Insurance Fraud Casebook E-Book
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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
Real case studies on insurance fraud written by real fraud examiners Insurance Fraud Casebook is a one-of-a-kind collection consisting of actual cases written by fraud examiners out in the field. These cases were hand selected from hundreds of submissions and together form a comprehensive picture of the many types of insurance fraud--how they are investigated, across industries and throughout the world. Entertaining and enlightening, the cases cover every type of insurance fraud, from medical fraud to counterfeiting. * Each case outlines how the fraud was engineered, how it was investigated, and how perpetrators were brought to justice * Written for fraud examiners, auditors, and insurance auditors * Other titles by Wells: Fraud Fighter and Corporate Fraud Handbook, Third Edition Edited by Dr. Joseph T. Wells, the founder and Chairman of the Association of Certified Fraud Examiners (ACFE), the world's leading anti-fraud organization, this book reveals the dangers of insurance fraud and the measures that can be taken to prevent it from happening in the first place.
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Seitenzahl: 579
Veröffentlichungsjahr: 2014
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Contents
Cover
Title Page
Copyright
Dedication
Preface
Insurance Fraud Classification System
Chapter 1: Needles in a Paystack
A Growing Company
Another New Case on My Desk
Rolling Up Our Sleeves
Presenting the Facts for Justice
About the Author
Chapter 2: The Good Doctor and the Insurance Consultant
A Growing Company
On a Hunch
Paging Dr. Ahmet
Working Through the Pain
Indisputable Evidence
Trend Setting
About the Author
Chapter 3: Greasing the Wheels in the Oil Business
Long-Distance Call for Help
A Groundbreaking Case
Looking Outside for Suspects
Lack of Accountability
About the Author
Chapter 4: Living the Dream, Keeping Up the Lie
The Family Illness
Watching and Waiting
About the Author
Chapter 5: Extinguishing an Arson Fraud
Backyard Barbecue
Expanding the Team
Good Faith Is Easily Exploited
Lazy Appraisal Work
Outcome of the Investigation
About the Author
Chapter 6: Weakest Link in the Chain
The Unexpected Meeting
The Interview
The Interrogation
The Second Interview and Interrogation
The Crime Ring Breaks
About the Author
Chapter 7: Everyone Gets Hurt: A Study in Workers' Compensation Fraud
Bundled and Bungled
Unlikely Rescuer
Crash Course in Insurance
Tracking the Letters of Credit
It All Comes Together
About the Author
Chapter 8: The Hazards of Doing Business with Friends
It Started with a Single Call
Understanding the Industry
What Jack Did Not Know
It Does Not End with a Confession
Plea Deal
About the Author
Chapter 9: There's Gold in Them Thar Malls!
When It Rains, It Pours
Divide and Conquer
Just the Tip of the Iceberg
Whistleblower, Beware
Complications Begin to Mount
Delay, Delay and Delay!
Our Team Enters the Fray
An Outcome, Not a Resolution
About the Author
Chapter 10: Damsel in Diamonds
Viceroy Jewelers
One Thing Leads to Another
The Truth Comes Out
Solving the Paperwork Puzzle
Duty Calls
Police Involvement
About the Author
Chapter 11: Operation Give and Go
Designing a Sting
The First Deal
On a Roll
Unexpected Consequences
Successful Sting
About the Author
Chapter 12: An Inspection Is Worth a Thousand Photos
Start Your Engines
Bringing on a Navigator
Becoming Car Buffs
Seeing What's Behind the Photos
One More for the Road
About the Author
Chapter 13: The Danger of Trusting Too Much
A Single Suspicious Check
Climbing the Fraud Ladder
Surprise Interview
Where Did It Go?
About the Author
Chapter 14: The Twin-Cities Machine
Running a Machine
The Team Versus the Machine
Ambulance Chasers, Runners and the Mob
Interviews
Medical Mill
Out of Sight, Not Out of Mind
The Big Picture
About the Author
Chapter 15: With Friends Like These . . .
False Alarm?
Nagging Suspicions
Mounting Dread
Now What?
Justice
About the Author
Chapter 16: All the Buzz
Partnerships in Action
Confirmed Suspicions
Lying Under Oath
Understanding the Elements
Preparing for Legal Action
Realities of the Courtroom
The Verdict Is Only the First Step
About the Author
Chapter 17: Getting Rich from the Elderly
The Promises of the Plan
A Different Side of Betty Comes Out
The Complaints Keep Coming
Unwelcome Visitors
The Plan Fails
About the Author
Chapter 18: Transparent Greed
Business as Usual
Imitation Is the Highest Form of Flattery
Glass Star's Evolution
The New Guard in Full Swing
A Holdout from the Old Guard
Brand New to the Job
Gathering Witnesses
About the Author
Chapter 19: Fault of Fortune
The Ethical Dilemma
The Consortium and Its Needs
The Reservations
The Investigation
Veracity Test
Too Good to Be True
The Interview
About the Author
Chapter 20: Going Blind to Fraud
Popular with the Auditors
Second Opinion
The First Visit
Audits and Reports
Fraud Referral
Tallying the Losses
About the Author
Chapter 21: Going Against the Cartel
The Cartel Climate
Acceptable Expenditures
Strange Bedfellows
The Plan in Action
David Beats Goliath
About the Author
Chapter 22: Falling Prey to Online Charms
A Good Deal Gone Bad
Call for Help
Seeing the Big Picture and the Red Flags
Revealing Records
Satisfied Customers
About the Author
Chapter 23: Big Bills in Little Cuba
Dusty Shelves
Whack-A-Mole
Store Visit
House Calls
The Truth Comes Out
About the Author
Chapter 24: Rushing an Insurance Claim
Second Generation
Unwelcoming Client
Spending Spree
The Robbery
The Rush Ends
About the Author
Chapter 25: Ignorance Is Bliss, While It Lasts
No Experience Necessary
Second Chance
Nitty-Gritty Fraud Examination
Bribes, Donations, Rebates and Consignments
About the Author
Chapter 26: The Name Game
Not Just Another Case
Beware of Intentionally Complicated Structures
Repeat Offender
Piling Up Boxes
You Can't Plan for Everything
About the Author
Chapter 27: Woo, Wed, Insure, Murder
We Have a History
Character Testimonials
Different Kinds of Evidence
About the Author
Chapter 28: Mystery Shopping for Fraud
Silver Star
Independent Expertise
Shopping Trip
Broken Paper Trail
Under Oath
Settlement Discussions
About the Author
Index
Cover image: Firemen © Photodisc; Car wreck © Photodisc; Insurance papers © iStockphoto/DNY59; Pills on money © iStockphoto/A_Carina Cover design: Helen Elliott
Copyright © 2013 by Association of Certified Fraud Examiners. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada.
