Private Interests

Photo via iStockphoto/KMLMTZ66
Photo via iStockphoto/KMLMTZ66

Sylvia Dawood was behind the desk when they burst through the door. “It was, ‘Get down!’ and I hit the tile,” she says. “I didn’t drop to my knees; it was straight to lying flat on the ground with a gun pointed at my head.”

Dawood watched as officers from the Macomb Auto Theft Squad (MATS) carted out computer equipment and boxes of business documents from Marks One Car Rental on 8 Mile Road in Warren, Mich. They seized $60,000 in cash and 66 vehicles from the rental fleet.

They went across the parking lot to raid Marks One Collision and two other Marks One rental locations nearby. They also searched owner Maher “Mark” Waad’s house and ransacked his daughter’s bedroom, while Waad was out of town with his wife on their anniversary. The operation involved more than 50 officers and disrupted a section of 8 Mile for most of that Wednesday April 23, 2014.

“In my time as an assistant district attorney, I had never seen a raid that big,” says Steve Haney, Waad’s lawyer. “They went in with SWAT teams and AR-15s; they disabled security cameras. They broke equipment. It was extremely confrontational.”

Dawood returned home to watch it on the news. The next day, the phone wouldn’t stop ringing. Not only did the computers have all the customer data, but the paper claims files were also taken by police. “The business fell completely to the ground,” says Dawood. “Customers pulled their claims, even for the cars we were working on.”

When Waad returned, he was arrested and charged with insurance fraud through “false pretenses.” The charges would escalate to a RICO indictment — racketeering. He would face more than 20 years in jail.

As word spread, Waad’s businesses slowed to a standstill. Banks called in their loans and cut off his credit lines. The towing and impound fees, lost rental revenue, property damage, and legal fees cost Waad more than $235,000.

At the time of our first interview in July 2015, Waad had won a dismissal in the criminal trial, though the prosecution had appealed, and he was waiting for that decision. It would be close to a year until the appeals court would uphold the original verdict, finally absolving Waad of all criminal charges.

Waad had lost his businesses, and was in the process of starting over.

Mark Waad’s case explores the relationship between the police, minority-owned businesses, and insurance investigators in the tough neighborhoods bordering Detroit’s northern city limits. It also offers insight into a facet of the insurance industry, specifically in the investigation and prosecution of insurance fraud, and the funding apparatus that facilitates these ­investigations.

Yet the relationships between Waad, Haney, insurance companies, and the police are more complicated than the narrative of corporate power and conflicts of interest — as the layers of discovery in the case reveal.

A Vendetta?

Waad and Haney contend that the raid was brought in retaliation for Waad filing a civil lawsuit in November 2013 against multiple insurance companies, including Farmers Insurance. (In court transcripts, both a Farmers lawyer and a MATS officer stated they believed the civil suit was filed to chill the criminal investigation.)

The lawsuit alleged tortious interference, defamation, and violation of Michigan’s anti-steering law, which prohibits insurers from “unreasonably restricting” policyholders from using a particular auto repair vendor. In January 2013, multiple insurance companies dropped Waad for direct billing in his car rental business.

“Our theory all along was that the timing of the raid was curious,” Haney says.

The April 23, 2014 raid of Marks One Rental and Marks One Collision in Warren, Mich., led charges of insurance fraud and racketeering for owner Mark Waad. The towing and impound fees, lost rental revenue, property damage, and legal fees cost Waad more than $235,000. More than two years later, Waad won a dismissal in the criminal trial.
The April 23, 2014 raid of Marks One Rental and Marks One Collision in Warren, Mich., led charges of insurance fraud and racketeering for owner Mark Waad. The towing and impound fees, lost rental revenue, property damage, and legal fees cost Waad more than $235,000. More than two years later, Waad won a dismissal in the criminal trial.

Haney points to the civil suit’s amended complaint, which specifically names one of the MATS officers, as well as a Farmers Insurance investigator identified in the suit as a key figure in the investigation of Waad — the one who allegedly motivated the raid.

The defamation charges stem from separate incidents in which a Farmers adjuster allegedly used racial slurs during a verbal altercation at Waad’s shop, and another in a phone conversation with a Farmers supervisor. Waad’s legal team obtained witness affidavits to corroborate both incidents.

