Nightline Fix

Fraud Rings Bilk Insurance Companies — and You — of Billions

Nightline Fix

Believe it or not, the fender bender seen in this undercover video could be an $80,000 car crash and a billion dollar problem. The men seen here have allegedly staged this accident for insurance fraud. No one got hurt but there could be lots of victims, quite possibly you.

It’s 5:30 in the morning. In the dark, agents and police officers stage at various meeting points around Miami. Today's mission is to sweep up and arrest some 20 people suspected of being involved in a personal injury insurance fraud ring. Among them two medical clinic owners. The cops tell us it may not be glamorous, but it is very lucrative, this particular ring brings in millions of dollars.

For 9 months, agents from Florida's Department of Finance have been unraveling what they believe is a complex racket of insurance fraud. Prosecutors allege medical clinic owners, physicians, therapists and alleged accident victims have organized fake car accidents to rake in money from insurance payments.

And on this morning the agents finally have them in their sights.

“We like to catch these people while they are home, while they have their guards down,” said Lt. Rafael Delgado. “And while sometimes they are still in bed.”

It's estimated personal injury fraud costs the state of Florida alone more than a billion dollars a year, a loss that is passed along to you, the consumer, in the form of higher and higher insurance premiums.

How does it work?

As seen in that undercover video shot by a detective in a previously prosecuted case, it starts with a faked accident. Police say it's perfectly orchestrated theater. The cars are now put in position on the street, the so-called passengers arrive on the scene and then a call goes out to the police.

The next step happens later when the passengers -- who are not really injured -- go to the personal injury clinic allegedly set up by the fraudsters, where they are paid and the employees file up to $10,000 per person in insurance claims for massage or therapy treatments that are never performed.

One car with four passengers could generate $40,000. Two cars, $80,000. For just one minor -- and fake -- collision.

The day before the arrests go down, Delgado briefs the team on the case, dubbed “Operation No-Med Services.” The operation targets what police say is a soup to nuts fraud operation. Four clinics, two owners, various employees who allegedly organize the staged accidents, and people accused of participating as paid passengers. Delgado tells ABC News “Nightline” the six car accidents these suspects were allegedly involved in cost insurance companies more than $400,000.

“Many of these individuals have prior arrests for forgery, larceny, narcotics, resisting law enforcement,” he said. “So again safety is No. 1.”

Delgado and Det. Oscar Sigler take “Nightline” correspondent Matt Gutman on a tour of where one accident took place.

“They are making a lot of money, a lot of money,” said Delgado. “It’s my understanding a lot of people who were once into narcotics are into committing staged accidents.”

But the accident is only the first step. Without the clinics this is all useless. Magic Hands is one of the four clinics targeted in the operation. According to the agents, these clinics can generate big money, millions per year.

After months and months of following paper trails, tracking down suspects, conducting surveillance, Delgado and the other teams are finally fanning out in the pre-dawn darkness to catch their quarry. At 6 a.m. it begins. And within the hour, nearly 20 suspects have been taken into custody and are on their way back to headquarters and questioning.

Within days they are all arraigned, and according to defense attorneys and court documents they have all entered not guilty pleas.

This crew may or may not be guilty, but the agents say the insurance fraud scams will keep coming.

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