Law Enforcement Today: Inside the Staged Accident Rings Bleeding Millions From Insurance
By: Damien Caldwell
Guest author Damien Jonathan Caldwell is President of the iFraud Foundation, Inc., a New York-based organization dedicated to combating insurance fraud through industry collaboration, education, and advocacy.
Insurance fraud has long been a drain on resources, trust, and justice within the insurance industry. But few schemes have been as elaborate or as disturbing as the rise of staged accident rings. These operations function as criminal enterprises, orchestrated like a business yet with devastating consequences for the very real victims, as well as the overall economy.
In this article we’re going to break down the anatomy of one such ring, exposing a pipeline that runs the gamut of criminal activities including immigration, staged accidents, money laundering, wire fraud, legal services, and healthcare fraud. Let’s examine how each cog in this fraud machine fits into the larger scam.
Organized Crime Entity (OCE): The Architects of Exploitation
Let’s begin at the top of the pyramid, where we would expect that a high powered legal firm would be seated. Now whereas, they are absolutely required, and in some instances they do hold the top seat, but not for the ring we’re examining. Here, atop sits the Organized Crime Entity (OCE). A criminal syndicate that designs and oversees the operations and in many cases multiple syndicates that work collaboratively for their mutual benefit. These groups actively scout two types of vulnerable individuals. The first, are citizens of impoverished countries, desperate to enter the United States. With promises of passage, employment and a better life, they bait their victims who unknowingly are entering into what in reality is an offer of conditional servitude in a fraudulent scheme. The second targeted group are local legal migrants and lower income individuals who they manipulate with promises of quick cash or big payouts for their participation.
These entities treat insurance fraud not as a side hustle, but as a complete business model, from logistics, finance, legal teams, to their human supply chains. The migrants, illegal or not, becomes a disposable tool in their operation, and fraud is the product they manufacture.
Human Trafficking Meets Fraud: The Migrant and The Coyote
The journey into perpetrating a crime for these migrants begins with the so-called opportunity presented to them in their home country. Seeking stability or an escape for them and their family from their native country they agree to whatever terms are laid out for them without realizing the severe consequences that await them, especially if successful in their endeavors. These migrants are eassigned to a “Coyote” (term for the person(s) that brings them across the border). This human smuggler, generally connected to directly or paid by an OCE, transports them into the country and delivers them to their designated locations within the U.S. They supply not only transportation but assist them with documentation well. This may include stolen identities, fake OSHA cards for construction employment, or more.
Once inside the country, migrants are placed in apartments, hotels or other places of residence that have, in many cases been funded by the law firms. Whether the migrant actually resides there or not becomes irrelevant as these are the addresses that are utilized in their job applications, and fake claims. Indebted to these OCEs they are now at the mercy of the handlers who control their movement, employment and eventual participation in staged accidents.
Apartment Address: Creating a False Paper Trail
In New York City, over 4,200 claims have been tied to a mere 28 addresses within 4 of the 5 boroughs. Deeper dives into these addresses reveal that many of them have been funded by entities related to or directly by the law firms themselves. This consistency allows for mass coordination of document generation, claim filings and management of their human supply chain.
What are now referred to in the industry as “hot bed addresses” have become red flags for claims adjudicators and defense firms. In our own research of hot bed addresses we discovered that several of them were actually hotels, while others have reported over 500 residents having resided at a single one bedroom apartment. Investigations have also identified clusters of addresses where claimants, relatives from the same countries and the same towns reside blocks away, but have filed injury claims days apart. Sometimes with the same employer, while other times they spread the scheme across several projects.
Participating Law Firms: The Legal Machine Behind the Fraud
No successful fraud ring can operation without the complicity of a well funded nefarious legal firm. Participating law firms serve as far more than the classic ambulance chaser, but act as the facilitators, guiding the fraudulent process from initial intake through claim payout. In some instances, it is actually the law firm who is providing the initial injury reporting. Their roles include but are not limited to:
Supplying housing addresses for residence or documentation
Working with runners who deliver new claims to them
Coordinating with cooperative medical clinics and professionals
Connecting and facilitating Third-Party Litigation Financing (we’ll discuss that later)
Filing and managing lawsuits on behalf of the staged “victims”
Let’s be fair though, these firms are not completely fraudulent, they handle a number of legitimate claims as well. But beneath the legitimate exterior, they are deeply embedded with or perhaps are now held hostage by the OCEs.
