Dozens Held in Massive Insurance Scam : Fraud: Investigation targets O.C. and San Diego area doctors and lawyers suspected of stealing millions of dollars from big insurers with false accident claims.

Ending an 18-month investigation targeted at attorneys and doctors charged with cheating insurance companies out of millions of dollars, authorities on Wednesday arrested at least 35 people in Orange and San Diego counties suspected of running one of the biggest auto insurance fraud schemes in state history.

Beginning at 6 a.m. Wednesday, more than 150 federal, state and local law enforcement officers swarmed the two counties, arresting suspects indicted for their roles in four loosely connected fraud rings that bilked insurance companies with phony auto accident claims, officials said.

Forty-four warrants were issued for 43 people in the two counties, resulting in at least 35 arrests by Wednesday evening. One man was accused of crimes in both Orange and San Diego counties.

State Insurance Commissioner John Garamendi said the arrests highlight an effort to go after doctors and lawyers who are critical to auto insurance fraud schemes. Garamendi said such fraud costs big insurance companies billions of dollars and contributes to increased consumer insurance rates.

“It’s the lawyers, doctors and other medical professions who pull the strings and make it all possible,” Garamendi said. “We all know that when fraud occurs, it comes directly out of your pocket and mine.”

The investigation involved law enforcement officials who infiltrated the rings and acted as “cappers,” a street term for people who are paid a fee for recruiting people willing to become part of the phony accident scheme and steering them to the attorneys and doctors involved.

Authorities estimate that the auto insurance companies paid out several millions of dollars in false claims, although a total will not be available until records seized Wednesday during the arrests are reviewed, said Garamendi and Orange County Dist. Atty. Michael R. Capizzi, who jointly announced the arrests at a news conference.

Garamendi estimated that fraud costs the auto insurance industry between $1.5 billion and $2 billion annually.

All but one of the 19 Orange County suspects named in three sealed indictments returned by an Orange County grand jury in November and December, 1992, were arrested Wednesday, Capizzi said.

Those arrested included attorneys Timothy Wallis Elliott, 45, and James Michael MacPhee, 41, both with practices in Westminster; Dr. Danh Con Truong, 53, of the Brookhurst Medical Center in Garden Grove and Dr. Frank Lowe, 71, of the L. Frank Health Care Clinic, a former Orange County facility no longer in business under that name, officials said.

The attorneys and doctors could have their licenses revoked if convicted of the charges, which include insurance fraud and conspiracy to commit insurance fraud, according to the State Bar of California and the Medical Board of California. None of them had previously been disciplined by those organizations, according to public records.

In San Diego, which was part of the joint investigation, authorities issued arrest warrants for 25 individuals and arrested 17 suspects, including Dr. Tony Tan, 30, of Carlsbad and chiropractor William Anthony, 61, of San Diego.

In addition to doctors, attorneys, cappers and clients, other employees of law firms and medical clinics were arrested.

The suspects were being held in local jails and are scheduled for arraignments within the next few days. Most of the defendants are being held in lieu of $250,000 bail.

The alleged lead capper, Duc Minh Nguyen, 31, of Orange County, was arrested by Orange County authorities, but also faces an arrest warrant in San Diego County, officials said. Nguyen was allegedly a link between at least two of the fraud rings, Capizzi said.

Nguyen first alerted San Diego authorities to the existence of the alleged auto fraud rings by admitting that he had contacts who would claim involvement in phony accidents and knew attorneys and doctors who would go along with the schemes, said Deputy Dist. Atty. John P. Massucco Jr. of the San Diego County district attorney’s office.

The scheme involved creating paperwork documenting phony auto accidents. Investigators who infiltrated the fraud rings said they were referred to doctors who signed documents stating they had provided extensive medical treatment and consultations. The undercover officers specifically told physicians that they had suffered no injuries, Garamendi said.

Attorneys then passed the medical and auto damage claims on to insurance companies, authorities said. While some insurance fraud schemes have involved staging actual crashes, no real accidents or injuries were involved in this scam, officials said.

Cappers and their “clients”--the individuals who agreed to pretend they were involved in accidents--typically receive a portion of the insurance proceeds, Garamendi said. But attorneys and doctors usually take the biggest cuts, he said.

Garamendi said the crackdown on the fraud rings should send a message to individuals involved in insurance fraud. The insurance commissioner said his office was adding 23 additional officers to fight auto insurance fraud.

“It’s not going to be a happy year for anyone feeding off the insurance industry,” said Garamendi, who said the bust ranks among the top four or five ever in California, in terms of the number of individuals involved. “It’s time to take insurance-fraud sharks out of the water and give California consumers some rate relief.”

Efforts to reach the attorneys and doctors named by authorities were unsuccessful.

But attorney John Wells of Santa Ana, who was not named in the indictment, said his firm’s administrator, 35-year-old Steven Son Nguyen, is innocent of the charges against him.

Wells said further investigation would prove that no one in his office was involved in insurance fraud.

The lawyer, who has been on medical leave since May, 1991, said the district attorney’s office made him aware a few months ago of what he thought was a “routine” investigation.

However, Wells said he did not know until Wednesday, when investigators searched his files for six hours, that they were looking for documents on two personal injury cases involving his office.

Wells said he believes the first case has no connection to his law firm. He said he recalled the second case, because Nguyen brought it to Wells’ attention three months ago when Nguyen suspected fraud was involved.

“I told him I didn’t need to know anymore; we were going to drop it,” Wells said. The insurance company later sent him a settlement check worth tens of thousands of dollars, Wells said, but he returned it.

“I don’t care. For a million dollars, I am not going to commit a fraud,” Wells said.

The same indictment also included charges against an employee of Cooper Medical Clinic, but Wells said his firm had not referred clients to that center in five years.

Agencies involved in the arrests included the FBI, the U.S. Postal Service inspector and several local law enforcement agencies in Orange and San Diego counties.

Capizzi said special recognition should go to the Farmers Insurance Cos., Aetna Insurance Co., Progressive Insurance Co. and 20th Century Insurance Co. for assisting investigators with insurance records.

Scam Anatomy Authorities in Orange and San Diego counties announced Wednesday that they had broken up three loosely connected insurance fraud rings. Suspects are allegedly responsible for an estimated several million dollars in false insurance claims from phony auto accidents. The action: Arrest warrants were issued for 43 suspects; at least 35 people were taken into custody. The targets: Doctors and attorneys. Two doctors and two attorneys from Orange County were among those arrested. The scheme: Individuals dubbed “cappers” helped find drivers willing to take part in the scheme. Doctors prescribed treatments and wrote medical bills while attorneys passed the claim to insurance companies. Individuals involved in auto insurance fraud schemes typically each get a cut of the check, which can top $50,000 in some cases. The cost: Auto insurance fraud costs insurance companies doing business in California an estimated $1.5 billion to $2 billion annually. Sources: Orange County district attorney, California state insurance commissioner