Auto fraud wave slams into Southland.

PLAYA DEL REY - It must have seemed like the perfect scam.

For more than eight years, on the long, busy boulevards of South Central Los Angeles, drivers were recruited with promises of easy cash and a series of bogus auto accidents was staged. The accident "victims" were referred to a Sherman Oaks attorney, who demanded hefty settlements from litigation-weary insurance companies. A chiropractor was on hand to produce phony or wildly exaggerated medical reports.

Since 1988, the seam artists allegedly staged as many as 100 collisions, winning between $10,000 and $20,000 per claim. The money rolled in.

At least it did until April 16, when state insurance investigators arrested the scheme's alleged mastermind, attorney Noel Stephen Olsham, in his Playa Del Rey home. Olsham was booked on 11 counts of insurance fraud and two counts each of tax fraud and tax evasion. Authorities also nabbed five others, including Olsham's wife and another attorney.

All told, the gang allegedly bilked insurers out of some $20 million in phony claims.

And according to Deputy District Attorney David Guthman, who heads the D.A.'s Auto Insurance Fraud Division, Olsham's gang is only the tip of the iceberg.

More fraud cases seen

"There will be more cases filed," Guthman promised. "We have identified over 200 attorneys in Los Angeles whose practices we believe are pervaded with auto insurance fraud cases. There is no lack of work for the people of my staff."

Guthman isn't the only one who is busy.

According to the California Department of Insurance, an estimated 10 to 20 percent of the state's auto claims arise from fraud; here in Southern California, the range is between 25 and 50 percent. The Automobile Club of Southern California estimates that auto insurance fraud costs Californians as much as $500 million a year - a big reason why the state's premiums are the highest in the nation.

Overall, the Department of Insurance estimates that insurance fraud - automobile and other types costs California consumers between $3 billion and $5 billion each year.

Given such sums, it might come as a surprise that California in fact has made considerable strides in fighting fraud in recent years.

In 1992, the state established a Fraud Assessment Commission, which last year provided about $28 million to fund district attorneys' offices for their work against workers' compensation fraud. A 1993 law requires all workers' comp insurers to maintain in-house anti-fraud units. And the Department of Insurance funds the auto insurance fraud-fighting activities of local D.A. offices though an annual $1 fee from auto insurance carriers for every car insured in the state.

Poking under rocks

As a result, more fraud cases than ever are being reported to the Department of Insurance. As department spokeswoman Candysse Miller put it: "The more rocks you look under, the more bugs you find."

If California's new insurance fraud infrastructure has led to more cases being reported, it's also helping investigators catch fraudulent claims early, before large sums of money have been paid out.

"In 1992, the bleeding was horrible," said Rannie Pageler, vice president of the fraud division at Glendale-based Fremont Compensation Insurance Co. "We don't have that going on today. The money isn't slipping out the door like it used to."

Pageler said that when he joined Fremont five years ago, it was not uncommon for the company to pay as much as $40,000 in bogus claims before the fraud was discovered. Now, he said, the company usually is wise before it has paid even $1,000 in claims.

Of course, as companies have gotten savvier, so have the insurance scammers.

"There's a lot more sophistication now," said Pageler, a 20-year law enforcement veteran whose fraud-busting exploits have been featured on such television tabloid shows as "Hard Copy" and "A Current Affair."

Zeroing-in on doctors

The managed care revolution, for example, has added a new twist to insurance fraud, Pageler said. Instead of providing unnecessary treatments, a growing number of crooked doctors are bilking companies by not providing treatment they've been paid to perform.

"It's a whole new slant on the issue," Pageler said. "We have to make sure doctors aren't under-treating our people."

As a result of the stepped-up enforcement in California, many fraud mills are moving to relatively untapped areas, such as the Midwest, Pageler said. He also said that anti-fraud efforts on the workers' comp front are driving scammers into auto-insurance and other types of fraud.

But Miller of the Department of Insurance said that, when it comes to fraud, California remains king, with as much as 20 percent of the country's total cases.

"This is a big-money state," Miller said. "There's a lot of money and a lot of litigation here. We're known as the fraud capital, and it's difficult to fight that."