Mass Insurance Fraud Suspects Rounded Up

Police began rounding up the 86 participants of an enormous insurance fraud ring that repeatedly staged crude accidents with luxury cars to bilk insurance companies out of more than $30 million in phony claims, officials said Wednesday.

“This is money taken out of your pocket [as consumers] just as surely as if you were stuck up on the street,” said state Insurance Commissioner Chuck Quackenbush, who announced the bust with Orange County Dist. Atty. Michael R. Capizzi.

Capizzi called it “the largest auto fraud case ever filed” in California. He said investigators also served more search warrants on Wednesday because “we believe the fraud activity is still continuing within the ring today.”

Among the first 50 people arrested Wednesday morning was the alleged mastermind of the scam, the former owner of an automobile repair shop in Garden Grove, Capizzi said.

The man, Amir Nateghi, 33, of Mission Viejo, faces 127 fraud-related charges, including 35 counts of conspiracy. Prosecutors asked that his bail be set at nearly $1 million. “He was integral to the overall scheme,” Capizzi said.

The ring used a variety of schemes to defraud the insurance companies--from staged accidents to overbilling for repairs, as well as reporting the theft of cars that had not been stolen.

One popular scam consisted of concocting phony accidents with luxury cars owned by the participants, who would damage the cars with sledgehammers and then get the cars repaired at shops in which ring members had a financial interest or connection. Many of these same cars were then used again to file more claims.

“There was no overall rhyme or reason to this,” said Kenneth Chinn, the senior deputy district attorney who presented the case of the Orange County Grand Jury, “just a lot of little bits and pieces that didn’t become clear until investigators put it all together.”

While it took investigators two years to get a complete picture of the conspiracy, Chinn said they “had an early awareness” that the ring was conducting a large fraud against numerous insurance companies.

The companies brought the case to the Insurance Department in the first place, Chinn said, adding that investigators noted “there were a series of body shops that vehicles were run through.”

The only shop named Wednesday was the Panther Auto Center on Harbor Boulevard, which Capizzi said was formerly owned by Nateghi, and now operates as Expert Collision Center.

Building the case, he continued, “was a process of unraveling and looking at how the insurance policies were obtained. That’s when a pattern started to emerge.”

Investigators noticed that the same car, and often the same individuals, would frequently pop up in multiple claims over a short period of time.

In one instance, the same car figured in claims with different insurance companies and different auto repair shops four times between June 22 and Dec. 12, 1994.

After the scams were pieced together, Chinn said, investigators could see that “there were many, many variations and common denominators and common players.”

Last summer, accident reconstruction experts from the California Highway Patrol’s accident investigation team were called in.

Officer Jeff Perez, from the CHP’s border division office, said he and a partner studied more than 500 photographs of vehicles allegedly damaged in accidents.

For many of the alleged accidents, Perez said, “it was very obvious they did not occur.”

Often it was as simple as noting that no paint had been transferred from one vehicle to another when a black car purportedly collided with a white one, Perez said. Or that substantially heavier cars reportedly in accidents with much lighter ones would suffer the more severe damage--an unlikely occurrence.

In October, Chinn began presenting the case to the grand jury, eventually calling more than 100 witnesses. On Dec. 15, the grand jury issued 15 sealed indictments covering the 86 participants.

How much of a dent the case will make in insurance fraud in Southern California remains to be seen, but Quackenbush, Capizzi and others said the prosecution would send the right message.

“Los Angeles is the capital of insurance fraud,” said Dave Petrelli, divisional superintendent of special investigations for State Farm Insurance Companies, the largest auto and home insurer in California and the country.

Petrelli commands a force of 75 fraud investigators. Schemes involving staged accidents--the sort alleged against the busted ring--”are among the most common forms” in operation today, he said.

What makes it hard to stop is that it spreads so quickly, Petrelli said. “It’s an organized activity and it will spread from L.A. clear across the country. We’ve found it in Virginia, Canada, Texas, and often it’s the same individuals driving and managing [the scams].”

Other agencies participating in the case included the state departments of Justice, Health Services and Motor Vehicles; the Immigration and Naturalization Service; the Federal Protective Service CID; the Orange County Auto Theft Task Force; the National Insurance Crime Bureau; and police departments from Los Angeles, Santa Ana, Glendale, Newport Beach and Burbank.

“This is a great victory for the insurance consumer of California,” said Quackenbush.

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Outsmarting Scammers

National insurance fraud experts say there are several things consumers can do to avoid becoming unwitting participants in a scam:

* Be wary of repair shops offering to inflate repair estimates to cover your deductible.

* Avoid people [known as cappers] who offer to introduce you to a lawyer or doctor who will help you obtain money from an insurance company by claiming injuries you did not suffer.

* Insist on alerting local police or the California Highway Patrol when you are in an accident so you can document that the accident occurred and a record is made.

* Employ safe driving habits to avoid being victimized in a “staged” accident. One popular form, called “the squat,” occurs when an unsuspecting driver following too closely rear-ends a car that suddenly jams on its brakes.

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Who to Call

If you think you have been involved in auto insurance fraud, call your insurance carrier; or you can leave an anonymous complaint with the National Insurance Crime Bureau, (800) TELL NICB (835-5642).

Sources: State Farm Insurance Co., California Highway Patrol, California Department of Insurance

Researched by MICHAEL G. WAGNER / Los Angeles Times