5 July A Real Life “Better Call Saul” July 5, 2017By Jon Coss - Blog Manager General Disability, Fraud, Insurance Fraud 0 After one of the nuttier fraud busts in recent memory, the FBI is searching for former Kentucky attorney Eric Conn, who recently pled guilty to committing over $600 million in Disability Insurance fraud. For 10 years, Conn perpetrated his scheme by bribing a doctor and several judges to approve his clients’ disability claims. In all, he represented 1,700 of these claimants.After pleading guilty and securing his $1.25 million bail with the equity in his home, the appropriately named Conn simply cut off his GPS monitoring bracelet and skipped town. He unfortunately had to leave behind his mobile home law office including his replicas of the statue of Liberty and the Lincoln Memorial he kept out front.In his time as an attorney, he hired B-list celebrities for television commercials and described himself as “Superman without a cape” ... and without a conscience apparently. He even performed rap songs in English and Spanish, claiming that he learned Spanish off a tape.Two aspects of this case really bother me, outside of the crime itself of course. One is that Conn could commit such brazen fraud over a period of 10 years without being prosecuted. The other is that his bail was set low enough that he was easily able to take off.Both of these facts illustrate the struggles that many of our clients face when dealing with fraud. Until we, as a country, decide to provide more funds to quickly detect fraud and decide to impose more serious penalties to those who commit fraud, we’ll continue to read about these cases. For now, I can only hope that the FBI catches up with Conn before he is able to do more damage. Related Posts 36% of Lifeline Recipients Can’t be Validated Another federal subsidy program is garnering congressional attention for large amounts of fraud, waste, and abuse. This time it’s the Lifeline program that provides discounts to low-income households for home or wireless telephone and broadband service. This program, which many Americans have likely never heard of, distributed $1.5 billion in subsidies to 12.3 million households in 2016.The problem is that a recent study by the General Accounting Office (GAO) could not confirm the eligibility of a whopping 36% of program beneficiaries. The surprising part of this is that validating eligibility is as straightforward as checking an applicant’s enrollment form against a qualifying benefit program, such as Medicaid-- if someone has already been deemed eligible for Medicaid, then they are also eligible for Lifeline.It is also troubling to note that the 84-page GAO report comes after a 2010 study that found problems with the program and led to a number of recommended reforms in 2012. Fast forward five years to today, and the problems persist.Fraud in Lifeline stems from several factors common to most government programs: pressure to distribute timely benefits, a lack of effective data matching, and service providers (in this case telecommunications carriers) that benefit from a lack of control. The GAO actually called this last one out in their report when they explained that “companies may have financial incentives to enroll as many customers as possible” despite questionable eligibility.None of the problems outlined in the report are particularly difficult to solve from a technical standpoint. But turf battles often lead to data sharing problems that lead to eligibility validation issues. And an unwillingness to enforce fraud reforms on businesses provides them with incentives to simply “look the other way”. Multiply this problem over the 2,300 federal subsidy programs operating today, and this adds up to a lot of money, all lost due to fraudulent, wasteful behavior. Analytics are more than Numbers and Stats – It’s About People by Tammy Marple, VP - Special Investigations Unit During my time as a fraud analyst, I realized that my work was so much more than just numbers and statistics. I worked in State Government for many years and a few years ago, my manager asked me to conduct a study on Opioids. I lived that assignment for 18 months.After the Opioid study was completed, I traveled the state and shared what I had learned with our regulatory and law enforcement partners. That assignment really stuck with me. The overall impact of the Opioid epidemic on healthcare costs, society, and the family unit is devastating. It is a sad truth when we can say “everyone knows someone addicted to these types of drugs,” regardless of how they got there. An even worse reality is the impact on the family as a whole: newborn babies born addicted to drugs, children being raised by their grandparents or in foster care because the parents are either dead or in jail as a result of their addiction and drug diversion activities, and families living with the daily possibility of overdose.One of the most eye-opening documentaries regarding this epidemic was created by Vanguard and is titled “The OxyContin Express.” Although the video is many years old, the story it tells is still very real today and it is no longer just a Florida issue. I often suggest that our interns and new employees in Pondera’s Special Investigations Unit watch the video. It explains drug diversion schemes from drug seeking patients to the cash operations of those that prescribe the drugs, as well as the overall human element. It’s been years since I conducted the study on Opioids, and yet Opioid abuse is still on the rise and growing fast with the introduction of illicitly manufactured fentanyl.An in-depth analysis conducted in 2016 by the Centers for Disease Control and Prevention (CDC), stated that drug overdose deaths were spreading not only geographically but also across demographic groups. Listed below are some of the stats from the CDC analysis:• Drug overdoses killed 63,632 Americans in 2016.