Barriers to Prosecution of Fraud Cases Include Finding an Effective Prosecutor

The biggest barrier to effectively prosecuting individuals who commit insurance fraud is finding an effective prosecutor, Scott Cassidy, chief of special prosecutions, Cook County State’s Attorney’s office said to a gathering of insurance fraud investigators, legal experts and law enforcement.

On May 21, Des Plaines, Ill.-based the National Insurance Crime Bureau (NICB) and Springfield, Ill.-base the Illinois Insurance Association held a summit to discuss various aspects of the fight against insurance fraud, including the topic of barriers to effective prosecutions.

“The high volume of cases and fraud’s sometimes complicated issues can often be a deterrent for prosecutors,” Cassidy said. “The most important thing a special investigative unit officer or company can do is develop a strong, working relationship with a prosecutor.”

Cassidy added that it is also important to put a “face” on the case with details, explanations and background that personalize the individual or group charged in the case. This helps the prosecutor determine how to spin case to the judge.

“You want a prosecutor to become passionate about your case so he will see it through to the end,” he said. “For that to happen you need to spend the time and energy to give him all the details and let him become invested in the case.”

An additional deterrent is that attorneys often find “white collar” crime with hefty dollar amounts confusing. “We aren’t numbers people,” Cassidy said.

NICB backgrounders concur with Cassidy and conclude that insurance industry studies indicate 10 percent or more of property/casualty insurance claims are fraudulent. And fraud is the second most costly white-collar crime in America behind tax evasion.

Moderator of the panel, NICB’ s Bill Schroeder said “Add it all up and insurance fraud costs Americans billions of dollars each year. Not only does fraud cause higher insurance rates, but it also raises our taxes and inflates prices for consumer goods.”

Cassidy encouraged insurance investigators to utilize the NICB database and work through the organization, which has a reputation for quick turn around time and networking with all involved, he said.

Emerging Issues

Brian Wilson, vice president of Zurich North America’s Special Investigative Unit, said another challenge faced by insurers and law enforcement is that the level of sophistication of the gangs and other groups committing the fraud crimes has risen dramatically.

“Many gang members now know how to access data and have taken the time to have knowledge about how the systems work,” Wilson said. “In one medical billing case the criminals created a legitimate company to handle the billing and then bilked the money from providers through the company they created.”

Wilson said gangs have moved to the suburbs, have access to computers and know how to use them and all the other technology advantages available. The new technology has allowed criminals to expand what they can do and how effective they can be.

Wilson said that special investigative units are relying more and more on data systems too, but still need to follow all the evidence, including interviews, fact checking and more.

“As good as they are, our databases can be overwhelming. It is more crucial now than ever before that investigators, the industry and others know how to sort through the data they have, and recognize what is important and what is not,” Wilson said.

He added that alignment of regulatory, industry and law enforcement resources is crucial to success in fighting insurance fraud.

Wilson said that the economy also contributes to the increase in insurance fraud.

“When people are out of work the situation presents a large recruitment tool to commit insurance fraud,” Wilson said. “In down times people are more willing to cross the line.”

Water Restoration

Another topic the NICB panel discussed were water restorations companies lack of oversight and licensing.

Farmers Insurance Group Senior Special Investigator R. J. Wilkinson said that one of the biggest problems insurers have is that water restoration companies are unlicensed and unregulated.

“Many water restoration companies are legitimate, but they are not regulated and many of the employees are not trained,” Wilkinson said. “Overcharging for services is just part of the problem.”

Wilkinson said solutions to this problem include better training of insurance adjusters on specific water and fire damage detection and then, overall agent education.

“The industry also needs to have better oversight of contractors who are hired after the water restoration people have done their jobs,” he said. He added that fraud reporting by agents and adjusters has to be a top priority in order to curb the problem.

The Federal Bureau of Investigation pursued 529 financial crime cases in its most fiscal year, including 209 insurance fraud cases. The 209 insurance fraud cases investigated resulted in 39 indictments and 47 convictions. The FBI says it realized $27.2 million in restitution and $427,000 in fines from insurance investigations. The FBI expects the number of cases and subsequent arrest and conviction statistics to rise in the near future as more fraud from Hurricane Katrina is uncovered.
Source: FBI, Insurance Journal

• Premium Diversion
• Fee Churning
• Asset Diversion
• Workers’ Compensation Fraud
• Disaster-Related Fraud

Source: FBI