Prepared Remarks of Assistant Director in Charge Janice Fedarcyk on Arrests and Charges in $275 Million No-Fault Auto Insurance Fraud Scheme
|FBI New York February 29, 2012|
Early this morning, FBI agents and detectives from the New York City Police Department began arresting members of a criminal conspiracy who are charged as a racketeering enterprise in the largest no-fault auto insurance fraud ever charged.
Search warrants were also executed at six Brooklyn locations and one in the Bronx.
The case is the result of an 18-month investigation by the FBI-NYPD Eurasian Organized Crime Joint Task Force.
The investigation uncovered a pattern of lucrative fraud dating back to at least 2007, exploiting New York’s no-fault auto insurance system to the tune of more than a quarter-of-a-billion dollars. The defendants are also charged for an extensive money laundering scheme in which they sought to conceal the vast proceeds of the enterprise.
The scheme involved a network of fraudulent medical clinics, purportedly owned by licensed physicians—as required by law—but in fact owned by Russian criminals who were the ringleaders of the scheme.
Other key players in the scheme include corrupt doctors, who were the nominal owners of the clinics and who prescribed excessive and unnecessary treatments for auto accident passengers.
Additionally, dishonest lawyers filed spurious personal injury lawsuits on behalf of accident passengers and advised them on what injuries to claim to bolster the bogus suits and maximize the unnecessary treatments.
The lifeblood of the fraudulent scheme was a steady flow of car accident “victims” who could be steered to the fraudulent clinics. Lower-level members of the conspiracy, called “runners,” were paid between $2,000 and $3,000 per patient referral.
Unlike some other insurance fraud schemes we have seen, the enterprise charged today is not alleged to have engaged in staged auto accidents. Staging accidents runs the risk of being discovered before the “victims” even start the claim and treatment process.
The runners here were paid to find passengers from real auto accidents, although the crux of the fraud was that the treatments prescribed were medically unnecessary. The accidents were real; the injuries claimed were not.
This criminal enterprise, while it lasted, was obscenely profitable. No-fault auto insurance fraud results not only in the unjust enrichment of the fraudsters and the defrauding of insurance companies. It is also a crime that indirectly victimizes every driver in New York. Wholesale fraud is an expense that drives up the cost of insurance.