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The Federal Bureau of Investigation and local law enforcement agencies increasingly are approaching insurers to contribute money and other resources needed to bust crime rings.

Cash, in both large and small amounts, often is needed by undercover agents to buy stolen goods from thieves, or at least show them that the purchasers have the money to make a buy.

But budget constraints can mean that law enforcement agencies don't have the needed cash.

Insurers often are willing to supply the money because it can help them retrieve stolen goods for significantly less than it costs to replace the merchandise. And, it can help insurers forge a relationship with police that can later prove valuable in efforts to recover stolen property.

It's a win-win case for the insurers and the law enforcers, says Robert F. DeBellis, a special agent of the FBI in Newark, N.J., who regularly works with insurers to recover stolen goods.

"If you have a claim of $500,000 and you can buy it back for a third of that, then it's an easy decision to make," Mr. DeBellis said.

In addition, the FBI gets more evidence against "the bad guys," he said.

And policyholders benefit as fewer claims can lead to lower premiums and the publicity on the sting operations can deter criminals from future thefts, said Donald Siegrist, home office fraud manager at Chubb Corp. in Warren, N.J.

"When word gets around that sting operations are in effect, it lessens the chance of hijackings happening," he said.

Chubb is one insurer that has taken advantage of the ability to redeem stolen goods at a knock-down price by funding a sting.

In 1993, a hijacker stole from a Chubb policyholder in San Diego a trailer full of clothes imported from the Far East worth about $100,000.

The California State Police officers working undercover were offered the clothes for about $30,000. The police wanted to buy the clothes to obtain more evidence against the criminal organization they had infiltrated and approached Chubb to fund the sting, Mr. Siegrist said.

Chubb decided in less than 48 hours to fund the sting.

"We got the clothes back and they got some more evidence," Mr. Siegrist said.

Chubb is seldom is approached to fund the stings but, when it is, the insurer likes to get involved, he said.

"The frequency is few and far between, but we have let the police know that we are amenable to it and that we would like to participate," Mr. Siegrist said.

The FBI also needs outside funding because its budget for stings also is limited, hampering its ability to collect the most evidence possible, Mr. DeBellis said.

In Newark, the FBI has a budget of around $55,000 every six months to buy stolen property in sting operations, but that can easily be spent in one or two stings, said Mr. DeBellis.

"If you buy two loads of VCRs at $30,000 a load, you've used up your whole budget," he said.

To obtain this "third-party funding," the FBI turns to trucking companies that are key targets of thieves and their insurers, Mr. DeBellis said.

The insurers normally are told that a stolen load is being offered for sale to FBI agents working undercover. The insurers then have, at most, two to three days to decide whether to fund the sting and come up with the cash to buy the stolen goods, he said.

The insurers benefit by retrieving merchandise they insured at a heavily discounted price, Mr. DeBellis said.

"You might have a load worth $100,000 or $200,000 and you buy it back for about a third of that value," he said.

The FBI runs sting operations sometimes for more than a year and typically several transactions are made to ensure that the bureau has sufficient evidence to make as many arrests as possible, Mr. DeBellis said.

"If we have a couple of loads and we buy one but we can't get third-party funding for the second one, we don't lose out, but it's better if we can get the second load, too," he said.

When more loads of stolen cargo are bought, it also helps increase the stature of the agents working undercover within the crime networks. In Newark, the FBI currently has about 10 agents working undercover, Mr. DeBellis said.

The FBI will usually keep about $100 worth of merchandise for evidence and return the remainder to the insurer, he said.

"We'll work to get the loads back to the trucking company or its insurers as soon as possible. That's especially true for loads of clothing because they don't want to get it back after the clothes have gone out of style," Mr. DeBellis said.

Other insurers that have supplied money to fund stings include CIGNA Corp. In 1993, the insurer paid out a $2 million claim for stolen computer equipment and then funded a $100,000 sting operation through which local law enforcement officers recovered the goods (BI, June 13, 1994).

It doesn't always take large amounts of money to help the police, and insurers can get their money back. Insurers can help police make arrests by, for example, supplying "show money" to lure thieves into stings.

Kemper Insurance Cos., for example, paid a claim from a New York policyholder for 980 tires stolen from an enclosed lot. The value of the tires was $84,194 and the deductible on the policy was $25,000.

About a year later, Kemper had the opportunity to get the tires back, said Charles E. Blossfield, manager of the special investigations unit at Kemper.

"We got a telephone call from the New York police saying that they were aware of the fact that the tires were intact and for sale. They said they needed $60,000 to draw the thieves out," he said.

Kemper agreed to supply the funds, which were used as show money in the sting, Mr. Blossfield said.

"They arrested six people, who were all convicted, and they recovered all but 10 of the tires," he said.

The $60,000 was returned to Kemper and the insurer subsequently recouped $52,109 from the sale of the tires, Mr. Blossfield said.

In other cases, insurers supply police with money to help purchase surveillance and radio equipment to help them in their operations, said Tom Christo, nationwide claims manager at Fireman's Fund Insurance Cos. in Novato, Calif.

The money may be contributed on an annual basis or in response to individual operations as a reward for recovering goods stolen from policyholders.

For example, last year a $50,000 shipment of men's jeans was stolen from a warehouse in Monterey, Calif. The police discovered the jeans in a raid in New York a few months later, Mr. Christo said.

While the police were able to recover the goods using their own resources, Fireman's Fund paid $5,500 to a police fund used to buy extra equipment, he said.

"Although the police can't show any favoritism, we wanted to do something that would help them know who we are when we contact them," Mr. Christo said.

Payments to set up sting operations can also help improve relations between insurers and police, said Jack Ford, assistant vp of special investigations at Reliance National Insurance Co., who works with police authorities to recover policyholders stolen property.

For example, Reliance National gave New York police $5,000 to set up a sting operation buying stolen cars in the New York borough of Queens, he said.

The police used the money, along with donations from other insurers, to rent a garage and buy video cameras to set up the sting, Mr. Ford said.

Over the course of several days the police made 18 arrests and recovered 61 stolen cars.

As Reliance National only writes commercial auto insurance, there was little chance it would recover vehicles owned by its policyholders, but it was still a good investment for the insurer, Mr. Ford said.

"The benefit is the relationship you form with the law enforcement community. I need contacts within the police to help me do my job, and when you do something like this you facilitate that," he said.

Insurers can also help law enforcement authorities by supplying equipment to carry out undercover work.

For example, in 1995 Chubb provided the Connecticut State Police with a 1992 BMWf to help the police set up an operation to expose an auto theft organization, Mr. Siegrist said.

"They infiltrated an auto theft ring and used the car to go in and sell it to the people involved," he said.

Operation Beacon ran for 18 months, during which the police recovered 66 stolen cars and made 40 arrests, Mr. Siegrist said.

Chubb also benefited from the operation, he said.

"It helps us develop a good relationship with local law enforcement and it helps reduce the number of claims," Mr. Siegrist said.

And the publicity surrounding the successful sting operations acts as a deterrent to would-be car thieves, he said.

In another case, Chubb gave a damaged car to FBI agents operating in Westchester County, N.Y. The agents used the car to build evidence against body shops that were padding bills.

In one case, a body shop operator charged an extra $1,300 for repairs that were not necessary. He was later arrested and given a 10-month sentence, Mr. Siegrist said.