Car insurance scam: 37 arrested in Project Whiplash raids

A lengthy investigation into a multi-million dollar auto-insurance scam led to the arrest of 37 people Thursday, many in the South Asian community, with police cracking down on an escalating problem that’s made the GTA Canada’s phony collision capital.

In early morning raids across the GTA — part of an investigation dubbed Project Whiplash — police arrested dozens, laying a total of 130 charges stemming from 77 collisions police say were staged and have helped send insurance premiums skyrocketing in the province. Additional arrests are expected.

“The victims of this crime are all of us who operate motor vehicles,” said Toronto Police Chief Bill Blair at a news conference to announce the arrests.

Auto insurance fraud costs Ontario drivers as much as $1.3 billion per year, between 10 and 15 per cent of all premiums, according to a recent report by the Auditor General of Ontario.

“There’s no question that the GTA is the staged collision capital of Canada,” said Rick Dubin, vice-president of investigative services for the Insurance Bureau of Canada (IBC), which was a key player in Project Whiplash.

The Toronto police’s traffic services division first probed the scam in 2009, said Insp. Gord Jones. A joint investigation with IBC and Financial Services Commission of Ontario (FISCO) uncovered a sophisticated scam ring operating primarily in the GTA’s Tamil community.

Police say the ring is allegedly headed by 10 people from Markham and Toronto, all facing a slew of charges, including fraud, forgery and falsification of books or documents.

It works like this: scammers orchestrate, or in some cases fabricate, an accident, then file a fraudulent insurance claim for vehicle damage and bodily harm.

If pulled off, the phony accidents can be lucrative, said Sgt. Mike McCulloch — as much as $50,000 per scam.

While exact figures are not known, Jones said the scams accounted for millions of dollars in losses.

State Farm Insurance, one of the first companies to suspect fraud by the accused, said its losses alone amounted to $4 million. A State Farm spokesperson confirmed that some of the accused were named in an affirmative action civil lawsuit launched by the insurance company in December 2010.

Some of the accused worked as paralegals, helping to file false insurance claims. Others operated rehabilitation or medical clinics in Scarborough, Toronto and Markham, and are accused of submitting false invoices to insurers.

Four of the implicated clinics face separate charges, laid by FISCO, under Ontario’s Insurance Act with one count each of knowingly making false or misleading statements to an auto insurer.

The clinics are: McCowan Rehabilitation Clinic, Ontario Rehabilitation Clinic, Physiotherapy Clinic and North York Health & Rehabilitation Centre in Toronto.

Many of the accused hail from the GTA’s South Asian community. Of the 10 alleged ringleaders, who range in age from 32 to 57, most are Tamil, said Det. Const. Kajamuganthan Kathiravelu, who made a separate appeal to the Tamil community at Thursday’s news conference.

Investigators contend the accused recruited largely from within their community, preying on new immigrants with few English-language skills.

“This gives a bad reputation to the community,” said Markham Councillor Logan Kanapathi, who is Tamil. “These people have let down their families and their community.”

It remains unclear if the alleged ringleaders previously knew their recruits, Kathiravelu said.

False claims have escalated in the province over the last five years. In a report released in December, the Ontario Auto Insurance Anti-Fraud Task Force said auto insurance fraud “is extensive, increasing and having a substantial impact on auto insurance premiums.”

From 2006 to 2010, overall auto insurance claims costs in Ontario rose by $3 billion — about $450 per registered vehicle.

Of that total increase, $2.4 billion, or 80 per cent, came from accident benefit costs, an increase that “cannot be explained by factors that would normally be expected to lead to increased costs,” such as a higher number, or a greater severity, of accidents.

Police named nine of the accused in Project Whiplash: Pirapaharan Nadesu, 33, of Toronto; Sipaskaran Sabaratnam, 32, of Markham; Nishanthan Ponnuthurai, 32, of Markham; Jeyakanthan Theivendran, 43, of Markham; Baskaran Tharmakulasingam, 35, of Toronto; Mahaletchumy Pathmanathan, 57, of Markham; Sujeegah Kanagalingam, 32, of Markham; Ravigunathas Gunasingam, 40, of Toronto; and Vishnukanthan Sabapathy, 35, of Toronto.