O.C. at Center of State’s Largest Car Fraud Case

SANTA ANA —  In the largest auto insurance fraud case in California history, more than 80 people have been indicted in a scam involving luxury cars that were allegedly smashed with sledge hammers, reported stolen and used repeatedly to file phony accident claims, sources said.

In all, 21 automobile insurance companies were hit for at least $21 million in phony claims. The arrests are expected to be made today in a sweep centered on Orange County.

On Dec. 15, the Orange County Grand Jury handed up sealed indictments in the case, concluding a two-year investigation that focused primarily on individuals and automobile repair shops in Orange County.

The various schemes apparently involved families and groups of individuals with ties to certain auto repair shops repeatedly filing claims on damaged cars, and receiving reimbursement for expensive repairs.

Details of the case are scheduled to be released this morning by Orange County Dist. Atty. Michael R. Capizzi and California Insurance Commissioner Chuck Quackenbush.

Eighty-six individuals were charged, some of them on multiple felony counts of fraud. They face bail amounts that range from $15,000 to $100,000 per count. Officials plan to seek nearly $1 million in bail for one individual alone.

In all, 66 top-of-the-line automobiles, including Mercedes-Benzes, Lexuses, BMWs and Jaguars, were used in the alleged scam to defraud the insurance carriers.

“This was not a very sophisticated bunch,” said the state source familiar with the investigation. “They would apparently take sledgehammers and bash in these very expensive cars and then file inflated claims for their repair.

“Because these are pricey cars, the repairs tended to be very lucrative,” the source continued. “The surprising thing was they would apparently repair, then damage the same cars over again [and put] the same names on the insurance claims.”

The case apparently began when investigators for the insurance companies noticed the same cars turning up on numerous claims and called in national insurance fraud specialists.

When the investigators realized how many people and claims were apparently involved, they alerted the Department of Insurance, the California Highway Patrol, the National Insurance Crime Bureau and other agencies, including the Orange County district attorney’s office and the Sheriff’s Department.

Investigators put the case together after executing 50 search warrants of bank accounts, interviewing hundreds of witnesses, and analyzing thousands of documents. They found “financial links” between individuals, auto shops and the same cars, the state source said.

Many of those suspected were identified by handwriting experts who examined their signatures on California driver’s licenses, insurance claim forms, and the endorsement signatures on insurance reimbursement checks.

The suspected claims were submitted to the insurance companies over a three-year period; the latest was filed last June.

Insurance experts estimate that between 17 and 20 cents of every dollar paid out in claims is fraudulent, and the fraud adds between $100 and $300 to the yearly cost of each consumer’s automobile premiums.

In the Orange County investigation, some of the submitted insurance claims unraveled when accident reconstruction experts from the California Highway Patrol were asked to analyze photos purporting to show two cars that had been involved in a collision.

“In some of the cases it was clear to these guys that the cars had not been in an accident together,” one source said.

In another case, one man made the payments on an automobile policy for a colleague, then helped him fill out the forms for an accident that allegedly never occurred.

Quackenbush has aggressively sought the prosecution of auto insurance scams, especially staged accidents, since an explosion that killed a Santa Ana family on the Long Beach Freeway last February.

Two men were charged in that collision in which the station wagon of the Santa Ana family was crushed between two trucks, resulting in a fiery chain-reaction accident. A 26-year-old man, his 24-year-old wife and their 2-year-old daughter were killed.

“Staged auto accidents can result in the injury and even death of innocent victims,” Quackenbush is quoted in a press release expected to be released today.

Quackenbush pushed a bill introduced last year by state Sen. John R. Lewis (R-Orange) to make the staging of auto crashes a felony subject to the three-strikes law. Currently, those convicted of participating in a staged crash can receive as much as five years in prison and a fine.

This is the second large auto insurance fraud ring busted in 12 months.

Two Los Angeles-area men were charged last June with 24 counts of fraud in what was then called one of the largest insurance scam operations in the country.

One of the men was sentenced to 10 years in prison, and the other to eight years, after making plea arrangements with Los Angeles County Dist. Atty. Gil Garcetti.

Garcetti said then that the two men masterminded a multimillion-dollar fraud ring that began in 1989 and operated nationwide. It included 17 medical clinics and several law firms.