Regulator imposes hefty penalties in auto repair fraud case
Ontario’s financial services regulator has fined an auto body shop $75,000 and one of its employees at the time $15,000 in connection with fraudulent business practices.
The Financial Services Regulatory Authority of Ontario (FSRA) imposed a compliance order and administrative penalties of $75,000 against 1843538 Ontario Inc., carrying on business as McLaren Collision, and $15,000 against Fady Rony Warda.
FSRA issued the orders on Thursday as a result of a settlement with McLaren and Warda.
The compliance order prohibits both parties from engaging in the business of insurance, FSRA said in a press release. “They are not allowed to perform work that is reasonably expected to be paid by an insurer or hold themselves out as being able to perform such work. These restrictions apply to McLaren permanently and to Warda for three months.”
McLaren charged an insurer for repairs to vehicles that were not done and for parts that were not replaced, FSRA said in the release. Warda damaged a vehicle taken to McLaren for repair, which allowed McLaren to increase the amount it charged the insurer for repairs and facilitated overcharging.
These are deemed unfair or deceptive acts or practices under the Insurance Act. “Autobody shops can only charge insurers for work that is needed and performed,” said FSRA’s director of litigation and enforcement, Elissa Sinha. “FSRA will not tolerate this conduct.”
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In 2017, Aviva Canada conducted an investigation into possible fraudulent activity in the auto repair industry, nicknamed Project Bumper. The insurer arranged to have two motor vehicles, a 2010 Ford Fusion and a 2016 Chrysler 200, damaged in a way that simulated a collision. The vehicles were equipped with hidden video cameras and driven by private investigators retained by Aviva to pre-arranged locations to stage collisions. After the collisions, the vehicles were towed for repairs.
“The camera in the Ford Fusion recorded Fady Warda repeatedly striking the area of the right front fender with an object,” FSRA said in the minutes of the settlement. “The camera also recorded Fady Warda twice striking the right side of the vehicle’s raised hood with a large object.”
The damage was appraised at more than $4,880 but a third-party appraiser found the actual work completed was about half the cost — nearly $2,400.
Initially, Warda and other parties disputed the allegations and requested hearings before the Financial Services Tribunal. But in the settlement document, FSRA said both Warda and McLaren admitted to the agreed facts in the minutes, some of which were detailed above.
“McLaren charged Aviva, and was paid by Aviva, for certain repairs not done to either the Ford Fusion or the Chrysler 200 and for damages done to both of the vehicles while they were at McLaren,” the minutes read. “Fady Warda admits and acknowledges that he caused additional damage to the Ford Fusion, thus facilitating McLaren’s overcharging for services.”
Michael Wetzel, an Aviva staff appraiser (who was not aware of Aviva’s sting operation) appraised both vehicles. In the case of the Chrysler 200, Wetzel appraised the damage at more than $9,800, but the third-party appraiser found the work completed to be valued at about $2,330.
Wetzel did not request a hearing and, in November 2020, was issued a $50,000 administrative penalty and an order to cease and desist from engaging in the business of insurance for six months.
Proceedings are ongoing before the Financial Services Tribunal regarding Rony Amanuel Warda, another McLaren employee at the time of Aviva’s 2017 investigation.
Feature image by iStock.com/patrickheagney
