EYE on OIG - April 1, 2008

Contents:
 

• Investigative Highlights
• Audit Report Highlights
• Civil Monetary Penalty Highlights
• Around OIG
• SSA OIG by the Numbers

Investigative Highlights

Former Hollywood Entertainer Defrauds SSA of $244,903

Our Los Angeles office opened an investigation after an SSA office in Los Angeles reported that an SSI recipient had continued to receive his father's Title II retirement benefits after his death. Our investigation revealed that Bill Williams, a well-known Hollywood entertainer during the 1970s, had endorsed and cashed his father's benefit checks since 1984. Williams had been receiving SSI based on mood disorders since 2006.

Because Williams was found retroactively ineligible for SSI based on the income from his deceased father's benefits, SSA assessed an overpayment of $10,152. The fraud loss from the theft of his father's benefits totaled $234,751. When interviewed, Williams admitted receiving his father's benefits fraudulently and concealing the income from SSA. Williams pled guilty to grand theft and was sentenced in January 2008 to 2 years' incarceration and full restitution to SSA.

Woman Claiming Mental Retardation Launches Mortgage Brokerage Firm

Our St. Louis office opened a joint investigation with the United States Postal Inspection Service, based on a referral from an SSA office in Clayton, Missouri. SSA reported that earnings records showed more than $100,000 annual income for a woman who had been receiving Title II disability benefits for mental retardation and schizophrenia since 1985.

Our investigation revealed that the woman had owned and operated a mortgage brokerage firm since 1999. We further determined that the woman had forged a judge's signature on a bankruptcy document, then purchased an $800,000 home using fraudulent loan application documents. She subsequently defaulted on the loan and the home is in foreclosure.

The woman pled guilty to Social Security fraud and wire fraud, and was sentenced in January 2008 to 33 months in prison and restitution of $153,857 to SSA and $70,718 to a mortgage company.

Woman Sentenced to 43 Years in Prison for Hurricane-Related Fraud

Our Birmingham office investigated an SSI recipient based on a request for assistance from a U.S. Attorney's Office (USAO) in Alabama. The USAO reported that the woman was the subject of a Federal Emergency Management Agency (FEMA) investigation for filing false disaster-relief claims following Hurricane Katrina.

Our investigation revealed that the woman had been receiving SSI since 1999 based on mental retardation and mood disorders. Moreover, she had concealed from SSA all income received from filing the false FEMA claims. SSA subsequently terminated the woman's SSI payments. The investigation also revealed that the woman, working with several co-conspirators, had filed 15 false FEMA claims using false Social Security numbers.

After a jury trial, the woman was found guilty of 22 counts, including theft, conspiracy, drug distribution, threatening a witness, and possession of a firearm. Based on the minimum sentencing guidelines, she was sentenced in January 2008 to 43 years in Federal prison and restitution to FEMA of $79,607.

Woman Receives SSI for 10 Years While Working Full-Time

The St. Louis CDI Unit investigated a 42-year-old woman who had been receiving SSI since 1997 for varicose veins and obesity. The Missouri Fraud and Noncompliance Unit reported to CDI investigators that the woman, also under investigation for workers' compensation fraud, was working full-time.

Our investigation revealed that the woman received $14,827.64 in wages from April 2006 through November 2006. The woman never reported her earnings to the SSA. When interviewed, the woman admitted that she had worked as a receptionist for her ex-husband's company since 1995. The woman advised that she did not inform SSA of her employment because she was afraid of losing her Medicaid benefits. She further stated that she stopped working after the State workers' compensation investigation began.

Based on our investigation, SSA assessed an overpayment of $47,113 due to the woman's unreported work activity from October 1997 through February 2007. In November 2007, the woman entered a Federal pre-trial diversion program, and was placed on probation for 18 months. She was also ordered to make full restitution to SSA.

