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L.P.C.,
Ltd. investigators, who have interviewed thousands of warranty claim
customers, both spurious and authentic, immediately recognize those
who are knowledgeable participants in a fraud. Additionally,
we can readily recognize people who believe they are helping out the
dealer in a situation that the government spooks often refer to as
false flag operations. In these cases, the spurious customers
are knowingly allowing their names to be used on false claim forms,
but are unaware that a fraud is involved or that the dealer is
obtaining any profit. (These folks often feel used and are
willing to provide detailed statements, introductions to others
taken in by a dishonest dealer, and volunteer to act as
witnesses.) Another approach which has often proven successful
on warranty fraud cases is to identify and locate former employees
of the dealer perpetuating the fraud. In many cases these
dealers not only cheat manufacturers, they also cheat customers,
employees and anyone else they can. It is unusual that former
employees of a dealer committing warranty fraud are unwilling to
provide complete cooperation. This, of course, can prove
exceptionally valuable, since often it is dealer's employees who
actually falsify the claim forms. (In one case, a former
employee of a dealer identified over 800 claim forms as being
fraudulent and certified that they were all falsified by him
personally at the direction of the business owner. Over $1
million was recovered in a cash settlement.)
Types of Warranty
Fraud:
Often it is simply a matter
of a dealer retaining the benefit that the manufacturer intended for
the end user who had a problem, but was unaware of the
warranty. In other cases, no customer ever existed and the
alleged adjustment never occurred. There have been cases
involving collusion between a dishonest field adjuster or
manufacturer's representative confirming the existence of defective
products which didn't exist. (One greedy dealer
"replaced" more of one product than was ever
manufactured.) In other cases, particularly those involving
auto parts, defective parts were on hand to back up the claim, but
they were obtained from junk yards or were just discarded parts left
by customers who replaced them in non warranty situations. In
other cases, the customer bought a warranty from the dealer when the
product was purchased, and the replacement should have been covered
under this dealer's warranty, even though it would otherwise be
eligible for replacement under the manufacturer's warranty.
While many clients elect to prosecute these fraudsters using either
local statutes or the federal mail fraud statute, most prefer to
resolve the matter by negotiating a settlement.
Return on Investment:
With warranty fraud, we feel
we can brag a little. In one case, our investigation netted a
cash recovery of over $6 million. Recoveries in the $1 million
range have been so common as to be unremarkable, except in one case
where a settlement in this amount was reached after only one week of
field investigation work. One minor case we are proud of
involved a $46,000 recovery obtained without any hassle. This
was a minor side issue handled along with a major operation in the
same area and the total investigation time involved was about eight
hours. We've never really done the math, but estimate that in
our history of warranty fraud investigation, clients typically
recover somewhere between $50 - $100 for every dollar spent on our
services. (We are referring here to actual cash
recoveries--not judgements.) In some cases, however, clients
have, for one reason or another, elected to negotiate low
settlements and in one foreign country, the client
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