ZERO TOLERANCE.

Colombian executive Jairo Mejia brooks no backsliding when it comes to insurance scams.

THERE WAS A TIME NOT SO LONG AGO AT COLSEGUROS, ONE OF COLOMBIA'S largest insurance companies, when a committee meeting scheduled for eight in the morning wouldn't really start until nine. No longer. "Now it starts at eight-zero-zero," says Jairo Mejia, head of Colseguros, who fines employees 3,000 pesos (US$1.55) for arriving late. And if a cellular phone rings during a meeting, its owner faces another fine of 5,000 pesos. "It's not just an idea. That's the way it is," he says.

The same unremitting discipline applies to his plan to root out insurance fraud inside the company--a campaign titled "Zero Tolerance."

Awarded the top job at Colseguros almost three years ago, Mejia has gained a reputation in his industry for fighting insurance fraud in an innovative, if hardheaded way--from the top down and from the inside out. No sooner had he arrived, than he asked all employees to sign a code of conduct mandating that they report suspicious dealings. Later, the company fired its top sales representative for retaining life insurance payments. The former employee is now a fugitive from justice.

"I'm talking about the champion of the Company," Mejia insists. "He was awarded every year. He received a trophy, he received money, the whole ceremony."

Then, just a few months ago, the company made headlines by blowing the whistle on what it alleges was a sophisticated scheme to defraud Colombia's port authority of millions of dollars, even though the claim apparently worked in the company's favor

Colseguros lawyers alerted Mejia when two men claiming to represent the company appeared with legitimate court papers and insisted the port authority owed Colseguros $23 million from a 16year-old settlement. To collect the back payment, they said, they would charge only $5 million. In fact, Mejia says, their calculations were based on a formula that was so convoluted that no one at the company could fathom it. So they reported the case to the government instead.

Internal tabloid. But perhaps the best example of Mejia's resolve to fight fraud is the company's Zero Tolerance newsletter--a colorful account of real-life swindles that have been unearthed and reallife criminals who have been undone. One recent edition tells how a Colseguros representative signed an inspection form for a car he never saw, leading to a false theft claim for more than $2,000. In fact, the car was destroyed in an accident before Colseguros became involved. Another cites a woman who altered a doctor's note to say she should take 12 or 13 days from work, instead of the two or three days the doctor recommended.

If such entries seem gossipy, they have hit their mark. Mejia says the Zero Tolerance bulletins are among the company's most widely read documents. And the leads they have produced by making employees more conscious of fraud have helped the company go after bigger fish.

Since the Zero Tolerance program began in early 1997, Colseguros has filed more than 80 lawsuits charging suspects with everything from writing false checks to staging car thefts, and nearly 200 employees have been sanctioned for lesser offenses, such as inadequate inspections and sloppy bookkeeping. In a company of 2,368 workers, that translates into about one sanction for every 12 employees, not including tardy fees and cellular-phone fines.

While Mejia was not able to say how much money Colseguros had saved with its stepped-up fight against fraud, an internal survey showed allegations of wrongdoing dropped by roughly 30% from 1998 to 1999, suggesting the zerotolerance message is getting through.

"The gray areas have been clarified' Mejia says, sitting on a sunny office terrace with a spectacular view of Bogota Before the Zero Tolerance campaign, employees abstained from reporting their suspicions for fear the company wouldn't take action or, worse, would reveal their identity as whistle-blowers. Now a monthly news bulletin reminds employees that the company is dead set on prosecuting fraud, but without compromising finger-pointers.

"Our examples [of uncovering fraud] are very important, because it is one thing to say something, and another thing to do it--to walk the wall," the executive says.

Besides taking internal measures, Mejia and the heads of many insurance companies have started sharing information to prevent dishonest sales agents from resurfacing. If Colseguros cancels an agent's license, it places notices in local newspapers saying so. If Mejia hears that a sales agent he is prosecuting is working for another company, he will write a letter to the company explaining the charges.

In Colombia, where the justice system is so overwhelmed that nearly half the prison population is waiting for trial, this kind of informal dragnet maybe the best way to prevent corrupt former employees from becoming repeat offenders. "If everybody does likewise, at least we will take them out of the industry. Then we need to get them out of the country;' Mejia says.

"There is no doubt his methods have filtered through the rest of the industry," says Luis Fernando Mathieu, president of the Chubb de Colombia insurance company. Mathieu worked with Mejia at Colseguros a decade ago and remembers the advent of tardy fees, which mostly go toward charity.

"He's strict. But that's a strength, not a crime' Mathieu says.

Dead claims. However, if Mejia has built a reputation as a tireless crusader against fraud inside Colseguros, preventing and detecting violations by clients on the outside is a totally different kettle of fish, particularly in a country known for the ruthless imagination of its criminals.

According to William Fadul, president of the Federation of Colombian Insurers, the two most common types of fraud seen in Colombia involve automobile and life insurance. It is not surprising, he says, to find that a person who was reported dead "is actually living down the street next door to so-and-so."

In more extreme cases, in the hope of supporting their claim, insurance beneficiaries have actually produced not only false death certificates, but also the cadavers of homeless people.

Mejia's own experience in the insurance industry has supplied him with countless examples of the audacity of insurance schemers. His investigators detect three to eight insurance requests a week for stolen cars, many brought into the country from Venezuela or Panama by international cartels. Often, he says, those trying to buy insurance already know they have a stolen vehicle on their hands.

Mejia insists his company's best defense against such crimes is to know the client, a challenge tied back to the selling process and tough in-house standards. "Corrupt sales agents will bring you people like themselves," he says.

Like his colleagues, Mejia also wants legislation that will slap much tougher penalties on those who get caught, so that zero tolerance can be applied in Colombian courts as well. As it stands, Mejia says, prison sentences for insurance crimes are too short to act as a deterrent, and minors are almost untouchable. "If we're lucky enough to apprehend them, they are often freed a week later," he says.

But most of all, Mejia would like to find a way to make the general public understand that insurance fraud should be a common concern, as it feeds other crimes. In one chilling example, members of a criminal ring accompanied several poor acquaintances to various insurance offices, taking out a small life insurance plan for them at each stop. Then they killed the plan holders and tried to collect the insurance payout as beneficiaries. "Your life is actually in danger," Mejia says, "We have to make people understand this huge problem."