23 facing felonies for ‘family and friend’ auto insurance fraud

Around 23 people in Santa Clara County are facing felony counts of alleged insurance fraud and conspiracy after police and state regulators thwarted a suspected "family and friend" organized auto insurance fraud ring.

On Tuesday, officers from the California Department of Insurance, the Santa Clara County District Attorney's Office, California Highway Patrol, Santa Clara County Sheriff's Office and San Jose Police Department arrested seven individuals in connection to the fraud case. Their arrest brought the total number individuals held on suspicion of being involved in the alleged scheme to 23.

The suspected ring leader, 34-year-old San Jose resident Gerson Castro Martinez, was arrested July 29 on eight felony counts. Castro allegedly involved family and friends in a four-year-long fraud scheme that netted the defendants more than $174,000, the California Department of Insurance said in a news release.

The agency's investigation uncovered 33 claims that contained a similar modus operandi, where repeat damage claims were made, insurance policies purchased either with fictitious identities or involved parties that knew each other but reported claims as though they were strangers and had been involved in a loss.

The ring allegedly used at least 40 different vehicles, some purchased with damages on them, and some sustained damages in staged collisions.

"This alleged auto insurance fraud ring is a prime example of the type of fraud that increases premium prices for all California drivers," Insurance Commissioner Ricardo Lara said in a statement. "The hard work of our multi-agency task force stopped this organized insurance crime ring that operated for years stealing more than $174,000 in fraudulent auto claims."

According to Department of Insurance detectives the fraud was uncovered when Rene Murillo Hernandez, 43, of Santa Clara, alleged he hit a parked vehicle after his vehicle was struck by an unknown driver.

Murillo left a note with his insurance information on the parked vehicle he struck. When the owner of the parked vehicle, another alleged member of the fraud ring, turned in a claim to the insurance company, the investigation revealed the damages were inconsistent with the two vehicles colliding with each other.

Further investigation revealed that the damages allegedly sustained in this incident were previously reported in a prior loss under different ownership, and that the PO Box address that was being used was used in several other similar claims by other individuals all claiming the PO Box address was the address where their vehicles were housed.

The claims were investigated by the Urban Automobile Insurance Fraud Task Force, made up of the California Department of Insurance, Santa Clara County District Attorney Investigators, the California Highway Patrol, and the National Insurance Crime Bureau.

The Santa Clara County District Attorney's Office is prosecuting the case.