One of my favorite movies growing up was “Serpico.” Starring Al Pacino, it’s a true life story about a New York police officer, Frank Serpico, who went undercover to expose corruption in the police force. Serpico was an honest cop trying to do the right thing, but he was harassed and threatened by his peers.
The struggle led to infighting within the police force and problems in his personal relationships.
In one compelling scene, Serpico tells a fable he calls “The Wise King.” It’s a story about a king beloved by his people. In the middle of the kingdom there was a well from which everyone drank. One night, a witch poisoned the well. The next day, everybody drank from the well except the king. The people, aside from the king, went crazy, committing crimes and creating chaos. Observing this behavior, the king approached his subjects and reprimanded them. He demanded they change their behavior. The citizens who once loved the king became irate and accused him of acting crazy. They came together and made a pact to kill the king. Clearly, in their minds, he had gone mad. The king feared for his life. Later that night, he drank from the well and immediately went insane. Upon seeing the crazed king the next day, all the people rejoiced because their beloved king had regained his reason.
This scene hit me like a ton of bricks when I was a kid. It may have had something to do with my decision to become a fraud investigator. Well, either that or Magnum P.I.’s lifestyle.
In any event, “The Wise King” story came back to me while watching a recent “60 Minutes” segment titled, “Over a Barrel,” which detailed the BP oil spill claims process.
Now, for the record, I am in no way condoning BP’s action in the tragic oil spill that occurred four years ago. The company’s actions were careless, negligent, and obviously damaging to our environment. However, BP responded immediately by reimbursing victims as soon as possible and paid billions of dollars in federal fines.
This blog isn’t really about BP, though. Rather, it points to the many unscrupulous people that take advantage of tragic events whenever a reimbursement program is in place. Unfortunately, this fraudulent behavior occurs with far too much regularity. It happened in the 9/11 tragedy, it happens anytime there is a serious train accident, and it clearly is happening in the BP reimbursement program.
After the BP tragedy, the government appointed renowned resolution attorney Ken Feinberg to spearhead the claims administration process and pay legitimate victims in an expedient manner. Mr. Feinberg handled the reimbursement plan in exemplary fashion during the 9/11 tragedy.
As in all reimbursement programs, he indicated that there were two types of claimants, the deserving and the devious. Unfortunately, the devious seem to far outnumber the deserving. His comments on the BP claims submissions were startling. He stated that of the approximately one million claims that his department reviewed, two-thirds were unfounded. This is a polite way of saying that 66% of the claims were fraudulent.
The reality is that BP has been victimized by an ocean of swindlers and has paid hundreds of millions of dollars to people who never saw oil anywhere but on television. Here are some true examples of parties who filed claims and actually got paid.
– A man in Oslo, Norway slipped on the ice, broke his leg, and filed a claim.
– A wireless phone company that burned down and went out of business prior to the actual oil spill filed a claim.
– An RV park owner who was foreclosed upon prior to the spill filed a claim.
– A Pontiac owner who could no longer sell Pontiacs because GM discontinued the line before the oil spill filed a claim.
– $60,000 in compensation went to colorectal surgeons located 300 miles from the coast.
– $173,000 went to an escort service located in Florida. (Why always Florida?)
– $8 million was approved for companies that clean up after hurricanes. The reality is, their income was down because there weren’t any hurricanes after the spill.
In total, the suspected false claims amounted to approximately $500 million paid out in damages.
The issues spiraled out of control essentially for two reasons:
1) A poorly written contract by BP opened a gigantic loophole for plaintiff attorneys, and they had a field day. BP was trying to pay claims as early as possible and included a sentence in the contract that read, “…all losses are presumed to be attributable to the oil spill.” In essence, BP unknowingly stated that no proof was required to file a claim, even if the claim had nothing to do with the oil spill. Attorneys flooded the television market with ads that “losses don’t have to be directly traceable to the oil spill.” The proliferation of these ads highlighted the same element: no proof required. One attorney actually wrote in a mass mailing to thousands of people, “…the craziest thing about the settlement is that you can be compensated for losses that are unrelated to the spill.” A Pied Piper approach to recruiting claimants with this message ensued and the claims administrators began to pay.
2) The second problem was that the claims administration process was handed over to a new company. The new claims administrators argued that because of the contract language, if a business lost money and filed a claim, they as administrators were not allowed to question if the claim had anything to do with the BP oil spill. The main lawyer for the alleged victims said of the contract, “A deal is a deal.”
Is it just me, or is all of this an assault on common sense? When does the spirit of an agreement outweigh a few poorly written sentences? Seemingly intelligent people are actually arguing that parties who have not been affected by a tragic accident in any manner should have every right to file a claim and receive a monetary award. One plaintiff attorney commented in the “60 Minutes” piece about the overall lack of common sense here, saying, “It is what it is.”
First of all, I hate that saying.
The whole philosophy of “It is what it is” is flawed. If something is wrong, that’s just the way it goes? As a guy who has dedicated his life to fighting fraud, I beg to differ.
As a fraud fighting community, let’s not be like the king in Serpico’s story. Let’s not drink from the poisoned well because everyone else is crazy and we just want to assimilate.
In closing, more than $3 billion in claims have been approved so far in the BP claims process. Thousands more have been filed. “60 Minutes” subsequently called over a dozen applicants who are believed to have filed false claims and collected money.
Not surprisingly, none returned the call.