Allstate Sues Company on Allegations of Fraud

Allstate Insurance Co. has sued a Los Angeles consulting firm for allegedly encouraging homeowners to file false claims after the Northridge earthquake, as part of a scheme to allegedly skim as much as half of all proceeds coming from the claims.

Allstate itself is currently the focus of a federal investigation stemming from the 1994 temblor for allegedly falsifying engineering reports to minimize claims. In May, FBI agents searched three Allstate offices, including one in Santa Fe Springs, to gather documents relating to the probe. The company has denied any wrongdoing.

Allstate spokesman Peter Debrecny said the Northbrook, Ill.-based company’s lawsuit, filed May 27 in U.S. District Court in Los Angeles, is not an attempt to deflect attention from the federal probe. He said the company’s own investigation into claims relating to the 1994 disaster began months ago and is part of a larger campaign to stamp out fraudulent claims in general.

He also said the lawsuit against Building Permit Consultants was just the first in a number of fraud suits the company plans to file in connection with the earthquake.

Among the defendants named in the action is John Kaldawi, a former Los Angeles city Building and Safety Department employee, who was convicted and sentenced to four years’ probation in 1995 for soliciting a $10,000 bribe to expedite a building permit.

The Allstate suit alleges that a year prior to his conviction, Kaldawi and two partners of Building Permit Consultants set out to bilk the insurance giant of millions of dollars by assembling a small army of homeowners, attorneys and appraisers to press knowingly fraudulent damage claims.

The company is seeking $2 million in compensatory damages and an unspecified amount of punitive damages.

Neither Kaldawi nor co-defendants Juliana Kaldawi and James Kaldawi, could be reached for comment. It was not immediately known if the defendants are related.