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Insurance > Car Insurance
Hundreds charged in insurance scam that cost State Farm $48 million
FRANK ELTMAN, Associated Press Writer. Associated Press
Copyright Associated Press
GARDEN CITY, N.Y. (AP) _ Hundreds of people _ including doctors, lawyers, chiropractors and psychologists _ have been indicted on insurance fraud and other charges involving millions of dollars in claims on staged auto accidents that prosecutors say was part of an organized crime ring with links to Russia.
Nearly 600 indictments have been filed in connection with the Brooklyn-based fraud ring, and further charges are likely, Suffolk County District Attorney Thomas Spota announced Tuesday.
The charges follow a yearlong investigation into accidents that took place on Long Island and in New York City, Spota said. Only 86 defendants have been arraigned so far, but the remaining indictments are expected to be unsealed in the coming days and weeks, he said.
In all the alleged accidents announced Tuesday, the insurance company was State Farm, which allegedly was defrauded out of $48 million. The average car accident resulted in claims of nearly $800,000, prosecutors said.
Michael Fella, executive director of the National Insurance Crime Bureau, an industry group, called it "the largest fraud investigation of its type in the country."
Karen Garsky, a State Farm spokeswoman, said that insurance fraud in New York has been estimated at "a billion dollar a year business."
Many of those arrested so far are American citizens of Russian descent living in Brooklyn, said Robert Clifford, a spokesman for Spota.
Clifford said investigators "definitely know profits gained by the ring ... were accessed by counterparts in Russia. This was an organized criminal enterprise."
According to investigators, the ring would pay $500 to people willing to be passengers in cars _ called "crash test dummies" _ that would prowl highways usually looking for women traveling alone or with young children, or elderly drivers. The scammers would then create a situation where they either crashed into, or let another vehicle crash into them at a slow rate of speed.
After the accident, the passengers would file phony claims of injuries with physicians and other medical professionals that the insurance company would then pay off, prosecutors said. The medical professionals were given a cut from the insurance payoff in return for their cooperation with the scam.
The cars usually used in the crashes were generally old clunkers in which the owner paid about $90 for a month's worth of insurance. In that month, the vehicle would usually be used in about four staged accidents.
In some cases, however, there were no actual accidents, but phony paperwork for claims were submitted for payment through the so- called clinics.
"It's not a medical clinic, it's a billing factory," said the district attorney.
Reproduced with permission of the copyright owner. Further reproduction or distribution is prohibited without permission.
Companies: State Farm Mutual Automobile Insurance Co(Ticker:X, NAICS: 524126, Duns:00-692-8097 )
Dateline: GARDEN CITY, N.Y.
Text Word Count 430
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