Auto No-Fault Fraud Reaching Unprecedented Levels
Written by: Robert Abramson
As seen in DRI’s “The Whisper”
Oklahoma Insurance Commissioner, John Doak recently purchased a Chevrolet Tahoe. According to the Tulsa World, the message on the back window, in bright white lettering, reads: “This car was paid for by fraud funds not at taxpayer expense.”
The anti-fraud unit also purchased hightech shotguns, bulletproof vests and seven police-package vehicles to combat criminal insurance fraud.
Welcome to the Wild, Wild West of auto no-fault insurance fraud.
Oklahoma just passed Senate Bill 1439, which goes into effect July 1, 2013. The new law makes insurance fraud a felony, allows a prosecutor to group several smaller thefts together and charge the perpetrator with a more serious crime. Punishment ranges from a $1,000 fine to a maximum of five years in prison.
New York recently cracked down on arguably the single largest no-fault insurance fraud case in U.S. history: $279 million. Mikhail Zemlyansky, the mastermind behind the operation, created a scheme encompassing more than one hundred clinics, thousands of patients, ten corrupt doctors and three law-breaking lawyers, which was verified via a release provided by the FBI’s New York field office on February 15, 2013:
- Runners were paid $2,000 to $3,000 each to recruit the patients and coach them on how to fake their injuries to maximize medical treatment.
- In order to mislead New York authorities and private insurers, some of the defendants in this case who were the true owners of these medical clinics (“No-Fault Clinic Controllers”) paid licensed medical practitioners, including doctors, to use the practitioners’ licenses to incorporate the professional corporations through which the medical clinics billed the private insurers for the bogus medical treatments.
- The No-Fault Clinic Controllers also instructed the clinic doctors to prescribe excessive and unwarranted referrals for various “modality treatments” for nearly every patient they saw.
The scheme came to a crashing halt when two undercover New York police officers posed as accident victims and witnessed the operation first-hand. Thirty-six defendants were charged with conspiracy to commit mail fraud and health care fraud. Ten of those defendants, including a licensed doctor and an attorney, have pled guilty.
Likewise, it is not surprising that Michigan, the only state in the country with unlimited and lifetime no-fault medical benefits, is dealing with its fair share of no-fault fraud. State Farm filed a federal RICO lawsuit against four Michigan doctors and two physical therapy facilities, asserting damages in the amount of $1.9 million.
The complaint alleges that the doctors and clinics submitted hundreds of bills and related documentation that were fraudulent because the services either were not performed or were performed pursuant to a fraudulent predetermined protocol of treatment (“Predetermined Protocol”), rather than to address the unique needs of the individual patients.
Remarkably, Michigan is one of the few states in the country that does not have an anti-fraud bureau to investigate insurance crimes. That may change in short order. House bill 4612 was recently introduced, which would create an automobile fraud authority focused on crash rings and other auto-insurance crimes.
Nationally, more and more insurance companies are creating specialized units to investigate suspected shady doctors and facilities. Defense lawyers are frontline fraud busters in this fight, and by alerting insurance companies and state investigators to what they uncover through depositions and discovery in their no-fault cases, the exposure of insurance fraud and accompanying RICO lawsuits may become a routine headline in the morning newspaper.