N.J. AG Notes Racketeering Convictions of Pair in Multi-Million Dollar Staged Accident Conspiracy

New Jersey Attorney General Peter Harvey announced that a Union County man and a Middlesex County man were convicted this week of racketeering, conspiracy, Health Care Claims Fraud and theft for their roles in a multi-million dollar staged accident and insurance fraud conspiracy, following a six week jury trial in Union County before Judge John Triarsi.

“These convictions represent the dismantling of one of the largest phony accident rings in the history of the state,” said Harvey. “Aside from stealing money from insurance companies, thereby contributing to higher auto insurance rates, these criminals put at risk the lives and safety of New Jersey’s drivers.”

While the investigation uncovered evidence of more than 90 staged accidents and the submission of fraudulent insurance claims exceeding $2 million, the indictment specifically charged Bandy and the co-defendants with the staging of eight phony automobile accidents and the submission of Personal Injury Protection (PIP) and property damage claims to eight insurance companies seeking in excess of $331,000.

The eight staged automobile accidents occurred on the following dates and in the following locations: April 23, 1999 in Union Township; July 15, 1998 in Linden; Sept. 9, 1998 in Edison; March 31, 1999 in Elizabeth; April 23, 1998 in Elizabeth; May 23, 1999 in New York City; Aug. 23, 1997 in Elizabeth and Sept. 8, 1997 in Woodbridge.

According to Vaughn McKoy, director of the Division of Criminal Justice, Anhuar Bandy, who was known to some of the conspirators as the “Chief”, 41, of New Brunswick, Middlesex County, and Elvin Castillo, 27, of Elizabeth, Union County, were convicted of racketeering, conspiracy and multiple counts of Health Care Claims Fraud and theft by deception alleged in a State Grand Jury indictment returned on April 15, 2002 and unsealed on May 16, 2002.

The indictment charged Bandy with conspiracy to commit racketeering, racketeering, conspiracy to commit Health Care Claims Fraud and theft by deception, three counts of Health Care Claims Fraud, all in the second degree, as well as three counts of third degree theft by deception.

“”This was the first time that our Office of Insurance Fraud Prosecutor brought racketeering charges against defendants in connection with a staged accident ring,” said McKoy. “These convictions represent a major milestone in our efforts to combat insurance fraud.”

Castillo was charged with one count each of conspiracy to commit racketeering, racketeering, conspiracy to commit Health Care Claims Fraud and theft by deception, Health Care Claims Fraud, all in the second degree, as well as third degree theft by deception.

Also charged in the indictments were 26 other co-conspirators, some of whom pled guilty and are awaiting sentencing and others whose various cases are still pending.

According to McKoy, crimes of the second degree carry sentences of up to 10 years in state prison and a criminal fine of up to $150,000, while crimes of the third degree carry sentences of up to five years in state prison and a criminal fine of up to $15,000. The defendants may also face civil insurance fraud fines pursuant to the civil Insurance Fraud Prevention Act.

In addition to being charged as racketeers, Bandy and Castillo were also charged pursuant to the State’s Health Care Claims Fraud statute. The Health Care Claims Fraud statute became effective on Jan. 15, 1998 and was passed to “enable more efficient prosecution of criminally culpable persons who knowingly, or with criminal recklessness, submit false or fraudulent claims for payment or reimbursement.”

The Division of Criminal Justice – Office of the Insurance Fraud Prosecutor’s investigation and the Union County jury determined that the defendants reportedly constructed or participated in the staged accidents by actually causing motor vehicle crashes or by colliding with fixed objects such as parked vehicles, telephone poles or other obstructions.

Even though the occupants of the vehicles were not hurt, they were treated at the Bandy-operated chiropractic clinics or at other, unrelated medical service providers. In some cases, the persons occupying the cars were reportedly aware of the phony nature of the automobile accidents, while in other cases the occupants were unaware that the accidents were staged.

The Union County jury found Bandy guilty as the principal organizer and beneficiary of the alleged staged accident activity. Bandy was the owner or operator of several North Jersey chiropractic clinics.

The chiropractic clinics owned or operated by Bandy were in business from approximately February 1995 through July 1999. They are the Elizabeth Injury Center, 925 Elizabeth Ave., Elizabeth; Amboy Injury Center, 272B Hobart St., Perth Amboy; Prospect Spinal Trauma Center, 500 Mount Prospect Ave., Newark; Plainfield Injury Center, 430 Watchung Ave., Plainfield; and the Golden Medical Center, 925 Elizabeth Ave., Elizabeth. The clinics ceased operations in July 1999, as a result of the Division of Criminal Justice – Office of Insurance Fraud Prosecutor’s investigation.

As part of the conspiracy to construct the staged accidents, the indictments alleged that a number of the co-defendants acted as “runners” to recruit persons to participate in the fraudulent activity and that the runners were sometimes known as “constructors,” allegedly because they constructed the automobile accidents. A runner is a person paid by a licensed professional, such as a medical service provider, to procure patients or clients for the professional practice so that insurance claims can be submitted.

It was alleged in the indictments that the defendants submitted fraudulent insurance claims for staged accidents to the following insurance companies: Allstate Insurance Company, Kemper Insurance Company, MDA/Newark Insurance Company, Prudential Insurance Company, Republic Western Insurance Company (U-Haul of Arizona), Selective Insurance Company, Sentry Insurance Company, State Farm Insurance Company, Bayside Casualty Insurance, Clarendon National Insurance Company, Continental Insurance Company, Farm Family Insurance Company, Liberty Mutual Insurance Company, Maryland Insurance Company, The Moxon Company, National Continental Progressive Insurance, National General Insurance Company, N.J. Cure, Ohio Casualty Insurance Company, Parkway Insurance Company, Progressive Casualty Insurance Company, Red Oak Insurance Company, United States Automobile Association (USAA), and the New Jersey Manufacturers Insurance Company.

In two separate, unrelated indictments, Castillo was charged with various tax and mortgage related crimes to include one count of second degree theft by deception, as well as one count of forgery and one count of falsification of records, both crimes of the fourth degree. These charges relate to the phony mortgage loan application.

He was also charged with one count of filing a false or fraudulent New Jersey income tax return, failure to pay New Jersey gross income tax and four counts of failure to file a New Jersey income tax return. All the tax charges are crimes of the third degree. These indictments are still pending in court.

“The defendants were convicted of racketeering, which included threatening witnesses and staging automobile accidents,” said Insurance Fraud Prosecutor Greta Gooden Brown. “While insurance fraud related crime is always serious, the conduct of the these defendants was extremely serious and threatening to the people of this State. Insurance fraud always costs everybody money, but this time it was very dangerous too.”

Brown acknowledged and praised the insurance industry for their cooperation in the investigation. The following insurance companies contributed time, expertise and other resources, during the course of the extensive criminal investigation: Republic Western Insurance Company, Allstate Insurance Company, Material Damages Adjustment (MDA) Services, Prudential Insurance Company, Selective Insurance Company, State Farm Insurance Company and Liberty Mutual Insurance Company. Also drawing praise from the Insurance Fraud Prosecutor was Crossroads Investigations, which also greatly assisted with the investigation.

Bandy and Castillo are scheduled to appear before Judge Triarsi on Dec. 3, 2004 to be sentenced.