CHARLESTON, S.C. - South Carolina's poor record of enforcing its laws against insurance fraud could make the state a magnet for scammers and result in higher premiums for residents, some legal experts and state officials say.

Some state legislators blame the state attorney general's office for lax prosecution, but agency officials say budget cuts have made it difficult to enforce the state's fraud laws.

"There is a dismal track record of prosecuting many of these cases at the state level in South Carolina," said Lynn Szymoniak, a lawyer who specializes in fighting fraud for the insurance industry in Florida and South Carolina. "The ones who have been successfully prosecuting these cases are the feds."

Insurance fraud can range from a person underreporting the number of miles he drives in his car to save a few bucks to more complex schemes such as businesses misclassifying workers to avoid paying high premiums required for more dangerous jobs.

Last year, 844 fraud complaints were sent to the attorney general's office, totaling about $3.7 million in reported losses. That's up 61 percent from 524 complaints in 1999.

A total of 354 of last year's complaints were investigated for criminal activity. Officials say that's far too many for a small staff of prosecutors and investigators to adequately fight insurance fraud, which each year can cost consumers as much as $80 billion nationally.

The attorney general's fraud division, created in 1994, relies on a budget of about $300,000 that covers the cost of two State Law Enforcement Division agents, one prosecutor and one assistant.

"If you were picking a state to run scams from, why wouldn't you pick South Carolina?" Szymoniak said. "If the penalties aren't tough enough, the prosecutors and law enforcement agents are understaffed, then that is the state you'll go to."

Five years ago, the attorney general's office operated on a budget of about $10 million, agency officials said. In recent few years, that budget has been cut by about 33 percent, down to around $6 million, officials said.

With shrinking coffers, the agency cut all nonessential travel and closed its satellite offices in Charleston and Greenville, where most of the insurance fraud cases were handled. The insurance fraud division, which has once had as many as 10 prosecutors and 10 SLED agents, was whittled down to its current size.

"There are not enough cops and prosecutors to keep up with the criminals. That is a never-ending story," said agency spokesman Trey Walker.

Some state lawmakers and industry officials say even when the agency was fully staffed, insurance fraud was not a high enough priority.

Numbers produced by the attorney general's office show that about $4 million has been paid through penalties and fines for insurance fraud crimes, just a smidgen of the $50 million in fraud reported since the unit was formed. Last year, the 91 cases that resulted in criminal convictions and civil fines resulted in $328,069, which is little more than the division's $301,247 budget.

The growing dilemma last year led a group of nearly a dozen state lawmakers to introduce legislation that would have toughened penalties, created a civil enforcement unit under the state Department of Insurance and assessed insurance carriers to pay for more agents. The bill, which died in committee, is expected to be reintroduced when the Legislature reconvenes in January.

"We have to make it a higher priority," said state Rep. Daniel L. Tripp, R-Mauldin. "As other states crack down on fraud rings and networks, the criminals are going to move into a state like South Carolina. We neglect this issue in our peril."

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Information from: The Post and Courier, http://www.charleston.net/