Pulling Back The Curtain on The 'Fraudemic'
New York City thrives on a culture of hustling, where ambition and the pursuit of wealth and success is woven into the fabric of daily life. However, the rampant lawsuit abuse overwhelming New York City’s tort system has exposed the cost of when ambition becomes greed, and the law is exploited for profit. Prime examples of this lawsuit abuse are the complex fraud schemes that have infiltrated New York’s construction and transportation industries. Every day New Yorkers are left footing the bill through higher insurance rates, increased housing costs, and a tort system bogged down by meritless claims.
Construction Fraud Schemes
The Gilded Age of New York City was defined by rapid infrastructural advancements and groundbreaking innovation in architecture and engineering. These developments, which were driven by the challenges of rapid urban expansion, laid the foundation for the city’s iconic skyline that we know today. In an attempt to protect the workers who were responsible for constructing these skyscrapers, lawmakers enacted New York’s Scaffold Law, which imposed a strict liability standard for gravity-related construction accidents. Despite decades of criticism and the fact that the law’s excessive liability accounts for about 10% of the state’s construction costs, New York is the only state that still maintains such a law.
The Scaffold Law opened the floodgates for fraudulent personal injury lawsuits, which have cost insurance companies billions in payouts. However, the consequences of the Scaffold Law and these fraudulent lawsuits extend far beyond the insurance companies’ bottom line. Habitat for Humanity has cited the Scaffold Law as an obstacle for disaster relief and affordable housing projects. The Building Trade Employers Association stated that the Scaffold Law is a significant barrier for minority- and women-owned businesses. Members of Congress have blamed the law for increasing the costs of infrastructure development by millions.
Recent investigations into the Scaffold Law have revealed systematic exploitation that is organized by Russian gangsters, and includes MS-13 members, corrupt surgeons, lawyers, and third-party litigation financers.
A RICO suit filed in the U.S. District Court for the Southern District of New York in March 2024 alleges that a group of 46 individuals and businesses systematically exploited the New York State Workers’ Compensation system and state labor laws. The complaint in Roosevelt Road Re, Ltd. v. Hajjar, alleges that those involved participated in a scheme to submit false or exaggerated injury claims to secure windfall settlements under the Scaffold Law.
This scheme reportedly targeted foreign-born workers who lack proficiency in English, encouraging them to file claims for fabricated or exaggerated injuries. In some cases, the injuries—a simple trip and fall, for example—would be exaggerated on paper into multi-million-dollar permanent disability claims. Videos of the alleged fraudulent falls have even surfaced, featuring workers staging accidents at construction sites, further highlighting the brazen nature of the fraud.
The impact of this alleged misconduct is staggering. According to the complaint, claims under this scheme have caused liability claim expenses for one reinsurer to balloon from $14 million in 2018 to over $142 million by 2022, exponentially increasing each year.
Despite a drop in the number of fatal construction accidents, suspicious claims continue to flood the system, contributing to skyrocketing workers’ compensation costs and inflating insurance premiums for businesses across New York. These scams are not only hurting construction companies but also driving up the cost of living for everyday New Yorkers, who are now facing some of the highest workers’ compensation costs in the nation.
In addition to the Hajjar case, New York personal injury law firms like Subin Associates, Wingate Russotti Shapiro Moses & Halperin, and Bangel, Cohen & Falconetti have come under scrutiny for their role in representing plaintiffs involved in these cases. Subin Associates is currently embroiled in multiple lawsuits and investigations over its practices and has already withdrawn from hundreds of cases, citing ethical concerns about the source of its referrals.
Further, an investigation by ABC Eyewitness News uncovered claims that Subin Associates had allegedly filed a fraudulent workers’ compensation lawsuit using the identity of Carlos Ramirez-Naranjo without his knowledge. Naranjo, who does not speak English, claimed that an acquaintance deceived him into signing legal documents under the pretense of a job application. Unbeknownst to Naranjo, these documents were used to file a lawsuit against a construction company for injuries he never suffered. The firm stated that Naranjo had signed a retainer agreement with them, but when Naranjo confronted them, they refused to provide him with copies of the legal documents. Later, Naranjo received a check from a pre-settlement funding company. The acquaintance reportedly told Naranjo to cash the check and give him $13,000 in cash, leaving Naranjo with $2,000.
It is unclear whether any of the federal investigatory agencies will get involved in the efforts to crackdown on the “fraudemic.” The involvement of the FBI has been hinted at, suggesting a high-stakes investigation that could bring federal criminal charges akin to those seen in major financial fraud cases. Recent statements by U.S. prosecutors asserting zero tolerance for large-scale corruption also suggest the possibility of future federal involvement.
Judges Playing a Role
New York judges play a key role in perpetuating the lawsuit abuse by allowing personal injury law firms to withdraw from cases when ethical concerns come to light. In 2024, Subin Associates requested to with- draw from 200 to 300 cases because of “ethical concerns” involving its referral source. One judge, Judge Devin Cohen, has allowed plaintiffs’ counsel to withdraw from at least eight cases in 2024 with almost no questions asked, including six cases where Subin Associates was the plaintiffs’ counsel. Judge Cohen is also on record demonstrating support and protection of plaintiffs’ lawyers, even preventing the defense counsel in one Scaffold Law case from questioning doctors who were to be called as expert witnesses about their involvement in the fraudulent practices alleged in the RICO cases. Other judges engage in ex parte discussions with plaintiffs’ counsel, despite a rumored instruction to all sitting judges advising against it.
