Federal prosecutors in New York are cracking down on an alleged ring of conspirators who actively recruited individuals to stage slip-and-fall accidents. In the recent indictment, federal prosecutors allege the conspirators—which include doctors, lawyers, and a litigation funder—worked together to defraud property owners and insurers out of $31 million by staging fake slip-and-fall accidents.
The group actively sought out vulnerable individuals who, according to the indictment, often lacked warm shoes or clothes and requested food during their initial meetings with the lawyers involved. Once recruited, the conspirators would direct the “victims” to selected locations where they were told to stage accidents and claim injuries. Following the “falls,” the “victims” would often be required to undergo surgery to proceed with their lawsuits. These surgeries occurred whether the “victim” needed them or not.
According to a report in Reuters, a central player in this alleged ring was litigation funder Adrian Alexander. Alexander not only allegedly paid co-conspirators a referral fee for getting fake accident victims to sign litigation funding deals but imposed exorbitant interest rates that left little to no money for the “victims.”
Making matters worse, Alexander also operated the MRI facility where many of the fake plaintiffs received MRIs. He and other funders also allegedly paid “incentive” payments to recruits who agreed to undergo surgery.
This indictment isn’t the first time that prosecutors have addressed the issue of those profiting from pushing plaintiffs into unnecessary surgery. Federal prosecutors in Brooklyn obtained guilty pleas from a surgeon and a patient recruiter involved in a scheme to provide unnecessary pelvic mesh removal surgery to women suing mesh manufacturers. That racket also involved litigation funding.
ILR recently released a research paper, Selling More Lawsuits, Buying More Trouble: Third Party Litigation Funding a Decade Later, which looks at the third party litigation funding (TPLF) industry. TPLF, which includes lawsuit lending and larger-scale investment financing, has experienced explosive growth in recent years. The paper examines how TPLF is fueling abusive litigation, how the few TPLF agreements that have been made public reveal serious ethical issues with the practice, and how lawmakers, regulators and the courts can approach TPLF reform.
This case is another example of litigation funders and plaintiffs’ lawyers taking advantage of vulnerable people with the goal of securing millions of dollars for themselves. This abuse of our legal system by litigation funders and plaintiffs’ lawyers is unacceptable and shows what happens without proper oversight.