As the two most recent Reports to the Nations have indicated, data analytics is one of the most effective anti-fraud controls an organization can use. It’s worth noting, however, that data analytics are also incredibly effective at fraud detection as well. Organizations in all industries, including government, have been implementing analytics for years. According to the Department of Justice’s (DOJ) 2017 Year in Review, they are no different.Read More
FROM THE PRESIDENT
James D. Ratley, CFE
I've met many whistleblowers in my time, and what’s always resonated with me is that they persist despite nearly impossible odds. Dr. Sam Foote, a physician with a genius mind and audacious spirit, persisted when he found himself facing Goliath: the Phoenix Veterans Affairs (VA) Health Care System. When scandal rocked the department in Arizona, he didn’t back down.
In 2011, Foote penned his first letter to the VA Office of the Inspector General (OIG) to report waste, fraud and abuse by Gabriel Perez, then-director of the Phoenix VA. Foote had heard rumors that Perez’s mismanagement of funds had put the hospital $12 million in the hole. The national inspector general for the VA investigated the allegations that same year and Perez retired while inquiries were underway.
Any whistleblower would sigh with relief at this point: The OIG listened, the alleged fraudster was ousted, and now Foote and the hospital could move on. However, during Perez’s tenure, seven physicians left the hospital, and he never replaced them, which left the hospital with a provider shortage.
In 2012, Sharon Helman, who’d previously served as director of the VA hospital in Hines, Illinois, joined as head of the Phoenix VA and nearly a year later was reporting a decrease in patient wait times. But in the next year, Foote discovered secret patient wait lists. “In April of 2013, they [Helman and senior staff] made two lists: They made one electronic list that they would take on and off about 150 names that they actually reported to central office,” says Foote in Fraud Magazine's latest cover article. “Then they had another electronic list that did not report to central office.” Helman and the other administrators were claiming bonuses for decreased wait times — and patients were dying while waiting for care.
Foote again brought his concerns to the attention of the VA OIG, but this time he faced some resistance. He then sent letters to several government officials, including Sen. John McCain, R-Ariz. Eventually, the office of then House Rep. Jeff Miller, R-Fla., the chairman of the Committee on Veterans’ Affairs, responded. Miller put Foote in touch with a CNN producer, and on April 23, 2014, CNN broadcast an interview with Foote, and the story went viral.
Thanks to Foote’s tenacious efforts, further investigations would reveal that 293 veterans died while waiting for care. Multiple high-ranking officials, including Helman, have been placed on administrative leave or fired. And Foote continues to speak out as the VA saga continues.
At the 28th Annual ACFE Global Fraud Conference in Nashville, Tennessee, this past June, Foote received the 2017 Cliff Robertson Sentinel Award “for choosing truth over self.” He might have taken on Goliath, but just like the result of that epic battle, Foote is taking down the giant.
Dr. Richard Lyschik, DDS, CFE, FAGD
President of Practice Rescue
Dr. Richard Lyschik, DDS, CFE, FAGD, President of Practice Rescue, was in the health care industry for many years before he added fraud prevention and detection to his skillset. While providing management consultation to many practices, he observed a variety of fraud schemes and was disheartened at how many medical professionals were hesitant to do anything about it. He warns that perpetrators in health care fraud schemes can be anyone and that doctors need to get more serious about punishing fraud.
How did you become interested in fraud prevention and detection?
My parents came to America from Austria and I traveled frequently to Europe as a child to visit family. Learning how to calculate exchange rates and even interpret travel schedules made me analyze groups of data. Traveling from country to country introduced me to strict border crossing protocols and accurate documentation requirements. Seeing the world definitely got my CFE analytical training off to an early start.
I later learned how to run three private practices and began to assist other doctors with their office operations. Eventually I became a management consultant for practices across the country and was exposed to a variety of fraud schemes. I was finally able to validate all of the fraud observations I made over the years as a health care provider when I joined the ACFE.
What are the most challenging aspects of investigating health care fraud?
It is shocking at how difficult it is to get doctors to believe that there could be fraud in the practice and just as hard to convince them to clean it up. I am always surprised at how when we initially discover fraud. Many doctors’ first reactions are that they don’t want to “rock the boat.” They don’t want you to upset the cash flow or their associated lifestyle, and they don’t want to go through a stressful firing and hiring encounter. They also worry about upsetting the morale of the employees — they often say, “What are the other staff going to think?” Some doctors believe they can solve the matter by having a staff meeting and others have even naively thought that if they speak to the fraudster the fraud will stop occurring.
Another type of doctor I’ve encountered is the one who thinks they are untouchable because they can call upon their CPA, their lawyer, or their malpractice carrier to get them out of “hot water.” It is rewarding though when the doctor recognizes the gravity of the fraud — we have assisted in successfully getting fraudsters fired, prosecuted and incarcerated. Unfortunately, there are times when a casual approach is taken and the fraudster mysteriously disappears and moves on to another similar health care business. It’s unfortunate to know the fraudster has access to money, supplies, drugs and confidential patient files again.
What is your most memorable health care fraud case?
I will never forget the office manager who took home the entire office computer while the doctor was on vacation. She had it cloned by her uncle to capture more than 2,000 patient records filled with social security numbers, insurance policy numbers and credit card data. When the doctor returned from vacation, and the patients’ credit card charges appeared on their monthly statements, it was discovered that the office manager went on a shopping spree for jewelry, exercise clothes, diet pills and more. My team assisted the doctor in the proper termination and subsequent prosecution of that employee.
Additionally, other employees in the practice were let go and strict new fraud prevention guidelines were introduced into the practice. The end result is that the practice became more profitable and added a second doctor within a year because of enhanced practice methods and controls.
Read Dr. Lyschik's full interview on ACFE.com.
Emily Primeaux, CFE
Assistant Editor, Fraud Magazine
He sees you when you're sleeping. He knows when you're awake. He knows when you've been bad or good...
"He," or "she," of course, is the ever present fraud fighter. And in 2016, fraud fighters saw a slew of unsavory characters who clearly ignored the elf on the shelf and instead stole, bribed or colluded to illegally line their own pockets. But for every bad apple, there are unsung heroes — the whistleblowers, journalists, investigators ... the list goes on and on. These heroes go to battle in the trenches every day to root out the crooks and thieves.
In honor of the holiday season, let's ruminate on the past year and the characters that made it onto either the naughty or the nice list.
- Wells Fargo: On Sept. 9, 2016, Wells Fargo negotiated a deal to settle a lawsuit filed by the U.S. Consumer Financial Protection Bureau, the Office of Comptroller of Currency, and the City and County of Los Angeles. Though Wells Fargo didn't admit to any wrongdoing, it did confirm that employees had opened more than two million checking, savings and credit card accounts without customer approval. And in a stunning turn of events, former employees then came forward to say they had called the ethics hotline to report dubious sales practices. However, according to these accounts, some whistleblowers claimed that the bank's strategy for dealing with whistleblowers was to find ways to fire them in retaliation. Though the case is ongoing, John Stumpf has stepped down as the bank's chief executive.
- Andrew Caspersen: On Nov. 4, 2016, this disgraced scion of a wealthy Wall Street family was sentenced to four years in prison for robbing his friends, family and a large hedge-fund foundation in a Ponzi-like scheme. The judge who sentenced him? None other than the ACFE's 2016 Cressey Award winner, Senior U.S. District Judge Jed S. Rakoff. Looks like Caspersen most likely received coal in his stocking this year.
- The Panama Papers: A giant leak of more than 11.5 million financial and legal records from the world's fourth biggest offshore law firm, Mossack Fonseca, detailing financial and attorney-client information for more than 214,488 offshore entities ... otherwise known as the Panama Papers. According to the papers, the leak "exposes a system that enables crime, corruption and wrongdoing, hidden by secretive offshore companies." The leaked documents outed scores of politicians, business leaders and celebrities for fraudulent business practices, including Iceland's Prime Minister, Sigmundur David Gunnlaugsson. He stepped down after documents revealed that he and his wealthy wife had sheltered money offshore.
- The Panama Papers: The papers themselves were a great feat of international cooperation when the International Consortium of Investigative Journalists, the German newspaper Süddeutsche Zeitung and more than 100 news organizations released the Panama Papers. These are the good guys.
