Looking back at a year of P&C insurance fraud in the Big Apple
Review a variety of cases from the Southern District of New York that highlight key features of these demonstrated (or alleged) insurance frauds.
Lawyers, accountants, other professionals, business people and consumers who are not directly involved in discovering, challenging and litigating insurance fraud matters likely would be shocked to learn about the breadth and prevalence of these schemes.
By the same token, one might think that the number and range of insurance fraud-related indictments, convictions and sentencings in just the Southern District of New York alone over the past year would be enough to warn potential fraudsters to think twice before acting. Yet if history is any guide, we can expect the volume and range of fraud schemes to continue to multiply, along with a steady stream of eye-opening fraud charges being filed throughout the next year in New York and across the country.
This column surveys a variety of Southern District of New York cases from the past 12 months, highlighting the key features of these demonstrated (or alleged) insurance frauds.
No-fault insurance
No-fault insurance fraud continues to be a major problem for insurance carriers and, because of the cost and the impact on premiums, for policyholders. Consider the case brought last January that U.S. Attorney Damian Williams referred to as a “$100 million automobile insurance fraud scheme” and one of the “largest no-fault insurance frauds in history.”
According to the charges, the defendants illegally owned and controlled more than a dozen medical professional corporations — including medical, acupuncture, and chiropractic practices — by paying licensed medical professionals to use their licenses to incorporate the professional corporations. The defendants allegedly bribed 911 operators, hospital employees and others for confidential motor vehicle accident victim information. With this information, they then allegedly endangered victims by subjecting them to unnecessary and often painful medical procedures, in order to fraudulently overbill insurance companies.
Then, in early April in a different case, Jelani Wray was sentenced to 84 months in prison by U.S. District Judge Paul G. Gardephe. Prosecutors asserted that Wray was a senior leader of a no-fault insurance fraud conspiracy spanning New York and New Jersey from at least in or about 2013 through in or about 2019 in which he and his co-conspirators bribed 911 operators, medical personnel and police officers for the confidential information of tens of thousands of motor vehicle accident victims. Using this information, prosecutors said, Wray and others contacted victims, lied to them, and steered them to clinics and to lawyers they handpicked. These clinics and lawyers then paid Wray and his associates kickbacks for these referrals, which they distributed to co-conspirators as payments and bribes, according to the government.
Licensed professionals
One can only speculate as to what would make a licensed professional risk his or her license, as well as prison time, by participating in egregious insurance fraud schemes. Yet it happens more often than one might expect.
Consider the case of Dr. Sady Ribeiro, a New York-licensed pain management doctor and surgeon, who pleaded guilty in late September, before U.S. District Judge Sidney H. Stein, to one count of conspiracy to commit mail fraud and one count of conspiracy to commit wire fraud.
As prosecutors explained, Ribeiro and others defrauded insurance companies and businesses by staging trip-and-fall accidents and then filing fraudulent lawsuits arising from those staged trip-and-fall accidents.
Prosecutors asserted that the participants in the fraud recruited more than 400 individuals (patients) to stage or falsely claim to have suffered trip-and-fall accidents at particular locations throughout the New York City area. As alleged, in the beginning, the participants in the fraud would instruct patients to claim they had tripped and fallen at a particular location, when in fact, the patients had suffered no such accidents.
Prosecutors alleged that, eventually, at the direction of the lawyers who filed fraudulent lawsuits on behalf of the patients, patients began to be instructed to stage trip-and-fall accidents, i.e., to go to a location and deliberately fall. Common accident sites used during the fraud scheme included cellar doors, cracks in concrete sidewalks, and purported “potholes,” according to the authorities.
According to the authorities, during the course of the fraud, the defendants and others attempted to defraud insurers or property owners of more than $31 million.
The government asserted that patients also were instructed to receive ongoing chiropractic and medical treatment from certain chiropractors and doctors, including Ribeiro. The participants in the fraud allegedly advised patients that if they intended to continue with their lawsuits, they had to undergo surgery. As an incentive to get surgery, the recruited patients were offered a payment of typically between $1,000 and $1,500 after they completed surgery, the government said. As alleged, patients generally were told to undergo two surgeries.
The government asserted that doctors participating in the fraud, including Ribeiro, “were expected to, and in fact did, conduct these surgeries regardless of the legitimate medical needs of the patients.” According to the charges, Ribeiro performed back surgeries, among other medical procedures, on nearly 200 patients—and, to maximize his patient base, he paid participants cash kickbacks in exchange for patient referrals.
The Coalition Against Insurance Fraud estimates that insurance fraud steals at least $308.6 billion every year from American consumers. Insurance frauds leading to criminal prosecutions and civil cases will no doubt continue this year and for years to come. The prosecutions and convictions, however, often lag years behind the commission of the frauds and in most cases touch only upon the proverbial “tip of the iceberg.”
Insurance carriers’ fraud departments and federal, state, and local authorities will need to keep a keen focus on fighting fraud and evolving schemes to limit the damage to insurers, policyholders, businesses, and consumers alike.
Michael A. Sirignano is a partner in the insurance fraud and commercial litigation practice groups at Rivkin Radler.
Opinions expressed here are the author’s own.
Related: