FBI Cracks Down on Staged Car Accidents : Insurance: Deliberate wrecks account for most of the estimated $20 billion a year in property and casualty fraud.

The FBI and other law enforcement agencies on Wednesday arrested or issued indictments against 126 people nationwide as part of its biggest crackdown ever on staged automobile accidents--a fast-growing form of insurance fraud that has long flourished in Southern California.

The FBI began its investigation of staged accidents, dubbed Operation Sudden Impact, in November, 1993, when it determined that the scam had become a significant crime problem nationwide. The investigation in 31 states has so far resulted in more than 400 arrests and indictments, including those that took place on Wednesday.

In Southern California, the investigation has led to the arrest of 13 individuals, of which 11 have been convicted on state insurance fraud charges, according to the federal authorities. None of the individuals was arrested in the latest crackdown.

Staged accidents account for a major share of the estimated $20 billion a year in property and casualty insurance fraud and resulted in the April, 1992, death of a man riding in a car on the Golden State Freeway near Burbank, according to law enforcement and insurance officials.

Last year, Jorge Sanchez pleaded guilty to vehicular manslaughter and insurance fraud charges after he purposefully swerved his car in front of a truck on the freeway. The truck overturned and landed on Sanchez’s vehicle, killing passenger John Luis Lopez Perez, 29.

“There is no question that staged auto accident fraud had been a growth industry over the last 20 years,” said Bill Sirola, a spokesman for State Farm Insurance. “They are extremely problematic because they are truly the work of professional criminals.”

The accident scams often include unscrupulous lawyers and doctors who participate in the filing of phony insurance claims for accidents that never happened, or actual crashes involving unsuspecting drivers. The rings also stage accidents involving vehicles with previous damage.

The California Department of Insurance estimates that about 80% of the suspected auto insurance fraud complaints it investigates involve staged accidents. “Los Angeles is the capital of staged auto accidents,” said Gary Hernandez, the insurance department’s chief of enforcements.

Larry Stanford, an investigator for the Insurance Department, said many of the California fraud rings, which include Los Angeles area gangs, have set up operations as far away as Florida.

Although concentrated in metropolitan areas, some of the rings operate in small cities as well. In fact, an investigation in Fargo, N.D., has resulted in 27 individuals being charged for traveling to Los Angeles to stage accidents, which resulted in 13 insurance companies being defrauded for more than $500,000.

The FBI’s nationwide investigation should help discourage staged accidents in the short run, said Doug Blank, assistant director of special investigations at Seattle-based Safeco Insurance. But the scam will keep growing in the long run “unless we continue to do these kinds of operations.”