- Tyler Schultz: When he discovered that Theranos, a health technology and blood-testing company, was using proprietary Edison machines that frequently failed quality-control checks and produced widely varying results, Schultz (an employee of the company at the time) decided to speak up. He drafted an email to founder Elizabeth Holmes to complain that Theranos had doctored research and ignored failed quality-control checks. What makes this move even more incredible is that Schultz is the grandson of George Schultz, a Theranos board member. Since then, a major investor has sued Theranos for fraud and the company has had to stop blood tests, shut down labs and cut jobs.
- Clare Rewcastle Brown: In 2010, Rewcastle Brown founded The Sarawak Report and Radio Free Sarawak to disseminate news that concerned the Sarawak region of Malaysia and eventually, news surrounding the emerging 1MDB (1Malaysia Development Bhd) scandal. 1MDB is currently being investigated by Swiss, Singh and U.S. authorities. And she's not backing down, despite a Malaysian court issuing a warrant for her arrest for "activities detrimental to parliamentary democracy" and the "dissemination of false reports." She'll be speaking about the scandal at the 2017 ACFE Fraud Conference Europe in London, March 19-21.
The naughty list may never be empty, but at least we have those on the nice list to turn to. And while 2016 saw some pretty egregious schemes, we can enter 2017 knowing that there are those willing to investigate and speak up. Here's to the new year!
Assistant Editor, Fraud Magazine
When I moved to Austin at the start of the year, I immediately set out to find new establishments that provide services I use frequently: a local dry cleaner, hair salon, grocery store, post office, etc. Finding a local doctor also always ranks high on my list when I move to a new place. And I’ve moved many times.
The most important criterion I look for in a primary care physician is simply that they are well respected and have positive reviews from friends or other patients. Should anything happen to my health, I want to know I’m in capable and experienced hands.
“There is no single way to commit fraud in the health care industry,”
- Robert Church, CFE, FCPA, CVA
Health care fraud is a sensitive subject, because its prevalence means people like me can suffer at the hands of an irresponsible few. I recently spoke with Robert Church, CFE, FCPA, CVA, Director of Healthcare Investigations at Forensic Strategic Solutions, about a healthcare fraud scheme that took place at DaVita Healthcare Partners in Colorado. DaVita, a provider of kidney dialysis services, was accused of paying for referrals from physicians, which federal law prohibits. As Church explained, when a company pays a provider practice group or a physician for patient referrals, it becomes more about the money than the patients’ well being. Needless to say, this is exactly what I don’t look for in a new doctor.
Church’s extensive knowledge of the case revealed some pretty deplorable information. A former whistleblower himself, Church jumped right in to explain the discovery of the fraud by David Barbetta, a former financial analyst at DaVita, who worked in their mergers and acquisitions group. According to Church, when Barbetta discovered the fraud, he went to his bosses, but was rebuked at every opportunity when he discussed his findings with upper management. Per reports on the case, one executive even told him, “Don’t give me that ethics crap.” Frustrated and angry, Barbetta knew it was time to leave the company and file a claim with the authorities.
Church went on to explain that Barbetta came to authorities with spreadsheets of sales, emails, and insight into the company and its operations. These showed that DaVita was involved in three fraud schemes:
- They allowed physicians to be a part of joint ventures with DaVita and kidney dialysis centers across the country. They then shared that ownership interest at a lower price than fair market value.
- They bought dialysis centers by acquiring them from referring physicians at a value that was in excess of fair market value.
- Finally, to ensure physicians received as much cash as possible, they manipulated the books and records of these joint ventures to squeeze out as much money as they could. One exec even referred to it as a “money bag for physicians.”
As Church discussed, having a whistleblower was crucial when it came time to find the information the fraud examiners needed to break the case open. However, it’s the lessons learned that fraud examiners should consider. “Fraud and health care can exist at all levels and in a host of ways. There is no single way to commit fraud in the health care industry,” says Church. “Companies that are bottom-line-only oriented or cash oriented will go to great lengths to both commit the fraud and cover it up.”
In DaVita’s case, they recently paid $389 million to settle criminal and civil anti-kickback investigations and ended joint ventures with kidney doctors at 28 dialysis clinics. “Eyes open is the order of the day,” says Church. “Recognize that schemes can take a host of avenues to get a company to the end result.”
To hear the entire interview with Robert Church, visit ACFE.com/podcast.