Mikhail Zemlyansky was nothing if not ambitious. The Russian native masterminded a sprawling crime empire that bled New York auto insurers with
seeming impunity. His gang made at least $400 million in dirty
crash-injury claims, federal prosecutors say. That audacious
money haul is nearly the team value of the Baltimore Orioles. It
was the largest auto-fraud scheme in U.S. history until the gang
was broken open this past winter.
If the federal RICO charges hold up,
then Zemlyansky will be an ominous
signpost of the looting power of organized crime kleptocracies that keep infiltrating the insurance industry. Alpha
gangs are setting up efficient corporate-quality theft machines that are adroitly
exploiting seams in the insurance system
with increasingly seismic heists.
they’re large, complex and often-insular
operations that can be devilishly hard to
penetrate. Some are homegrown; some are
franchises of overarching mafias back in the
home country. Some rings are quite large;
others are smaller but still highly organized
enough to be called organized crime.
More Large-Scale Fraud Gangs
Organized crime isn’t new to insurance
fraud. Gangs have assaulted auto insurers, Medicare, and other insurance programs for years. What appears to be new
is an increased penetration of insurance
by organized unsavories. The question is
whether steroidal stealing is so routine
that it’s becoming a new norm for insurance fraud.
“These crimes are often the work
of well-organized, sophisticated rings
whose successful schemes generate enormous profits for the criminals and result
in equally enormous losses to insurance
carriers and, ultimately, the public,” said a
2011 New York strategy report on how to
combat auto fraud in the state.
Data are in short supply, but the anecdotal case is building. Investigators frequently
say they’re seeing more gangs of larger
scope, often tighter hierarchical organization and discipline, and well-oiled looting
ability. Several nine-figure fraud sprees
have surfaced just in the last few months
alone. But whether the curve is way up,
somewhat up or even flat, the fact is that organized crime maintains a dominant presence in the insurance-fraud business.
Organized crime itself is a slippery
term. There’s no easy definition; call them
fraud gangs or cartels. Whatever the name,
Penetrating Ethnic Gangs
Most fraud gangs tend to be ethnic.
They are Russians, Armenians, Estonians,
Latvians, Jamaicans and outfits from varied Spanish-speaking nations, to name
just some. Ethnic gangs can be hard to
penetrate. They often stick largely to their
own nationality. The shared language and
close family ties among gang members
can erect a highly resistant barrier.
Russian mobsters and those from former Soviet bloc countries are an especially forceful criminal presence in the U.S.
The fall of the Soviet Union in 1991, for
example, spawned numerous powerful
crime gangs loosely known as the Russian mafia. They had learned little respect
for government in the old Soviet Union
and had developed acute survival skills
by learning how to steal from the government. These mobsters exported those talents to the U.S. and are putting them to
work against insurance systems. The FBI
even has a task force solely for Eurasian
crime—and it played a large role in Zemlyansky’s takedown.
Regardless of nationality, the better-mobilized fraud operations can lodge
claims for hundreds of millions of dollars before they’re busted. Many more
gangs may be trolling silently underneath the investigative radar.
Lawrence Duran was nailed with a
whopping 50 years in federal prison last
year for masterminding an attempted
$205 million ransacking of the federal
healthcare safety net for seniors. A crony
received 35 years.
Duran crafted a network of thiev-
ing medical outfits throughout Florida.
Among other tactics, recruiters trolled
halfway houses for addicts and alcohol-
ics. The residents were bribed to receive
bogus mental-health and sleep-disorder
treatment billed to Medicare.
Zemlyansky’s suspected roughriders
were centered in the Russian immigrant
enclave of Brighton Beach in New York
City but stole insurance money in all city
boroughs. He tried to lodge so many fake
injury claims that his ring needed three
billing companies just to handle the paperwork, prosecutors allege.
Recruiters monitored police radios to
track down crash victims at the scene.
ER employees also alerted recruiters
when crash victims came in.Zemly-ansky ran nine clinics in the Bronx,
Brooklyn, and Queens. They allegedly
provided worthless and excessive medical treatments, including physical therapy, acupuncture, pain management,
psychological services, X-rays, MRIs
and other services.
In fact, drug dealers and other mobsters are switching to insurance because
they perceive this crime as more lucrative, less-dangerous and possessing lower
odds of being caught (refer to the chart
on page 25).
Get Their Cut
Doctors also were on the take. They
were paid to act as illegal straw owners of
clinics actually dominated by gang members. Lawyers sued insurers, coaching the
crash victims on what to say when auto
insurers interviewed them.
The stolen insurance money was laundered through shell corporations and
corrupt check-cashing services, officials
say. These defendants used the money
to finance princely lifestyles—including
vacations in Mexico and Atlantic City;
bling from Louis Vuitton, Chanel and