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Library of Congress Cataloging-in-Publication Data
Insurance fraud casebook: paying a premium for crime / edited by Laura Hymes and Joseph T. Wells. pages cm Includes index. ISBN 978-1-118-61771-7 (cloth); ISBN 978-1-118-70093-8 (ebk); ISBN 978-1-118-70099-0 (ebk); ISBN 978-1-118-70087-7 (ebk) 1. Insurance crimes–Case studies. 2. Fraud investigation–Case studies. I. Wells, Joseph T. HV6768.I544 2013 364.16'3–dc23 2013013593
To Grampy Hymes, a casebook enthusiast and retired dentist who has seen insurance fraud from inside the clinic
Preface
The idea of shared risk is the foundation of all types of insurance. In one of the earliest examples of shared risk, ancient Chinese traders would distribute their cargo throughout many different oceangoing vessels to limit the incurred losses if any single one of them capsized. Later, the Babylonians enacted the first known written laws in the Code of Hammurabi (circa 1750 B.C.), which, among its many provisions, allowed lenders to charge additional costs to cancel loans for which the collateral was lost or stolen.
Early insurance was principally limited to the extreme risks associated with ships and the goods they transported on the high seas. But even in ancient Rome, records exist to show that there were burial societies that paid for funeral costs of their members out of the dues they were assessed. The Achaemenid Empire in ancient Persia (circa 550–330 B.C.) was the first to offer individuals insurance for their general interests. Each year citizens presented the ruler with a gift. If it was worth more than 10,000 gold coins, the gift and the giver were recorded in a ledger. If the gift giver later needed money for an investment, for a child's wedding or another personal venture, the government would give him or her twice the amount of the recorded gift.
By the mid-1400s, marine insurance was highly developed but other forms of insurance were not. Sharing losses, rather than making a profit, was the main goal at the time. However, after the Renaissance in Europe, the insurance industry experienced significant growth and became much more sophisticated.
Other disasters began to be covered by insurance after the Great Fire of London of 1666, which destroyed 13,200 buildings. In 1680, Englishman Nicholas Barbon established the first fire insurance company, known as The Fire Office. Around the same time, Mr. Edward Lloyd of London opened a coffee shop that became a popular hangout for ship owners and merchants. Risk takers also congregated at Lloyd's to provide insurance (for a profit) for shipping concerns. Documents would be prepared, and those providing the insurance would each sign at the bottom, a process that added the term underwriter to our lexicon. Lloyds's of London would go on to become one of the largest insurance entities in the world.
More insurance companies sprang up in England and continental Europe after 1711, during the so-called bubble era. Many were downright fraudulent get-rich-quick schemes that sold worthless securities to the public. Others were woefully undercapitalized and could not cover their losses from claims. And no systems had yet been developed to weed out fraudulent claims by the insureds. The resulting chaos of the burgeoning industry took more than a century to right itself.
What we now call health insurance probably began in Germany, building on the tradition of welfare programs in Prussia and Saxony that began in the 1840s. By 1880, German Chancellor Otto von Bismarck introduced old-age pensions, accident insurance, medical care and unemployment insurance. The British followed with a system of social insurance in the early 1900s, which was greatly expanded after World War II.
In America, the insurance industry developed slowly, helped along by Benjamin Franklin. In 1752, he founded the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire, which made significant contributions to the prevention field by warning against certain fire hazards and refusing to insure high-risk dwellings. Around the same time, the sale of life insurance commenced in the United States, mostly tied to religious institutions. The Presbyterian Synods in New York and Philadelphia started the Corporation for Relief of Poor and Distressed Widows of Presbyterian Ministers. And within 50 years, nearly two dozen life insurance companies went into business, but most failed.
By the mid-1850s, life insurance companies had started taking hold in the United States. New York Life was formed during this period and is now one of the most prominent. Early life insurance companies had to contend with crooked agents in their employ, a problem that still exists in measure today. It was common then for agents to sign up people they knew to be in bad health for the sole purpose of collecting a commission on the sale; no physical exams were required at the time. But by the late 1800s, employing doctors to use standard criteria for evaluating risks reduced (but did not eliminate) the problem. The other half of the fraud equation was the insurance companies themselves. Many that sprang up were nothing more than Ponzi schemes, which were mathematically predestined to fail.
