Investigators with the California Department of Insurance's (CDI) Fraud Division and the AB 1050 Bay Area Auto Fraud Task Force (BAAFTF), made the arrests of the four suspects who they believe comprised the collision ring dubbed "Operation Phantom Menace."
"The scheme allegedly used by these suspects is the poster child for insurance fraud," said Garamendi. "The claims were faked and the chiropractic bills and property damages were faked, but the financial losses are very real for the consumers who picked up the tab."
In late September, the BAAFTF - a task force comprised of CDI Fraud investigators, the California Highway Patrol (CHP), and the Alameda County District Attorney's office - served multiple location search warrants which included: three law offices, three chiropractic clinics and three residences. The suspects were arrested for multiple counts of insurance fraud, conspiracy and grand theft.
Arrested was Norberto "Chito" Diaz Mora (aka Chito Mora), 52, of Daly City, on 140 felony counts involving insurance fraud. Mora was the alleged ringleader or "capper" of this ring. Also arrested were three chiropractors: David Wu, 37, of San Francisco; Reza Aliakbar, 39, of San Jose; and Marcello Mehmandoust, 39, of Alameda. Each was charged with multiple felonies related to insurance fraud.
All four suspects were booked into the Alameda County Jail, with bail ranging from $100,000 to $250,000. If convicted, each suspect could be fined up to $50,000 and/or receive five years in prison or double the value of the fraud, whichever is greater.
Two-year undercover investigation
The arrests are a result of a two-year undercover investigation by BAAFTF. It focused on this alleged organized crime group which staged false auto accidents and reported accidents that in fact never occurred. The suspects allegedly recruited people with policies covering bodily injury damages and instructed them to crash their vehicles in staged or paper-scripted collisions. (A paper-scripted collision is one in which there is no actual damage done to a vehicle. A false police report and/or insurance claim is filed indicating there was a collision when in fact there was not.)
The "capper" then recruited additional people to falsely claim that they were injured passengers in the vehicles at the time of the fictitious accidents. The alleged parties to the fictitious accidents would then make false insurance claims with insurance companies stating they were passengers in one of the involved vehicles and required chiropractic treatment for their alleged injuries.
The chiropractors allegedly involved in the conspiracy knowingly provided bills to the victims' insurance companies for services never rendered. In some cases the chiropractors met with undercover investigators between one and five times, and then submitted fictitious bills for more than 20 treatments which were never performed.
The BAAFTF began the investigation in August 2004. Two undercover investigators from the BAAFTF were introduced into the alleged ring and were able to identify several suspects. Law offices, chiropractors and an auto body repair shop were found to be involved with Mora, the suspect capper who was primarily responsible for orchestrating these fraudulent insurance claims.
The five staged collisions during the Phantom Menace Operation resulted in losses of approximately $75,000, which consisted of chiropractic bills, legal representation fees and claims for property damage.
BAAFTF's investigators estimate that the crime ring orchestrated more than 100 auto collisions throughout the Bay Area, with an estimated loss to insurance companies of $2.3 million.
The BAAFTF was assisted by the Special Investigations Units and claims offices of the following insurance companies: 21st Century Insurance, USAA Insurance, Liberty Mutual Insurance and Progressive Insurance. The National Insurance Crime Bureau also provided assistance and support in this investigation, which is still ongoing. The case is being prosecuted by the Alameda County District Attorney office's AB1050 team, Deputy District Attorney Kathleen Famulener, and Investigator Michael Oppido.