Thursday, May 29, 2014

Criminal Coffee

It has been said that "truth is stranger than fiction." Two people have been recently convicted of fraud for their receipt of disability benefits, while running a business named "Criminal Coffee."

Last February, we saw reports of a "massive Social Security disability scheme." The Manhattan District Attorney's Office rounded up over 100 people on charges of taxpayer fraud. The allegations are that "ringleaders" of the plot "coached" people on how to obtain Social Security benefits for disability. 

In May, almost 90 people were arrested, accused of scheming to defraud Medicare. They allegedly billed for treatments that were either medically unnecessary or not provided. The defendants include doctors and nurses. They allegedly paid patients cash in exchange for information that facilitated billing for these fraudulent services.  


Senator Bill Nelson, a former Florida insurance regulator and current U.S. Senator, introduced a bill recently to "Stop Schemes and Crimes Against Medicare and Seniors ("Stop SCAMS"). Does it really make a bill more effective to give it a catchy acronym? Senator Nelson was quoted in a Workcompcentral story saying "fraud continues to run rampant," claiming this to be especially true in "Florida, where South Florida remains ground zero for Medicare fraud."

But back to "Criminal Coffee." In May, ABC Newsreports that Ramona Hayes and Cory Eglash have been convicted in relation to their work for Criminal Coffee. Egash was convicted of conspiracy to defraud the U.S. and mail fraud, but is appealing. Hayes is serving 12 months in federal prison after pleading guilty to mail fraud. The two ran a coffee shop called "criminal coffee," and were documented engaging in activities that were inconsistent with their claims of disability. 

The story says that Social Security pays about $175 billion in disability annually. They received about 72,000 fraud allegation claims last year. The Washington-based team that investigated Egash and Hayes works ten to twelve fraud cases per week.

The news is full of similar stories involving workers' compensation. Fraud is out there, some people do not make wise choices. Some fraud involves people inappropriately receiving benefits, but that is not the extent of the problem. There are a variety of ways for people to act poorly. 


The following have been accused, not convicted. There is the parks department worker whose symptoms prevented her from working. She is accused of being a singer and drummer in a band while disabled. The state is seeking prison time and restitution of over $350,000. There is the garbage collector who was arrested for seeking workers compensation benefits days after competing in a Jiu Jitsu competition. Not necessarily a problem on its face, but he denied participating in that competition, in a deposition. There is the police officer accused of fraud for "exaggerating the extent of his injuries." The examples of allegations are not hard to find.


One blogger concluded recently that "the media likes to profile the cases involving workers." This author is not identified by name on the blog. The author believes that worker fraud receives the most media attention because workers "are the easiest players to prosecute." The blog asserts that injured workers account for a very small percentage of the money lost to fraud, claiming that "employee fraud amounts to less than 2% of total WC fraud." In a series of posts, the blogger discusses other serious examples of fraud in the system, including doctors accused of billing for services never performed, unnecessary prescriptions and tests, and the recently publicized referral "fraud scheme" involving the Pacific Hospital in California.

Recently, there was a story about a psychologist sentenced to three years in prison and ordered to pay restitution of $1.8 million. He billed for "services not provided or he exaggerated the amount of therapy that was done. In one case, billing for care provided seven days a week. 

A Pensacola, Florida chiropractor was sentenced to six years in prison. He was convicted of racketeering and grand theft for "advising patients to exaggerate their injuries." He was caught when a patient complained, and authorities corroborated the allegations through "subsequent interviews with more of" his patients.

In May, the Washington State Department of Labor and Industries reported that two interpreters there had been convicted of fraud. They padded their mileage costs for trips they made to provide services when injured workers visited physicians. There were days that they claimed to have driven 500 to 800 miles in a day providing these services. 

Injured workers and service providers are not the only ones accused. Last December, a contractor in California was sentenced to six years in prison. He was ordered to pay over $4 million in restitution. He failed to pay proper workers' compensation premiums. He made misrepresentations to insurance carriers in obtaining coverage, and concealed his business' claims history.

Recently, the Monterey, California District Attorney reported another contractor conviction. This employer should have been a registered contractor, but simply neglected to have a license or to procure workers' compensation coverage at all.    


In an even more ambitious scheme, a Virginia man recently was sentenced for fraud in which he created fictitious businesses, impersonated the owner of each, obtained workers' compensation coverage for each, and then filed false claims on behalf of the fictitious employees of the fictitious employers to obtain workers' compensation benefits. He is to pay restitution of about $325,000 and will go to jail for 12 years. 

In February, an insurance broker was charged with stealing about $4 million from a business in an "insurance scam." This story includes allegations of bribery, kickbacks, and interesting accounting, involving the broker and an employee of an indian tribe that purchased coverage. The broker and accountant were convicted in May. One defense counsel said "the prosecution seems bothered by the profits made, and they are trying to equate profits to theft." He continued "the tribe (the insured) might have been overcharged, but is that stealing?" Another said his client "never committed a crime, and the prosecution's case boiled down to a misunderstanding of complex financial arrangements."

So, it seems, there are a variety of people who make poor choices. The Monterey DA's website prominently proclaims "workers' compensation fraud is a crime," and then describes categories including "uninsured employers," "applicant fraud," "employer fraud," "premium fraud" and "provider fraud." It is a concise and informative overview of the various fraud perspectives. Fraud indeed comes in many forms, and is committed to gain a few dollars in additional benefits or to gain millions in payments or savings.

Some will get caught, others will not. Some will pay restitution and some will go to jail. Some choices result in minimal gain, others are more significant. As I consider these examples, and others that seem to permeate the daily workers' compensation news wires, I wonder whether fraud is more prevalent today than it was 30 years ago. Back then news of a fraud prosecution was rare, and I often heard the lament that prosecutions were too few and far between. Has the news coverage just improved, that is we are just more aware today, or are the actual poor choices becoming more prevalent?


I also wonder if Senator Nelson and his co-sponsors will accomplish any headway stopping "SCAMS." Do we really need more laws on the books to define and prohibit these various scams and schemes? The team that worked the Criminal Coffee investigation is working 10-12 fraud cases per week under the current laws. They say there were 72,000 complaints of fraud last year under existing law. Perhaps what is needed is more investigators, higher financial penalties, greater incentives for whistle blowers, or some combination of these?

In the event you just cannot resist doing it, perhaps you might name your coffee shop "Innocent Coffee," just to throw off the pursuit? 

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