents noted that some recent developments being seen in the staged auto accident racket are actually attempts by the scammers to avoid triggering the traditional red flags insurance companies look for. One growing area is the use of rental cars in staged accidents. In order to perpetrate this type of fraud, the scammer rents a vehicle and purchases the maximum available insurance at the time of rental. An accident is then staged one or two days later. The scammers don’t have to wait a month or two to avoid the red flag of an accident occurring on a new policy.
Another new development is a reduction in the number of passengers in a staged accident to avoid the appearance of a “stuffed vehicle.” And the latest development is the use of a stolen vehicle to stage an accident. The vehicle is abandoned at the scene of the accident and the claimant goes against his uninsured motorist coverage. According to Detective Uber, these accidents usually take place at a quiet residential intersection between 10 p.m. and 2 a.m. when no witnesses are present.
The detectives and agents all agreed that the staged accident scammers can be hard to catch, especially since the number of people involved can constantly mushroom. As the participants become familiar with the way the scam works, some may decide it looks like an easy way to make money. “If he can do this, so can I,” they say.
Sometimes the detectives are lucky and an informant comes forward, as happened with the Trixie group. But insurance companies and other agencies must compare notes, either through a separate data bank or through the NICB tracking system—which went into effect in January 1994 — to fight this type of fraud. And they must aggressively go after those claims they believe may be fraudulent. If the people who run these scams become aware that carriers will actively investigate suspicious claims, it might go a long way toward stopping them.
The John Cooke Fraud Report would like to thank Detective Robert Uber and Detective Humberto Fajardo of the Los Angeles Police Department, Valley Traffic Detectives, and National Insurance Crime Bureau Special Agents Lonnie Melchior, Joy Pagenkopp, Pete Mello and Wes McKinney for their help in preparing this story.
© Copyright 1995 Alikim Media