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Home  >  Topics  >  Investigations

July 11, 2000
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Insurance Scam Scuttled

An aggressive response to insurance fraud is sending a message in California where a million-dollar scam involving a large motoryacht was thwarted by a team of state and federal officials, private insurance investigators and police.The arrest last fall of Johnny Lew of Atherton, CA, capped a delicate “sting” operation in which investigators played along with Lew in his alleged scheme to have his 56-foot Viking Norwel taken out to sea and scuttled. Lew allegedly planned to collect on his $1 million insurance policy by filing a claim that his boat was stolen from its Redwood City, CA, marina slip.“Insurance fraud is very real and ultimately hurts all consumers in the premiums they pay for insurance,” said Carroll Robertson, vice president of claims for BoatU.S. Marine Insurance. “But the unprecedented level of cooperation that exists now among insurance companies and marine police is making it harder for crooks to get away with fraudulent claims.”Lew, 62, has a prior criminal record and allegedly began asking around late last summer about hiring someone to take his boat out beyond San Francisco Bay into international waters to sink it. He was allegedly offering $50,000 in cash to have the boat scuttled. The state of California Department of Insurance (DOI) has a Fraud Division with its own network of undercover investigators who heard of Lew’s conversations. They arranged for one of them to contact him, offering to “do the job.”Lew had a $1 million insurance policy on the Norwel with American Yachts in Baltimore, insurance underwriting managers who specialize in covering high-end boats. The Viking Sport Cruiser is a 1997 model with an enclosed flybridge, large swim platform and two Volvo diesel engines.Working with agencies that included the California Highway Patrol, the U.S. Coast Guard and the Redwood City police, investigators agreed to “sink” the boat while Lew was on a trip out of the country. However, investigators had the Norwel moved from its slip at night, hauled out at another marina and covered up. Lew returned and, believing the boat was sunk, allegedly paid the undercover investigator $30,000 and other valuables. He then allegedly called the Redwood City police reporting his boat stolen and called to file a theft claim with American Yachts.The claims process began with an aggressive fax and Internet theft reward bulletin, although the adjuster handling Lew’s claim said any “theft” of such an expensive boat always raises red flags. Two marine investigators, Dan Rutherford of Cape May, NJ, and Todd Schwede of San Diego, CA, were hired by American Yachts to recover the “stolen” boat and eventually their work led them to the California officials who let them in on the sting operation by the undercover agents.DOI spokesman Scott Edelen said the fact that the insurance company took immediate action to try to recover the vessel greatly aided their ruse with Lew. “The suspect thought everything was on the up and up,” Edelen said. “The reward poster and all their work helped make it a genuine sting from beginning to end.”Insurers cooperated fully with the state and local authorities. They met with Lew to take statements in the “investigation of the loss” and allowed Lew to believe his claim was being paid. He was finally arrested when he showed up at the Redwood City Police Department for an appointment to fill out what he believed was a final police report needed by his insurance company. He has been charged with insurance fraud, making terrorist threats, attempted grand theft of personal property and solicitation to commit a crime.“It’s the largest single insurance fraud I’ve ever seen,” said Edelen. “All fraud is taken seriously because insurance in California is an $80 billion-a-year business. Every individual who has any kind of insurance is paying $300 a year because of the cost of fraudulent claims.”In May, Lew was freed on $500,000 bond and scheduled to go to trial this month, according to the San Joaquin County District Attorney’s office. He could get as much as 12 years in prison if convicted on four felonies.Part of the success in fighting boat theft as well as fraud is due to the work of the IAMI, the International Association of Marine Investigators (http://www.iamimarine.com/), an organization that BoatU.S. helped get started. The group consists of over 1,000 members who are professionals from both the insurance industry and law enforcement communities. The group sponsors training seminars and an active Internet fraud network in which members nationwide share information on marine thefts, crimes and suspected frauds.# # #Copyright BoatU.S. Magazine July 2000. This article appears here with the permission of BoatU.S. Magazine.






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