Broke homeowners linked to arsons

He says anger is another motive. "These people are so upset. They got tricked into getting these mortgages, and they never could afford them."

"If I can't have this house, no one will," one informant reported hearing a homeowner say before a suspicious house fire.

Brisco tells of a couple of evicted homeowners who are suspected of breaking into their foreclosed home before the new owners could move in, spraying the interior with angry graffiti before setting it on fire.

The insurance-industry-funded Coalition Against Insurance Fraud sees reports like these as cause for alarm: "Are insurers ready for the potential increase in arsons? Are fire investigators on alert?" Executive Director Dennis Jay asked in his blog.

But Jeff McCollum, a spokesman for State Farm Insurance in Bloomington, Ill., says there's no evidence. "We checked with our investigative guys; they said no," McCollum says. "They did a pretty comprehensive look at it; it's still no. It's maybe one that the coppers and the investigative guys, maybe it's just fun for them to talk about it."

His latest data -- through September -- show that insurance claims for "suspicious" or "undetermined" fires are down, McCollum says. Such claims are up slightly, though, in New York and in California, which is hard-hit by foreclosures. Florida, also rocked by foreclosures, has seen a slight increase in suspicious claims, "but nothing we would call significant."

Mild-mannered arsonists

Frank Scafidi, a spokesman for the National Insurance Crime Bureau, sees no evidence of a trend, either. His nonprofit agency helps 1,000 or so member companies, property and casualty insurers, with investigations and analysis into all types of insurance fraud.

Even with all the unemployment and foreclosures in Michigan and Ohio, the most recent statistics show that fires decreased in those states between 2006 and 2007.

But statistics, if there are any, will be slow to surface because insurance companies pay claims first and investigate later, he says. Arson cases are difficult and time-consuming to build. Any current cases will lumber along in the investigation pipeline, invisible until charges can be made and prosecutions begun.

Many observers say there's no question that people commit arson under economic stress. "Traditionally, there will be some acts of fraud that are driven by the economic conditions, no question about it," Scafidi says. A slice of the normally law-abiding population -- in every economic stratum -- will seize on arson as a solution under the right set of pressures, he says.

For example, auto repossessions are rising, and so are cases of auto arsons. Weydert, the Stockton attorney, prosecuted a young man who drove his new Nissan extended-cab pickup into a canal and collected on insurance after he realized he couldn't make the payments.

Two Baylor University researchers believe they know precisely what those pressures are. Allen Seward, an associate professor of insurance and finance, and Steve Green, an associate professor of economics, studied residential arson in 30 U.S. cities between 1994 and 2002. (See a .pdf file of their study, "The economics of residential arson.")

They concluded would-be arsonists need more than just falling prices to nudge them into crime. Prices have to fall far enough to depress a home's price below the value of its mortgage, Seward says. In those cases -- present in a number of American cities now -- the small fraction of people who'd consider arson have a stronger incentive, the Baylor team found.

Arsonville

Scafidi says opportunity alone can sometimes push otherwise average people to action. Some homeowners, he says, seized the chance when Hurricane Katrina hit the Gulf Coast.

"There were arsons in the middle of a flooded city, if you can believe it," Scafidi says. "But the industry, as you can understand, was reluctant to call attention to it. We were more focused on dealing with people who were displaced."

In Detroit, "we are finding there have been a lot of greedy people, mortgaged to the hilt," says Varnas, the fire captain. Under financial pressure, they act to make certain that "I got my money." Varnas calls these payday crimes. Renters commit them, too, to collect on renters insurance.

Detroit's swaths of blighted neighborhoods with empty homes are a target for arson -- for squatters living in them, for frustrated property managers trying to force out squatters or for owners who are desperate to get at their equity when they can't sell, Varnas says.

Other cities are now also inheriting a plague of vacant homes from foreclosures. Even banks and mortgage companies are walking away from homes they've foreclosed on, forcing cities such as Buffalo and Cleveland into court to try to force them to maintain their foreclosed houses.

Making the case

These days, the Detroit Fire Department's arson tip line rings steadily with anonymous callers who want to rat out friends, neighbors and relatives. Their tales, even discounting some for dubious motives, give investigators a window into arsonists' desperate and sometimes clumsy motives and methods.

"We've got neighbors turning in other neighbors," Varnas says. One woman left a message on the tip line saying that a neighbor had offered her a chance to make some money. She declined, she said, and shortly afterward the neighbor's home caught fire.

It's not simple for investigators to make criminal cases from such anonymous tips. But emotionalism and impulsiveness sometimes make amateurs easier to catch. Sloppy arsonists dribble a detectable trail of accelerant from one room to the next with no evidence of a forced entry. Some neglect all their bills except the insurance payments. Other red flags: removing furniture and belongings in the days or weeks before a fire, or a history of insurance claims.

Stressed homeowners who intentionally leave a pot with oil on the stove or deliberately provoke an electrical fire may assume that their intent will be impossible to prove. But arson investigators are becoming increasingly focused and sophisticated. The Insurance Services Organization manages a database used to compile and cross-reference information about all insurance claims. Investigators use it to spot repeat claimants and those who collect multiple payments by insuring the same property with several different companies.

"A lot of people don't realize the extent to which insurance companies investigate these," says Brisco. Arsonists who think, "'Oh, yeah, insurance companies will just pay out this money -- they won't conduct any investigation,' are in for a surprise."

Updated Dec. 10, 2008

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