In the 1990s the Russian immigrant community in NYC grew by orders of magnitude. One thing the newly imported entrepreneurs quickly figured out is that America is extremely vulnerable to large scale fraud in almost every sphere of life. Story time! 1/11

First, something people don't realize-- immigrant communities have higher levels of trust within than they do with the host. People will trust criminals in their own community more than they trust local institutions. Language and cultural barriers play a huge role. 2/11

All right. So they figure out that if you get into a car accident, you can claim pain and it's impossible to medically verify. They start doing that. Fake light fender benders, claim pain, six months later get a settlement. 3/11

But of course they had to deal with lots of American middle men-- doctors, accident lawyers, etc. That's a lot of money on the table. Why not cut the middlemen out and take all that money themselves? So they start building out the fraud infrastructure. 4/11

By then there were enough russian lawyers and doctors. They start building law/medical offices dedicated to accident insurance. The lawyers deal with court cases, the doctors provide necessary paperwork and fake the evidence. Vertical integration means more $$$$. 5/11

But they need clients. So they start advertising it on local russian TV and radio stations. Because the ads are in russian, they pretty much tell you how the thing works straight up. Trust and language barriers provide plausible deniability. 6/11

Eventually it got really out of control. Dozens upon dozens of offices, competing with each other on experience and price. They also get Russian limo companies in the game. Rent two limos, fill them with 16 ppl each, crash them into each other. Boom. 32 clients. 7/11

The insurance cos realize something's wrong. They're bleeding money in a small area of Brooklyn. They get investigators on the case. But now what? *Everyone* is Russian. Lawyers/doctors/limo cos all know each other. The "customers" don't speak any english. 8/11

Word around the grapevine is that there is a crackdown. But the biz doesn't slow down at all. End user would get $20-30k/accident. Lawyers/doctors would probably split as much. That's really good unit economics to shut it all down. 9/11

Eventually the way insurance cos pull it off is that they give large contracts to russian immigrant PI companies. They compensate per hour + upon producing evidence of fraud. That's what unravels the whole thing. The invisible hand strikes again. 10/11

This gold rush lasted from ~1992 to ~2000. About a decade, give or take. News were that insurance co losses were in the billions. Good times for all.

(Please stay tuned for part II next week -- the wonders of large scale medicaid fraud) 11/11