Archive Page - 08/16/13 41 years, 2,172 covers and 54,888 stories from PEOPLE magazine's history for you to enjoy
- Courtney Love and Frances Bean Cobain Share a Hug at Sundance
- The Style Top 5: A Look at a Sexy New Jeans Ad (Starring Adrian Grenier)
Kendall Jenner's Makeup Secret & More
- Lindsay Lohan Posts Racy Photo and Jokes About Her Untreatable Illness
- How Did JLo's Sexy Co-Star Sculpt His Washboard Abs?
- Go Behind-the-Scenes of the Sundance Film Festival!
On Newsstands Now
- Matthew McConaughey: In His Own Words
- Jessa Duggar's Wedding Album
- Brittany Maynard's Final Days
Pick up your copy on newsstands
Click here for instant access to the Digital Magazine
People Top 5
LAST UPDATE: Sunday January 25, 2015 07:10AM EST
PEOPLE Top 5 are the most-viewed stories on the site over the past three days, updated every 60 minutes
- June 30, 1975
- Vol. 3
- No. 25
The $1.7 Billion Insurance Ripoff, and the Ex-police Chief Who Is Out to Stop It
No longer. As head of the four-year-old, Westport, Conn.-based Insurance Crime Prevention Institute, former New Haven Police Chief James Ahem, 43, investigates fraud on behalf of more than 400 insurance companies. Ahem, a member of the President's Commission on Campus Unrest and author of Police in Trouble, directs 70 investigators around the country who work with law enforcement agencies to gather evidence against insurance ripoff artists. So far Ahern's operation has resulted in more than 1,000 convictions. Recently he discussed the problem of insurance fraud and white-collar crime with Christopher P. Andersen of PEOPLE.
How widespread is insurance fraud?
Roughly 10 percent of all insurance claims are fraudulent, and the number is climbing. That means that insurance companies are bilked out of about $1.7 billion in fraudulent claims each year, and that cost is passed on to the consumer. Once the fraud problem is solved, we could bring down insurance premiums by perhaps 15 to 20 percent.
What types of fraud are most common?
In the personal injury area the possibilities are virtually endless. Some people make an entire career out of one particular routine, roaming the country and using aliases. There was one man, for example, who only fell down in front of Catholic churches. Apparently he thought they would be more eager to settle early. Another guy picked the wet linoleum in front of the ice-making machine of Holiday Inns for his slip-and-fall. Both got away with this for years before anybody noticed something peculiar. One man would carry a vial of blood with him, then fake a collision on his bicycle. He would go home and, with a pair of pliers, break off pieces of his own teeth. He managed to defraud insurance companies of $30,000 before he was finally caught, indicted and convicted.
Is self-mutilation of this sort common?
It's difficult to say. There's a town in Florida that insurance people call "Nub City" because hundreds of persons have suffered the loss of various organs and limbs. Supposedly, claims of up to $300,000 have been paid for lost fingers, lost toes, etc. Insurance companies have become very suspicious of claims from there now.
What about product liability?
You always get the people who find rodent hairs in their restaurant food or a roach in a bottle of soda pop. One woman would claim to find a roach in her soft drink, go to the ladies' room to vomit and wind up spitting out her false teeth and breaking them on the floor. The false teeth alone would cost the insurance company $475. We investigated and found out she had been doing this for 30 years. Another favorite is baking ground glass into bread, resealing the package, then suing the manufacturer.
Is arson on the upswing?
In times of recession the incidence of arson increases greatly. Suspicious fires have tripled in the past five years. Losses caused by arson this year alone may reach $1 billion. It is the most difficult crime to solve, since the evidence is usually consumed by the fire. Only 1 percent of suspicious fires result in an arrest, and only 1 percent of those arrests result in conviction.
How do you solve an arson case?
In my 18 years in law enforcement the only time I have ever seen an arson solved is when a professional torch tells all, or when a guy sets himself on fire in the process and is caught running in flames from the building. I've known that to happen.
