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Jewelry Heist Ends in Insurance Fraud, According to Commerce Department

July 26, 2012

For Immediate Release  

ST. PAUL, MN – Formal charges have been filed in Kandiyohi County District Court on allegations that Spicer resident Todd Patrick Paffrath committed felony insurance fraud when a ring was stolen from his Willmar jewelry store last December. According to a formal investigation conducted by the Minnesota Department of Commerce’s Insurance Fraud Unit, Paffrath allegedly submitted an insurance claim after the diamond ring was stolen under a false appraisal for $10,000 more than the ring’s actual value. 

“In this case, the formal charges allege that one theft led to another – in the form of insurance fraud,” said Commerce Commissioner Mike Rothman, whose Department conducts criminal investigations of insurance fraud cases in the State of Minnesota. “Insurance fraud is a serious crime, and it will not be tolerated in Minnesota.”

Federal Mutual Insurance Company, also known as Federated Insurance, alerted the Department’s Insurance Fraud Unit of potential misconduct by Mr. Paffrath in February of this year. Law enforcement officers at the Commerce Department immediately began a formal investigation collecting evidence to determine the merit of the allegations against Paffrath. In cooperation with the Willmar Police Department, the Commerce Department’s Insurance Fraud Unit determined the following allegations:
  • On November 30, 2011, Paffrath informed Federated Insurance that a men’s diamond ring was stolen from Paffrath & Sons Jewelers located in the Kandi Mall; Paffrath did not report the theft to local law enforcement officials 

  • Paffrath advised the Federated Insurance claims adjuster that the ring was valued at $15,728 

  • A payment for the insurance claim was issued to Paffrath & Sons Jewelers in the amount of $15,528 for the loss of the diamond ring (less the deductible) 

  • Using the Automated Pawn System (APS), the Willmar Police Department located the stolen ring at a Pawn America store in Fridley, Minnesota which led to the arrest of Thomas Scott Wright who was formally charged for the theft 

  • After the ring was recovered, Paffrath returned the insurance claim award in total to Federated Insurance 

  • The ring’s worth was then re-evaluated by Federated Insurance and the new appraisal from an independent source determined the ring was in fact valued at $4,610 

  • There were noted differences between what was submitted by Paffrath to Federated Insurance and what the independent appraisal reported; specifically, the Carat weight value and the cut of the diamond 

  • The total Carat weight reported by Todd Paffrath was 2.08; in the appraisal report, the Carat weight is reported as 1.43
Based on these allegations and evidence, Todd Pafrath has been charged with felony insurance fraud and may face up to ten years in prison and a fine of up to $20,000. Paffrath will appear in Kandiyohi County District Court on August 15.

Commissioner Mike Rothman cautions all Minnesotans that insurance fraud is a crime with serious criminal consequences. According to the National Insurance Crime Bureau, insurance fraud is the most costly white collar crime in the United States, behind tax evasion.

“Many people who commit insurance fraud see it as a victimless crime,” said Rothman. “But the truth is that insurance fraud steals from the wallets of every Minnesotan in the form of higher premiums. Our insurance fraud unit works every day to stop insurance fraud in its tracks. But one of the best ways to prevent insurance fraud is to educate Minnesotans about the criminal consequences of cheating the system.”

More information about insurance fraud in Minnesota can be found on the Minnesota Department of Commerce website.