Insurance Fraud is a Violent Crime

Insurance Fraud is a Violent Crime

Jatiek Smith (also known as “Tiek”) a member of the Bloods Gang was charged with one count of racketeering conspiracy, in violation of 18 U.S.C. § 1962(d), and one count of extortion conspiracy, in violation of 18 U.S.C. § 1951, arising out of allegations that Smith and his co-conspirators engaged in a pattern of extortionate conduct to dominate the fire restoration industry. Smith’s case was tried in a ten-day bench trial between November 27, 2023, and December 11, 2023. In United States Of America v. Jatiek Smith et al., No. 22-cr-352 (JSR), United States District Court, S.D. New York (February 14, 2024) the USDC found Smith guilty on all courts in a lengthy and detailed opinion.

FINDINGS OF FACT

Based on the record presented at trial the Court made the following findings of fact:

The Fire Restoration Industry

The “fire restoration industry” refers to the businesses that redress and repair properties that have suffered damage from fires or exposures to fires. Within this industry, “fire restoration companies” (sometimes referred to as “emergency mitigation services companies,” or simply “fire mitigation companies” or “restoration companies”) provide emergency mitigation services, demolition, and construction services to properties that have suffered such damages. Another group of participants in the fire restoration industry are the “public adjusters.” A public adjuster represents the property owners in their claims made against the insurance companies that insure their properties. The term “chasing fires,” as conventionally used in the industry, refers to a fire mitigation company’s or public adjuster’s efforts to solicit business from the owners of fire-damaged properties. Both public adjusters and restoration copaMnies will chase fires in an attempt to be the first to sign any given fire. Smith’s Rise Within First Response “First Response” is a fire mitigation company at the center of this action. Carl Walsh, the owner and founder of First Response, hired Jatiek Smith in approximately October 2019. While Walsh retained legal ownership of First Response, in practice Smith effectively took control over many aspects of the business from Walsh and by early 2020 was understood to be its leader. Smith is a member of the Bloods street gang. Clash with AES When Smith joined First Response, American Emergency Services (“AES”) was First Response’s primary competitor. A fight ensued, and someone from AES fired a gun at Jackson.

On May 5, 2020, Smith, along with Jackson and three other members of the Enterprise, went to an AES warehouse to assault AES’s owners in retaliation for the events of the prior day.

The Enterprise Imposes Rules on the Industry After AES left the industry, Smith imposed a set of rules on fire restoration companies that had once competed.

The Enterprise Enforces Its Rules Through Violence and Threats of Violence Multiple people adverse to Smith were assaulted by his organization.

INSURANCE FRAUD

The vast majority of work performed by First Response and other restoration companies is paid for by insurance companies. If insurance companies do not pay for any restoration work, as a practical matter that work will frequently go uncompensated, as homeowners are rarely in a position to pay. Restoration companies such as First Response therefore have a strong financial incentive to ensure any insurance claim is accepted. When First Response, under Smith’s leadership, saw illegal conditions in a property, at times it used the fact of those conditions as a tool to get Public Adjuster Peralta retained. When First Response, under Smith’s leadership, saw an illegal condition that could interfere with an insurance claim, employees would remove or effectively cover-up that condition and conceal it from the insurance carrier. As a result of fraud claims excluded were paid by the insurance carriers.

OBSTRUCTION OF OFFICIAL PROCEEDING

Before learning that Walsh was speaking with federal investigators, Smith directed Walsh to meet Smith in Smith’s car. Smith eventually tricked Walsh into revealing that Walsh had spoken to law enforcement.

CONCLUSIONS OF LAW

Extortionate Conspiracy The Government has proved numerous instances in which Smith and his co-conspirators confirmed their agreement by actually carrying out such extortion. Specifically, of the six specific instances in which the Government alleges that Smith and his co-conspirators carried out such extortions, namely the alleged extortions AES (McKenzie), ServPro (Vargas), EFS (Boryk), Willon Charles, iFlood, and an unnamed contractor during the “mala sagure incident,” the Court found the Government proved beyond a reasonable doubt that the first four extortions occurred in furtherance of an agreement-to-extort entered into by Smith and his co conspirators. Specifically, the Court concluded as follows: The Government proved beyond a reasonable doubt that Smith and his co-conspirators agreed to extort McKenzie and AES in at least two respects. First, Smith and other members of the Enterprise attempted to extort McKenzie and AES by demanding that AES pay $100,000 to continue chasing fires. In addition, Smith and his co-conspirators successfully extorted AES by forcing them out of the fire chasing business. Accordingly, the Court concluded that Smith and other members of the Enterprise agreed to extort AES. It was virtually undisputed at trial that AES stopped chasing fires after these events occurred. The Court concluded beyond a reasonable doubt that AES exited the industry as a result of violence and threats of violence perpetrated by Smith and his co-conspirators. The Government presented evidence from numerous witnesses of at least six specific acts of intimidation carried out by Smith and his co-conspirators against participants in the industry, in addition to the violence against AES described above. These include the threats or acts of intimidation. The evidence of specific assaults against public adjusters who refused to give fires to Smith, and his co-conspirators support an inference that assaults would also have been carried out on other companies that attempted to take away fires from the Enterprise.

RICO CONSPIRACY

The essence of a RICO conspiracy is the existence of an agreement to violate RICO’s substantive provisions. RICO conspiracy was established by proof of: (a) of an agreement to join a racketeering scheme, (b) of the defendant’s knowing engagement in the scheme with the intent that its overall goals be effectuated, and (c) that the scheme involved, or by agreement between any members of the conspiracy was intended to involve, two or more predicate acts of racketeering.

Predicate Acts of Extortion.  The Court concluded that the Government proved beyond a reasonable doubt that Smith and other members of the Enterprise agreed to, and in fact did, commit predicate acts of Hobbs Act extortion on numerous occasions during the specified period as part of a larger pattern of racketeering activity.

Predicate Act – Mail & Wire Fraud. The Government proved beyond a reasonable doubt that members of the Enterprise conspired to, and in fact committed, mail and wire fraud by submitting, or assisting others to submit, false and fraudulent insurance claims on a continuing basis during the specified period. In short, Smith is independently guilty of the RICO conspiracy because of the conspirators’ agreement to commit a pattern of mail and wire fraud, as clearly evidenced by their continuing engagement in that fraud.

VERDICT

For the reasons set forth above, the Court finds the defendant guilty of Count One and Count Two charged in the Indictment in the above-captioned case.

ZALMA OPINION

Insurance fraud is a violent crime when infiltrated and conducted by members of a violent street gang like Smith and the Bloods gang. They took over the fire reconstruction industry in New York by assaulting, threatening, and controlling public insurance adjusters and fire reconstruction contractors all in an effort to defraud insurers and victims of fire (whether accidental or intentional) and profit from organized crime efforts. The federal investigators and prosecutors have acted to protect the public and their insurers from criminal conduct and forced normally honest people into either joining in the criminal scheme or give up their business.