“It’s our theory that they conducted the raid to offer a defense against the defamation portion of the federal suit,” Haney says. “The only defense they would have for calling Mark a ‘crook’ and a ‘dirty Arab’ is if it were true.”

The story goes back further, to a 2010 case in which Farmers paid out a claim to Waad for a fire at one of his businesses. The same Farmers investigator was in charge of the case. According to Haney, the investigator suspected arson and “lost it” when Farmers decided to pay out. He has been out to get Waad ever since, Haney says.

Haney has intimate knowledge of the events surrounding the fire. At the time, Haney was not yet working for Waad — he knew him from the other side of the fence. Farmers had contracted Haney’s firm to investigate Waad’s claim. As Farmers’ lawyer, Haney recommended at the time to deny the claim.

Killing It

Born in Iraq, Waad emigrated to the U.S. with his family at age 2 and grew up in Sterling Heights’ “Little Baghdad.” A self-described hustler, he opened his body shop at the age of 19 in 2004. “We used to drive around in the snow, and pull people off the freeway and drive them into the body shop,” Waad says.

While others were doing keg stands in college, Waad was generating millions of dollars. “Give me a piece of metal, and I can turn it into money,” Waad says. “If you tell me no, I’m going to find a different way to make it a yes.”

In 2009, in spite of the Recession, Waad opened the car rental business, a natural outlet for his body shop customers who needed temporary wheels. It happened almost accidentally, when a customer needed a replacement vehicle.

“She said, ‘Listen son, if you don’t have a car for me, I’m going to a dealership,’” Waad says. “I ended up giving her my Escalade to go home with, just so I could get the claim. I said, ‘tomorrow I’m going to open my own car rental company.’”

Waad cultivated a client base around the African-American and immigrant communities north of Detroit. He found a niche with an underserved population — those who had car rental insurance but often had bad credit and no credit card, and not enough money for a rental car deposit. Cash renters are generally deemed too risky for the major car rental companies.

To grow his car rental business by specializing in insurance replacements, Waad knew that he would need to connect directly with insurance companies for billing, alleviating the hassle and expense of renters paying out of pocket. This was particularly beneficial to his credit-challenged clientele.

Waad managed to establish direct-bill relationships with national insurers, no small feat for an indie player. Marks One would soon grow to become the largest independent car rental company in Michigan.

With a fleet of close to 700 vehicles and his businesses grossing more than $5 million annually by 2013, he was financing most of his fleet in-house. “I was my own bank,” he says. “I was killing it.”

Increasing Scrutiny

As Waad’s businesses grew, so did scrutiny from the insurance companies.

Waad attributed some of that scrutiny to his rapid rise, particularly as an Arab-American. Haney concurs. “It would be impossible for people outside of Detroit to appreciate the level of anti-Arab sentiment and hatred towards the largest Arab-American community in the world outside Baghdad,” he stated in an email.

But why specifically would insurance companies drop his direct billing for car rental transactions? One theory, Haney and Waad had posited, is economics. Insurance policies contractually provide a daily car rental rate (say, $30) to the policyholder. If Waad charges $29.99 to the insurance company while a major car rental brand charges $21.99, it makes sense to cut out the higher provider.

The claimed financial disincentive to use Waad’s company makes sense — but is it a sufficient motive to drop direct billing?

Pressed on the dropping of direct billing, “The genesis of all the paranoia was rooted in the frequency of stolen vehicle claims Mark would have compared to other rental car companies,” stated Haney. “Mark is/was the only car rental company in the state of Michigan to rent to cash customers in America’s highest crime demographic … [The] predictable result was a high rate of thefts and conversions.”

But it wasn’t just one insurance company that dropped him; it was several in less than a month.

“This is Detroit,” Haney stated. “All of the SIU agents are former cops and all attend the same bars, fraud focus groups, and NICB meetings. Coordinating their attack on Mark was very predictable and easy. I say this because I was a former ATPA prosecutor and used to be the moderator at those same NICB meetings and fraud focus groups.” 
Another reason for the scrutiny may have been Waad’s willingness to poke the hornet’s nest harder.

