Gang Member Who Led Violent Takeover of Fire Restoration Industry Sentenced

June 5, 2024 by

A gang leader who recruited other gang members and used violence, threats of violence, and extortion to take over the fire restoration business in New York City and defraud insurance companies has been sentenced to 12 years in prison.

Jatiek Smith was sentenced by U.S. District Judge Jed S. Rakoff after being convicted following a bench trial in December 2023 of racketeering and extortion conspiracies.

In addition to the prison term, Smith, of Staten Island, was sentenced to three years of supervised release and ordered to forfeit $354,546.44. Restitution will be determined at a later date, according to prosecutors.

Fire Mitigation Industry Terror: NYC Gang Member Convicted of Extortion, Racketeering

In 2019, Smith joined the fire mitigation company First Response, which was involved the practice of “chasing fires,” which refers to soliciting repair, mitigation, demolition, and construction business from the owners of fire-damaged properties. Insurers pay for the services.

Prosecutors showed how Smith, a member of the Bloods, a violent street gang, quickly assumed control over the operations of First Response. He recruited other gang members and associates to join him at First Response and then used violence and extortion to terrorize and dominate the fire restoration industry in New York City.

Property Restoration Industry: A Culture in Need of Repair?

The use of violence and extortion to dominate an industry places the New York case in a category of its own. But experts say often-aggressive, sometimes-violent tactics have been seen across the country as fire restoration, paid for by insurance carriers, attracts illegitimate contractors seeking quick profits.

In many cases, contractors or adjusters show up at fire victims’ homes, sometimes even before firefighters have extinguished the blaze.

“We have unfortunately seen this emerge as a common practice after major loss events,” said Michael Richmond-Crum, counsel for the American Property and Casualty Insurance Association. “While these practices are seen in areas where major catastrophic events take place, there is no geographical limit to the practice, and we have seen these bad actors move around the country in response to major events.” Read more.

Smith asserted control over the industry by first ousting First Response’s main competitor, American Emergency Services (AES), through violence, threats, and extortion. Once Smith and his crew had established control over the industry, they imposed rules that allocated a preferential share of fires to First Response. These rules were backed by threats — including a demand that AES pay $100,000 to continue in the business and threats to kill children — and violence.

Industry participants who solicited fires in violation of Smith’s rules were assaulted in broad daylight, prosecutors found. Smith and his crew also extorted hundreds of thousands of dollars from other industry participants.

According to prosecutors, Smith maximized his profits from this scheme by concealing illegal conditions in properties and defrauding insurance companies.

In his defense, Smith claimed that the competitor he ousted was the aggressor in the industry and he worked to reduce the conflicts and violence by standing up to that firm and setting up a rotation system to assure that all chasers got a minimum number of fires each month. He maintained the system was not extortionate.

However, Judge Rakoff found that Smith’s defense was undermined by the government’s proof of Smith’s use of violence and extortion to enforce the rotation.

“Offering up these benign explanations for the rotation system is akin to a mobster calling extortion payments “protection money,'” the judge wrote in his December ruling against Smith.

The judge found that overall the government proved beyond a reasonable doubt that Smith and his co-conspirators agreed to extort AES, ServPro, EFS and an individual but failed to prove extortion relating to iFlood and a contractor.

“The simple fact is that the government has put forward substantial evidence that violence and intimidation by Smith and his co- conspirators were used to enforce the rotation system,” the judge concluded.

Prosecutors’ evidence included recordings of Smith threatening to kill competitors and ordering an attack on a rival firm’s employee and videos recovered from his cellphone showing his crew members assaulting employees of rival emergency mitigation services firms.

The judge also found that there was ample proof of the actual existence of a racketeering enterprise, of Smith’s participation in it, and of the commission of extortion and mail and/or wire fraud.

Smith denied being involved in any racketeering conspiracy that committed insurance fraud. He said that while he learned at one point that conditions at homes were being concealed for insurance purposes, he said the evidence at trial showed that the relevant instances “barely even involved him, let alone constituted acts furthering the enterprise he was the supposed leader of.”

But the judge said Smith was wrong that the insurance fraud was unrelated to the purpose of dominating the fire restoration industry. The judge wrote: “Dominating the fire restoration industry, including by increasing the number of fires signed by the Enterprise, was only profitable if insurance companies paid out insurance claims. Because the insurance frauds were a means to ensure those insurance claims were paid, these frauds directly facilitated the profits generated by the Enterprise through its dominance of the restoration industry and its extortion.”

The judge found the government did not prove a third charge against Smith of obstruction of justice.

First Response primarily operated in Brooklyn, Queens, and Staten Island but also did business in the Bronx and Manhattan.

The office of U.S. Attorney for the Southern District of New York Damian Williams prosecuted the case. Williams praised the work of the Federal Bureau of Investigation, Homeland Security Investigations, the New York City Police Department, and the New York City Department of Investigation.

“We will not stand for gangs or any criminal groups that try to corrupt our institutions and threaten our safety. Today’s sentence demonstrates that those who use violence and intimidation will face significant jail time,” Williams commented after the sentencing was announced..