A Word About Fraud…

Every once in awhile a case comes along that has a little bit more intrigue than the run-of-the mill investigation. A few years ago, we were asked to look into why a man was injured while working on a scissor lift that had apparently gotten away from him. In order to understand what happened, it is important that one realizes that a scissor lift can be raised and lowered while in place or moved forward and backward. The controls for this particular lift were located on the side of the platform railing and were raised and lowered as the platform was raised and lowered. This particular lift had been rented from an equipment rental company by a construction company and as stated earlier, was in use at the time of the accident. Specifically, a construction employee was standing on the platform in a raised position while attempting to move the lift to his left. Upon releasing the control to stop the machine, the machine did not respond and eventually crashed into a forklift. As a result of this incident, the rental company, by its contractual agreement with the construction company, was expecting to be indemnified because the employee had filed suit against the rental company for his injuries.

After receiving this assignment, a trip was made to the rental company’s location in order to conduct an examination of the machine. At first, no restrictions had been placed on the examination. Upon arrival, it was learned from rental company representatives that the lift could not be operated, disassembled, or tested in any way. The examination was to be limited to taking photographs and making notes of observations. One of the photographs that was taken is shown below. The photograph shows the condition of the control panel as it was found during the first examination. Note the dirty appearance and the type of joystick used.

Approximately four months later, a joint examination was organized wherein various parties that had used or worked on the machine gathered to witness the testing and examination of the lift. The examination was begun with allowing all of the parties to photograph the machine. Although the machine had been photographed four months previous, the lift was again photographed. When the photographs were later reviewed and compared with the photographs taken at the first examination, it was then discovered that the control in place during the second examination was different form the control initially found on the machine. The appearance of the control shown below is the control that was on the lift during the second examination. Clearly, this control is different from the one shown in the photograph above. It then became obvious that not only had the control been replaced but, the only reason to replace the control was to hide the problem in the first control that most likely caused the accident. Once the lawyers were made aware of the switch, the claim for indemnification by the rental company soon disappeared. Presumably, the lawsuit filed by the employee against the rental company was settled.

Although fraud exists, even in civil cases, it is fairly hard to prove. This aforementioned case was more the exception than the rule. Over the past 30 years, I have had several cases where I thought that something was missing or there was more to the situation than “meets the eye”. In all cases, at the end of the day, it’s what you can prove not what you can feel. If you can develop proof for what you can feel, then great! If not, then all you do is conclude based on your evidence. If you are going to commit fraud, be prepared to cover even the smallest detail. As illustrated above, no one thought that the control replacement would be noticed, but it was!

 

Getting Bad Gas?

We’ve been working on an assignment where two vehicles equipped with diesel engines were allegedly damaged by bad diesel fuel. We were asked to determine if the gas station where the fuel was purchased was acutally selling contaminated diesel fuel. Unfortunately, the vehicles were already repaired and any diesel fuel had already been discarded by the time we began our investigation. We have been able to determine that at the time the purchases were made, the water level in the diesel tank was above the state mandated maximum level of 2 inches. As a result, there was a possibility that a combination of diesel and water could have been pumped into each customer’s vehicle when the purchases were made. Once the purchases were completed, the water level could have dropped enough so that the next customers would not have purchased water contaminated fuel. It is also possible that while the diesel tank monitoring instrumentation measure water depth inside the tank, the diesel might be contaminated with something else. Something that would ignite in a diesel engine but at the same time, could cause damage to the engine – like gasoline. Diesel samples were obtained and sent to a lab for analysis. The result of that analysis revealed that the samples did not contain any water but instead contained traces of gasoline. Specifically, levels of toluene and xylene were higher than normal.

If you find yourself in a similar situation, regardless of having purchased diesel or gasoline, it is imperative that you don’t lose your purchase receipt. Your receipt will become invaluable regardless of whether you paid cash or used a credit card. Next, get your vehicle to a mechanic as soon as possible after you suspect engine trouble. Second, advise you mechanic that if the fuel tank or lines have to be drained, not to discard anything that comes out of the lines or tank. Third, collect all contents in a clean, dry, container and label the container with the cutomer’s name and date that the contents were taken. Also save all parts. If possible, photograph the contents and all parts that have to be replaced. If the engine has to be replaced, photograph the engine and record the engine identification number. The mechanic should be able to assist in obtaining the number if necessary. Fourth, if the fuel appears to be contaminated, advise your insurance carrier and then the station owner where the fuel was purchased. Once the initial notifications have begun, each party should begin it’s investigation. The more information is obtained when the discovery is made, the easier it will be to prove the claim or discredit the fraud.

Federal Jury Renders Verdict Against State Farm

ABC News is reporting that a Federal Jury has found that State Farm Fire and Casualty Company has committed fraud while falsifying reports of damage to a home damaged during Hurricane Katrina. State Farm auditors Cori and Kerri Rigsby testified that they witnessed widespread fraud in State Farm offices in Biloxi and Gulfport Mississippi. Specifically, using a falsified report, State Farm avoided paying $250,000 for wind damage to a residence and instead, was able to shift the resposibility to the National Flood Insurance Program. ABC News has also reported that the federal govenrment will seek reimbursement and that State Farm will appeal the ruling. Furthermore, the ruling opens the possibility for “review of thousands of similar cases”. The entire article can be found on the ABC News website located at http://www.abcnews.com.