Administrative Law Judges' Caseload Performance (View Report A-07-07-17072)

In this audit, we evaluated the effect of varying levels of administrative law judges' (ALJ) caseload performance on the Office of Disability Adjudication and Review's (ODAR) ability to process projected hearing requests and address SSA's growing backlog of pending disability claims.

We found that ODAR's ability to process projected hearing requests and address the growing backlog of cases will continue to be negatively impacted by the caseload performance of some ALJs if their current performance levels continue. In FY 2006, fully available ALJs processed cases ranging from a low of 40 to a high of 1,805 (with an average of 485). There is currently no official minimum number of cases an ALJ is required to process.

Based on our analysis, at the FY 2006 production level, ODAR would not be able to process all of the projected hearing requests over the next 5 years. Based on the true backlog of 345,000 cases, we estimate that if ALJs continue to process cases at the FY 2006 level, and the number of fully and partially available ALJs each remain the same, the backlog will increase by about 150,000 cases by FY 2012. However, if fully available ALJs performed at the production levels of 500 or 550 cases, ODAR would be able to process all hearing requests and make reductions in the backlog through FY 2012.

We recommended, and SSA agreed that it should (1) establish an ALJ performance accountability process based on availability; (2) assess offices' caseload performance and take appropriate corrective actions; and (3) evaluate caseload management procedures and share best practices among regions.

The Social Security Administration's Income and Resource Verification Process for Individuals Applying for Help with Medicare Prescription Drug Plan Costs (View Report A-06-06-16135)

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 established a new Part D Prescription Drug Program. The Centers for Medicare and Medicaid Services are primarily responsible for this program. However, SSA supplies applications for the low-income subsidy, and assists the public with filing these applications. SSA's primary role is to determine whether a person will be eligible for a subsidy based on income and resources. We conducted this audit to gauge the effectiveness of SSA's income and resource verifications performed for individuals applying for the Part D low-income subsidy.

Our review indicated that SSA properly denied subsidy applications because individuals' income and resources exceeded limitations specified by law. However, we estimate that SSA approved Medicare Part D low-income subsidies to approximately 276,000 applicants whose income and/or resources exceeded established eligibility limits. The enrollment of these individuals in prescription drug plans would result in estimated low-income subsidy expenditures of approximately $473 million during a 12-month period. This occurred primarily because SSA did not obtain information needed to verify income and resource amounts on subsidy applications prior to issuing eligibility determinations.

We further estimate that SSA's new redetermination process is unlikely to correct these errors in approximately 130,000 of the 276,000 cases. SSA believes it made correct subsidy award decisions based on information available when it rendered eligibility determinations. However, information now available indicates that SSA approved subsidies to a significant number of individuals who did not appear to meet eligibility limits.

We recommended that SSA (1) ensure that income and resource amounts appearing on applications are subjected to verification; (2) work more closely with the IRS to obtain timely income and resource data, and use this data to verify eligibility; and (3) ensure that its redetermination process identifies and terminates improperly awarded subsidies currently in effect.

Adjustment of Overpayment Balances Related to Title II Critical Payments (View Report A-04-07-17028)

When SSA determines that a beneficiary has been overpaid, it initiates recovery actions. In some cases, SSA will withhold the entire monthly benefit to recover the overpayment. However, if the beneficiary contacts a field office and can prove dire need for that withheld payment, the field office may issue a "critical payment" immediately. We conducted this audit to determine whether SSA properly adjusted overpayment balances after it issued critical payments.

For the period August 1, 2002 through August 31, 2005, we identified 72,883 critical payments that met our criteria, and randomly selected 250 payments to review. Our review found that SSA did not always adjust overpayment balances when it issued certain critical payments. For 73 (29 percent) of the 250 critical payments reviewed, SSA did not adjust its records to account for the related overpayment. As a result, SSA did not record $48,162 in overpayments. In total, we estimate that SSA did not account for approximately 21,282 overpayments totaling about $14 million from August 1, 2002 to August 31, 2005.

