Psssst – Need a phony ID? A fraudulent tax refund? Insurance money from a sham car crash? Florida may have just what you’re looking for.
Since the first settlers hacked their way into the mangrove tangles and drained much of the swampland, sunny South Florida has been virtually synonymous with shady deals and scams.
Over the past decade or so, the three most populous South Florida counties – Miami-Dade, Broward and Palm Beach – have become less renowned for old-school “Miami Vice”-style drug shootouts than for scammers stealing hundreds of millions from the government, banks and individuals by using laptops, stolen identities and fake medical procedures.
The endlessly creative crooks come up with fake Jamaican lotteries, false marriages for immigration purposes, mediocre seafood marketed as better seafood, insurance rip-offs from fake accidents and fires – even foreign substandard cheese passed off as domestic top shelf. But the big money is in a trio of major fraud trends: Medicare, mortgage and identity theft-tax refunds.
By almost any measure, South Florida is the nation’s organized fraud capital, although authorities say it’s not entirely clear why.
“Is it the weather? Is it because it’s beautiful and the fraudsters want to live here? Is it because it’s such a melting pot and you have organized crime from all ethnic groups?” said Kelly Jackson, top agent in the Internal Revenue Service’s criminal investigative division in South Florida. “Any fraud, it always seems to start here.”
Take the most popular current trend: identity theft coupled with income tax fraud. According to the Federal Trade Commission, Florida ranks first in identity theft complaints at about 193 per 100,000 residents in 2013. But that’s dwarfed by the greater Miami area, which had 340 complaints per 100,000 residents that year.
The number of false federal income tax returns, meanwhile, is 46 times the national average in South Florida, according to a Treasury Department report.
George Piro, special agent in charge of the FBI’s South Florida office, said in many cases criminal organizations are shifting from violent crimes to those involving mostly digital data.
“Identity theft, the fastest growing crime here, is as easy as one, two, three. One, criminals steal someone’s name and Social Security number. Two, they use that identity to file a fraudulent tax return online. And three, they collect the refund check. Repeat thousands of times,” Piro said.
Criminal organizations have used people from all walks of life to steal identities: hospital workers, prison employees, high school cafeteria workers, people at state agencies and assistants in law offices.
It’s even become dangerous to be a letter carrier, because mail is great way to steal identities. The U.S. Postal Inspection Service is offering a $50,000 reward for information leading to the arrest and conviction of anyone involved in 13 recent robberies of letter carriers in South Florida. One was slain in 2010 for his mailbox key.
Nationally, the Treasury Department’s Inspector General for Tax Administration estimated in April that in 2012 more than 787,000 potentially undetected fraudulent tax returns were filed totaling more than $2.1 billion in refunds.
“The number of stolen identities and the dollar amount of the tax fraud involved in these cases is staggering,” said Miami U.S. Attorney Wifredo Ferrer.
The lure of stealing huge amounts of government money also drives fraud in the Medicare program, which provides services to America’s elderly. Since 2007, nine regional “strike forces” of the Justice, Treasury and Health and Human Services departments have charged about 2,300 people who had falsely billed Medicare for $7 billion.
The South Florida unit’s share of that? More than 1,500 defendants through last September.
Stealing from Medicare can require a large organization: crooked doctors, people to handle the billing, patients willing to accept kickbacks, and so on.
Among those recently charged is Dr. Salomon Melgen, a prominent Palm Beach County eye doctor also accused in a corruption indictment with his friend, New Jersey Democratic Sen. Bob Menendez. Melgen, who has pleaded not guilty in both cases, stands accused of falsely diagnosing patients with eye conditions and performing unnecessary procedures to bilk Medicare out of as much as $105 million.
Meanwhile, since at least 2009, Florida has led the nation in mortgage fraud as a percentage of the number of loans originated, according to the LexisNexis research company. The company reports that a financial industry index of mortgage fraud ranks the South Florida metropolitan area No. 1 nationally, with 12.3 percent of all such fraud reports in 2013, the most recent year available.
A trio of recent guilty pleas shows how a typical scheme works. Hector Hernandez, 57, admitted in court that his company, Great Country Mortgage Bankers, paid kickbacks to borrowers whose applications for Federal Housing Administration loans were falsified so they would qualify. Great Country would then sell the loans to banks and other institutions for a profit.
In all, Great Country stole $64 million. To date, 25 people have pleaded guilty in the scam.
Paul George, a Miami-Dade College history professor who specializes in South Florida, noted that the region’s reputation as a haven for schemers dates to the land speculation boom of the 1920s, when alligator-infested swampland was marketed to Northerners as a slice of tropical paradise. Today, with the area such a melting pot, it’s no wonder South Florida is also a cauldron of creative crime, he said.
“It goes back to the roots of Miami. It’s always been a place for starting over again,” George said. “People move here either from the north or the south. People have some anonymity, maybe they think they can pull off something here.”
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