New York City Police Commissioner Raymond W. Kelly,
Queens District Attorney Richard A. Brown, State Insurance Department
Superintendent Gregory V. Serio, State Taxation and Finance Department
Commissioner Andrew S. Eristoff and State Banking Department Superintendent
Diana Taylor today announced the arrest of 30 individuals who were part of a
sophisticated insurance scam involving lawyers, medical professionals,
individuals posing as injury victims and a member of the Bonanno crime family.
The arrests were carried out by the New York City Police Department's Auto Crime
Division commanded by Deputy Inspector Howard R. Lawrence.
David Moore and the other NYPD investigators began " Operation Fraud Factory" in
January of 2003 initially focusing on a clinic in the Richmond Hill section of
Queens called the Medical Arts Center. The investigation widened to show that
this criminal operation covered the entire spectrum of a medical insurance fraud
scam involving automobile accidents. Investigators believe this group generated
between eight and nine million dollars a year.
Commissioner Kelly said,
"Insurance fraud is taking money from the pockets of law abiding New Yorkers.
This is one 'factory' we're all happy to see close."
The lowest level
operators in this scam were the "victims" or "patients" recruited by "runners"
to participate in bogus accidents. Sometimes the accidents were staged between
two cars involved in the scheme or an accident was created with an unsuspecting
second vehicle. Additionally, the runners employed word of mouth within their
networks of acquaintances to locate individuals involved in real auto accidents
to play victim. The runner's role started with drafting the players, but also
included making sure the accidents happened believably and coaching the victims
through the medical and legal process that followed.
At the accident
scene, the participants would obtain a Police Accident Report or PAR. The
proprietor of the medical clinic, Arthur Bogoraz, and Bonanno associate Joseph
Fratta reviewed the PARs to determine which ones seemed least likely to raise
the suspicion of the insurance companies or the authorities. A rear-ended car
that was occupied by three individuals was an ideal type of accident because it
posed little question regarding cause and three individuals could generate a
The accident victims arrived at the Medical Arts Center
for examination. The doctor and other medical professionals then approved a
battery of tests including dental and psychological exams that were usually not
performed. Insurance companies generally have a limit of 30 days and $50,000 on
medical procedures performed after an auto accident. As a result, the clinic
quickly did everything it could to maximize profit. One standard practice showed
patients receiving two unnecessary MRIs costing $1,000 each. The runners
received approximately $1500 to $2300 for each patient they referred to the
center. Each patient was paid $500.
Lawyers and paralegals solicited
business from the patients in the confines of the clinic * which is in and of
itself an illegal practice * and filed suit against the automobile insurance
companies. Insurance companies customarily paid claims of $5,000 or more to
avoid the cost of a trial. This money was divided among the lawyers, the victims
and the runners with kickbacks to Joseph Fratta and Arthur Bogoraz.
one particular case, an accident victim, who was unaware of the scam being
perpetrated, arrived at the clinic for medical care. She received shoddy and
abbreviated treatment, but the scammers attempted to charge her insurance
company for as many tests as they could. This woman still experiences pain, but
is unable to receive the treatment she needs because her insurance company shows
her as fully examined.
Some of the fraudulent practices were captured on
police videotapes. Four search warrants executed in October 2003 yielded
approximately $100,000 and two guns.
This investigation is ongoing and
more arrests are expected.