When he started to believe that insurance companies had begun “steering” replacement rental clients away from his business to major car rental providers, Waad says, “I told my renters how to file a complaint on the insurance companies for doing this.”

Pay Your Deductible

Still another reason for increased attention specific to Waad’s collision business was summed up in four words inscribed on a sign outside of his shop: “We pay your deductible.” This was another way for him to cut a break for his working poor clientele.

When a body shop promises to save — or “pay” — all or part of the policyholder’s deductible, the body shop may cut into its own profits to return some money to the insured.

More often, however, the body shop will find ways to save on the repair of the vehicle, such as repairing a bumper instead of replacing it, or by using aftermarket parts instead of OEM (original equipment manufacturer) parts.

Insurance companies don’t like the practice because body shops would need to deviate from the repairs on the written estimate that they determined were needed to bring the vehicle back to its pre-accident condition. Waad says the practice is fairly common in his area. And it is legal in Michigan — the insured has the right to restore the vehicle to less than its pre-loss condition at the shop of choice.

“Some of these customers have a thousand dollar deductible and no rental coverage,” Waad says. “The customers don’t go by the estimate. And I don’t have a contract with the insurance companies to go by their estimate. My obligation is to the customer.”

Waad did not have to follow the insurers’ estimates because he was not part of any direct repair program. In exchange for a steady flow of business, the direct repair program contractually binds the repair provider by a set of rules established by the insurance company, including repairing the vehicle to the insurer’s estimate.

Overall, industry advocates frown on the practice. “If a shop is willing to cheat an insurer, then would they also be cheating the consumer as well?” says Chuck Sulkala, executive director of the National Auto Body Council.

Nick Mariano owns the Utica, N.Y.-based Priceless Car Rental franchise in conjunction with a collision repair service. He has a sign posted over the counter: “Please don’t ask us to save your deductible.”

“We don’t bother with that,” Mariano says. “It just opens the door to trouble.”

Escalating Events

The event that became the catalyst for the criminal investigation took place on Sept. 12, 2013, at a Farmers claims branch office in Novi, Mich. There, members of Farmers SIU, including the investigator with the alleged vendetta, met with members of the MATS unit, the Macomb County assistant prosecuting attorney, and an investigator from NICB.

As a result of this meeting, in the ensuing weeks, a Farmers’ vehicle inspection specialist examined nine vehicles at the homes of clients who had repairs performed at Marks One Collision.

The investigator filed a report based on the inspections. In each of the nine vehicles, the report stated that the repairs were done contrary to the estimates: The work was never done, parts were fixed but not replaced, or aftermarket parts were used when the estimate called for OEM parts.

According to the report, the dollar amount of the discrepancies for each vehicle was greater than $1,000, the threshold for a felony in the state of Michigan.

The report, obtained by Auto Rental News in the civil trial discovery, was damning for Waad: Farmers also asserted that Marks One Collision produced inflated or fake towing bills, extended repair time periods to increase rental car charges, enhanced vehicle damage, and forged two-party checks. In addition, Farmers purported that Marks One’s rental vehicles suffered an unusually high number of damage and theft claims.

MATS produced its own report, also obtained by ARN, which contained a summary of the allegations in the meeting and a cut-and-paste of the vehicle inspection report. Officers attempted to contact the owners of the nine vehicles; seven were allegedly “interested in furthering a complaint against Waad.”

With his direct bill lifeline severed, Waad’s client base eroded. He filed the civil suit in November 2013, a few weeks after the inspections.

The lawsuit evolved over amended complaints, and, with the steering claim dropped, the remaining claims boiled down to the negative effects of the cessation of direct billing by the insurance company defendants. In addition to the defamation claims, the suit alleged claims of tortious interference (damage to Waad’s businesses) based on the actions of insurance investigators, who, according to the suit, told policyholders that Waad had committed insurance fraud.

The civil trial started in February 2014. Two weeks later, MATS submitted a warrant request for Waad’s arrest and the raid.

Repair Discrepancies

The criminal case went to trial in the summer of 2014 while the civil trial was proceeding. The prosecution did not try the case based on the potpourri of charges in the SIU report — instead concentrating on the allegations of repair discrepancies.

