It was easy money for Harris Ahmed. All he had to do was find people willing to take part in a fake car accident.
The man who approached him in Toronto about "doing accidents" told Mr. Ahmed he would get $1,000 cash for every passenger and driver he could recruit for the insurance scam. Each person would claim they were hurt in the crash.
Mr. Ahmed went right to work. A few weeks later, a car driven by one of his recruits collided with a Jaguar while driving through a north-Toronto suburb. The three people in the luxury car were also in on the plan, using vehicles purchased from a salvage yard.
On the surface it looked like a small-time problem: a few people trying to bilk the insurance industry for profit. But when fraud investigators pulled apart the operation, they found a complex ring of more than 40 fake accidents and at least $10-million of fraudulent claims.
It was the most sophisticated auto-insurance fraud ring ever uncovered in Canada, and the case has posed a new problem for the country's auto insurers.
What made it so striking was that the ring included a rehabilitation clinic, used to submit claims for expensive treatments that never happened. To investigators, that was the clearest evidence yet that organized crime, not merely street-level criminals, was exploiting the auto insurance industry.
Ontario is Canada's hotspot for auto-insurance fraud. In a province where consumers pay $9-billion worth of premiums each year, insurance companies estimate as much as $1.3-billion goes to cover fraud. The cost is shouldered by other drivers.
"It's a significant amount and, more importantly, it's a rising amount," said Kathy Honor, president of RBC Insurance.
But a Globe and Mail investigation has found that the way the industry and governments combat the problem may be contributing to its growth. Lax oversight, a dearth of legal and investigative support, and reluctance within the industry to co-operate on sharing crucial data are all hindering attempts to stop fraud.
Following a clampdown in the United States in recent years, there are signs Canada is becoming a haven for auto insurance fraud, and that people connected to the largest staged accident ring in the U.S. are now operating in Toronto.
But the problem is not merely an Ontario issue: Two other provinces - Manitoba and B.C. - have recently uncovered some of the biggest staged-accident cases they've ever seen.
It is a deceptive problem if judged only by its numbers. Fraudulent accidents amount to less than one per cent of the 160,000 car crashes reported in Canada each year - but the cost for consumers and the industry is high.
As auto-insurance fraud graduates from being a small-time problem in Canada to a large, sophisticated and lucrative business that is worth billions of dollars, the financial toll is increasing.
THE EVOLUTION OF FRAUD INC.
The new breed of auto-insurance fraud emerging in Canada comes after a major crackdown in the United States.
In 2002, the largest staged accident ring in the U.S. was uncovered in New York by Peter Smith, then an assistant district attorney on Long Island. Starting with a confession from a man arrested in a staged crash that seemed like an isolated case, Mr. Smith unravelled a web of insurance fraud that spanned more than 1,000 accidents. It was like nothing the insurance industry had ever seen before.
Using a task force of local and federal police, Mr. Smith's team was able to establish something more significant: The ring used a network of medical clinics to submit hundreds of claims a week to insurance companies, billing them for costly treatments that were never administered, from x-rays to acupuncture.
The investigation led to the indictment of more than 400 people and 112 New York area medical corporations. The losses totalled more than $200-million, including $50-million for insurance giant State Farm. "For the first time, we were able to show how organized it was," Mr. Smith said.
More importantly, the case changed the industry in the U.S. The majority of states now use a similar task-force approach, joining local and federal police with insurance industry officials to investigate fraud, and backing them up with prosecutors who are specialists in such cases.