These injury firms have excelled in collaboration, as an industry the firms have spent millions investing in the development of technology which houses information on every insurance carrier, defense firm, jurisdiction in which they come into contact with. Unlike the defense side of the coin, they are not hesitant to share their information amongst themselves. The data analytics conducted by these firms create a profile not just for a region, but for each target. They know who, where, when, and how hard to push to settle cases for the best return.
Impressive as that may be, information alone is not their only tool. Recently, it has come to light that in one New York City jurisdiction where the lead litigator for a firm named in several RICO (Racketeer Influenced Corrupt Organization) cases held all his cases, was related to a Supreme Court Judge in that very district. Now we can’t point to any direct claims of influence or illegal activity, but when news came light earlier this year, it led to said attorney taking cases in other jurisdictions. Leaves one to strongly question however if that district was completely void of impropriety.
From a vast information network, to a network of legal and political connections, the stage for these firms to play their part in assisting the OCEs is clear. In fact, the law firm of Subin and Subin when faced with multiple RICO (Racketeer Influenced Corrupt Organization) allegations, withdrew themselves from close to 300 cases, for multiple reasons, but primarily claiming that they suddenly believed their claims may have been fraudulent in nature. In total, New York courts have seen over 600 withdrawals from multiple firms in the past year alone. At an average settlement of $1.5 million, that represents nearly $1 Billion dollars in fraudulent claims that were withdrawn. Let’s let that number sink in.
Fake OSHA Training: Manufactured Legitimacy
So, how do illegal migrants get on job sites you may ask? Well, to further legitimize the scheme, these organizations have managed to penetrate and corrupt even some legitimate safety training organizations. That in conjunction with their forgery, provides migrants with OSHA training course certifications and fraudulent OSHA cards. The only real course being offered is how to file a 240 Labor claim in NY. Sometimes this occurs just days before a planned incident.
In speaking with risk managers, we came across one who unknowingly attended such a course while attempting to re-educate themself on safety procedures, and see what their crews were learning. This risk manager was shocked to sit through a lecture on proper ways to file claims, seek counsel and what to after. Obviously, the incident was reported, but the reality is that is one of numerous facilities in which this is occurring. Upon completion, the fraudulent credentials enable the migrants to pose as legitimate construction workers on job sites for unsuspecting subcontractors. In some instances, they don’t even have legitimate employment on a job site, they simply gain access and stage an accident!
In many cases, the individual performs no real work or only appears on-site briefly. But thanks to the falsified OSHA documentation and in some cases an employment connection on the inside, they now have all the elements necessary to stage a workplace injury.
Construction Job: The Set Up to the Fraud
Once on-site, the migrant is strategically placed in environments where an injury can be staged. Sometimes this involves small, low-risk jobs where a fake fall or accident is easy to simulate. Other times, the accident is outright fabricated, no real incident ever occurs, as can be seen in the YouTube video series called NY Fraudemic in which on one such “accident”, the worker is caught on video, standing behind a dumpster bin waiting for the ambulance, which he called to arrive. When he hears it approaching he lays down on the floor and puts on an award winning performance.
The “injury” is usually carefully timed, to ensure that there are no witnesses to the incident but easily discovered by coworkers or others.
This is the inflection point of the fraud scheme. The migrant is instructed to fake an injury and initiate a claim. They may allege a fall, impact, repetitive stress, or another workplace-related trauma. The goal is to trigger a chain reaction involving:
Workers’ Compensation Claims
Injury lawsuits
Unwarranted medical treatments
Disability applications
This is the moment when the fraud enters the official system and starts bleeding resources from legitimate insurers and employers.
Medical Providers & Imaging: “Doctoring” the Injury
At this stage of the scheme, enters the treating medical provider. These are providers, to whom the injured “worker” is almost always directed to by their newly found legal representation. Their job is to fabricate or exaggerate diagnoses, schedule the “injured workers” for expensive and unnecessary treatments. They validate these treatments with diagnostic images that have been found to be completely fabricated utilizing technology, or re-using images that belonged to another patient and have been doctored and made to appear as if they belong to the injured worker. They also re-use medical reports, as has been the case with multiple surgeons, who appear to have utilized the same medical report, in one instance over 40 times to validate unnecessary treatments and subsequent surgery.
New York State is one of several with clear treatment guidelines for injured workers which medical providers must adhere to. However, each of these claims and injured workers have accepted the terms of a litigation funding loan. This means that the medical provider, who normally would not move forward with a procedure that has no been approved, are now free to do so as their treatments and subsequent surgeries are covered by the litigation financing loans.