At the trial, Haney picked apart the report. He showed that the investigator failed to total the value of the actual parts used in the repairs and also failed to consider other services provided by Waad’s businesses, such as discounted or free car rental and payment for some or all of the insured’s deductible.

The revised calculations of the defense showed the discrepancies amounted to less than $1,000 in each instance. In one case, Haney argued that the total repairs and value of services were more than the written estimate, causing the collision shop to lose money. Moreover, four of the nine vehicle owners who were asked to testify said they were happy with the repairs — contradicting the police report.

In March 2015, the circuit court dismissed the criminal charges against Waad. The prosecution appealed. More than a year later, on May 31, 2016, the Michigan Court of Appeals denied the appeal.

Waad was finally exonerated. But the damage to his businesses had been done.

The April 2014 raid — involving 50 cops that disrupted a section of 8 Mile for much of a day and saw the seizure of computers and boxes of business documents — produced no evidence that was used at trial to corroborate Farmers’ claims.

Regarding the seizure of 66 rental vehicles, “This case was about collision shop billing discrepancies,” says Haney. “The rental company was never the subject of the criminal investigation. Why then were the rental vehicles seized?”

Simply Not There

Three rulings were tendered in Waad’s case — upon the preliminary examination, criminal trial, and appeals panel — and all three opinions questioned the validity of the prosecution’s case.

In the verdict in the criminal trial, Judge James Maceroni commented that the case never should have made it to the Macomb County Circuit Court. Regarding evidence to convict, “It’s simply not there,” he said in court. “This case should have been dismissed at the preliminary examination.”

In dismissing the appeal, the panel of judges wrote: “We hold that the district court abused its discretion in binding defendant over for trial on the charges.”

Taking a step backward to the preliminary examination, former 37th District Court Judge Dean Ausilio, who allowed the case to proceed, wrote he was “stunned by the alleged business practices of the defendant.”

He also wrote, remarkably: “As to the prosecution’s case, the court is troubled by its reliance in making charging decisions based on an obviously flawed, self-serving investigative report prepared for the MATS by an insurance company, who happens to be involved in federal civil litigation with the defendant and provides funding for the MATS unit, without a full, unbiased, and independent investigation.”

How High

Judge Ausilio’s statements referenced something Waad and Haney relayed at the outset: “If I’m the insurance company and I call the detective in auto theft and say jump, the detective says, ‘How high?’” Waad says.

All four entities responsible for Waad’s investigation, raid, and prosecution are funded, in whole or in part, by the insurance industry — either directly or through assessments on insurance policies.

Members of Farmers’ SIU organized the September 2013 meeting and conducted the inspections of Waad’s clients’ vehicles. Farmers’ investigators then prepared the report and brought it to MATS and the Macomb County district attorney’s office to green-light the raid.

NICB, also present at the meeting, was created by the insurance industry and is wholly funded by its member insurance companies to investigate various types of insurance fraud.

The raid was conducted by MATS, a task force comprised of officers from Macomb County Sheriff’s Department, Michigan State Police, and police departments from towns within the county.

More than half of MATS’ budget is funded through the Automobile Theft Prevention Authority (ATPA) of the State of Michigan. According to county records, the MATS budget was $1,034,828 in 2015 while ATPA granted $626,309 to MATS that year — more than 60% of the MATS budget.

ATPA is funded by assessments on insurance companies via an annual fee of $1 levied on each non-commercial insurance policy in Michigan.

ATPA also funds a full-time assistant prosecutor position within the Macomb County prosecutor’s office — the prosecutor assigned to Waad’s case — that has the sole responsibility to prosecute auto theft, insurance fraud, and related crimes for MATS and other task forces. In 2015, ATPA disclosures indicate it funded $80,368, or half of this position’s salary.

Haney is well aware of these funding mechanisms. Before he was Waad’s lawyer and before he represented Farmers, Haney was the lead prosecutor for two years for the auto theft unit in the Michigan attorney general’s office — a position funded by ATPA.

Points System

The Michigan ATPA is administered by the Michigan State Police and is governed by a board of directors with representatives from law enforcement, insurance companies, district attorneys, and consumers.

Formed in 1986 by state statute, ATPA was born from the efforts of the Michigan Anti-Car Theft Campaign Committee (ACT), a political action group created by insurance companies and made up of auto manufacturers, car rental companies, financial institutions, and law enforcement.

