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On a recent trip to “Nawlins” (as anybody who knows anything pronounces it), I had the opportunity to sit down face-to-face with a dozen SIU investigators representing seven companies. Thus, the following information comes from sources that I deem to be highly reliable. Not surprisingly, however, company personnel were reluctant to be identified and quoted. Out of deference to confidentiality, the following article is devoid of specific names attached to the quotes.
There’s a saying down in New Orleans: “Half of the city is under water and the other half is under indictment.” When people hear this, they will snicker and laugh, like they’ve just heard a side-splitting joke. But for those who live there, there’s also an element of pain. The city, recognized for the gaiety of its Mardi Gras, for its incomparable Cajun and French Creole cuisine and for its rich and colorful history, also has a dark side that threatens all that is good. There is corruption, on every level, in every corner; and some people’s pockets are lined with stolen gold.
In New Orleans Parish alone, conservative estimates of losses to auto fraud are in the range of $20 million per year; but realists think the loss is probably between $50 million and $75 million.
With a racial split of 65 percent black and 35 percent “other” (combined Caucasian, Asian, Hispanic, etc.), much of the fraud begins to take on overtones of color. At first telling, the stories sound just like those heard in dozens of other locations throughout the country. One ring favors the swoop and squat scenario; another ring works alone – foregoing the swoop vehicle and preferring to use just a single car to squat in front of the victim. Yet another group will stage late-night accidents on favored street corners and maintain its control over the drivers and occupants of both vehicles. These groups all have their own fingerprint accidents, each bearing the telltale markings of the group behind it.
But in New Orleans, there is another aspect, a sinister ingredient that vastly changes the equation of fraud.
“I recently had a long conversation with a white tow-truck driver,” related an investigator for a major insurer, “He complained that even when he was the first tow-truck driver to arrive at the scene of an accident where one or more cars needed to be towed, he’d usually be waved away because the people involved in the accident were waiting for ‘their own’ tow-truck company to respond.”
While some areas of the country are overwhelmed with staged accidents, wherein medical treatment and questions of liability are at the heart of the claim, New Orleans players prefer to milk the insurance cow from all four teats at once. The first three consist of the medical/legal angle, the peripheral services – ie. the tow-truck, the rental car, etc. – and the body shop angle. The fourth – and probably the most unsettling of all – is made up of law enforcement personnel and other government agents associated with the business of accidents.
“It is not unusual for the runners to arrive at an accident scene before the police get there and start handing out law office business cards,” says a lady SIU investigator. But how do they get there so fast, we ask? “It’s not too difficult,” she responds. “It happens when the police dispatcher, the one who received the call from the scene, notifies a runner or a preferred tow-truck driver (one who will kick back a little something) or even a preferred ambulance company before the police call even goes out over the radio.”
“There’s also the problem,” adds another investigator, “of the handheld police radios that are kept on the front seats of those cars driven by the runners or tow-truck drivers. So the guy who chases accidents for a crooked attorney hears about the location of an accident at the same instant as the police officer responding to the scene.”
He’s speaking of the police band radio, a special frequency that can be picked up only by official police communications equipment. The system, implemented just a few years ago, was meant to cramp the style of those who would monitor police frequencies, using equipment anyone could easily purchase from Radio Shack. But how do the bad guys get their hands on these handheld police radios? “Plain and simple,” is the answer, “the going rate to rent a radio from an off-duty officer is $160 per eight hour shift.”
An officer putting in 40 hours a week at work could conceivably pick up $20 per hour for the 128 hours he isn’t carrying his own radio. A little simple mathematics – $20 x 128 hours – yields a whopping $2,560 per week! Multiply that number by 52 weeks in a year – not bothering to compute the piddly little stuff like vacations, holidays and sick days – and an officer’s potential profits for renting out his radio hit an astounding $133,120 per year.
“New Orleans is noted for having some of the lowest paid police in the nation,” says another investigator, “yet some of these guys, who are earning only about $25,000 a year, are living in homes that cost between $300,000 and $400,000.”
These problems within the police ranks, while certainly not involving all officers, are pervasive enough to put a serious dent in enforcement efforts. It doesn’t start and stop, however, with the officers on the street; it extends way up the ladder, to the higher reaches of the department as well. In fact, the last two Commissioners of Insurance for the State of Louisiana, Sherman Bernard and Doug Green, were both convicted and sent to the federal penitentiary. Not to be outdone, one of the Deputy Insurance Commissioners has traveled the same road; since his release from prison, he is once again actively employed. Only now he works as a legal assistant for an attorney whose accident files have often come under the scrutiny of the various SIU departments.
