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By G. Andrew Nagle
History tends to repeat itself in the fraud business, sometimes tragically.
On June 17, 1992, in the midst of a “squat” auto accident set up on a Los Angeles area freeway, something went massively wrong. The driver of the squat vehicle, in a car loaded with three other passengers, decided to do his trick in front of a loaded car carrier. His reasoning, it’s surmised, was that a commercial vehicle would be heavily insured. He would have known not only that a commercial vehicle liability policy is mandatory in the State of California, but that the limits are exceptionally high and coverage is afforded by a large insurance carrier with deep pockets. He would also be aware that many of the large commercial trucking entities have umbrella coverage, often raising the total available liability limits into the $5 million to $10 million range. Part of the business of being an accident staging criminal is to know such things.
Organized auto fraud rings do not utilize drivers on a onetime basis. In the larger rings, each individual plays a part and the drivers of the squat vehicles must be considered professionals. It is not an unusual circumstance for such a driver to go out into traffic and become involved in multiple accidents in a single day. He may come back to the “home base” only long enough to pick up an alternate vehicle or to load up a new set of passengers. Then it’s back to the freeway to seek the next victim.
As with any occupation, the more one performs a task, the better one becomes at that task. And so it is with the professional driver. Hitting the brakes with exactly enough force to cause an accident but not so much force that it’s a serious accident is a talent acquired with experience.
Jorge Sanchez, the driver of the squat car on June 17, was no stranger to having accidents. Investigation revealed that he was hardly a rookie driver when he chose the car carrier as his next mark. On that fateful day, instead of the truck hitting the squat vehicle in the rear and causing the hoped for $500 to $1,000 worth of damage, the unexpected occurred. The truck jackknifed, fell atop the squat vehicle and crushed one of the back seat passengers. Crushed him dead.
Suddenly a new element entered into the realm of staged automobile accidents. Murder. Over the next few years, the Los Angeles DA’s office was exceedingly busy. Approaching the case as an organized conspiracy, the prosecutors brought multiple charges against the fraud ring’s key players and obtained guilty verdicts on almost all charges. The jury, however, deadlocked on the second-degree murder charge brought against Gary Miller, the Encino attorney who provided the marketplace for the ring’s series of bogus claims. After all, the dead man had been actively participating in the scam, and it was difficult to arouse sympathy for someone killed during the commission of a crime.
Early in 1997, a similar tragedy struck in Southern California. This time, however, there were three dead people. And this time they were innocent bystanders: a family tragically caught in the inferno of fraud as it played its hand on the 710 freeway.
The driver of the squat vehicle, Isidro Gomez Medina, while attempting to make a semi rear-end his vehicle, caused a far more severe chain reaction accident. Juan Antonio Lopez, 26, of Santa Ana, his wife Maria Lopez, 24, and their daughter Joanna, 2, were returning home after a family get-together. Traveling south on the 710 in a safe and prudent fashion, Juan was driving just behind a Ralph’s food truck. The Ralph’s truck was immediately behind the squat car. When the accident occurred, a gravel truck slammed into the Lopez’s station wagon and crushed it accordion style. Medina and the driver of the “swoop” car sped away from the scene when he realized the carnage he’d caused. The young family was pinned in their seats and unable to escape their car before the gas tank exploded. Bystanders were unable to do anything to help the trapped family and helplessly stood by as the flames shot high into the air. The terrified screaming from the Lopez car after too long finally went silent.
Obviously, the example of charging attorney Miller with murder and later sending him to prison had not had enough of an impact on the shady side of the PI legal community. So now another message, a far stronger one, is in the offing. In June, police charged Medina with three counts of murder and Griselda Bojorquez, a suspected coconspirator, with one count of being an accessory and six counts of insurance fraud. Esteban Solano Galvez, the front seat passenger in the squat car, was arrested in Phoenix on the same day Medina and Bojorquez were arrested in Long Beach. Galvez was also charged with three counts of murder. Authorities believe that Galvez was the brains, arranging the accidents, and Medina was the brawn, driving the squat cars.
According to Henry Avina, chief investigator with the California Department of Insurance Fraud Division, one of the things that organized auto fraud rings are doing to avoid detection is to change the number of occupants in the squat car. “Too many insurance companies were red flagging those accidents with three occupants in the car. So the stagers began using either two or four occupants, sometimes more. In the 710 accident, only Medina and Galvez were in the squat car”
Information developed about Galvez included the fact he was always in the front passenger seat of the squat car for each staged accident. “He positioned himself in that spot so, if the driver suddenly got cold feet, he could reach over with his left foot and slam on the brake. That’s what we believe was the case in the 710 mishap,” said Avina.