According to its Plan of Operation, ATPA grants funds “based on the scope of the problem in a jurisdiction and also by performance history.”

Similar to many grant scenarios, ATPA requires recipients to submit performance activity reports and financial reports.

ATPA measures performance through a system that awards points to prosecutor and law enforcement grantees for numerous measurable objectives, including number of passenger vehicles recovered, number of defendants convicted of insurance fraud, and insurance fraud-related arrests — which delivers the highest points possible.

Could this have motivated the type of overly aggressive conduct in Waad’s case? “It’s almost a bounty system,” Haney says.

Reporting Fraud

This grant-funding mechanism is not specific to Michigan, though Michigan’s was the first in 1986. Since then, Automobile Theft Prevention Authorities have been duplicated by statute in 12 other states and are also funded by auto theft prevention fees imposed on insurance policies.

Michigan and 23 states fund the investigation and prosecution of insurance fraud by assessments on automobile insurance policies. Photo by Vince Taroc
Michigan and 23 states fund the investigation and prosecution of insurance fraud by assessments on automobile insurance policies. Photo by Vince Taroc

Set in the broader context, 48 states and the District of Columbia have insurance fraud laws, and those states make filing a false insurance claim a crime. In 43 states, insurance fraud is classified as a felony.

Requirements regarding how insurance fraud is reported vary by state, as well. Forty three states and the District of Columbia require insurers to report suspected fraud to its state fraud bureau, law enforcement, or approved agencies such as NICB. Michigan is one of a handful of states that does not have a proprietary insurance fraud bureau, nor does it have a mandatory reporting requirement.

In the matter of Mark Waad, an investigative unit from an insurance company brought the case to an ATPA-funded task force and an ATPA-funded prosecutor “without a full, unbiased, and independent investigation,” according to Judge Ausilio.

Waad’s case is not unique. Other cases involving insurance-funded investigations and subsequent civil suits also alleged faulty reports, withholding exculpatory evidence, and vindictive behavior.

Exculpatory Evidence

Hampton v. State Farm, a Kansas case decided in 2008, also questioned the timing of criminal charges. After policyholder Jennie Hampton’s vehicle was burned, State Farm denied her claim. She then brought a breach of contract suit against State Farm — who only then brought criminal charges, even after a police investigation absolved her.

The case was reported to NICB. The trial judge found that NICB had not done an independent investigation of State Farm’s assertions and that State Farm’s SIU concealed and disregarded exculpatory evidence, including using a paid “expert” who rendered an opinion on the vehicle’s engine without a full examination.

The plaintiffs were granted a punitive award of $8 million, which was upheld on appeal, citing the court’s findings that showed conduct that was “clearly reprehensible.”

In Radcliff v. State Farm, an Indiana case decided in 2014, State Farm alleged that the policyholder, a building contractor named Joseph Radcliff, violated the RICO Act by intentionally damaging rooftops and submitting false claims for damage after a 2006 hailstorm.

Once Radcliff was cleared of criminal wrongdoing, the civil trial resulted in the jury dismissing State Farm’s fraud claims and finding that the insurance company had defamed him, using Radcliff as an example in the media. The jury found that State Farm withheld exculpatory evidence from NICB and the prosecutor’s office.

State Farm was ordered to pay $14.5 million, one of the largest defamation verdicts in U.S. history.

These cases stirred the memory of a case first reported by Auto Rental News in 2007, regarding the three-year criminal probe of Total Fleet Solutions, a Central Florida-based company that provided services to car rental companies that suffer losses when a rental car is in an accident.

An investigation culminated in charges that the business sold flood- and hurricane-damaged cars to unwitting motorists and inflated damage estimates. The case was thrown out, with the judge finding that the company owners and their attorneys sought guidance from regulators more than a year before charges were filed, which showed a “complete lack of criminal intent.”

Unholy Alliance

“Unlike most other criminal prosecutions, insurance fraud prosecutions are increasingly being brought by prosecutors funded separately from the state’s general revenues,” wrote Aviva Abramovsky, a professor of law at Syracuse University, in An Unholy Alliance: Perceptions of Influence in Insurance Fraud Prosecutions and the Need for Real Safeguards, a research paper published in the Journal of Criminal Law and Criminology in 2008.