• Nearly two-thirds of these deaths (66%) involved a prescription or illicit opioid.• Overdose deaths increased in all categories of drugs examined for men and women, people ages 15 and older, all races and ethnicities, and across all levels of urbanization.• CDC’s new analysis confirms that recent increases in drug overdose deaths are driven by continued sharp increases in deaths involving synthetic opioids other than methadone, such as illicitly manufactured fentanyl (IMF).Pondera’s technology can identify these areas of risk in a variety of programs. This is the reason behind what we do to make a difference and potentially effect change for the better. Certainly, our goal is to detect fraud, waste, and abuse in government programs, but it really does come down to people. Sure, technology is always a cool thought when it comes to smart phones, cars that drive themselves, video games, and other advancements, but technology can also be used to detect certain behaviors within large data sets and identify highly suspect activities, patterns, or hot spots of concern. Pondera leverages technology to identify suspect activity and protect vulnerable populations within a program to make a significant difference, not only from a government budget point of view but also in the lives of our fellow citizens.Cited SourcesVan Zeller, Mariana. “The OxyContin Express.” YouTube, Current TV - Vanguard, 19 October 2009, https://www.youtube.com/watch?v=wGZEvXNqzkMResearchers for the Centers for Disease Control and Prevention (CDC). “U.S. Drug Overdose Deaths Continue to Rise; Increase Fueled by Synthetic Opioids.” www.cdc.gov, 29 March 2018, https://www.cdc.gov/media/releases/2018/p0329-drug-overdose-deaths.html Zapping Taxes (Illegally of Course) In their never-ending quest to circumvent the law, unscrupulous business owners are now adopting the use of so-called “zapper” software to avoid paying sales taxes. Zapper software automatically deletes a portion of cash sale transactions and then automatically reconciles the business’s back end finances to make it appear that the businesses paid the appropriate amount of taxes. This scheme reduces tax collections for governments and passes the burden to the vast majority of businesses who choose to act within the law.Thanks to a crackdown by federal and local officials, recent arrests include $1 million in unreported sales at Cesar’s Restaurant in Lakeview, IL (home of the “killer margarita”) and $800,0000 at the Lao Sze Chaun restaurant in Milford, CT. However, a simple Google search will reveal that almost no city is immune to the zappers.Zapper software is so popular that some businesses are now starting to offer it to their clients. In December, for example, a Canadian man pled guilty to selling zapper software to eight restaurants in the Seattle area leading to $3.5 million of taxes avoided. It is alleged that his company, which sells Point of Sale (POS) software, also sold the illegal zapper software through a subsidiary in China. After the sale of the software, they even offered to support their customers with their ongoing efforts to defraud the government.Zapper software, while somewhat novel, is just another attempt to apply technology to skirt the law. And while law enforcement training and targeted audits will surely help detect some of these modern-age fraudsters, analytics that use peer comparisons, spike indicators, and other statistically rigorous detection methods can also help detect the problem early. Like the old saying goes, it takes fire to fight fire. Does the Mylan EpiPen Settlement Send the Wrong Message to Fraudsters? The United States government and several states recently announced that they had settled a $465 million lawsuit against Mylan Inc., the maker of the EpiPen. The Department of Justice stated that Mylan had “knowingly” misidentified the EpiPens as generic to reduce the number of rebates it owed to state Medicaid programs. All drug manufacturers, including Mylan, must agree to the rebate program to be eligible to supply drugs through Medicaid.Those of you that follow these types of stories may recall that Mylan was accused of price gouging last year when they increased the price for a 2-pack of EpiPens to $600—a 400% increase over 6 years. In addition to the price gouging accusations, Mylan was also forced to settle a separate Medicaid billing complaint in 2009.EpiPens, for those of you unfamiliar