What about the most common type of fraud, auto fraud?
Auto accidents and accident-related injuries account for about 70 percent of our caseload. Ambulance-chasing—also known as "running" or "capping"—is still a huge nationwide racket. It is particularly prevalent in black communities. The so-called "Black Mafia" is heavily involved in some cities—particularly Chicago.
How does auto fraud work?
An attorney may employ dozens of "runners" who do nothing but sit around in parking lots or on the side of the road waiting for an accident to happen. When someone is, say, rear-ended, the runner will approach the victim and, while the victim is still shaken, offer "assistance." The runner will hand him the card of the attorney he works for and suggest that he see a doctor. The doctor, of course, works for the attorney.
What is the doctor's role?
He may overtreat an existing injury—thereby driving up any settlement—or he may diagnose and treat a nonexistent injury, faking X-rays and medical reports. In the meantime the runner has also recommended a body shop that tows the car away. The owner of the body shop—and I hasten to add that most are legitimate—might then take a sledgehammer to the vehicle and drive up the damages to the car. Or he may have hundreds of damaged parts "on file," so that he can replace an undamaged grill on a 1975 Chevy with a severely crumpled one. What started out as a $1,000 claim becomes a $10,000 claim. Ironically the claimant himself almost never gets more than what he could have gotten in the first place.
What other kinds of auto frauds are there?
The staged accident is very popular. We recently helped Bronx District Attorney Mario Merola nail a ring of 33 men who were buying junked cars, taking out insurance on them over the telephone, then claiming they were wrecked in accidents. They collected about $100,000 in false claims before they were indicted. We are investigating one case in a small southern town where one man is the town doctor, head of the local medical association, director of the town clinic and the chief of police. He loaded up a bus full of townspeople—all insured by the same company—then claimed it had been run off the road. Of course as police chief he handled the accident reports, and as town doctor he treated everyone at his clinic!
What kind of doctor or lawyer gets involved in insurance fraud?
Some are just very greedy. One body-shop owner who headed a big ambulance-chasing ring used to drive a beat-up wreck to the racetrack. If he lost at the track that day, he would claim that his car was in good condition when he drove it in and that it had been wrecked in the parking lot. But more and more we are finding doctors who gamble heavily and get in over their heads. The loan shark tells them how to make the money to settle their account.
Is the Mafia involved?
Absolutely. In Detroit, we participated in a federal investigation of a Mafia operation that involved 11 lawyers, 12 doctors and 11 policemen. After the trials, one of the witnesses was executed gangland style. Murder indictments have been handed down as a result. In one eastern state, our investigation of an organized crime ring resulted in 70 arrests. We think they may have grossed $10 million in insurance fraud over a four-year period.
Does the Mafia stick primarily to auto-related insurance fraud?
That's a particularly lucrative area, but organized crime goes wherever there is money. One man slipped and fell on a torn carpet in a Manhattan antique store. His arm was mangled, and he filed an insurance claim for $275,000. The jury awarded him $40,000. Before he was paid off, however, it came to our attention that the man was a heavy gambler. It turned out that he owed $20,000 to a loan shark. Two thugs had taken him to a garage and roughed him up with a baseball bat, then suggested a way to raise enough money to pay his medical bills and the $20,000 he owed. The accident was arranged. The antique store owner, the two men who administered the beating and the claimant were arrested and convicted.
Why do usually law-abiding people think it is acceptable to defraud an insurance company?
Some people say to themselves, "Hell, I've paid my premiums for years. It won't hurt that big company." Like most white-collar crime, it is directed against a cold, impersonal institution. But people are now consumer-conscious. It has been suggested that 15 percent is tacked onto the price of all goods and services in this country just to cover dishonest practices like shoplifting, employee pilferage, robbery and fraud. The main reason we are finally making some progress in solving the problem is that people despise thieves.
January 23, 2015
Treat Yourself! 4 Preview Issues
The most buzzed about stars this minute!