“The adoption of this prosecution funding method allows insurance fraud prosecution programs to exhibit the most comprehensive presence of any private industry in the enforcement of relevant criminal laws.”

Abramovsky also questions whether private funding could lead to selective prosecutions.

“They’re giving priority to insurance fraud prosecutions at the expense of other noble and just causes that aren’t being prosecuted where there is no industry willing to fund them,” Abramovsky told Auto Rental News. “Where are the assessments to bring child abuse or domestic violence cases?”

This type of funding doesn’t stop with ATPAs — 24 states fund their fraud units, either in part or completely, by assessments against insurance companies.

Insurance consultant Tim Ryles served as Georgia’s commissioner of insurance from 1991 to 1995. “Insurance regulation is traditionally a civil action, a regulatory action, but I see a trend to criminalize contract disputes,” he says.

Ryles has concerns regarding cases that are referred to as fraud, particularly to insurance-funded entities such as NICB, without establishing reasonable suspicion.

He questions the qualifications of private insurance investigators dealing with criminal law. While many investigators come from a law enforcement background, licensing, and even accreditation, are not mandatory in most states.

“In most cases, the ‘fraud’ investigators don’t have to know anything about insurance contracts, including appraisal clauses designed to reconcile differences of opinion about loss amounts — and coverage — in an increasing number of states,” Ryles says.  

Ryles has chaired the National Association of Insurance Commissioners’ Anti-Fraud Committee, and he also helped to write Georgia’s fraud statute. “When that happened, I always feared that it would be abused. Sure enough, my worst fears have come true.”

Insurance Fraud

  • Steals $80 billion a year across all lines of insurance. (Coalition Against Insurance Fraud estimate)
  • Losses average about 10% of claims volume. (2013 FICO survey)
  • Prevention efforts produced an 18:1 return on investment in 2015, including value-added activities such as law enforcement training and public awareness. (NICB estimate) 

Hard to Prosecute

But some experts dispute the idea that insurance-industry funding of prosecutions constitutes a conflict of interest.

“You’re barking up the wrong tree,” says Barry Zalma, a Los Angeles-based insurance coverage attorney and certified fraud examiner. “The funding has nothing to do with it. The issue may not be who paid for the prosecution, but the lack of competence of the prosecutors.”

The system is in place, Zalma says, for good reason. “Traditionally, prosecutors will not prosecute insurance fraud cases, regardless of the crime and the statute,” he says. “They won’t do it because it’s too hard. An insurance fraud case might have ten thousand pages of paper.”

“I’ve given the Los Angeles County prosecutor a sworn deposition — a confession under oath — by an insured for insurance fraud and five corroborating witnesses, and they refused to prosecute on grounds of insufficient evidence.”

Zalma referenced the thousands of cases that proceed within the confines of ethical behavior. “The plaintiff’s bar has filed all kinds of suits and appeals saying the insurance companies are evil for doing this,” he says. “And they’ve given up trying.”

“Prosecution of cases is left to the individual auto theft teams as well as prosecutors in the counties they serve,” wrote Lt. Scott Woodard, executive director of the Michigan ATPA. “The ATPA simply provides funding.”

“There has been no evidence whatsoever that there has been any influence between the insurance industry and criminal prosecutions,” says Howard Goldblatt, director of government affairs for the Coalition Against Insurance Fraud. “What you’re hinting at doesn’t exist. It’s a red herring.”

Besides, assessments on insurance companies don’t always work to the insurers’ advantage, Goldblatt says. “Some insurers are frustrated that they pay the assessment each year, but there are only a handful of cases that ever move through the system.”

And Michigan, both Zalma and Goldblatt say, is a special case. “Michigan is the second largest state in the country that lacks decent insurance fraud infrastructure,” says Goldblatt. “If you’re an insurer in Michigan, you are uncertain of how to bring forward a criminal prosecution of insurance fraud. You don’t know if the local prosecutor or state attorney general would have the resources, time, or personnel to do something.”

Regarding Michigan ATPA’s point system: “If a grantee is not showing success, why continue the grant?” Goldblatt asks.