In the early 20th century, the insurance industry blossomed with profits, and companies sought to expand by offering additional coverage for a variety of risks. One of the first forms of insurance for health was established by Britain in 1911 with the passage of the National Insurance Act. In the United States, a group of Dallas-based teachers formed a partnership with an area hospital in 1929 to provide a set amount of health and sickness coverage in exchange for a set, prepaid fee. This partnership eventually became known as Blue Cross. Meanwhile, physicians developed Blue Shield as an alternative. The two groups eventually merged.
During World War II, wage freezes were instituted throughout companies in America. Group life and health insurance offerings sprang up (at mostly the companies' expense) as corporations, desperate for workers, saw a legal way to attract and keep employees. Such large group policies went to large carriers, which led to a consolidation of the industry, squeezing out smaller entities.
As the healthcare market grew, the U.S. government began encouraging participation, which led to tax-exempt status for employer/employee contributions in 1954. Although some continued to strongly oppose a nationalized healthcare system, Congress enacted Medicare and Medicaid in 1965. Medicare called for compulsory hospital insurance for those over 65; Medicaid provided care for low-income people through a program that combined federal and state resources, the benefits of which vary from state to state depending on per-capita income.
While many counties have nationalized healthcare, the United States remains a patchwork of governmental and private plans. This has resulted in some of the world's most expensive and ineffective health insurance coverage. In 2010, the U.S. Congress passed the Patient Protection and Affordable Care Act (ACA), seeking to extend mandated coverage for nearly 50 million uninsured Americans. The ACA also wants to slow down the growth in the cost of healthcare and improve the patient delivery system. But it has been used as a political football, as a large minority of Americans oppose mandated, universal healthcare. Only time will tell whether it is better or worse than the system (or lack thereof) it replaces.
Fraud in the insurance and healthcare industry has always been a problem. Although there have been many attempts to determine the actual costs, the figures are estimates at best and unsupported guesses at worst. Suffice it to say that fraudulent transactions regarding insurance claims probably exceed those in any other area for a number of reasons.
First is the concept of diffusion of harm. This means that fictitious claims are spread across a large number of people. While a person might never steal from a neighbor, committing fraud against a faceless corporation, governmental agency or insurance company is easier to justify. Second, most people just don't like insurance companies. Many argue that they are bloated, rich bureaucracies interested only in their own welfare and not the people they insure. They claim that the insurance companies are there when collecting premiums but absent when it comes to paying claims. This attitude makes insurers an easy target for fraud.
The third reason for large volumes of insurance fraud might relate to the technological processing of claims. Those charged with developing systems to prevent insurance fraud are certainly no smarter than some of those committing it, and internal control systems are designed only to be reasonable, not foolproof. In short, where there is a will, there is usually a way. A fourth reason for insurance fraud, particularly as it relates to health insurance, stems from a patient's instinctual trust of his or her medical provider. Many of us think of our doctors and nurses as benevolent caretakers who have our best interest at heart, but we fail to realize that these providers commit the overwhelming majority of healthcare fraud. Whatever the causes, most experts believe insurance and healthcare fraud is getting worse, not better.
This collection of case studies comes to you directly from members of the ACFE; each case has been investigated and written by anti-fraud experts working directly to combat insurance schemes. The case studies cover a wide array of insurance fraud — from healthcare fraud, to arson, to murder and everything in between — because we want to provide a panoramic view of the problem rather than limit the cases to a narrow sector of the industry. We changed the names of the people and places to protect the anonymity of those involved, but the cases themselves are real. All profits from this publication will be donated to the ACFE Scholarship Foundation to train the next generation of anti-fraud experts.
As legislation develops and the insurance industry evolves, staying abreast of the trends will be essential for the fraud fighters investigating the crimes and the consumers trying to avoid becoming victims. We hope this collection offers you an informative but also entertaining reference, whether you are reading it as an expert or an interested novice.
Laura Hymes, CFE Dr. Joseph T. Wells, CFE, CPA Austin, Texas March 2013
Insurance Fraud Classification System
*We include government health care providers in the category of “Insurer.” Although these programs are susceptible to frauds by other insurers, such schemes would fall under the “False Claims of Coverage” branch of this tree.
CHAPTER 1
Needles in a Paystack
CHARLES PIPER
Susan Shamrock became a doctor because she wanted to provide people with relief from their allergy suffering. Although sticking needles in patients was not her favorite thing to do, Susan knew she was helping them get back to their normal lives. She enjoyed being a physician and helping people.
On the home front, Susan was happily married. She and her husband had two daughters who enjoyed a lifestyle most kids would envy. The girls attended private schools, had the latest electronic gadgets and even received expensive professional golf lessons. The family lived in a big house, and Susan and her spouse drove fancy cars. Dr. Shamrock was highly respected in her community and she gave generously to various local charities.
As the years passed, both Susan and her husband took to gambling at local casinos for entertainment. Eventually, Mr. Shamrock quit his job to pursue professional gambling; by doing so, he could even write off gambling losses on their tax returns. Predictably, Susan's husband lost a lot of their money gambling. But their marriage was good, their kids were happy and Susan's practice was profitable.
A Growing Company
After Susan opened her own allergy clinic, she grew increasingly gratified that she was able to help so many patients; plus the money was good. Business was slow in the beginning, but it didn't take long before patients under her care started coming back for regular treatments. Newer patients followed, and the practice kept growing. Business was so good that she hired employees to schedule appointments, handle accounts payable and receivable and file claim forms with insurance companies and federal and state healthcare programs. She also hired medical assistants and an office manager.
Sometimes Susan became frustrated because a few of her patients didn't respond to treatment regimens. In those instances, her patients not only continued to suffer from their allergies, but they or their insurance companies continued paying for treatment that was not working.
