Calif. Undercover Sting Operation Nabs Dozens for Conspiracy to Commit Fraud in Tri-County Region

A multi-agency enforcement unit conducted a sweep Thursday in California that has to date resulted in the arrests of 27 suspects following a year-long undercover investigation into auto body insurance fraud.

Warrants were issued by the District Attorney’s offices in Sacramento, San Joaquin and Yolo Counties for the arrests of 43 people suspected of conspiring to commit insurance fraud, with 28 served in Sacramento County, 13 in San Joaquin County, and two in Yolo County.

“Operation FX” was conducted by the California Department of Insurance (CDI) Fraud Division and the California Highway Patrol (CHP) with the assistance of the National Insurance Crime Bureau (NICB). Operation FX investigators approached auto body shop personnel in Sacramento, San Joaquin, and Yolo Counties, posing as insurance policyholders asking for fraudulent documentation to support fraudulent insurance claims.

Investigators went to approximately 460 auto body shops in the tri-county area, making contact at 278 businesses. Owners and/or employees of 39 auto body shops supplied approximately $137,350 in fraudulent repair estimates to the undercover officers.

“These scams are more than crimes,” said Insurance Commissioner John Garamendi. “This criminal activity drives up the cost for everyone who pays auto insurance. Today’s successful operation not only removed individuals who wanted to cheat the system, but also sent a clear signal to would-be criminals – we will catch you and you will be prosecuted.”

CDI, CHP and NICB received assistance from the following companies and agencies:

• Progressive Insurance;
• USAA Insurance;
• State Farm Insurance;
• Sacramento County Auto Theft Task Force;
• Regional Auto Theft Task Force-Santa Clara County;
• District attorney’s offices in Sacramento County, San Joaquin, and Yolo County;
• Lodi Police Department; and
• Sacramento Sheriff’s Department.

Operation FX is just one in a continuing series of California auto body sting operations, which commenced in Santa Clara County with Operation Fast and Fraudulent in 2001. Similar efforts included one in San Francisco in 2003 (Operation Body Count) and one in Monterey County this past January (Operation MADCAT). In total, 399 sting operations occurred with 88 auto body shop owners and/or employees suspected of committing insurance fraud.

Thursday’s arrestees will be booked into the Sacramento, San Joaquin, and Yolo County jails, and the respective district attorney’s offices will prosecute the cases. In general, bail will range from $5,000 to $10,000 based on the specific charges filed in the respective jurisdictions. Also generally speaking, insurance fraud (California Penal Code § 550) is punishable by up to five years in prison and/or fines not to exceed $50,000.

In addition, CDI Fraud Division investigators made inquiries into the status of the businesses’ workers’ compensation coverage when they found persons willing to be involved in fraudulent auto body schemes.

Therefore, enforcement agents with the state Department of Industrial Relations accompanied the arrest sweep and issued nine citations to date for failure to have workers’ comp insurance that could result in $26,000 in fines. Willfully failing to carry workers’ comp coverage is a violation of California Labor Code § 3700.5, and carries a $1,000 fine.