Dallas County Man Admits Role in $5 Million Staged Accident Fraud Scheme

U.S. Attorney’s Office, Northern District of Texas
March 18, 2014

DALLAS—Leroy Nelson, 61, of DeSoto, Texas, appeared this morning before U.S. Magistrate Judge Paul D. Stickney and pleaded guilty to his role in a $5 million staged accident fraud scheme, announced U.S. Attorney Sarah R. Saldaña of the Northern District of Texas.

Specifically, Nelson pleaded guilty to one count of mail fraud and one count of engaging in illegal monetary transactions. He faces a maximum statutory penalty of 20 years in federal prison on the mail fraud count and 10 years in federal prison on the illegal monetary transactions count. In addition, each count carries a fine of up to $250,000, and restitution could be ordered. Sentencing is set for July 7, 2014, before U.S. District Judge Sam A. Lindsay.

According to the plea agreement filed in the case, Nelson agrees to forfeit several vehicles, a motor home, a boat and trailer, and real estate in Duncanville and Cooper, Texas.

According to the factual resume filed in the case, beginning in 2005 and continuing through 2012, Nelson engaged in a scheme to defraud automobile insurance companies by fabricating and submitting false and fraudulent claims for damage to technical equipment damaged in fictitious road accidents.

As part of the scheme, Nelson promised cash payments to individuals he recruited for them to falsely report to their automobile insurance company that, while driving, they inadvertently damaged a piece of equipment. Typically, the individual would falsely report that while driving, he or she had either rear-ended a trailer pulling equipment or swerved to avoid something in the road and collided with equipment on the side of the road. Nelson would instruct the individual on how to make the telephone call to the insurance company.

Nelson then prepared and submitted the claims for property damage in the name of a “DBA” he created. The claim would include a photo of the equipment and a fictitious repair estimate that Nelson prepared. The damaged equipment was described as very technical in nature, such as a “Remote Aircraft Landing Marker,” a “chemical Pipeline Examiner” or a “Seismographic Probe.” The claimed repair expenses would usually be from $16,000 to $19,000.

Nelson opened private mailboxes in states including Minnesota, Missouri, Washington, Arizona, Connecticut, and Louisiana to receive the insurance checks. The mailboxes were opened under an assumed business name that Nelson used as the owner of the damaged equipment in the claims. Nelson also used the addresses of two warehouses on Explorer Street in Dallas and directed that mail received at the private mailboxes be forwarded to one of those two addresses.

The cumulative total of the insurance claims prepared and submitted to insurance companies by Nelson from 2005 to 2012 totaled approximately $5 million.

This investigation was brought to the attention of federal law enforcement by the National Insurance Crime Bureau (NICB) and Farmers Insurance Group, Special Investigations. The FBI, Internal Revenue Service-Criminal Investigation, and U.S. Postal Inspection Service conducted the investigation. Assistant U.S. Attorney Christopher Stokes is in charge of the prosecution.