According to investigators, under Jim Brown, the current Insurance Commissioner, the Louisiana DOI places the majority of its enforcement emphasis on protecting the general public from misdeeds perpetrated by insurance companies – not the other way around. Louisiana is very much a plaintiff-oriented state, they say.
Adding to the problems encountered by the fraud-fighting industry, are the rules governing political contributions. A politician is required to list only the amount of money contributed to his or her election coffers and the source of that contribution. Thus, certain large law firms and medical practices, coincidentally the same ones whose names appear over and over again on certain types of accidents, can contribute huge amounts of money to individuals running for political office, including those sitting on the bench as judges. Although the main player in the firm may only contribute $5,000, others in the office do likewise: including the legal assistant, the office manager, each secretary, every clerk, even the hourly employee who empties the waste baskets. In some cases, the mothers, fathers, uncles and brothers of everyone concerned also act as donors. In short, it is not uncommon for a politician’s campaign fund to be enriched by significant amounts of money from a single business source. Complicating matters further, the rules associated with spending that booty are loose as well. Who is to say that the $100,000 spent to re-carpet or re-furnish the politician’s personal residence – out of campaign funds – is not proper? After all, he does occasionally entertain constituents at his home. Ditto on purchases of fancy clothes and automobiles and selective hiring of staff.
Companies are often hesitant to take even the most notorious fraud cases to trial, a fact which the plaintiff bar is fully aware of. It’s bad enough that the judge could conceivably have received a very large campaign contribution from the offices of the very attorney set to plead the case of an allegedly injured plaintiff. When an unpredictable jury system is added into the mix, it can be hard to maintain any sense of fairness or justice.
In some ways, a recent case heard in New Orleans Parish bore an eerie similarity to the situation seen in South Central Los Angeles, wherein a jury was asked to decide the fate of OJ Simpson. The jury’s motto could well have been characterized as, “Damn the evidence, full speed ahead.” With two bulging disks in his lower back, the plaintiff in the New Orleans case was a crooked attorney’s dream-come-true. The accident – or nonaccident as the defense insisted – was questionable at best. The plaintiff vehicle, driven by a black man from French Guiana, slammed on its brakes in front of the insured vehicle, driven by a white man. Evidence offered at trial showed there was no contact between the vehicles, supporting testimony from the insured that he had been able to stop about three inches short of the squatting vehicle. There was no damage to either car, not even a scratch, but the plaintiff claimed there was contact. The plaintiff did not appear in court or testify in any fashion – primarily because he’d been deported months earlier in conjunction with other illegal activities. When a noted accident reconstructionist was brought in as a witness, the judge wouldn’t even permit him to speak. “We don’t need to hear from some fancy guy from New York,” the judge opined. “This is Louisiana.” Later, both of the plaintiff’s two witnesses were caught lying under oath on the stand – not just once, but numerous times. The alleged injuries to the plaintiff were proven to be pre-existent – in direct conflict with the testimony he gave during his deposition when he claimed never to have had any prior back problems.
The jury, made up of 12 blacks, voted for a plaintiff award of $160,000. The insurance company had what they considered a cut-and-dried case. It was bogus from the outset, and they had been able to disprove every single facet of the plaintiff’s claim. But, in the end, the facts just didn’t matter.
“Awards like this make it difficult to take a case to the trial phase,” says one of the discussion participants, a southern states manager, “and the plaintiff attorneys nearly wave this flag in our faces during the pretrial stages of negotiation. They’re not afraid to enter the courtroom because the deck is stacked so heavily in their favor.”
Do plaintiffs actually get the medical treatment they claim to have received? It’s anybody’s guess because the questionable medical clinics in New Orleans have their own unique manner of operation. First, there are no laws governing ownership; a lawyer can open a medical clinic under his own name or a family member’s name. An investigator who’s done far more than his share of clinic inspections comments, “Some of the medical clinics are staffed by physicians who wouldn’t be allowed to work anywhere else. They may have a medical degree from Jakarta or Damascus. There’s no threat of malpractice, though, because the clientele is strictly controlled and these doctors are never really on duty. Essentially, they just act as signatories.”
What about the treatment provided? “What kind of a clinic won’t take a patient off the street?” he adds, “A patient could be standing in the front doorway, having a full-on heart attack; but unless the guy’s been referred to the clinic by a particular attorney, nobody will help him. What kind of a clinic is that?” Treatment – what’s given – is also a sham. The receptionist often doubles as the physical therapist, and TENS units are handed out like so much Halloween candy.
