Alleged police scam had hidden cost

The alleged extortion scheme outlined by federal prosecutors this week seemed to benefit both auto accident victims, who avoided paying towing fees and insurance deductibles, and Baltimore police officers, who got kickbacks for making referrals to a car repair shop.

But insurance industry representatives warn that the money accident victims saved on the front end of this arrangement will be made up later with higher premiums. Inflated towing and storage fees are the second-most common type of fraudulent claim, according to the National Insurance Crime Bureau.

Insurance companies are "going to recapture their money from somewhere," said Frank Scafidi, a spokesman for the bureau, which conducts investigations for 1,100 insurance companies. He said the companies will recoup their losses "in the form of higher premiums for everyone driving a car in Maryland."

City Councilman Robert W. Curran, who has closely followed the towing issue and supports regulation — saying it protects consumers even as it allows 13 firms to monopolize the city's business — said auto accident victims caught up in the alleged scheme only think they got good deals.

"It's an insurance scam," Curran said.

There is no evidence so far that people involved in the accidents knew they were involved in an illegal scheme. For anyone standing shaken on the side of the road next to a damaged car, any chance to avoid shelling out money can seem attractive.

And, federal authorities said in the 41-page criminal complaint, Baltimore police officers were offering a sweet deal. Drivers involved in accidents could bypass the city's regulated tow companies — and their fees — by choosing a repair shop recommended by officers handling the calls.

For drivers, the arrangement proved expedient and cheap — saving them up to $140 in towing fees, additional storage fees at a city impound lot and $250 to $500 in insurance deductibles.

For the officers who made the referrals, the accidents were an opportunity, authorities say. They allegedly pocketed $300 per car from the repair shop, payments the U.S. attorney's office in Baltimore has described as an extortion racket in a criminal complaint charging 17 city officers with corruption.

The immediate victims are entities people love to hate — towing firms with exclusive city contracts that collectively take in more than $12 million a year removing cars parked illegally or damaged in accidents, and insurance companies.

"The public doesn't look at the insurance industry as a victim," said Scafidi, a former FBI agent who spent 10 years in Washington and investigated police corruption. "It's a big company, who cares, I've paid premiums for years and I never had a claim. But what happened in Baltimore is illegal and it's a crime."

He said the scheme is common among rogue or gypsy tow truck drivers in cities across the nation. In 2008, nearly 35,000 questionable vehicle claims were referred to the nonprofit insurance crime bureau — a 19 percent increase over 2008. The claims included inflated towing bills, faked damage and bogus glass repairs.

Federal prosecutors, in discussing the indictment Wednesday with reporters, would not say how much money the Rosedale repair shop, called Majestic, took in through the alleged scheme. The owners of Majestic were charged with extortion; they could not be reached for comment Thursday.

But the prosecutors said insurance companies were victimized, as police told accident victims to let the repair shop owners help them file claims.

The indictment describes one officer talking with the repair shop owner about doing "more damage to the vehicle" — known as "souping it up" — because the car owner's deductible was high and the damage was minimal. That didn't leave enough money to repair the car and pay the officer, the indictment says.

Prosecutors do not allege that the accident victims — who were not identified — knew they were playing a role in the alleged extortion scheme. Some did not speak English well, suggesting that officers took advantage of them, and at least one person became suspicious and called internal police investigators, court papers show.

That person was involved in an accident Jan. 1, 2010, when a car went out of control and slammed into three parked vehicles on Cedonia Avenue in Northeast Baltimore. According to the indictment, the officer filed a report saying that one victim made his own arrangements to have his vehicle towed to Majestic. The owner of one car denied that and said it was the officer who made the call, which to him appeared odd.

The criminal complaint says officers induced victims to contact Majestic by promising that the company would pay deductibles and help with insurance claims. The officers called the repair shop from accident scenes and put its owners on the phone with vehicle owners to make arrangements, the indictment says.

Scafidi said the alleged involvement of city police officers was troubling.

"It makes people who might not be inclined to go along to participate," he said. "I mean, if a guy shows up in a tow truck with a wife-beater T-shirt on and says, 'I'm going to make this all right to you, you won't have to pay a penny,' you might say, 'I'm calling the cops or my insurance company.'

"But in this case cops are there, and when they tell you something, you're going to believe them."

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