Prosecutors Expose Massive "Slip and Fall" Scam
A "slip-and-fall" injury can result in a tort claim against the owner of the premises where the injury happened.
Notoriously, slip-and-fall accidents and injuries can also be faked.
Usually, these scams are small-scale crimes involving only a handful of people. However, a recent federal indictment portrayed a complex scheme that lasted for five years and cost $32 million.
As the New York Times reported,
Neighborhood scouts lined up victims willing to fall in potholes or deliberately trip outside of restaurants, bodegas and dry cleaners. Doctors treated patients for broken limbs, busted knees and internal injuries, including some that were fake. Sometimes they performed unnecessary procedures that drove up the potential value of the personal injury lawsuits that followed.
The legal and medical fees were usually paid for by specialized finance firms, which give high-interest loans to plaintiffs involved in lawsuits.
Five men are charged with orchestrating the fraud.
As the Times reported, litigation finance firms,
many of them backed by hedge funds and private equity companies, typically bankroll lawsuits with large cash advances. The goal is to profit on the advances, some of which come with interest rates as high as 100 percent, from the proceeds of any settlements or jury verdicts.
Litigation finance firms are sometimes controversial. For example, they've been criticized for making high-interest loans to former pro football players involved in litigation with the National Football League (NFL) over concussions and other brain injuries.
According to the Times,
nearly 1,000 ex-players had signed dubious contracts with lenders and lawyers. Nearly a dozen lenders have lent money at interest rates of 50 percent or more to players who will pay them back with money they receive from the estimated $1 billion settlement, which provides up to $5 million to players with dementia, Parkinson’s disease and other serious neurological conditions.
Litigation finance firms are also getting involved in the #MeToo movement against sexual harassment.
According to the Times,
Companies that offer money to plaintiffs in anticipation of future legal settlements are racing to capitalize on sexual harassment lawsuits.
That is setting off alarms in some quarters because the industry, like payday lenders, has a history of providing cash at exorbitant interest rates to customers who need the money for living and sometimes medical expenses.
A settlement advance firm is paid back only if a plaintiff gets money from a settlement or damages award in a lawsuit. High interest rates are claimed to be legal because the money is technically an advance rather than a loan.
Tens of thousands of people use litigation finance firms, and the largest firms advance up to $40 million in payments per year.
Most settlement advance firms aren't regulated or licensed.
In January, Colorado's attorney general announced that the state had settled a lawsuit against two lenders who charged predatory interest rates to Colorado consumers. The settlement will result in more than $2 million being paid back to people in Colorado.
A Colorado court ruled that the payments given to consumers did in fact qualify as loans under state usury laws limiting the amount of interest that could be charged.