Chief Assistant District Attorney Daniel R. Alonso: Testimony Before the New York City Council Transportation Committee

January 22, 2013 | New York, NY

Thank you for the opportunity to present the views of the Manhattan DistrictAttorney’s Office on combating no-fault insurance fraud in New York. By wayof background, I currently serve as the Chief Assistant District Attorney inManhattan, and have been a prosecutor for 17 years. For nine of those years, I was an Assistant United States Attorney in the Eastern District of New York, where I served for three years as Chief of the Criminal Division. In that capacity, I supervised the prosecution of a wide range of crimes including health care fraud, and I was the lead prosecutor in what was, at the time we announced the indictment in 2001, the largest staged accident case in New York’s history. My current office, under the leadership of District Attorney Cyrus R. Vance, Jr., and his predecessor, Robert M. Morgenthau, has also investigated and prosecuted a number of large no-fault insurance fraud rings.

We in law enforcement are keenly aware that wherever there is a large pot of
money, there are criminals looking to steal it. And one of the larger pots of
money is that mandated by New York law and funded by ratepayers around the
state who own cars: no-fault insurance. Unfortunately, no-fault has lent itself to
massive fraud and abuse, which has contributed to our inordinately high auto
insurance rates.
 
District Attorney Vance’s Office very much operates under the principle that a
crime prevented is worth more than a crime prosecuted. We are not waiting to react to crime – we have made it a point to come up with strategies to prevent
serious crimes before they happen. This is true in the violent crime arena, and it
is equally true with white collar crime and organized crime. With no-fault
insurance fraud, this translates into a need for a strong, effective law
criminalizing the unscrupulous “runners” who pay and are paid to bring
patients into no-fault clinics. The purpose is simple: to prevent fraudulent
claims.
 
New York and federal policy makers have known for decades that sometimes it
is necessary to criminalize certain behaviors in order to deter or prevent other,
more costly behaviors. Thus, in New York we criminalize possession of guns as
one way to prevent shootings, or switchblades to prevent stabbings. And the
federal Medicare-Medicaid Anti-Kickback Act [1]  makes it a crime to pay for
patient referrals, because when you’re getting paid for every patient you send
over, you quickly run out of legitimate patients, and that becomes the source of
Medicare and Medicaid fraud.
 
So, too, in the no-fault insurance area, we need to prevent fraud by attacking
the root of the problem, the runner. As you are aware, the typical scheme
involves collaboration among not just unscrupulous medical clinics and
lawyers, but also the runners who recruit and bring in patients and clients. If I
could stress one and only one point to you today it would be this: without
runners, the patient supply for fraudulent clinics would dry up, and New York’s
ratepayers would save tens if not hundreds of millions of dollars.
 
In stressing that point, I would like to make clear the distinction between an
anti-runner law and an anti-fraud law. We propose a law that criminalizes
paying for patients and clients, as a means to prevent fraud. Fraud itself is, of
course, already a crime – the law even specifically criminalizes specialized types
of fraud such as Insurance Fraud and Health Care Fraud – such that more antifraud laws are unnecessary. The key difference between what we propose today and anti-fraud laws is that the latter require proof of fraudulent intent or knowledge, while the runner law we propose today criminalizes knowingly and intentionally making or receiving prohibited payments, without further inquiry into whether any particular claim is exaggerated, inflated, false, misleading or unnecessary.
 
Why is it so important to have an illegal payments law? Because the no-fault
scam is like a 21st century “military-industrial complex” for the underworld, in
that every participant works to make sure that every other participant makes
money but that no one is left holding the bag, and everyone has the means to
deny fraudulent intent. The runner brings patients to the clinic and he gets
paid. The patients visit the clinic and they get paid. The lawyer, who has been
helpfully provided by the medical clinic – often physically setting up shop
inside the clinic – signs up the patient and he gets paid his one-third contingent
fee for what is typically a nuisance-value pain and suffering claim. And of
course, the clinic owners and other providers get paid for providing as many
kinds of treatments as they can – neurology, psychological counseling, MRIs,
X-rays, acupuncture, physical therapy, and durable medical equipment, to name
a few. Everyone wins, except the insurance companies and their ratepayers,
those of us who own cars. We lose.
 
In our experience, runners operate in four primary ways, all of which involve
their steering passengers whose names are on the accident report – and who are
willing to return for multiple visits – to the corrupt no-fault clinic in exchange
for between $1,000 and $2,000 per head. Those passengers are typically given
services that are based not on need, but rather on how much they generate in
insurance billings for the clinic.
 
In the first typical scenario, runners use their street connections to find people
who were in real car accidents — whether actually injured or not — and send
them to the clinics for services. Second, they may stage the accidents by fitting
as many people as possible into at least two cars, and plotting a low impact
collision. Third, in a dangerous variation on the staged accident, some runners
may actually have their recruits cause an accident with an innocent victim,
usually targeting expensive cars on the theory that these cars are better insured.
And finally, although this is rare, I have personally prosecuted a runner for
bribing a corrupt Brooklyn police officer to draft bogus accident reports.
 
The common theme is the runner – typically a shady middleman who does not
care one whit about injuries, patients, or taxpayers, only money in his pocket.
As I mentioned earlier, during my tenure at the U.S. Attorney’s Office, we
prosecuted a large-scale staged accident ring known as the Hawkins
organization, named for Quentin “Flint” Hawkins, who at the time we called
the “king of the runners” in Brooklyn. Until Judge Jack Weinstein sent him to
federal prison, he had spent more than 20 years staging hundreds of car
accidents, each generating on average between $100,000 and $200,000 in
fraudulent billings by no-fault clinics.
 
Despite the many successes of my office and our sister offices in New York,
we also encounter common setbacks. The entire enterprise is premised on the
understanding that its participants will stick to a simple plan if questioned by
police. The patients know to say they were really injured, the doctors say they
merely treated a patient who complained of injuries, the lawyers say they filed a
claim for a client who had an accident report and medical records, and the
runners run away. It is thus exceedingly difficult under existing law, without
years of investigation, to prove that the various participants acted with
knowledge of fraudulent claims. And the runners and providers know this.
In order for state prosecutors to prevent no-fault insurance fraud schemes
effectively, we need to be able to take runners off the streets, put them out of
business, and put them in prison. For that reason, the Manhattan DA’s Office
supported the passage last session of S7451-2011, which would make it illegal
either to act as a runner or to hire a runner, and that for certain thresholds –
either monetary or based on the number of patients referred – would make
hiring or acting as a runner a felony subject to the provisions of New York’s
Organized Crime Control Act.
 
The premise is simple: Once you dry up the supply of patients, you’ll take away
the incentive to defraud insurance companies. Legitimate patients won’t suffer.
Legitimate clinics won’t suffer. And legitimate lawyers won’t suffer. This is
simply being smart about crime prevention. The Senate version passed at the end of the session, and we look forward to its consideration this session. Your resolution in support would go a long way.
 
In closing, we commend the leadership of this Committee, especially its Chair,
as well as all of the members of the Committee and Speaker Quinn, and we
respectfully recommend that the full Council issue the proposed resolution.
Thank you again for providing us with the opportunity to share our views
today.
 
[1] 42 U.S.C. § 1320a-7b(b).