News: 2007 Press Release

LOS ANGELES - An historic two-year undercover sting operation by the Los Angeles County District Attorney's office has disrupted the work of a dozen law office administrators who allegedly routinely defrauded insurance companies. But prosecutors say, "It's only the tip of the iceberg."

"The prevalence of automobile fraud in Southern California has earned Los Angeles the reputation of being the fraud capital of the world," District Attorney Steve Cooley said today. "Thanks to a joint operation with the California Department of Insurance and our Auto Insurance Fraud Division, we've filed one of the largest cases of insurance fraud ever prosecuted in California."

Joining Cooley at a press conference to discuss the undercover operation dubbed "Operation Store Front" was state Insurance Commissioner Steve Poizner.

"This type of insurance fraud, like all insurance fraud, is not a victimless crime," Poizner said. "Insurance fraud hurts all Californians by keeping insurance rates high by adding, in essence, a $500 fraud tax on every man, woman and child in the state of California.

"To make matters worse, these people not only sought to rob California insurers and consumers of their money, but in their dishonesty have struck at the trust we place in our medical and legal professionals every day," Poizner said. "I'm happy to say that the conduct of those arrested is the exception, not the rule."

Following a tip from a confidential informant, the investigation was launched in September 2004 involving suspected attorneys and legal office employees who were allegedly selling accident insurance claim cases for referral fees and kickbacks from chiropractic clinics.

The informant allowed an undercover investigator with experience in investigating insurance fraud cases to be planted in the informant's chiropractic clinic. The investigator served as the office administrator. As part of the so-called "capping" scheme, employees from 12 San Gabriel Valley law offices allegedly referred clients to the chiropractor clinic and then filed fraudulent documentation and padded the bills sent to insurance companies. Settlements were then distributed by the law offices to the client, the law office and the chiropractic clinic. Prosecutors documented more than $500,000 in losses to insurance companies from just one chiropractic clinic.

"The crimes identified by this investigation are opportunistic crimes fueled by greed," Cooley said. "While we're pleased our investigation has disrupted fraud in a dozen offices in the San Gabriel Valley, these crimes unfortunately are the tip of the iceberg. Hopefully this investigation and the resulting 101 indictments are a message that people who make a career out of defrauding insurance companies will be brought to justice."

Last week, prosecutors announced 13 Grand Jury indictments were returned naming 101 defendants charged with more than 200 counts of insurance fraud. To date, 88 defendants have been arrested. Four are out of the country and 11 are in other states. A total of 325 police officers from 10 agencies assisted in the arrests.

"I commend the excellent work of investigators from the D.A.'s Bureau of Investigation, our Auto Insurance Fraud Division prosecutors, the California State Department of Insurance, the California Highway Patrol, the Secret Service and the FBI for their work in putting this complex case together," Cooley said.

"I also commend the courage of the informant in coming forward and working with investigators. The pressure to go along with business as usual and pay kickbacks or risk going out of business is enormous," he said.

Of the 101 people indicted, 13 are office administrators who allegedly worked as "cappers," two are attorneys and 86 are insurance claimants.

"Insurance company cooperation was essential to the success of this investigation," Cooley said.

The following is a list of companies that cooperated in the investigation:

• 21st Century
• AAA
• AIG
• Allstate American Express (Ameriprise)
• American Family
• Berkley Risk Administrator
• Carl Warren & Co. (Los Angeles County)
• CNA Commercial
• Coast National Commerce
• West Continental Western Group
• Danielson National
• Electric Everest National
• Farmers
• Gallagher Bassett
• Geico
• Hartford
• Horrace Mann
• Infinity
• Kemper Independent
• Los Angeles City
• Liberty Mutual Liberty
• Mutual Commercial
• Lincoln General
• Mercury MGA Insurance
• Mitsui-Sumitomo
• Ocean Harbor Casualty
• Permanent General
• Progressive
• Safeco
• Safeway Direct
• St. Paul Travelers
• State Farm
• Sterling Casualty
• The Robert Plan
• Unitrin Direct
• Unitrin Specialty
• USAA
• Viking
• Wawanesa
• Western General
• Western United
• York Claims
• Zurich Empire