As part of her continuing education, Susan attended various seminars where she learned from other experts in the field. At one training event, the speaker discussed a new allergy treatment that was considered experimental by the Food and Drug Administration (FDA). Susan was intrigued and inspired by the presentation and immediately began offering the treatment as an alternative to her patients who hadn't responded to previous therapy. She even listed the experimental treatment on her website. Several of her patients were willing to try it out of frustration because nothing else worked for them, and they had no financial qualms because their insurance paid for it.
Another New Case on My Desk
I was a federal agent with experience investigating complex fraud schemes (including healthcare provider fraud) when I received a referral in the mail at my office. The note indicated that Dr. Susan Shamrock had possibly miscoded billings for allergy treatments when submitting claims for several of her patients.
The allegation said she provided patients with nonapproved, experimental allergy treatment but listed it on insurance claims as a different, approved treatment. (Allergy treatments not approved by the FDA are not reimbursable by insurance companies or federal healthcare programs.) The referral also mentioned Dr. Shamrock's website description of experimental treatment. Based on her website, there was no denying that Susan was promoting the use of the experimental treatment.
The referral also reported that during a federal audit of a random sampling of billed treatments, Dr. Shamrock was asked to provide supportive documentation for several of the insurance claims she submitted and that the government already had processed and paid. However, Dr. Shamrock ignored or failed to respond to the requests.
Rolling Up Our Sleeves
From experience, I knew that healthcare fraud often affects many insurance carriers and federal healthcare programs — if one program was defrauded by a provider or facility, in all probability other programs and companies were also defrauded. Based on that knowledge, I immediately contacted healthcare fraud investigators I had previously met or worked with and notified them of the referral. Some of those investigators worked for agencies that had their own healthcare programs. I asked the investigators to determine if their agencies received and paid insurance claims from Dr. Susan Shamrock. Only one of the investigators, Agent Andrew Badge, responded positively.
Badge and I had successfully worked together in the past, and, like me, he used to be a street cop before becoming a federal agent. Badge and I met at his office and developed an investigative plan for this case.
Using administrative subpoenas, we separately requested and later obtained copies of numerous patient files and billing records from the doctor's office. Dr. Shamrock took about a month to comply fully with the subpoenas. Waiting this long is not unusual in white-collar investigations, and, in fairness, the doctor had a small office staff and years' worth of records to copy. In addition, they had to do most of the copying after normal business hours when the clinic was closed.
Patient files are often thick and might include: patient contact information (name, address, Social Security number, date of birth, etc.), insurance policy coverage information, claims submitted for payment, records of payment, explanation of benefit forms, dates of treatment, physician notes, lab test results, appointments and so on.
Badge and I worked in different buildings about ten miles from each other so we periodically met for lunch and talked about this case and others. When we finally received the subpoenaed records, we reviewed them at our own offices. We searched for indicators that patients received the experimental treatment, which may have been miscoded and billed as an FDA-approved treatment.
Reviewing the boxes full of patient files was a tedious process. Although I was terrible at dissecting worms and frogs in high-school biology classes, I enjoy dissecting information in fraud cases. The review took several weeks to complete. The first several days were boring because only a couple of files indicated that patients received the experimental treatment. Nevertheless, I carefully reviewed each claim individually.
Although I had never received allergy injections myself, I thought it odd that some of the patients reportedly received shots four or five times a week. I telephoned Agent Badge, told him what I found and added, “I wouldn't go to the doctor's office four or five days a week if they were giving out free lunches — let alone just to get needles stuck in my arm.” Badge remarked, “I'd go if they were giving free lunches.” We both laughed.
More alarming than what I was finding in the patients' files was what I wasn't finding. The files often contained no supportive documentation for any of the billed injections. For example, in one patient's file, the dates on insurance claim forms indicated allergy injections were given to the patient on January 10, 12, 14 and 15. But there was no documentation in the file indicating the patient ever stepped foot inside the doctor's office on any of those dates.
As I continued reviewing patient files, I found repeated instances where there was absolutely no supportive documentation for any of the services billed for.
In addition, when there was documentation, the charts indicated that the patients' next visit would not be for several weeks. The next pages in the patient files often indicated they were last seen on the previously documented dates.
For example, a patient's file might read something like this:
January 3: Patient John Smith seen today and given an injection. His next office visit will be February 5.
Then the next documentation would read:
February 5: Patient John Smith last seen on January 3. Patient given an injection. Next visit will be March 7.
In short, the written notes in the patients' files contradicted the insurance claims. The charts were incriminating evidence that the patient had not visited Dr. Shamrock nearly as frequently as the documents indicated.
I alerted Badge to my findings, and he said he had been seeing the same pattern in his files. At this point, I began to understand why Dr. Shamrock refused to comply with the auditors' previous request for treatment records; she didn't have any to give!
Knowing that documents alone do not prove a case, Badge and I began interviews of patients at their homes. Prior to the interviews, I listed questions to help guide me and gave a copy of the list to Badge. Having most of the questions already written down makes it easier to take notes. I emphasized that the draft list of questions was only to be used as a guide and additional questions would be asked as needed. Badge liked the idea of numbering the questions and said he was going to start doing it for his future interviews.
Our first interview was of a former patient named Steve Hardwick. He said he never received more than two or three injections in any given week. But what Hardwick said next was a complete surprise: “I didn't need to go to the doctor's office anyway; Dr. Shamrock just gave me the filled syringes to inject myself.”
I asked Steve to elaborate. He said that about once each month, he would show up at Dr. Shamrock's office and she would inject him with an allergy shot. During the same visit, the doctor or her assistant would hand him a month's supply of filled syringes, and he would later inject himself with the antigens two or three times a week.
