N.Y. Businessman Charged With $10M Insurance Fraud Scheme

August 14, 2012

A businessman who owned fleets of commercial vehicles in New York is accused of defrauding insurers of at least $10 million.

The defendant, Scott Sanders, is charged with submitting fraudulent insurance applications to get lower rates. He was arrested and arraigned last Friday.

Authorities said that from 2003 through 2012, Sanders controlled fleets of commercial vehicles that were garaged and operated in New York City.

During that time period, authorities say, he submitted fraudulent insurance applications to auto insurance companies — through both the New York Automobile Insurance Plan and the open market — that claimed that his vehicles were garaged and operated outside of New York City.

Based on these misrepresentations, the insurance companies issued policies for the vehicles at lower premiums than the vehicles would have been eligible for if the true location of the vehicles’ garaging and operation had been provided.

Sanders also helped other commercial fleet owners whose vehicles operated in New York City obtain insurance at lower premiums using the same misrepresentations about garaging and operation locations. As a result of his scheme, officials alleged, insurance companies were defrauded of over $10 million in premiums.

Sanders, 43, of Saddle River, New Jersey, is charged with one count of conspiracy to commit wire and mail fraud, which carries a maximum penalty of 20 years in prison, five counts of mail fraud, each of which carries a maximum penalty of 20 years in prison, and one count of aggravated identity theft, which carries a mandatory minimum, and consecutive sentence, of two years in prison.

“As alleged, for nearly a decade, Scott Sanders engaged in a scheme to defraud a host of insurance companies to the tune of at least $10 million. He will now be held to account for his conduct,” said Preet Bharara, the United States Attorney for the Southern District of New York.

Bharara’s office announced last Friday the unsealing of an indictment charging Sanders with participating in a nine-year auto insurance fraud scheme to obtain substantially lower premiums for commercial vehicles he owned and controlled.

Since 2003, New York State has required owners of fleets of commercial vehicles, including livery cars and ambulettes, to obtain commercial auto liability and physical damage insurance coverage.

The premiums typically charged in connection with such coverage are based, in part, on where the vehicles were garaged or operated. Companies charge substantially higher premiums for automobiles principally garaged or operated in New York City.

Owners of livery fleets typically obtain auto insurance through the voluntary insurance market or, if that is not an option, through the New York Automobile Insurance Plan (“NYAIP”). The NYAIP assigns policy applications to insurance carriers doing business in New York State, who are then required to provide insurance coverage to the applicant.

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