At the center of the scandal is Philadelphia Police Officer Gary Cottrell, a 15-year police veteran.
Police say the 44-year-old officer acted as a "wreck chaser" for University Collision Centers. UCC, with locations in Gray's Ferry and Manayunk, was allegedly enhancing and creating damage to vehicles brought in for repair so they could in inflate the value of damage claims.
Investigators say Cottrell, who was arrested Tuesday morning at his home, used his position to direct accident victims to UCC and would then get kickbacks based on a percentage of the ultimate insurance settlement
"It's a sad day when a police officer is arrested, but I think it sends the right statement that we have to police ourselves," Philadelphia District Attorney Seth Williams said.
Seven damage appraisers from various insurance companies are also charged in this case.
There was no comment from University Collision Center or its owner Ed Hildebrandt.
Hildebrandt's lawyer Michael Wolf, meanwhile, also faces charges for allegedly advising him on how to work this scam.
Police used an undercover officer and electronic surveillance to gather evidence. It was a State Farm employee who tipped the D.A. in the beginning and turned informant.
"What they were doing ranged from taking cars with no damage at all and damaging them to taking cars that had been in legitimate accidents and increasing the damage," Assistant District Attorney David Augenbraun said.
The D.A. says the rip off by UCC will total in millions of dollars.
Williams also says no one is immune from prosecution when caught doing wrong including Philadelphia cops.
"It's very sad, but like the D.A. said, it's important to note, we police ourselves, we take this very seriously," Deputy Commissioner Richard Ross said.
Those arrested are facing charges ranging from bribery to participating in a corrupt organization.
The scam has been traced back at least five years.
UCC will be allowed to stay open to help pay restitution.