Hardwick said, “Come with me; I think I have a couple of the syringes in the fridge.” We followed him into his kitchen, where he opened his refrigerator and pulled out two filled syringes. Hardwick said, “These are the syringes Dr. Shamrock gave me.”
Understandably, Agent Badge and I asked a bunch of follow-up questions. Steve Hardwick said he liked the arrangement because he could inject himself and didn't need to travel back and forth to the doctor's office all the time. But the fact is, he injected himself only two or three times each week, not four or five times like the insurance claims indicated. Plus, the insurance claims specifically listed the location of service as Dr. Shamrock's office.
I studied the claim forms a little closer and observed that all of the injections were reportedly given on weekdays; never on the weekend. I asked Hardwick if he ever injected himself on the weekend and he said, “Sure, lots of times.” He said he never had to report his dates of injection to the doctor's office.
I speculated that Dr. Shamrock knew that if she listed Saturday and Sunday treatments on her insurance forms, the insurers would reject the claims (because the doctor's business was closed on the weekends). I also figured that since Dr. Shamrock apparently thought she could get away with allowing patients to inject themselves away from the clinic, she would probably have no qualms about listing the incorrect injection dates on some paperwork.
Agent Badge and I photographed, marked and collected the filled syringes as evidence, and Badge later stored them in his office evidence refrigerator. During the next several weeks, Badge and I conducted more patient interviews. On the days we worked together, we alternated buying each other lunch. It seemed like every time it was my turn to pay, Badge picked a more expensive restaurant to eat at.
During our interviews, Badge and I heard similar stories from Dr. Shamrock's patients. A few people also said they received an experimental allergy treatment. Those patients reported that Dr. Shamrock assured them she would take care of the insurance billings. Since the patients didn't have to pay any money out of pocket, they had no concerns about how much the insurers were billed or how the treatments were coded.
After returning to my office, I contacted one of the government healthcare program integrity officials and was informed that each injection should have been given by a qualified and approved healthcare professional inside the physician's office. The official said the patients should have been monitored by a healthcare professional in case they had adverse reactions to the injections. I was also informed that the government would not have paid those claims had they known the patients injected themselves and that the locations of service were falsely recorded. I telephoned Agent Badge and told him what I had learned. He then called the program integrity officials from his agency and received the same information. Some agencies and insurance companies have different rules, so it was important for us to get clarification from the experts at our respective agencies.
In the days that followed, I attempted to quantify the potential dollar loss based on the patient files and claim forms I reviewed. I began adding up all the dollars for the false claims where there was no supportive documentation or false information. I also included the few instances where the experimental treatments were miscoded. But as I continued reviewing the claim forms, I found something even more alarming.
In addition to billing for injections, Dr. Shamrock billed extremely high prices for “preparing and mixing” the antigens in the syringes. Supposedly, each patient had his or her own unique master serum. Injections were billed at about $50 each, but mixtures were billed for thousands of dollars each!
The real money Dr. Shamrock made came from the falsification in the number of antigen mixtures made. To avoid detection, she billed for lots of injections — and made an extra $50 for each fictitious injection.
I also knew that the insurance regulations required patients to pay copayments when they received treatment. Providers are not permitted to waive the copayments. So circumstantial evidence of fraud was established by the lack of patient billings for copayments. Interestingly, Dr. Shamrock had no qualms submitting false claims to insurance companies, but she never sent her patients false bills for the copayments. I suspect she knew darn well that the patients would have been lining up at the door to complain if she tried to defraud them too.
My next question was: How many syringes could be filled with each mixture? Agent Badge and I issued more administrative subpoenas to Dr. Shamrock's office for the supportive documentation for preparing the mixtures.
Guess what? She didn't have those either. We also asked for the doctor's office appointment and sign-in books and found that the patients who were billed as if treated on certain dates did not have appointments and did not sign in on those dates. The evidence was getting stronger. I started to wonder if there was any legitimate business going on inside the doctor's office.
Badge and I decided we needed to interview some of the doctor's employees. We started by interviewing former employees. Badge and I alternated who would be the lead interviewer while the other took notes. One of the former administrative employees told us, “A few years ago we got into trouble with an insurance company for not having supportive documentation, and I told Dr. Shamrock to stop billing for services that we hadn't provided. But she wouldn't listen to me and we kept on doing it.” Badge and I glanced at each other; the case against Dr. Shamrock was getting even stronger.
Agent Badge and I also interviewed Dr. Shamrock's current office manager, Katy Lincoln, at her home on a weeknight. She essentially said the same thing as the former employee. Badge and I decided to try to get additional evidence and asked Katy if she would consent to record a telephone conversation with Dr. Shamrock. She was initially hesitant but finally agreed. Before Katy called Dr. Shamrock, we told her what topics to cover.
In the recorded conversation, Dr. Shamrock said she knew miscoding the treatments was not appropriate. She also admitted she knew the doctor's office was sometimes paid for treatments not provided. But Dr. Shamrock never went so far as to admit that she directed the false claims to be generated.
After returning to my office, I made a copy of the recording, secured the original as evidence and later had a transcript made.
A few days later, Badge and I flipped a coin to determine who would get to interview Dr. Shamrock. I won. Interviewing the doctor was interesting to say the least. I didn't tell her we had a recorded conversation of her admitting knowledge about the false claims because that would have immediately implicated Katy Lincoln as an informant.
When I asked Dr. Shamrock about the missing documentation to support the billings, she blamed an office flood. When I asked why she let patients inject themselves away from the office, she said they preferred it that way. When I asked how she determined the dates that injections were given, she initially said she just guessed but later said the office computer automatically entered the dates. When I asked why she didn't collect copayments from her patients when they were treated, she said her patients couldn't afford to make the copayments.
