Forensics

Businesses Set Up to Burn

Introduction

There is a genre of fires in Asia involving businesses set up to burn. By 'set up' is meant factories or warehouses that are built and operated from the outset for the express purpose of insurance fraud. Naturally, these fires are always deliberate. Potemkin factories or warehouses are built or established and then operated for a period of time, varying from weeks to months. There are factories that produce for six months and nothing is ever sold, and warehouses where the flow of material is always in, never out. With this type of claim, the fraud usually encompasses the machinery, stock and other contents.

Forensic Fire Investigation Methodology

atlas map

The red dots show the approximate locations of the 17 business of the type described in this paper.

There is no substitute for conventional fire investigation and with many of these fires, evidence like multiple seats of fire and/or the presence of an accelerant are found, though some are more distinctive than others. However when conventional evidence is less than convincing, an alternative approach may be taken that is based on proving fraud rather than arson. To this end we collect scientific and engineering evidence that can be presented in a court of law. In doing so, we complement rather than replace the normal investigations carried out by adjusters, forensic accountants and valuers.

Features

Factory or Warehouse Operation

A factory can be likened to a complex machine, for which every part must work for goods to be produced. Factories set up to burn might superficially resemble a legitimate factory, even to the extent of deceiving an insurance inspector when the factory is visited at the time of surveying the risk. Insurance risk surveyors are often welcomed or even invited with the calculated purpose of legitimizing the factory with their inspections. These establishments will rarely pass close scrutiny and the skill of good investigation is to convert initial misgivings to hard facts that can be presented in a court of law. The following are some of the key areas of factory/warehouse operations to consider.

Space

The relative proportions occupied by raw material, work-in-progress and finished goods.

Capacity

The claimed throughput vis-à-vis the machinery capacity.

Ancillary

The utility installations, consumption, and necessary maintenance, administration and quality control sections.

Workers

Correlation between machines and workers.

Machinery

Feature of machines in this category of fire are :

  • Old and obsolete.
  • Poorly maintained.
  • Broken and incomplete.
  • Not electrically connected or without motors.
  • Incompatible with each other or the quality of goods.

Stock

The stock may be exaggerated in terms of quantity or quality or both. The features of the stock that would give rise to suspicion are :

  • Quantity claimed does not fit into the space available.
  • Burnt remains incommensurate with quantity claimed.
  • Stock could not have burnt in the time available.
  • Condition of building inconsistent with the expected heat output of the quantity of stock claimed to have burnt.

Juxtaposition of Machinery and Stock

stock machinery

Photographs showing a warehouse before and after a fire. The partial collapse was incompatible with the claimed 1,400 tonnes of plastic feed stock, photographed days before the fire. The stock had obviously been removed by the time of the fire.

Many processes do not have enough work-in-progress to cause significant damage to the machinery. Examples are rubber glove and paper making. Consequently it can be found that stock is placed around or even inside machines to an extent they could not have worked. This stock may be scrap material from the industry, packaging material, or even scraps unrelated to either the raw material or finished product of the factory. The investigator should have an appreciation of the quantity of work-in-progress expected for an industrial process.

Courtcases

Some of the results of our investigation into Potemkin factories have been presented in courts where the judgements have been for insurers.


Other Links For Forensic Service - Fire & Explosion Category

Business Set Up to Burn | Self Heating of Farm Produce | Hot Work Accidents | Chinese Altars | Textile Fires | GC Analysis | On-Board Marine Investigations | Pre-Fire Photographs | Furniture Fires in Malaysia | Medium Density Board Factory Fires