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Allegheny County’s Fraud Fighting Tactics ‘Reek of Corruption,’ DA Candidate Says

Harry Schmidt of McKeesport, Shanna Shackelford of Carrollton, Ga., and Joe Radcliff of New Smyrna Beach, Fla., were all charged with crimes by their insurance carriers, a BuzzFeed News investigation found.

The Allegheny County District Attorney’s Office reportedly pursues more insurance fraud cases than any other agency in the state. An investigation by BuzzFeed News found that the office gets evidence and money from insurance companies to handle claims filed by customers.

Last year, for example, the DA’s office received more than $700,000 in industry-funded grants, according to BuzzFeed. The money helps to pay for a prosecutor and police officers who work exclusively on insurance fraud cases.

In a statement, a spokesman for District Attorney Stephen Zappala said the partnership “not only helps to hold people who abuse the insurance system accountable, but also serves as a deterrent to others contemplating similar behavior.”

Independent District Attorney candidate Lisa Middleman, however, criticized the arrangement, saying it "reeks of corruption” and prevents law enforcement from conducting independent investigations into suspected fraud. Middleman is set to challenge Zappala in the November election.

“What we have right now is the district attorney’s office being bought by the insurance companies,” Middleman said.

“You wouldn’t want Giant Eagle to be able to buy their own prosecutor to prosecute people for shoplifting from Giant Eagle,” Middleman continued. “I think that what the insurance companies are doing is very similar. They’re buying their own district attorney so that the district attorney is doing their collection work for them.”

Industry groups say fraudulent claims cost insurers billions of dollars a year, and that much of the cost is passed on to customers in the form of increased premiums, BuzzFeed reported Thursday.

But Middleman said the DA’s office does not need money from the industry.

“If there is truly insurance fraud going on, it is the responsibility of the district attorney’s office to investigate that,” Middleman said.

Middleman said, if elected in November, she would not accept money from insurance companies, and instead would devote resources elsewhere.

“When you are spending your time and your effort and your energy worried about a non-violent crime,” Middleman said, “you’re sacrificing … the effort that should be going into stopping violent crime.”

The BuzzFeed story highlighted the story of Harry Schmidt. The McKeesport resident was accused in 2010 of faking the theft of his pickup truck to file a false insurance claim. He faced seven years in prison and was forced to sell his possessions to cover his legal fees.

The case was based largely on the testimony of an expert who had been hired by Schmidt’s insurer and who had written the report the company had given to police, BuzzFeed reported.

A judge ultimately acquitted Schmidt due to shortcomings in the evidence, according to BuzzFeed.

Schmidt later sued his insurance provider, Erie Insurance, and the case settled for an undisclosed amount.

Reporter Kendall Taggart, who led the BuzzFeed investigation, said the relationship between the Allegheny County District Attorney’s Office and insurers is not unique. Speaking to 90.5 WESA’s The Confluence Friday, Taggart said an industry-funded group in Pennsylvania, called the Insurance Fraud Prevention Authority, pays the salaries of more than 100 prosecutors, investigators, and other staff who are dedicated exclusively to insurance fraud.

Taggart found 27 cases across the country where home and auto insurers contributed materially and financially to investigations that resulted in false accusations against customers.