with them, are self-injectable medical devices used to offset often life-threatening allergic reactions to bee stings, foods, and medications. As a parent of two EpiPen-carrying children, I can certainly attest to the importance of the device. I suppose that’s part of the reason Mylan felt comfortable increasing their prices so dramatically.What really bothers me about this case is the fact that the settlement represents only 134% of the total amount of damages incurred. This 34% “penalty”, on top of what was already owed, isn’t much of a deterrent against improper billings, as evidenced by the fact that Mylan has been busted twice in just eight years. Consider that this is a company with over $11 billion of revenue in 2016. Also consider that Mylan’s stock price increased 1% on the news of the settlement, no doubt reflecting the fact that investors expected a larger settlement. In my opinion, this settlement sends the wrong message to unscrupulous businesses. They may look at these numbers and figure that "intelligent cheating" could be quite profitable, encouraging them to simply write off lawsuits as a cost of doing business. This is despite the fact that they would be violating the federal False Claims Act which addresses contractors who defraud the government. Funding Donald Trump’s Child Care Program Donald Trump recently announced plans for a new child care and paid family leave plan. While I will not be offering any opinions on the plan or on Donald Trump as a candidate, I was interested to see that the announcement sparked discussion of government fraud, waste, and abuse. In this case, the discussion surrounds the Unemployment Insurance (UI) program because Mr. Trump claims that he will reduce fraud in UI by over a billion dollars each year to help pay for his proposed child care plan.Paymentaccuracy.gov, a government website devoted to providing information on payment inaccuracies, estimates a 10.7% improper payment rate in UI for 2016 resulting in $3.5 billion in erroneous payments. While a small amount of this actually represents underpayments, the majority of the $3.5 billion is waste. The trick, of course, is reducing fraud without delaying benefits to those who are eligible and without spending more money on improving the system than you actually save!This is where things get interesting. The White House Office of Management and Budget claims that UI program integrity improvements, over the next 10 years, would result in just $150 million a year in savings, or just over 4% of the $3.5 billion. The Congressional Budget Office’s estimates are even worse. They estimate annual savings of $40 million at a cost of $17 million per year, for a net gain of just $23 million per year!These dramatically different viewpoints between Mr. Trump and government regulators point out two problems when discussing government fraud, waste, and abuse. On the one hand, aspiring politicians and much of the public dramatically underestimate how difficult it can be to detect, investigate, and enforce fraud findings. On the other hand, many government agencies only report on the fraud they know about and estimate savings based on using traditional techniques against those unrealistically small numbers.Here’s what I can tell you from our experience working in Unemployment Insurance. By combining modern detection techniques with cooperation between states and the federal government, we could net far greater savings than are estimated today. Whether or not other facets of Mr. Trump's program are viable is up to you, the voter, to decide. However, I think we can all agree that there are better uses for those funds than making payments to fraudsters. How to Steal $80 million Five Cents at a Time Last week, in the realm of “are there any government programs fraudsters won’t steal from”, California officials announced charges against five people who were ripping off the state’s recycling program.Four defendants are accused of accepting recyclable cans from other states, faking the paperwork, and then billing the state for refunds on the 5- or 10-cent “deposits” that Californians pay when they buy beverages in the state. Of course, Californians can redeem the cans themselves, but I’m just guessing that not many do.Incredibly, the total amount of the containers added up to $80.3 million. And, even more incredibly, this is not an isolated case. In 2015, for example, a California jury indicted another group of fraudsters for trucking over 200 million bottles and cans into California to collect $14 million in refunds.A quick check of the California Attorney General’s website reveals that the state does indeed have a Recycle Fraud Program with the objective to “detect and stop existing fraud by organized criminal groups against the recycling fund and to deter future fraud through the successful prosecution of criminal activity.”In many ways, this simply serves as more proof that even the most well-intentioned programs are subject to fraud and criminal abuse. When even 10-cent transactions are targeted, it should concern everyone about what’s occurring in larger government programs. Comment (0) Comments are closed.