Thursday, 03 June 2010 18:46

'Operation Straight Body' a Sting Launched in Orange County, CA

The fallout from the Orange County auto body sting operation which swept up 53 shop owners and estimators earlier this month has already cost many of those implicated their DRP arrangements. Several major shops involved, with the notable exception of two of the state’s three Sterling shops owned by Allstate, have already had their DRPs cancelled by their insurer partners.

Details of the specific charges are still forthcoming, but those involved will likely be charged  under CP code 550b(2), which reads, in part:

(b) It is unlawful to do, or to knowingly assist or conspire with any person to do, any of the following:

(1) Present or cause to be presented any written or oral statement as part of, or in support of or opposition to, a claim for payment or other benefit pursuant to an insurance policy, knowing that the statement contains any false or misleading information concerning any material fact.

(2) Prepare or make any written or oral statement that is intended to be presented to any insurer or any insurance claimant in connection with, or in support of or opposition to, any claim or payment or other benefit pursuant to an insurance policy, knowing that the statement contains any false or misleading information concerning any material fact.

 

A mitigating factor may be that most shops do direct estimates, in that they are written and sent directly to the insurance company by the body shop. Customers who come in off the street and just want a written estimate to take with them are usually using it as a bargaining chip with the other party to the accident.

Many experienced shop owners were clearly under the impression that if the estimate was marked “OR,” meaning “owner requested,” that they bear no liability for what is done with the estimate beyond that point. This case will thoroughly test the argument that if the estimate is written explicitly for the vehicle owner and given to the vehicle owner, then it is the vehicle owner who commits insurance fraud if he turns it in to the insurance company.

A number of the shops are joining together to combine their representation to counter the charges. One prominent attorney Dyke Huish, has publicly criticized the expense and public value of the sting operation, as well as the DA’s “grandstanding.” Said Huish, “I guess his feeling is innocent until proven guilty applies in the court room but not in public opinion and the media.” Huish is representing at least six of those charged in the case.

The case formally began June 2 when 53 Orange County shop owners and estimators were arrested and booked in ‘Operation Straight Body’ following a 5-month undercover investigation by the OCDA Automobile Insurance Fraud Unit targeting auto body repair facilities. The Orange County DA, Tony Rackuackas, released the following statement on Thursday, June 3.

“Between January and May 2010, the OCDA conducted 152 undercover operations throughout Orange County.

“The targets for this operation were identified through the Bureau of Automotive Repair (BAR), who provided the OCDA with a list of 141 auto body repair facilities that have had consumer complaints within the past three years. The additional targets were identified through referrals by the National Insurance Crime Bureau (NICB) and independent auto repair facilities that were not registered with the BAR.

“Investigators arrested the defendants on felony insurance fraud charges on June 2, 2010, and June 3, 2010. The defendants have each been charged with one felony count of insurance fraud and face maximum sentences of five years in state prison if convicted. A complete list of defendants and the auto body repair facilities where they worked is available. The in-custody defendants who have not posted the $30,000 bail will be arraigned in Department CJ-1, Central Jail, Santa Ana.

“From January to May of this year, the Auto Insurance Fraud Unit of the Orange County District Attorney’s Office conducted and coordinated Operation Straight Body—the largest case of auto body repair insurance fraud [investigation] in Orange County’s history.

“Operation Straight Body was an undercover investigation focusing on 141 auto body repair facilities suspected of engaging in insurance fraud, as referred to us by the Bureau of Automotive Repair and the National Insurance Crime Bureau. We also investigated seven unregistered auto repair body shops and a few selected stores.

“I am happy to report that most of the subjects that were contacted by our undercover investigators refused to engage in insurance fraud... [Ed—portions of the next part of this statement were later retracted, so we do not reproduce it here.]

“One of the defendants, after getting arrested, acknowledged that he is glad we did this investigation because the industry is out of control. This prosecution puts dishonest operators and anyone thinking about committing fraud on notice. We are watching them, and they will be prosecuted.

“I think consumers have the right to know which of the auto repair shops are conducting straight businesses and which are not. There is a saying: there is no honor among thieves. Dishonest businesses willing to rip off the insurance companies are more likely to rip off the customers as well. We alternated using two different cars in two scenarios. The 2001 Ford Expedition we used was totaled by an insurance company after being involved in a rear end collision.

“As you can see from the pictures, the rear bumper is completely missing. Additionally, the Expedition was backed into a telephone pole, causing the rear hatch to have an indentation. The 1999 Mercedes Benz E430 we used was also totaled by an insurance company after being involved in a rear-end collision.

As you can see from the pictures, the left side of the bumper is not attached to the vehicle and is hanging freely. The vehicle has a large dent in the passenger side front fender. Using the Ford and the Mercedes, our investigators went to the auto body repair facilities asking for an estimate to repair the damages.

“The investigator would then ask if all the damage could be repaired under the same insurance claim, even though not all of the damages were caused by the “accident” that the claim was under. Two-thirds of the estimators did the right thing. They rightly advised our investigators that filing one claim for two separate, unrelated damages would constitute insurance fraud.

“Those who agreed to file damages under the same claim are now charged with felony insurance fraud, which carries the maximum penalty of five years in state prison. We went one step further using the Mercedes Benz. Our investigators told the estimator that the vehicle was purchased with the rear end and front fender damage at an auction. The auto insurance was purchased after the damage occurred. The investigator then told the estimator that he needed an estimate to submit a claim to the new insurance company to fix the pre-existing damages.

“Again, the majority of the estimators refused, advising that this was insurance fraud. Those who completed the estimate despite knowing it was going to be used to commit insurance fraud are looking at a felony conviction and up to five years in state prison.

“One of the dishonest operators was so bold that he advised our undercover investigator how to inflict more damage to the car to maximize the claim. Some of the defendants charged are owners of repair shops and others are employees. We will continue to investigate whether these were orchestrated fraudulent schemes or just opportunistic crimes.”

One of those arrested, Sergio Perez, who owns USA Auto Collision in La Habra—said he was innocent when booked.

“I don’t have any idea about any insurance fraud. I’m doing everything OK. I don’t understand why they arrested me. We write estimates according to what the client tells us,” said Perez, 44, who has owned the shop for eight years. “My record is clean and I do everything professionally. This surprised me.”

All those accused are innocent until a court of law, not the DA, says otherwise. See related article and CAA guidelines this issue.
Dyke Huish, Criminal Defense Attorney
949-837-8600  (Office)

Additional information on the vehicles involved in the operation

All those accused are innocent until a court of law says otherwise:

To see the list of those charged and shops they work in as reported in local media, click here.

 

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