FBI Busts $31 Million Trip-and-Fall Insurance Scam

Two doctors and two lawyers have been indicted on charges that they ran a sophisticated $31 million fraud scheme that recruited more than 400 homeless people and drug addicts to stage trip-and-fall accidents, then undergo unnecessary surgical procedures. Personal-injury lawsuits and falsified insurance claims were then filed against the owners of the targeted properties, possibly including numerous New York metro area housing cooperatives and condominiums.

“In carrying out the scheme, the defendants allegedly preyed upon the most vulnerable members of society,” said Manhattan U.S. Attorney Audrey Strauss. “Now, thanks to the FBI, the defendants are in custody and facing federal charges.”

The six-count indictment was unsealed recently by the U.S. Attorney’s Office for the Southern District of New York and the New York Office of the Federal Bureau of Investigation. It charges two surgeons, Dr. Andrew Dowd and Dr. Sady Ribeiro, and two lawyers, George Constantine and Marc Elefant, with conspiracy to commit mail and wire fraud, mail fraud, and wire fraud in connection with a scheme to obtain fraudulent insurance reimbursements and other compensation for staged trip-and-fall accidents.

All four defendants pleaded not guilty. Michael Bachner, an attorney for Elefant, said his client “looks forward” to his day in court. He added, “We are confident that the evidence proves that Mr. Elefant acted in good faith and in reliance on the information provided to him.”

The scheme operated from 2013 to 2018. The indictment charges that “known and unknown” confederates recruited “patients,” frequently from homeless shelters, who were instructed to claim they had tripped and fallen at prescribed locations, which were chosen because they featured unsecured cellar doors, cracked sidewalks or potholes. Constantine and Elefant, claiming negligence by building owners, then filed hundreds of personal-injury lawsuits against the owners and/or their insurance companies.

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Then the scheme went to a new level. The patients were instructed to actually trip and fall. Drs. Dowd and Ribeiro then performed surgical procedures – frequently with no medical necessity – including discectomies, spinal fusions, arthroscopic surgery, knee and shoulder surgeries and non-surgical epidural injections. “At least one patient who underwent surgery as part of the fraud scheme was told after awaking from general anesthesia that she had almost died during the surgery,” court papers state. The patients were given loans of $1,000 to $2,000 after each procedure, and they were promised a percentage of any settlement from the lawsuit. These loans carried interest rates of 50% and up.

 “Patients typically were convinced to submit to two surgeries to maximize the value of their fraudulent lawsuits,” the indictment states.

 The patients’ upfront legal and medical costs were usually covered by litigation funding companies. During the course of the scheme, Constantine collected more than $5 million in legal fees, and Dr. Dowd performed hundreds of knee and shoulder surgeries for about $9,500 per operation.  

While the scheme highlights the need for co-op and condo boards to be diligent about maintaining adequate liability coverage, it also points to the limits of that coverage. Boards whose insurance carriers pay a trip-and-fall claim – even a fraudulent one – will have that loss on their record when it’s time to renew their policies. The result will likely be higher premiums and reduced coverage. Some boards, unable to get policies from mainstream insurance carriers, could be forced to shop in the so-called Excess and Surplus market, where premiums are sharply higher for clients who are considered a bad risk.

Is there a way to avoid getting scammed? “Installing video cameras is something boards can think about doing,” says Ed Mackoul, president of the insurance brokerage Mackoul Risk Solutions. “I have clients who have put in cameras for this very reason. Unless you can prove that the fall is fraudulent, the insurance carrier will have to pay the claim. Trip-and-falls, or slip-and-falls, are the No. 1 most common liability claim.”