43 Indicted in N.Y. Auto ‘Fraud Factory’

New York Superintendent of Insurance Gregory V. Serio, New York City Police Commissioner Raymond W. Kelly, Queens District Attorney Richard A. Brown, State Taxation and Finance Department Commissioner Andrew S. Eristoff and State Banking Department Superintendent Diana Taylor announced the indictment of 43 individuals and corporations for engaging in a widespread no-fault automobile insurance scheme.

The group includes a reputed Bonanno crime family associate, Joseph Fratta, along with five lawyers, three medical doctors, a dentist, other state-licensed medical professionals and clinic employees posing as medical professionals, that conspired to defraud insurance companies of millions of dollars by operating a Queens medical clinic as a “fraud factory” that staged sham automobile accidents, submitted false claims and medical reports and provided unnecessary treatment of individuals with feigned injuries.

Serio said, “Operation Fraud Factory uncovered individuals who were defrauding millions of dollars from the no-fault system which can translate into higher auto rates for honest New Yorkers.”

Three of the defendants have additionally been charged with money laundering and are accused of concealing over $1 million of the alleged ring’s criminal proceeds by negotiating insurance company checks at a Manhattan check-cashing outlet.

The multiple indictments are the result of a 14-month undercover investigation that began in January 2003 conducted jointly by the New York Police Department’s Auto Crime Division, the New York State Insurance Department’s Fraud Bureau, the New York State Department of Taxation and Finance’s Tax Enforcement Office, the New York State Banking Department’s Criminal Investigations Bureau and the Queens County District Attorney’s Organized Crime and Rackets Bureau.

The indictments charge that the ring allegedly operated under the protection of the Bonanno crime family through defendant Fratta who supervised and managed part of the ring’s business and received a salary from the Richmond Hill clinic where he had an office.

The indictments also charge that the clinic’s alleged boss, Arthur Bogoraz, and its alleged managers, including Irena Chernomaz, and alleged head runner Pasqual “Richie” Clemente, assisted Fratta in carrying out schemes for the criminal enterprise.

Matthew Averko, a claims arbitration adjuster employed by the Robert Plan Insurance Company at 999 Stewart Avenue in Bethpage, New York, is alleged to have received cash payments from the clinic through clinic manager Steve Marcus of up to $60,000 between 2002 and 2003 in exchange for approving claims his employer had previously denied.

Also Fratta and Bogaraz – as part of the money-laundering component of the scheme – are charged with giving Rocio Duran and Denian Duran checks from various insurance carriers totaling over $1 million that were made payable to the clinic’s doctors and other medical professionals. Rocio Duran and Denian Duran, it is alleged, negotiated the checks at the Wholesale Connection L.L.C. at 17 Battery Place in Manhattan and then distributed the cash proceeds to Fratta and Bogaraz who are alleged to have used the money in part to pay runners and sham patients.

The indictments allege further that the ring paid runners up to $2,700 for each person whom they recruited to pose as injured accident victims. Fake patients, it is alleged, received payment from either a runner or a clinic employee of up to $2,000 for their participation in the scheme. In order to receive payment, the indictments allege, a fake patient had to visit a medical doctor, a chiropractor, an acupuncturist and a physical therapist several times per week, sign up with a lawyer affiliated with the scheme and receive unnecessary MRIs, X-Rays, nerve conduction studies and medical supplies.

Fratta and Bogoraz are additionally charged with income tax evasion for substantially under-reporting their earnings from the medical clinic in an effort to avoid paying the required amount in taxes.

District Attorney Brown said, “The defendants are alleged to have plundered the system for millions of dollars. Their alleged crimes cost New York’s drivers plenty and drove up the cost of insurance policies. Auto insurance fraud costs New Yorkers an added $1 billion each year – nearly $200 per driver – and that is the major reason why New York’s automobile insurance coverage costs an average of nearly $2,000 per driver, second highest in the nation.”

The insurance companies allegedly defrauded include: Clarendon Insurance Company, Kemper Insurance Company, National Grange Mutual Insurance Company, Auto One General Insurance, State Farm Insurance, Allstate Insurance Company, Progressive Insurance Company, American Transit Insurance, and Liberty Mutual Insurance.