In short, Dr. Shamrock claimed every mixture and allergy injection billed for was accurate to the best of her knowledge. And when asked why she miscoded the use of experimental allergy treatment to give the appearance that she used an FDA-approved method, Dr. Shamrock said, “That treatment works! It's not my fault that the FDA takes too long to approve good medicine.”
Presenting the Facts for Justice
Agent Badge and I brought our collective case to the federal prosecutor's office. In total, the losses were approximately $500,000. The criminal prosecutor declined to accept the case, saying it would have been stronger if Dr. Shamrock said on the recording that she personally directed the false claims to be submitted. Badge and I knew that prosecutors cannot accept every case that comes across their desks, so next we briefed the civil prosecutor, who accepted it without reservation. Using the Federal Civil False Claims Act (Title 31 USC 3729) would potentially allow for treble damages — three times the amount of each false claim.
Dr. Shamrock claimed she did not have the assets to repay. However, she eventually sold a second house and some other property to pay for some of the losses. Rather than debarring or suspending Dr. Shamrock from doing future business with the government, the affected agencies decided to put her on a well-monitored performance and compliance plan, which subjected her to regular audits and other stringent requirements to ensure that this type of activity would not occur in the future.
About the Author
Charles Piper, CFE, CRT, is the owner of Charles Piper's Professional Services located in West Tennessee. He serves as a Certified Fraud Examiner, licensed private investigator and national consultant. Mr. Piper previously served for more than 30 years in law enforcement, including 20 years as a Federal Special Agent and Criminal Investigator.
CHAPTER 2
The Good Doctor and the Insurance Consultant
MICHAEL KING
Erso Ahmet was an Australian orthopedic surgeon. He was the middle child of a hardworking, middle-class immigrant family, born in the western suburbs of Sydney, New South Wales. Erso's grandfather, a teacher in Palestine, had worked closely with the British forces during World War I, at times passing intelligence on the Ottoman Turk army positions during the battle of Jerusalem. After the war, Erso's grandfather, grandmother and five children (including Erso's father) made their way to Australia, arriving initially in Melbourne in 1919 before moving to Sydney a few months later.
Erso's father, like many immigrants new to Australia, wanted a better life for his children and knew the importance of education. His father owned a furniture business, and the children were expected to help with the business in addition to studying hard at school. Erso lived with his family in the suburbs before moving into town to study with his older brother. Erso attended medical school; his brother studied engineering. While at university, his parents introduced him to Ajda, and a year later the two were married. One year later, the first of their four children was born.
Erso graduated with honors and secured a placement with a large Sydney hospital for his residency internship. While working there, Erso anglicized his name to Edward but often went by Eddie. After working a number of years at the hospital, he went back to school and eventually became a specialized surgeon in orthopedics.
Erso moved into private practice and began to consult on work-related injury claims, including referrals from the state-based Worker's Compensation Agency. He found this work very interesting and learned how minor injuries can have a devastating impact on claimants and their families. However, he found the paperwork and the cap on professional fees a constraint.
On the advice of a colleague who was also a personal friend, Erso decided to undertake plaintiff consultancy. His friend was able to supply him with a reference to a national personal injury solicitor. Initially, work was not as plentiful as he had expected. In a discussion with his friend, he was told that his medical reports read like they were written for the Worker's Compensation Agency and needed to be more “generous and flexible.”
The next report that Erso wrote stated that the claimant had suffered “40 percent impairment to spinal function” and “30 percent of the whole body.” Erso was uncomfortable because he thought the wording was a little over the top. He waited for the lawyers to contact him and challenge it, but they did not. After the generous report, his reputation grew in the personal injury litigation circle. Referrals began coming in regularly, and soon his calendar was booked two and half years in advance.
A Growing Company
Auswide Insurance Limited has offices in all of Australia's capital cities and had been in business for decades. The company offers general insurance products, including home and contents, vehicle, boat, marine and travel. It also offers injury products, such as compulsory third party, public and product liability and life insurance.
Auswide leadership embarked on an aggressive expansion of operations and acquired a number of leading Australasian insurers, including one that offered workers' compensation insurance. After the various acquisitions, the company began a major software and information technology (IT) revitalization because many of its systems were outdated and incompatible.
As part of the expansion, the company grew its special investigation unit (SIU). Then the investigation areas were reorganized and in some states cut entirely. The SIU's headquarters was located in Brisbane, Queensland. It was managed in two sections: the general insurance arm and injury claim arm.
I was hired as a senior investigator in the injury claims unit and oversaw the expansion of the team from three investigators to nine over the next few years. Most of our investigations were involved with claim fraud arising from motor vehicle injuries. However, we investigated all types of claim fraud. Furthermore, to provide Australia wider coverage and to manage the large number of claims, we used the services of a number of external private investigation firms.
Auswide Insurance Limited is one of Australia's largest insurance companies, employing more than 3,500 staff and with an income of more than 3.1 billion.
On a Hunch
It was early Monday morning in October, and I just sat down at my desk and was once again admiring the pristine views of the Brisbane River as I waited for my computer to boot up when I received a phone call. The caller introduced himself as Peter Butler, Investigation Manager of Alpha Insurance. Peter and I had met briefly about a year ago at an anti-fraud conference in Sydney. As at any of these trade events, attendees spent a lot of time networking and handing out business cards.
After some small talk, Peter got down to the reason why he called. “I think there is an issue with one of your claimants . . . truthfully I have no idea if it is one of yours! I am doing the ring-around.” Peter went on to say “I received a call from an orthopedic surgeon whom we use for our workers' compensation claims. The informant went to a seminar in New Zealand, and one of the speakers was an Australian orthopedic surgeon. The informant told me that the speaker was on a compensation claim arising from a motor accident. I got the impression it was more likely to be gossip; you know what these after-5 drinks are like,” Peter said.
