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Livery Fleet Owner Sentenced In Manhattan Federal Court To 121 Months For Multimillion-Dollar Insurance Scam

FOR IMMEDIATE RELEASE
Friday, February 14, 2014

To Pay Lower Premiums, Defendant Deceived Automobile Insurance Companies by Lying About Location and Use of Livery Vehicles

Preet Bharara, the United States Attorney for the Southern District of New York, announced that SCOTT ERIC SANDERS was sentenced today in Manhattan federal court to 121 months in prison for his participation in a long-running automobile insurance fraud scheme and aggravated identity theft. As part of the scheme, SANDERS, who owns fleets of commercial vehicles, systematically misled insurance companies as to where the vehicles he owned were garaged and operated, and how those vehicles were being used, so that he could obtain automobile insurance for those vehicles at substantially lower premiums. SANDERS was convicted in April 2013 of one count of conspiracy to commit mail and wire fraud, five counts of mail fraud, and one count of aggravated identity theft following a four-week jury trial before U.S. District Judge Lewis A. Kaplan, who also imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “Scott Sanders was convicted of repeatedly falsifying insurance applications to save millions of dollars in premiums. He lied about where the insured vehicles were garaged and operated, as well as about what the vehicles were used for and who actually owned them. He also compounded the felony when he committed the same crime on behalf of other fleet owners. Now he will pay the consequences for his criminal conduct.”

According to evidence introduced at trial, other proceedings in this case, and documents previously filed in Manhattan federal court:

In New York State, owners of fleets of commercial vehicles, including livery cars and ambulettes, are required to obtain commercial automobile liability and physical damage insurance coverage. The automobile insurance policy premiums are based, in part, on where the insured vehicles are garaged and operated as well as how the vehicles are being used. Vehicles that are principally garaged or operated in New York City are charged substantially higher insurance premiums than vehicles that are principally garaged or operated elsewhere in New York and adjoining states. In addition, vehicles that are primarily used as livery cabs are charged substantially higher insurance premiums than vehicles that are operated for many other commercial purposes. Owners of livery fleets obtain automobile insurance through the voluntary insurance market or, when they are unable to obtain insurance through the voluntary market, through the New York Automobile Insurance Plan (“NYAIP”). The NYAIP assigns policy applications to insurance carriers doing business in New York State, who are then required to provide insurance coverage to the applicant.

From at least 2005 through 2010, SANDERS controlled fleets of commercial vehicles that were garaged and operated in New York City. During that time period, SANDERS engaged in a widespread scheme to defraud automobile insurance companies in order to obtain automobile insurance for his vehicles at lower premiums by misrepresenting where the vehicles were garaged and operated, and in some instances, how those vehicles were being used. Specifically, SANDERS caused to be submitted insurance applications to both NYAIP and directly to insurance companies that claimed that SANDERS’s vehicles were garaged and operated outside New York City, when they were not. In addition, on some of those applications, SANDERS represented that SANDERS’s vehicles were being used for commercial purposes other than as livery vehicles when these vehicles were, in fact, being used as livery vehicles. In these insurance applications, SANDERS also listed the names, and in some instances the dates of birth and driver’s license numbers, of other individuals, some of whom had previously rented livery vehicles from SANDERS, as the presidents and owners of SANDERS’s companies, when those individuals were not in fact the presidents or owners of those companies. Relying on these misrepresentations, the insurance companies issued insurance policies for the vehicles controlled by SANDERS at lower premiums than those for which the vehicles would have been eligible had the insurance companies been aware of the true locations of garaging and operation, as well as the true use, of the vehicles.

In addition, as part of the same scheme, SANDERS helped other commercial fleet owners whose vehicles operated in New York City obtain insurance at lower premiums using the same misrepresentations about how those vehicles were being used and where those vehicles were being garaged and operated. Over the course of SANDERS’s scheme, insurance companies lost millions of dollars in premiums that they would have otherwise charged had they been provided accurate garaging, operating, and usage information about the vehicles.

SANDERS was convicted of one count of conspiracy to commit mail and wire fraud, five counts of mail fraud, and one count of aggravated identity theft.

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In addition to prison, SANDERS, 42, of Saddle River, New Jersey, was sentenced to three years of supervised release and ordered to pay a fine of $50,000, restitution of $4,878,592.30, and forfeiture of $4,878,592.30.

Mr. Bharara praised the work of the Postal Inspectors from the United States Postal Inspection Service and investigators from the New York Automobile Insurance Plan.

This matter is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Paul Krieger and Brent Wible are in charge of the criminal case.

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