36 Charged in $279 Million Car Insurance Scam

John Egan

Three dozen people -- including 10 doctors and three attorneys -- have been charged with exploiting New York state's no-fault car insurance law to defraud insurance companies of more than $279 million. Authorities say this is the largest no-fault car insurance fraud scheme ever prosecuted in New York.

Aside from the 10 doctors and three attorneys, the defendants include eight members and associates of a criminal organization, most of whom owned or controlled fake medical clinics.

Janice Fedarcyk, assistant director of the FBI's office in Manhattan, said: “Our investigation uncovered a pattern of lucrative fraud exploiting New York’s no-fault auto insurance system to the tune of more than a quarter of a billion dollars. The criminal enterprise, while it lasted, was obscenely profitable. The scheme not only unjustly enriched the defendants and defrauded insurance companies. Auto insurance fraud is also a crime that indirectly victimizes every driver in New York.”

Thirty-five of the suspects were arrested in New York and New Jersey, and one suspect was arrested in Minnesota.

Under New York law, every registered vehicle must carry no-fault car insurance, which enables the driver and passengers of an insured vehicle to obtain benefits of up to $50,000 per person for injuries suffered in a car accident, regardless of who's at fault. The no-fault law requires prompt payment for medical treatment, bypassing the need for victims to file personal injury lawsuits to obtain reimbursement. Under the law, patients can assign their reimbursement rights from an insurer to others, including medical clinics that treat injuries.

From at least 2007 through 2012, the owners of the clinics implicated in the scheme paid medical professionals, including doctors, to use their licenses to set up operations so that car insurers could be billed for bogus medical treatments. In effect, these medical professionals acted as “straw" owners of the clinics, authorities say.

The real owners of the clinics allegedly paid thousands of dollars in kickbacks to people who recruited car accident victims to undergo medically unnecessary treatments. Authorities claim that the straw owners were told to prescribe unwarranted treatment, such as physical therapy, acupuncture and X-rays. The real owners got kickbacks for patient referrals for these procedures, authorities say. Furthermore, the real owners also allegedly referred patients to personal injury attorneys who filed bogus lawsuits on behalf of the patients.

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