A piece of legislation passed in 1993 was meant to change things by making it illegal for an attorney to pay a runner. The law was easily circumvented, though – now the doctor pays the money to the runner.
Many in the industry think it is the runners who create the claims. All nod in agreement as one of the investigators comments, “Many of the accidents we see – the ones that occurred legitimately – become claims simply because the runners and some of the police officers who respond to the scene create the injuries for the sake of insurance claims. If these individuals weren’t there, the accident would probably end with a bent fender and a broken headlight.”
Some accident scenes offer a perfect opportunity for another favorite in bogus claims – stuffers. A vehicle that had only one or two occupants at the time of the accident may suddenly have its passenger count escalated to five or six by the time the claim is presented to the insurer. Where do these extra people come from? “It’s the runner. He’ll go to the closest phone booth and make a fast call; suddenly, four more people show up out of nowhere and claim to have been in the car when it was hit,” says another.
There have been some successes over the past few years, but they’ve been small in comparison to the overall problem. In early 1996, as part of the Sudden Impact initiative, two policemen were arrested and charged with insurance fraud for writing up false accident reports. Information gleaned during that investigation included the going rate for a bogus accident report: $300 to $500 per report, paid by the runners.
The problem is not new; it’s been going on, nearly unchallenged, for many years. In 1979 federal officials seized medical and legal records pertaining to a suspected organized auto insurance fraud ring. Analysis of the seized records revealed 63 of 170 patients interviewed reported a runner or a police officer had referred them to the law office involved. Of further interest, 35 of 72 claimants reported they were given “accounts” with the attorneys’ offices and received “loans” against their eventual anticipated settlement.
“Operation Bone Cracker,” an investigation focusing on low impact rear end collisions occurring between December 7, 1995, and April 9, 1996, was also a success. Interestingly, the investigation led to the seizure of records at a law firm owned by (oh my, what a coincidence!) a Los Angeles attorney. Those arrested were predominantly poor Hispanic people recruited to take part in the staged accidents.
Another ring, broken earlier this year, involved individuals with alleged ties to the Russian Mafia. The law offices and medical treatment centers set up to handle the claims were similar to those springing up in metropolitan areas throughout the USA. Some blame their lack of success – they were busted very early in the overall game – on the fact that they were “outsiders,” trying to cash in on money that could be better directed to local scamsters. Crooks are not happy when other crooks invade their turf, and the Russians didn’t have the established ties to law enforcement and the judiciary that the local organizations have.
The insurance fraud problems so prevalent in the automobile accident arena do not start and stop with staged accidents. Joe Giglio of the Workers’ Compensation Commission and Tony Radosti of the Louisiana Crime Commission see many parallels between the players in the auto scams and the players in other areas of insurance. “Bogus workers’ compensation claims are on the rise,” says Giglio, “and we’re seeing the same doctors names popping up on these medical reports as we see in the fraudulent automobile claims.”
With so many things negatively affecting the fight against fraud, what are some of the answers? One former FBI agent expressed the opinion that federal assistance is needed. “Insurance fraud is unfortunately low on the totem pole,” he says, “and the manpower at the FBI is predominantly aimed at organized crime. It is up to the insurance industry to sell the fact to those at the federal level that insurance fraud is a major, major problem.”
Everyone agrees that solving the problem will take a concerted and cohesive effort by each of the insurance companies actively doing business in the area. “It’s imperative that we maintain open lines of communication between the carriers. It’s also necessary to let companies with a smaller New Orleans presence know exactly what the story is down here,” comments one of them.
One of Radosti’s duties is getting the message out to the public. Insurance is paid for by each and every citizen and the cost of fraud is not borne by the companies but by every policyholder. “The public needs to understand that all this money sliding through the cracks belongs to them. They need to get angry enough at the system that things will change. Education can do that.”
Everyone agrees that establishing a local IASIU chapter was a step in the right direction. Membership is growing every month, and the opportunity to sit down face-to-face to discuss the problems and the issues affecting everyone who does business in the New Orleans area is proving to be very beneficial.
They also agree that the media, if it is responsible in its reporting, is necessary for the eventual solution. Video footage of a doctor or an attorney being put in handcuffs can send a strong message to other white collar professionals contemplating an easy buck. Reading about the mass arrests and incarceration of others involved in the scams can make the general public think twice before becoming involved. And hearing that the insurance
industry is not simply going to lie down and spill out coins without a fight may be the strongest deterrent of all.
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