I said, “Why go to a seminar and present if you're on a claim?” Thinking a little more about it, I agreed that it was quite strange. I began to shift the various case folders and reports that were stacked on my desk, looking for a pen. “Can you give me the orthopedic surgeon's name?”
“Edward Ahmet,” Peter said.
“Thanks, Peter. I'll make some inquiries and have a look at what we got and I will let you know. It may take a few days.” After I hung up, I sat at my desk for a few minutes and thought about the odd situation. Initially I thought maybe nothing was wrong. Claimants are capable of working even if they are receiving workers' compensation, providing they have told their doctor and us. Actually, we are happy if they do; it means their health is improving, and we will save money. Then I recalled a story of a claimant who was reporting to be on a total disability claim. One of our investigators was watching television one night and realized that an actor in a television advertisement was the claimant! It would not hurt to check.
I opened up the claims database and reviewed all the active personal injury investigations. I decided to start my search by looking for any doctors. We had three listed, but none by the name of Edward Ahmet.
I called Peter back and I asked if we could speak with the informant. He said he would see what he could do. Peter organized a telephone conference with us and the informant, who was not one of the normal complainants we usually heard from (an ex-spouse, neighbor or coworker who was outraged that the claimant was going to get a big disability payment). Rather, this informant was Dr. Gregory Hugo, a respected orthopedic surgeon. Hugo started by saying “It may be nothing, but I think one of the speakers at the September conference is on a claim. There was talk at the conference about Dr. Ahmet's car accident and that he had been in the hospital a couple of years ago. He seemed fine and displayed no sign of injury. There was also some talk among the conference attendees about him working in Melbourne. He could still be on a compensation claim.”
I asked Dr. Hugo if he had a copy of the conference agenda. He said he did and could email it to me. I summarized the information I had and emailed it to Auswide's claims manager, Steven Phillips. I also asked if the claims officers could check their current cases for a claim by Edward Ahmet. Experience taught me to also check on the surname only. I had worked on a number of cases involving Asian claimants who used English first names rather than their own given names. It would not hurt to check.
Paging Dr. Ahmet
Recent mergers with various other insurers resulted in a number of different computer systems that could not “talk” with each other. Indeed, the investigation system was not scheduled to link with the claims data for about three months hence. So it was a long, two-day wait until I received an email from the claims manager with a list of all the claimants by the name of Ahmet. Toward the end of the list was Dr. Erso Ahmet. I thought to myself, this could not be a coincidence!
I emailed the claims officer asking for the case file to be sent through the internal mail. The next day was Friday, and it arrived on my desk at about ten o'clock. I opened the file, which was quite light on detail. The policy had been taken out five years ago. It was what we refer to as a stapled policy, which was developed specifically for those in the medical profession. It included income protection, accident injury and business expense coverage. The income protection policy was designed to cover lost wages for a period of five years. Two years after the policy had been taken out, the claimant was involved in a motor vehicle accident that resulted in him making a claim. A quick review indicated the following payouts:
Accident injury policy lump sum$10,000Business expense coverage$20,000Income protection per month$15,000The income protection account stated that as of October, we had paid $540,000 in claim protection over the last few years.
The file also included copies of Dr. Ahmet's income tax returns, which we require because the policy pays 75 percent of the income earned before the accident. The paid benefit is treated as income. On the income tax return, the doctor claimed business income was nil, and his occupation was listed as “orthopedic surgeon.” My first thought was the doctor had returned to work and not disclosed his employment. But then the name was not an exact match? Could it have been someone else?
I decided that the most effective way to get to the bottom of it was to call the doctor. I looked up the home phone number on the claim and called it. It rang several times and when a man answered, he identified himself as Dr. Ahmet. I explained that I worked for Auswide Insurance and needed to clarify a few details on his claim. We had a general chat about the claim and how he was feeling. He said he was still in occasional pain and on medication for it. I asked if he had attended a conference overseas. Without any hesitation he said, “Yes, in New Zealand.” To me the doctor sounded like he was happy to talk and he was not guarded in his responses. In short, he was asked by an old friend to speak at the New Zealand conference at the last minute when one of the speakers pulled out. He had not contacted his family doctor because the doctor was on vacation and he did not want to meet the replacement physician. Afterward, the conference had slipped his mind. So when he went back to the doctor the other week, he did not report it. He went on to say that the three-hour flight to Auckland was not nearly as long as the flight to Perth he had to make last year to see a specialist. He also told me he used the name Edward professionally because it was easier for people to remember.
I recall hanging up the telephone and thinking that it sounded reasonable. The story was believable, and the doctor did not deny going to the conference. Still, something did not feel right. I thought about how we had paid more than half a million in claims so far. Was he really working? The comments by Dr. Hugo echoed in my mind; surely he must have had some concerns himself.
I entered Dr. Ahmet's name into a Web browser to see what turned up — only one return with the name of Dr. E. Ahmet and the address and business phone number we had on his claim form. I dialed the number, but it was disconnected. I looked at the business address and noted that it was in a specialist medical center. I called the main line and spoke with a receptionist who told me that Dr. Ahmet no longer worked at the center and had not done so for some time. There were no other listings, and he was still living in Sydney. I also checked the white pages for listings in Melbourne but found nothing. Could Dr. Hugo have been wrong? I decided to issue instructions to one of our private investigators for some surveillance. I found myself actually hoping that I was being overly cautious.
