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Year 2000 Insurance Fraud Warning
August 24, 1998: 2:32 p.m. ET
AUSTIN, TEXAS, U.S.A. (NB) -- By Steve Gold, Newsbytes. InfoGlide, an Austin, Texas-based firm that fights insurance, Medicaid, and workers' compensation fraud, says that criminals are taking advantage of the Year 2000 computer problem, scamming billions of dollars from government agencies and private companies preoccupied with solving the Year 2000 problem.
According to John Valentine, the firm's chief executive officer (CEO), its fraud review of major financial institutions, Medicaid providers, and police departments, revealed the trend, which is accelerating.
The fraud rings, Valentine said, are using modified names, addresses, social security numbers, and other false identifiers to make bogus insurance, Medicaid, and workers' compensation claims, taking advantage of the "technology paralysis" that many insurance firms are experiencing.
"Computer criminals figured out the obvious. If they changed their names and addresses, for example, they could take out multiple policies. And they knew that the Year 2000 problems had the insurers too tied up to ever catch it," he said.
In one fraud review, Valentine said InfoGlide had found 11 innocent ways to spell Los Angeles within an insurance firm's database. When InfoGlide notified the company, it said it was too tied up with Year 2000 problems to even think about their database irregularities.
According to the company, using modified names, addresses, social security numbers, and scores of other bogus identifiers, staged auto accident fraud rings have stolen up to $100 million from one major property/casualty insurance company alone.
The firm says that the perpetrators were sophisticated, computer literate criminals and had several computer programmers working as part of the ring. According to InfoGlide, they used the technology paralysis of the insurance industry, because of the Y2K computer bug, to shield them from being detected.
"Year 2000 problems are freezing all the technical resources for the insurance and Medicaid industry. Y2K makes fraud a criminal's dream," said Valentine.
InfoGlide says that, in one large metropolitan area, a ring of attorneys and doctors were hiring illegal aliens or recently arrived legal aliens to participate in staged auto accidents. These aliens, the firm says, had names which "looked like an eye chart" with very difficult West African, Asian, or Balkan spellings.
According to Valentine, the names proved most difficult for local insurance investigators because they could not tell if the names were modified or not from case to case.
"It's one thing when you have a policy for John James and Jimmie Jon, who an investigator might consider as the same person. It's much different with Nyuguen Hui Lao and Li Nyugen. The latter two are the same person, but you would never know," he explained.
For its survey, InfoGlide spoke with attorneys, investigators, police organizations, government investigators, and prosecutors in 21 states. Over 61 percent found similar patterns of criminal fraud rings using the profile of modifying names and other identifiers.
Interestingly, the survey found that many of those contacted were beginning to experience new kinds of financial fraud, much of which is caused by the Year 2000 paralysis.
"We've interviewed insurance firms in Canada, Great Britain, and Australia and they have begun to find the same phenomenon. Criminal fraud rings are hitting them as never before because the Year 2000 problem has tied the hands of their technology people," Valentine said.
Newsbytes notes that insurance databases in the US, as well as in Western Europe, have been set up to prevent rolling fraud, where one person has multiple policies, usually with slight variances in their names. By careful cross-matching, these databases can often highlight a fraud in progress, allowing the insurers to take appropriate action.
According to InfoGlide, however, people are going beyond name modifications and changing every identifier, sometimes 30 at a time. They are also victimizing insurers, financial institutions, and Medicaid providers across databases, knowing that the Year 2000 problem, and its strangle hold on technical resources, has eliminated any chance of being caught.
InfoGlide says it has developed new technology with the help of two former Royal Canadian Mounted Police (RCMP) programmers to keep up with the Year induced fraud. According to Valentine, it now detects "fraud profiles in constantly changing data."
On one case, InfoGlide found a workers comp fraud ring consisting of many homes in a specific neighborhood. These people all had different names, addresses, and other identifiers. The case was cracked because the perpetrators had all taken out different P.O. boxes, but at the same post office.
Probably the most unusual, according to Valentine, was a family that traveled throughout the US victimizing a single worker's compensation insurance company. These people were particularly brazen, not even bothering to significantly change their names and other identifiers.
According to InfoGlide, the fraudsters simply hit the single insurance company in different regions knowing that their internal computer systems did not "talk to" each other.
In this way, the firm says, they victimized each of their nine regions individually. It was only after InfoGlide did searches across all nine databases simultaneously that the fraud was discovered. Unfortunately, by that time, the insurer had paid over $165,000 in claims.
This criminal fraud family had a son who was very computer literate. He knew that this particular company was so tied up on Year 2000 issues that it couldn't get its systems to work together. And he used this knowledge to his advantage," Valentine said.
When asked to rank the fraud types, Valentine said that automobile fraud rings, while everywhere, are dwarfed by worker's comp fraud. The biggest frauds, however, are those that involve Medicaid. Many states, he noted, "could buy an NFL football team with what they could save in Medicaid fraud -- each year."