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Letter to the Editor

Allstate, Progressive and Encompass Insurance Companies File $36 Million RICO Lawsuit to Combat No-fault Fraud Ring

NEW YORK -- Allstate, Progressive and Encompass insurance companies have filed a civil lawsuit in Southern District Court, New York County, against a multi-million dollar fraud enterprise operating in the Bronx, Queens and Long Island. The companies are seeking $36 million in damages from 26 defendants, among them doctors, dentists and an acupuncturist.

"This case clearly illustrates the need for legislative reform of New York's no-fault insurance system," said Edward J. Moran, assistant vice president for Allstate's Special Investigation Unit.

Named in the suit are the four ringleaders: Dipak Nandi, M.D., Afsar Gul, Satrajit Rudra and Iftikhar Malik who allegedly organized a massive scheme with the intent of bilking the no-fault insurance system, insurance companies doing business in the state and consumers who ultimately pay the price of auto insurance fraud.

"Unfortunately this is just one particularly outrageous example of how New York's no-fault insurance system, as it stands today, can be manipulated for the benefit of insurance cheats, with the costs paid by the honest consumer," said Moran.

Allstate, Progressive and Encompass allege that over a four-year period, the ringleaders set up an extensive network of phony medical corporations to fraudulently bill the insurers for tens of millions of dollars in no-fault claims. In order to establish the facilities, the defendants paid to use the names and professional credentials of medical providers to skirt laws requiring medical facilities to be owned and operated by licensed professionals.

"The no-fault system has few safeguards against these bill processing centers disguised as health care facilities," said Moran. "This one fraud ring, and we believe there are hundreds operating in New York, netted at least $12 million for the perpetrators. Unfortunately this organized criminal activity is just the tip of an iceberg of fraud and abuse that is driving up the cost of insurance for all consumers, and is a threat to the safety of the driving public. We need changes to the front-end of the no-fault system to prevent fraud and abuse in the first place, or it will be impossible to get our arms around the entire problem."

The alleged hub of the operation was the Bronx-based Fordham Medical Pain and Treatment, P.C., later known as Plaza Medical & Pain Treatment P.C., which fronted as a multi-care medical clinic. To generate a steady stream of patients to Fordham/Plaza, the ring employed several "runners" responsible for staging accidents, recruiting accomplices to act as injured parties in the accidents and for steering the patients to Fordham/Plaza. Runners received payment based on the number of "victims" they fed to the clinic.

The complaint alleges that routinely, many of the persons treated were paid fees with the additional prospect of a monetary settlement from their personal injury claim pursued by their attorneys, who they were referred to by Fordham/Plaza.

"The complaint alleges that paying for staged accidents is the primary source of Fordham/Plaza's business," said Vince Coyne, Progressive Insurance Company special investigations manager. "Runners can operate today without fear of criminal penalties and without much risk. We support current legislative efforts to make 'running' a felony offense."

The fraud ring is organized around the illegally incorporated clinics, the "doc-in-a-box" operations, allegedly established by the ringleaders who purchased the names and licenses of medical doctors to serve as front persons of the PCs, while lay persons were given the actual control over the practice of medicine.

The insurers allege that a typical scam started with the initial visit to the Fordham/Plaza clinic by the uninjured, staged-accident participants, where they would undergo a series of extensive and exotic medically unnecessary diagnostic tests. The tests led to a "template" diagnosis, or false or forged medical reports, ordering the claimant to receive multiple treatments including acupuncture, physical therapy and chiropractic services, racking up thousands in bogus billing.

To increase the moneymaking capacity of the enterprise, the insurers allege the ringleaders illegally incorporated and operated a number of specialty provider facilities, mostly specializing in acupuncture services, to service patients referred to them by Fordham/Plaza. Through this practice, the defendants were able to exponentially increase the number of bills submitted to the insurers for each claimant.

Among the other alleged illegal activities undertaken by the defendants in the complaint are:

• Billing for services never provided, duplicative and/or inflated billing;
• Accepting kickbacks for referrals of staged accident "victims" to unrelated diagnostic testing facilities;
• Creating three management companies to launder money from the operation back to the ringleaders;
• Forging office sign-in sheets to justify repeated treatments; and
• Enlisting dentists to defraud insurers for phantom treatments for Temporal Mandibular Joint Disfunction allegedly occurring as a result of an auto accident.

"Systemic changes need to be made to the no-fault system," Progressive's Coyne said. "This includes reasonable requirements for notification of treatment, more time for insurance companies to investigate suspicious claims and guidelines for the treatment of soft-tissue injuries, the source of the majority of no-fault fraud."

The 24-count complaint seeks relief under the federal Racketeer-Influenced and Corrupt Organizations Act (RICO) and New York State law. Allstate, Progressive and Encompass are seeking restitution of paid claims, plus treble damages and an injunction to stop the defendants from continuing their operation. The companies are also seeking to block and recoup any paid and pending payments to the defendants.

Allstate, Progressive and Encompass are committed to participating in anti-fraud activities in conjunction with the State Insurance Frauds Bureau and law enforcement. This is one in a series of suits Allstate and Progressive have filed jointly to expose and combat no-fault fraud rings.

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