WYOMING, Mich. (WOOD) — The car crashes weren’t real and the patients didn’t actually have any injuries, but the people behind an elaborate fraud scheme made off with more than a million dollars.
Ringleaders out of Florida exploited a loophole in Michigan’s no-fault automotive insurance system in the kind of fraud that drives up premiums for everyone.
Starting more than four years ago, drivers recruited to the scheme would crash into trees, deliberately run off the road or say an animal hit their car.
When Target 8 investigators asked one of those drivers why he did it, he replied, “I don’t know.”
“No reason,” Alex Watters continued. “I don’t know why. Stupid. Dumb.”
Watters was down on his luck and making some cash for staging a fender bender was enticing.
“The recruiter would reach out to individuals within their community — Cuban nationals, Dominicans — and asked them to participate and go stage automobile accidents, pay them $1,000,” Homeland Security Investigations Resident Agent in Charge Jeremy Pierczynski explained.
The instructions from the criminals in charge were simple.
“(They) said, ‘Run off the road and get a police report,'” Watters told Target 8. “It was before I had this job. I was broke. I made some money.”
Watters and dozens of others staged crashes across West Michigan. They were then told to seek physical therapy at clinics owned by David Sosa-Baladron and Belkis Soca-Fernandez, Cuban nationals living in Tampa, Florida. Their scheme started in 2012 when they opened Revive Therapy Center near 28th Street and Burlingame in Wyoming.
“The next step was going to see a doctor. They were coached in that process to tell the doctor what symptoms they had so they could get a script for therapy,” Pierczynski said.
The patients would complain of generic back and neck pain.
“The clinic would then bill the insurance company. Let’s say a person came seven times. They would bill the insurance company 75 times,” Pierczynski said.
Sosa-Baladron and Soca-Fernandez denied having any knowledge about those fake billings, but federal officials say practically everyone was in on it, from the recruiter to the drivers to the managers of the clinics. While drivers in West Michigan were staging the crashes, the couple was living lavishly in a roughly $800,000 Tampa mansion after making nearly $1 million from the fake billings.
“Greed, in a word. And they were very successful, unfortunately, in this situation,” Wyoming Department of Public Safety Chief James Carmody said.
Carmody’s department and many others responded to the fake crashes.
“We have our public safety — police, fire and EMS — tied up when they could be doing other things,” Carmody said.
MICHIGAN’S INSURANCE RULES ATTRACT CROOKS
So why did the Florida couple target Michigan? No-fault auto insurance.
“It’s an unlimited pot of money. It’s like saying, ‘Welcome to Michigan’ for those people who are unscrupulous and looking to make money off the insurance system,” said Lori Conarton, a spokeswoman for Lansing-based trade association Insurance Alliance of Michigan.
Conarton explained that under Michigan’s no-fault system, insurance pays your medical costs no matter who’s at fault in the crash. The payouts from insurance companies eventually get passed along to the customer. Michigan drivers pay some of the highest premiums in the country because of the no-fault system.
And it makes the state a target for fraud.
“Although we can’t quantify it exactly, about 10 percent of all claims are fraudulent,” Conarton said.
Her group wants to see changes to the state’s system, including the creation of a fraud authority to help find and prosecute similar scams.
But the latest reform efforts by lawmakers fell short of making it out of the state House earlier this month and the future is uncertain.
“It’s a political situation, political question that they’re going to have to wrestle with. We’ve been dealing with no-fault insurance for a long time in the state of Michigan,” Chief Carmody said.
The good news is that authorities are catching on to a crime that cheats us all.
“I think we know with the insurance companies what to start looking for,” Pierczynski said. “We’re looking at how can we shut this down. We leave the policy issues and the law issues up to state and federal legislators.”
After a joint investigation by HSI and the FBI, the U.S. Attorney’s Office charged eight people in connection to the crash scam. The couple leading the fraud were sentenced in August to at least 10 years in prison and ordered to pay roughly $675,000 in restitution.