Litigation funder is charged in staged accident plot; high interest rates left little cash for phony plaintiffs
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Federal prosecutors have accused a Manhattan litigation financier of participating in a staged $31 million slip-and-fall scheme that recruited drug addicts and homeless people to serve as plaintiffs willing to undergo unnecessary surgeries.
Alexander is accused of funding scores of fraudulent lawsuits in a scheme that included two lawyers and two doctors.
Prosecutors say litigation funding companies run by Alexander and others paid referral fees, typically $1,000 to $2,500, to organizers of the fraud scheme for each patient who signed a funding agreement. Alexander’s company was “one of the primary funding companies used in the fraud scheme,” the indictment says.
The funding companies paid legal and medical fees for the plaintiffs, even if they had medical coverage through an insurance company or government-subsidized programs. The companies charged interest rates that were as high as 50% on medical loans and 100% on personal loans to the plaintiffs, prosecutors say.
The interest rates were so high that often the majority—if not all—of the lawsuit proceeds were paid to the funding companies, lawyers, doctors and others, prosecutors say. The funding was so lucrative that Alexander told investors that his company had annual returns above 30%.
Alexander was charged with conspiracy to commit mail and wire fraud, mail fraud, and wire fraud
The indictment says the scheme extended from at least January 2013 to April 2018. More than 400 people were recruited to falsely claim they had hurt themselves in trip-and-fall accidents. At first, would-be plaintiffs falsely said an accident occurred; later they went to locations to stage their falls and be taken to the hospital in an ambulance. Accident scenes included cellar doors, cracks in sidewalks and potholes.
The fraud defendants recruited “extremely poor” individuals who were “desperate enough to submit to surgeries” in exchange for incentive payments, the indictment says. Many people were recruited from homeless shelters.
“For example, it was common for patients to ask for food when they would appear for their intake meetings with the lawyers,” the indictment says. “Many of the patients did not have sufficient clothing to keep them warm during the wintertime and had poor-quality shoes.”
Among the lawyers allegedly participating in the scheme were George Constantine and Marc Elefant, who filed hundreds of fraudulent lawsuits against the property owners of the accident sites, the indictment says. The would-be plaintiffs were instructed to claim injuries to areas of their bodies that included knees, shoulders and backs—areas that could result in higher awards.
The plaintiffs were referred to MRI facilities, including one run by Alexander, and to certain doctors who “almost invariably recommended that the patients undergo surgery irrespective of medical need,” the indictment says. Patients were also instructed to receive treatment from a chiropractor and were encouraged to attend physical therapy sessions.
The recruited patients were told they would have to undergo surgery if they wanted to continue with their fraudulent lawsuits, the indictment says. As a surgery incentive, the patients were offered loans that were typically between $1,000 and $1,500 per surgery. The patients generally were told to have two surgeries.
Alexander pleaded not guilty on Wednesday.
Reuters sought comment from lawyers representing Alexander, Constantine and Elefant. The wire service received a comment only from Elefant’s lawyer, Michael Bachner of Bachner & Weiner.
Bachner told Reuters that Elefant filed the lawsuits based on his good-faith belief that clients were injured. He learned in 2017 that some clients may have been lying and withdrew as their lawyer, Bachner said.