Juan Antonio Lopez and his family lived with his parents and worked for his brother. The questions of legal recourse for the surviving family members are being studied. They have obtained the legal representation of well-known Orange County attorney John Quincy Adams III and the various areas of potential collectibility are being scrutinized. He knows that the big dollars in organized freeway auto accident rings lie with the attorneys and medical doctors who are participating in the crime ring. Those avenues of collectibles, however, will probably be left to the insurance companies. But how do we reach them?
According to Ross Silverman of Katten, Munchen, Zevas & Weissman, the lead attorney on a recent Chicago area case in which State Farm is seeking civil redress from alleged organized ring participants, California is leading the way with the whistle blower statutes. The Illinois case, brought in a state where there is not yet a whistle blower law, has been brought under the Federal RICO statute. “There are many legal RICO issues,” says Silverman. “First, it is necessary to prove that there was, in fact, an enterprise. In order to do this, you must prove that there was a structured group of people. Then you’d have to prove the people associated with the criminal enterprise were conducting business in a pattern with racketeering activity”
While there is an Illinois statute that allows for recovery of three times the actual damages on fraudulent claims and two times the amount that has been submitted but not yet paid, insurance companies often prefer a RICO solution. “The problem is that there’s also a provision in the Illinois statute that says if the insurance company uses the statute to bring an action, and if the action is found to have been brought in bad faith, the defendants can recover twice the value that the insurance company is trying to recover,” says Silverman.
Dennis Kass, an attorney with the Los Angeles based firm of Manning, Marder and Wolfe (and lead attorney on the first whistle blower action pursued in California based on civil fraud claims), feels that any large scale action against the California doctors and attorneys participating in the 710 ring will be more successful if brought by the insurance companies, not the families of the victims. “The families are best off pursuing common law torts against any such culpable individuals. Heirs are not insurance companies and they do not have access to the extensive data bases that insurance companies have access to,” explains Kass.
Joe Heath, an attorney with the Long Beach firm of Ford, Walker, Haggerty & Behar, is certain that any civil RICO actions brought in California will come from the carriers themselves. “Common law torts have a lower burden of proof,” he says “so civil RICO actions will come from the insurance companies that have the resources to prove the necessary elements of the action. Everyone is talking about RICO, but it appears that only the larger companies are filing cases. The work required to prepare such a case and to eventually prevail is a massive undertaking.”
Kass comments, “The California whistle blower statute has more teeth and presents an easier burden of proof, while RICO tends to get very large and complex because the case law is complicated and you are covering multiple jurisdictions. Additionally, the whistle blower can be used on either a single claim or a huge criminal conspiracy. It doesn’t matter if the insurance company pays the claim. On one suit our firm filed, six claims had been paid but 28 more were identified prior to payment. We still made them all part of the lawsuit.”
[Codified under 1871.1, whistle blower laws allow an insurance company to seek redress for the attempted fraud or for the filing of a false claim. The laws provide liability for anyone using a capper or submitting a fraudulent claim to an insurance company. Proof is required that someone knowingly submitted a fraudulent claim, with willful disregard. In a whistle blower suit, the government takes 65 to 75 percent of the recovery on unpaid claims caught in the process. It’s patterned after the federal false claims act and for those cases that the insurance company has actually paid out on, the company can recover double.]
According to Bob Mason, general counsel for the National Insurance Crime Bureau (NICB), “The theory is not that whistleblower actions and RICO actions are in lieu of a criminal prosecution. They can be in addition to. We’d certainly like to see more interest on the part of the companies for joint insurer activity, and we’d be happy to facilitate any such common ventures. Our purpose includes trying to help the insurance companies put these actions together.”
Silverman adds, “The NICB can be of substantial benefit to insurance companies by providing them with information and expertise necessary to go forward and efficiently put together the information necessary to evaluate the feasibility of civil litigation. They can also act as the liaison with appropriate government agencies who may have an interest in going after those professionals involved in such activities.”
Everyone seems to be in agreement. One of the primary answers to effectively prosecuting and collecting from organized criminal enterprises lies in our legislative process. Those states that do not have effective statutes in place should begin looking at those states that do. And eventually, we all hope, our early legal recourse activities will have enough of an effect to help put the brakes on the slaughter of innocents on the highways of America.
G. Andrew Nagle is an attorney with the firm of Johnson, Cebula & Rygh in Long Beach. He can be reached at (562) 437-0307.
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