This means that versus the established course of treatment recommended for say a spinal fusion, the provider is able to do so, without any true indication, many weeks before the guidelines would indicate it necessary. In a documented instance buy the iNYS Workers’ Compensation Board, they rejected the renewal of Dr. William Lerman’s certification to treat Workers’ Compensation patients, due to his continued disregard of the guidelines. This provider performed spinal surgeries as soon as 2 weeks post alleged accident. Unethical medical providers who have sworn an oath to do no harm and are now performing spinal fusions, and other debilitating surgeries on otherwise health twenty-something’s in the prime of their lives. This leaves them with debilitating injuries and pain for the remainder of their life.
In a recent RICO suite filed by Merchant’s Insurance, a 23 year old claimant with a lower extremity injury was led to have multiple shoulder, and spine surgeries and a subsequent rejected attempt to claim a Traumatic Brain Injury as well. In one of the first stories shared by the NY Post, a twenty-something female, migrant was subjected to multiple fusions, and screws in her spine. She admitted to having participated in a staged accident scheme and her regret as she realizes that she will live in pain now for the rest of her life.
There are a number of reasons why these medical providers may fall into this trap but frankly, none of them matter. They are doing harm for money and butchering young men and women with procedures which they know are not indicated and will leave them in a state worse of than when they met them.
What is the industry doing to combat this Fraudemic
Continuing to let this problem go unchecked is no longer an option. Insurance premiums on construction projects are 3 to 4 times higher than the national averages, that’s if you can get one of the four remaining insurance companies to write coverage. The trickle down effect impacts that costs of rent, groceries, and the every day items we rely on daily.
So how is the industry fighting back, some brave carriers, like Tradesman, Roosevelt Road Re, American Transit Insurance Company, Merchants Insurance, GEICO and Liberty along with employers like Uber have taken to pulling together all of their information and have filed Civil RICO suits in the Eastern and Southern Districts of NY and other states. These suits clearly detail the allegations against the alleged players including, law firms, medical professionals, runners, clinics and diagnostic facilities.
We have also seen the formation of individual specific coalitions, in New York we have a Staged Accident Coalition as well as a Scaffold Law Coalition, these coalitions are made up by members of the industry from employers, trade organizations, attorneys, relation firms and lobby groups to help facilitate legislative reform such as endorsement for bills like S8413/A8981 which would make staging a construction site accident a Class E felony. As Andriana Vamvakas, President of Andromeda Advantage states “It’s a necessary step to preserve the integrity of our worker compensation system and ensure resources go to those who genuinely need them.
Another significant development in the fight against fraud is the formation of the iFraud Foundation. This not-for-profit 501c3 was born out of a unique collaboration among industry stakeholders from the private and municipal sectors with one goal, collaboration in the fight against insurance fraud.
The iFraud Foundation
The Board Members of the iFraud Foundation are from across the industry sectors and include, Arch Insurance, ConEdison, Andromeda Advantage, Alliant Insurance Services, L&M Construction, Lawsuit Reform Alliance of NY, Cullen & Dykman, Atlantic Mutual Insurance and Cohen Vaughan. With an Advisory Committee made up of representatives from the NYC School Construction Authority, The Port Authority of NY & New Jersey, Tully Construction, Lettire Construction, StructureTone, and the Association of Builders and Contractors.
The foundation’s goal is to create a collaborative united front across the industry among all stake holders. Through the collective sharing of data the foundation has designed and developed the iFraud Insurance Defense Database, a means for the industry to proactively identify potential insurance fraud, share information and collectively fight fraud, and initiate real change with objective data that can only be obtained through collaboration.
Additionally, the Foundation works with the industry in investigating and reporting potential fraud, advocating for legislative reform and taking a very active boots on the ground approach through its participation on the previously mentioned coalitions and task forces to help our industry combat this problem. It’s educational program iEducate produces the Virtual Deep Dive Podcasts which break down the complicated legal matters and fraudulent schemes so that everyone can understand what is transpiring and why they are impacted. While its Insights. Intouch. Podcast hosted by former ABC News Investigative Reporter Kristin Thorne (responsible for breaking the staged construction accident story) interviews key stakeholders and players in the industry to share their stories and impact this fraudemic has had across the country.
The Foundation’s efforts since its inception have been significant and far reaching and it is just getting started. It will continue until its mission is accomplished because its board and committees are made up of members who believe in the cause, and recognize that this is not just a business or economic problem anymore, it has become a human problem, with trafficking, laundering and support from known terrorist organizations, it needs to be stopped.
If you would like to learn more about the iFraud Foundation and how you can get involved in this national effort, email them atgetinvolved@ifraudfoundation.org