The prevalence of third-party financing in these cases creates additional consequences for victims when judges allow discontinuances and dismissals without question. These funders provide plaintiffs with money up front to pay the doctors and lawyers involved in the elaborate schemes. Judges have reportedly allowed lawyers to walk away from cases without consequence, leaving plaintiffs owing thousands of dollars to the lenders.
For example, after falling on a sidewalk in Manhattan, Lesly Ortiz was referred to Subin Associates by one of their notorious runners. The law firm then sent her to Dr. Michael Gerling who performed two surgeries on her, despite ER doctors having told her that nothing was wrong. Ultimately, Judge Lynn N. Kotler granted Subin’s request to be relieved from the case after the defense counsel brought to the court’s attention the fact that Subin’s office was prosecuting lawsuits for eleven other people who resided in the same building as Ortiz. Ortiz suffered from “unbearable pain” following her surgeries and was left with no recourse. Unfortunately, the pain from the surgeries was not the only consequence Ortiz faced. She never received any money from the suit and was left thousands of dollars in debt to a lending firm who gave her money for her medical and legal bills.
It appears to be a trend among judges to look the other way when presented with details of these scams, either by allowing firms to withdraw from cases without consequence or by keeping suspicious cases alive until they settle. By continuously granting plaintiff attorneys’ requests for orders to show cause, these judges clog the court’s dockets, delay legitimate plaintiffs’ claims, and cost defendants money. And by allowing plaintiffs’ counsel to easily withdraw from these cases without suffering consequences, judges are allowing the lawsuit abuse to continue ravaging New York’s tort system.
A judicial shrugging of the shoulders in the face of criminality—if proven—is very concerning. When courts start looking the other way when given details of suspicious lawsuits, they are effectively enabling and facilitating the wrongdoing and allowing New York’s “fraudemic” to thrive.
Automobile “No-Fault” Fraud Schemes
Unfortunately for New Yorkers, the Scaffold Law is not the only contributor to the city’s “fraudemic.” Recently, New York City’s automobile insurance market has been overwhelmed by a surge of fraudulent claims, with dire consequences for both insurers and consumers. The City’s requirement for the highest commercial-vehicle insurance coverage in the country has turned these insurance policies into lucrative targets for fraudulent schemes, which are similar to the construction schemes. Additionally, New York is a “no-fault” state, which means that insurers are required to pay for medical expenses and property damages regardless of who caused the accident. Like the construction schemes, these scams also involve gangs, corrupt lawyers and doctors, and third-party litigation financers who recruit vulnerable individuals to stage accidents involving commercial vehicles, including rideshare cars and delivery trucks. Some of the scammers even go as far as encouraging these individuals to undergo unnecessary surgeries to increase the potential insurance payouts.
A recent lawsuit filed by Union Mutual Fire Insurance Company alleged that several medical facilities and doctors have been orchestrating an insurance fraud scheme where they file claims for unnecessary and excessive treatments and provide inaccurate medical reports. According to the complaint, the defendants led insurance companies to believe that the treatment was necessary, knowing that the false reports would result in additional treatments for the patients, including painful and expensive surgeries, and costly liability lawsuits.
A different surge of RICO lawsuits are being filed by insurance companies against small and local New York pharmacies. Twenty-six such suits were filed in one week in October. These suits allege that the parties are exploiting New York’s “no-fault law.” The law allows health care providers and pharmacies to bill insurance companies directly for services and treatments.
Insurance companies have stated that this “massive scheme” is “systematic and carefully orchestrated.” According to one complaint, these pharmacies have allegedly been providing patients with medically unnecessary topical pain creams, oral pain medications, and muscle relaxers rather than the less expensive, over-the-counter versions. The complaint claims that the pharmacies have kickback arrangements with “no- fault clinics,” where the patients are being prescribed these expensive and unnecessary treatments.
The scale of the litigation is staggering; between 2010 and 2018, jury awards for trucking-related lawsuits increased almost 1,000%, with the average award increasing from $2.3 million to $22.3 million. As a result of these staggering settlements and jury verdicts, American Transit Insurance Company (ATIC), which insures around 60% of the city’s commercial taxis, black cars, and rideshare vehicles, is “on the brink of collapse.” ATIC reportedly had $700 million in losses due to insurance fraud and rising settlement costs. And who will suffer if insurers like ATIC collapse? Everyday New Yorkers. If ATIC is liquidated or taken over by the state, it will be New York taxpayers footing the bill for unpaid claims. Further, the thousands of drivers left uninsured will either flee New York or find new coverage with likely higher premiums. Either way, New Yorkers will be left to pay the price.
Trip-and-Fall Schemes
As if the strict liability scammers have not profited enough from the construction fraud schemes, they also seem to be lining their pockets with payouts from questionable slip and fall claims. In fact, New York City is the number one city in America for questionable slip and fall claims, which cost taxpayers $53.5 million in 2023.
A “fraudemic” hit the Big Apple in 2024. Some of the worst examples of lawsuit abuse came to light in New York City with the filing of several RICO lawsuits against plaintiffs’ law firms. Lawsuit abuse is driving up the costs of goods and services and driving employers and insurance companies out of the state.
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