The scheme is said to have cost insurers — and, through higher rates, their policyholders — more than $5 million.
The seven were arrested on June 27 by investigators with the Texas Department of Insurance (TDI), the Federal Bureau of Investigation, and the U.S. Postal Inspection Service, following the return of indictments by a federal grand jury. Sentencing has been set for Dec. 12. The defendants face up to 20 years in prison and substantial fines.
"A very thorough investigation by our fraud unit and assistance from the U.S. Attorney's Office succeeded in quickly bringing these suspects to justice," said Commissioner Jose Montemayor. "We continue to work with the U.S. Attorney's Office in other areas to put a stop to these blatant acts of fraud."
The defendants purchased and insured several two-story homes. Pretending to be away for the weekend, the defendants intentionally flooded the homes with water hoses or by damaging water pipes. The water lines would be repaired before an adjuster arrived. The defendants would file claims to obtain the full policy limits of the insurance coverage for their damaged personal property along with additional living expenses. Some homes were flooded more than once. At least one house was "cooked" to encourage the development of mold. Insurance companies paid claims in excess of $5 million.
The defendants served as homeowners, independent subcontractors, vendors, and service providers in filing claims, repairing the damage and selling the homes to each other to repeat the process. Homes in the greater Houston area, Bay City, and Austin were used in the insurance fraud scheme.
Publication date: 10/14/2002