Working Through the Pain
Later I received a phone call from the manager of the private investigation firm, who told me that during the surveillance period, Dr. Ahmet boarded flights for Melbourne on three occasions. The manager asked if I wanted someone in Melbourne to pick up the surveillance of Ahmet when he traveled, and I hesitantly agreed. A lot of the time surveillance is hit and miss, but I wanted to see where this would go.
A few weeks later it was mid-December, and I was looking forward to my annual holidays, when an email arrived from the private investigation company. I opened the attachment and read the cover letter. In brief, the report summarized:
The subject was observed across a four-week period. During this time, he was observed traveling on seven occasions from his residence to the Sydney domestic airport.On each occasion, he was observed boarding a flight to Melbourne.On three occasions, he was observed leaving Melbourne airport in a taxi.The subject was observed entering the foyer and taking the elevator to Level 27 at 140 William Street in Melbourne on two occasions.The investigator made inquiries with the reception staff on Level 27 and determined that a Dr. Edward Ahmet had an office on the floor.It appeared that Dr. Erso Ahmet was working in Melbourne under the name Edward. I realized a number of things. First, we had never conducted a fraud investigation into an income protection claim — most of our resources were focused on injury claims arising from motor accidents. This could be a very resource-intensive investigation. Second, we had never investigated a doctor, let alone a specialist.
I commenced a review of what I knew with the aim to develop an investigative strategy. The claimant was an orthopedic surgeon who lived in Sydney and possibly worked in Melbourne. I made a wide range of inquiries with specialist practices throughout Melbourne to no avail. I thought perhaps Dr. Ahmet was taking referrals only. I knew that he would have to either write reports for insurers or personal injury solicitors, which would result in a paper trail for me to follow.
I put in a request to our IT department to search for all reports with the name “Ahmet.” We had just introduced a policy of scanning reports for personal injury claims, but I was warned that the process was far from guaranteed, as it relied on the claims staff scanning hard-copy reports. I was also told that several departments, including sections of liability claims, had not commenced this practice. Not the most auspicious start to the case.
I returned to work in late January and found out IT finished the report search for “Ahmet”; it found more than 2,000 documents. Then I narrowed the search to medical reports written by “Dr. Edward Ahmet.”
We had received the first claimant report written by Dr. Ahmet nearly three years earlier. Since then he had written almost 600 reports for personal injury solicitor firms. I examined each of the accounts and noted they recorded the doctor's business address as 140 William Street in Melbourne and another at Chiefly Tower in Sydney. Until then I was not even aware that Ahmet was working in Sydney. When I compared the dates with Ahmet's own medical claim, I noted that on several dates that he had reported to his doctor that he was still unfit to resume duties, he had in fact done consulting for personal injury solicitors. I began to calculate the fees he had charged for each of his reports. I diligently entered the fees into a spreadsheet and found they totaled $342,511.
Another shock followed soon. The search picked up all of Auswide's documents with the name Ahmet, and while sorting through them, I found an email and service contract dated four months earlier. Dr. Edward Ahmet had been offered a position on our injury claim panel of surgeons in Melbourne! Amazingly, he was now consulting for us on injuries caused by car accidents. During this time, he charged Auswide $15,000 in consulting fees. In one case, we wrote that he suspected that the claimant was exaggerating the limitations!
I totaled up the undisclosed work and benefits paid to date:
Claimant solicitor consultations$342,511Auswide Insurance consultations$15,000Claim payments$570,000Total:$927,511I entered the details of the investigators' reports, surveillance evidence and each of the 600 reports and other documents into our case management system. Once I had collected the evidence, I organized a meeting with Jill Duggan, manager of Legal Services. Jill said, “This is incredible. . . . He has been working for us.” We decided that the next course of action would be to offer the claimant an interview to see if he was willing to explain himself. Jill agreed to be present.
Indisputable Evidence
I called Dr. Ahmet and asked if he could come into our Sydney office next week, and he agreed. On the day of the interview I greeted Dr. Ahmet in the reception area at about 9:30 a.m. and invited him into a conference room. I decided to use this room as it was not as cramped or formal as the interview room. Our interviews are not recorded using audio or video recording equipment; we still managed the interview process the old-fashioned way — writing notes on paper.
Jill greeted Dr. Ahmet, who had arrived alone. I asked if he wanted anyone present. He waved away my concern and said no. Jill and I had conducted interviews together in the past, and, before this one, we had agreed that I would lead it and Jill would take notes. This would allow me to spend my time listening to Dr. Ahmet, asking relevant questions and introducing various exhibits.
I started by asking Dr. Ahmet about his health and how his claim had been managed so far. I then went through the necessary background details, such as name, address, occupation and his signed claim form. I asked him to elaborate on his medical and employment history. I did not want a confrontational interview so I spent time building rapport with him. This was important because, as an insurance investigator, I had no legal power to compel a person to attend or remain in an interview. I needed to foster an environment where he would be willing to tell me his story.
Dr. Ahmet asked if we were checking up on him, and I responded with “Should we be checking up on you?”
He simply gestured to a large number of case folders I had placed on the table behind us. I asked if he wanted to tell us anything before we started, but he said no.
When Jill and I planned the interview, we decided to play the surveillance video first. Normally we use video last, as it often provokes claimants who view surveillance as being spied on. However, since the video did not prove or disprove his injury, we wanted to see where it would take the interview. We played some of the footage taken by our investigators in Sydney.
I asked Dr. Ahmet if he had any comments. He said, “Not really — that suggests I am mobile. I have never said that I am not. It really does not show much at all. I went to the airport, so what?”
I said, “You went to the airport several times in a week.”
“So?” he asked.