A Big Problem

While the prosecution of insurance fraud is layered with complexities, the problem is massive.

According to estimates from the Insurance Information Institute from 2015, property-casualty fraud amounts to about $34 billion each year in the U.S., which comprises about 10% of yearly property-casualty insurance losses and loss adjustment expenses.

In light of this scope, studies have revealed that consumers have shown a higher tolerance for insurance fraud — or even a higher willingness to commit fraud — compared to other crimes.
When funds are allocated to fight insurance fraud, the benefits are in multipliers of the money spent.

“When our agents uncover a ring of auto thieves or insurance scammers, and, along with law enforcement, successfully dismantle their operation, the benefit from that work extends not just to policyholders of our member companies, but to every person within the community where those crooks operated,” stated Frank Scafidi, director of public affairs for National Insurance Crime Bureau.

Good News

Mark Waad entered ARN’s orbit through Neil Abrams, an industry contact.“It’s a David vs. Goliath story,” Abrams said. “It reads like a movie script.” Waad attended the 2016 International Car Rental Show in Las Vegas in April. He is a big guy, a teddy bear, soft-spoken with a broad smile.

Mark Waad (left) and Waad's lawyer Steve Haney. Before working for Waad, Haney was an assistant prosecuting attorney for the State of Michigan as well as a partner for the law firm that investigated Waad's fire claim in 2010. Photo by Steve Reed.
Mark Waad (left) and Waad's lawyer Steve Haney. Before working for Waad, Haney was an assistant prosecuting attorney for the State of Michigan as well as a partner for the law firm that investigated Waad's fire claim in 2010. Photo by Steve Reed.

Steve Haney came too, wearing probably the most expensive suit at the show. He played guard for San Jose State in the late ’80s. Haney rose to prominence as Magic Johnson’s attorney in the ’90s, negotiating his licensing and endorsement deals, as well as endorsements for other NBA stars after their careers ended.

Regarding the case, good news was imminent, confirmed a couple months later when the appeals court decision finally cleared Waad of all criminal charges.

Back on 8 Mile Road in Warren, Mich., the sign on the building now reads “Executive Car Rental.”

“It was impossible to keep the name Marks One, with everything that happened,” says Waad, adding that the name Executive is a reminder of his struggle with insurance companies who “made an executive decision to take me out.” He changed the body shop’s name to Prime Collision, “because I was their prime target.”

The rental business is flourishing again. In addition to six standalone stores, Waad recently opened up locations in six franchised auto dealerships. “I’m buying cars from the dealerships and in exchange they’re letting me rent cars to warranty customers,” he says. “It’s a complete 360.”

Waad has taken back the mantle as the largest independent car rental company in the state of Michigan. His new business, he says, has more controls and is run “more like a corporation.”

In terms of the civil suit, that, too, would soon bear fruit with two insurance company defendants, who entered into confidential settlement agreements. Waad says he is satisfied with the terms. ARN has learned that one of those defendants reestablished its direct bill relationship with Waad’s rental company. The claims against Farmers are ongoing.

Regarding his direct billing claims, at least with one company, Waad got his wish.

Haney was forced to withdraw from that case, as he expected, owing to his previous relationship with Farmers regarding the 2010 investigation of the fire.

The dismissal of the criminal case allowed Haney and Waad to proceed with another suit for malicious prosecution. Brought on Sept. 16, 2016, the suit is against numerous defendants, including Farmers, one of its investigators, three members of the MATS taskforce, an ATPA-funded prosecutor, and the Michigan ATPA.

The lawsuit lays out many of the claims against Farmers in the original civil suit, including the faulty SIU report, the testimony of the vehicle owners in favor of Waad, and the contacting of policyholders alleging Waad’s fraud schemes. It outlines the new defendants’ complicity in these actions as well.

This new suit also produced an information dump in discovery, including insight into the 2010 fire.

Irony in the Fire

Haney had always been upfront regarding his work for Farmers in investigating the fire. “I was making a decision on a claim, and I made a written recommendation to deny it, but Farmers ultimately decided to pay it,” he says.

Waad responded at the time that Haney “was every day on my ass. But he never turned up anything.”

Says Haney, regarding working for insurance companies: “You generally want to lean towards what they want to hear to continue to get the work. I admit it now, and I think anyone who would be honest as an insurance lawyer would acknowledge that you typically look at it as favorably as possible to your insurance company client.”

Yet the details of the fire only emerged when Haney’s letter that recommended denial of the claim became available in discovery. The letter was addressed to the Farmers investigator that Haney and Waad alleged to have a vendetta to get Waad.

In the letter, obtained by ARN in discovery, Haney wrote that he had investigated Waad for 20 prior insurance claims for another insurance company. The letter referenced a prior felony conviction for check forgery and “numerous lawsuits where [Waad] has been primarily a defendant in civil actions alleging either fraud or financial irresponsibility.”

The letter references not one fire but three within three days, each involving video showing three different vehicles driving into the same wall of the building. One of the vehicles, according to investigators, “involved an ignitable liquid poured over the seats and direct ignition applied.”

Asked later about the contents of the letter, Waad did not deny involvement in the civil actions. “It’s the cost of doing business,” he says. Regarding Haney, “He was being a good lawyer.”

Following up with Waad on whether he’s still offering to pay his body shop clients’ deductibles, he wanted to clarify one point — the collision shop has been closed to the public since March 2016, when regulators issued a cease-and-desist order for operating an unlicensed facility. The order references several consumer complaints, including improper invoicing, failure to give a written estimate, and “repairs not performed.”

“We have a lawsuit on that, too,” Waad says, somewhat sheepishly. “I can send it to you if you want.”

In conversations following the issuance of the order, neither Waad nor Haney mentioned the closing of the shop.

Real World

The real world is messier than the story of David taking on Goliath — both had motivations, private interests, and secrets we’ll never know.

The raid on Waad’s car rental company, which was unrelated to the body shop investigation, destroyed his business. One catalyst was the “self-serving investigative report prepared for the MATS by an insurance company,” according to Judge Ausilio, “without a full, unbiased, and independent investigation.” But you could make the case that Waad gave them a match to light. Did an investigator have a vendetta, or was he just doing his job? That’s for a court to decide.

Waad made mistakes — lots of them. Yet Waad’s turnaround is remarkable, and it appears he will have a long and fruitful career in car rental, or in any career he chooses, doing it the right way.

The real world is complicated when it comes to funding cash-strapped jurisdictions. The assessments that pay to fight insurance fraud return measurable benefits in multiples to society. If that funding spigot is turned off, where does that leave us?

But this funding arrangement allows, in some jurisdictions, a private company’s investigative unit to bring a case directly to a prosecutor funded by the same entities. At the very least, the arrangement opens the door to questions of government impartiality and the perception of conflict of interest.

The real world is more complex than those suggesting that a grant funding system that uses private money will always, categorically, come without undue influence. Investigators and prosecutors weigh the stacks of cases on their desks, as we all do. If half of their salaries come from grants that award points for number of insurance fraud convictions, the question of influence must be raised.

The facts and information presented here are based on interviews, internet research, court depositions, witness affidavits, transcripts, exhibits, and video evidence. Lawyers for defendants in the civil suits did not respond to emails asking for comment.

Comments

  1. Jason Manelli [ November 23, 2016 @ 12:25PM ]

    Steering is a major concern in our industry, and it does sometimes feel like the insurance companies will work hard to not direct bill us as independents. I sympathize with Mr. Waad in that regard.

    However, my eyebrows went up at the prospect of a body shop based car rental business growing to 700 cars from nothing between 2009-2013.

    A very entertaining read, and I have to say thanks to ARN and CB for this fascinating, in depth and well researched journalism.

  2. Neil Abrams [ November 28, 2016 @ 07:15AM ]

    Congrats to ARN and CB for providing an exceptionally broad and deep explanation of the Maher Waad story...a true David v. Goliath saga. Can't say I've ever seen a more in-depth analysis conducted by ARN regarding an industry issue that lurks in the shadows but is ever-present in the competitive dynamics of the rental business. Reads like a novel, including heroes and villains, yet presented in a fair and balanced manner. I just hope that the revelations exposed by the article ultimately lead to some real change, at a federal or state level, in how special interest organizations interact with if not influences the multitude of law enforcement agencies across the country which police auto fraud cases as well as consumer rights violations. We'll see.

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