SSA generally agreed with several of our recommendations, including that SSA: include a systems indicator that specifies a critical payment was issued to replace an overpayment benefit withholding; and periodically perform a supervisory review on a sample of critical payments with overpayment indicators.

Citing limited information technology resources, SSA disagreed with our recommendation to modify its system to ask staff whether the critical payment adjustment also requires an action to account for an overpayment.

SSA is authorized under Section 1129 of the Social Security Act to impose civil monetary penalties (CMP) for each false statement made in applying for or continuing to receive SSA benefits, or for neglecting to report to SSA changes that affect benefit eligibility. SSA has delegated this CMP authority to OIG, which can impose up to $5,000 for each false statement or omission, as well as assessments in lieu of damages of up to twice the resulting benefit overpayment. For fiscal year 2008 to date (through February 29), Office of the Chief Counsel (OCCIG) attorneys have imposed $2,457,657 in penalties and assessments under the OIG's CMP program.

Woman Assessed $85,000 Penalty for Cashing Deceased Mother's Checks

Based on an OIG audit identifying individuals whose benefits continued to be paid after their deaths, our Seattle office investigated a woman who had forged and cashed her deceased mother's Social Security benefit checks since 2004. When our agents interviewed the woman, she stated that she only realized her actions were wrong when Department of Veterans' Affairs agents interviewed her for using veterans' benefits paid to her mother after her death.

The investigation revealed that she had previously pled guilty to theft of Government funds related to the misuse of veterans' benefits. Moreover, during the course of that investigation and prosecution, she had signed a sworn statement admitting that she had knowingly misused her mother's Social Security benefits. When the U.S. Attorney's Office declined to prosecute the Social Security fraud, agents referred the case to OCCIG for CMP action. The total benefit overpayment was $22,760, but OCCIG ultimately imposed $107,760 in penalties and assessments based on the woman's actions in receiving her mother's benefits and failing to report her death to SSA.

Husband and Wife Conceal Resources to Receive SSI for 11 Years

Our San Francisco office investigated a husband and wife based on a referral from the North Sacramento SSA office. Our investigation revealed that the two had failed to report $13,200 in cash resources when they applied for SSI in 1994. They continued to conceal those resources on multiple SSA forms over 11 years, until they used the money in 2005 to purchase burial contracts. Their daughter, who helped them apply for SSI when they moved to the United States from Fiji, had also failed to report her parents' cash resources, which would have made them ineligible to receive SSI. SSA assessed an overpayment totaling $39,515.

Agents referred the case to OCCIG for CMP action after the U.S. Attorney's Office declined to prosecute the husband and wife due to their advanced age. OCCIG negotiated a settlement in February 2008 in which the husband and wife agreed to pay a $10,000 penalty based on their false statements to SSA, and an assessment in lieu of damages of $28,000.

Inspector General in the Spotlight

On Feburary 28, 2008, Inspector General Patrick P. O'Carroll, Jr. testified before the House Committee on Appropriations, Subcommittee on Labor, HHS, Education, and Related Agencies at a hearing on the Social Security disability backlog. Other witnesses included Commissioner of Social Security Michael J. Astrue and Ronald G. Bernoski, president of the Association of Administrative Law Judges. Mr. O'Carroll shared with the Subcommittee details of the OIG's work in assessing factors contributing to the backlog and assisting SSA in its efforts to reduce disability processing times.

On February 5 and March 4, Inspector General O'Carroll served as a guest lecturer in the Inspectors General Program at Georgetown University's Public Policy Institute. In his lecture on "Public Policy in Action," Mr. O'Carroll discussed the OIG's role in the public policy arena and the relationship of an IG with the Agency head, Congress, and other stakeholders.

SSA OIG Leadership Development Program Participants Selected

Inspector General O'Carroll recently announced the first OIG Leadership Development Program (LDP), a succession-planning initiative aimed at developing qualified candidates for future OIG management vacancies. The LDP will give participants an opportunity to gain leadership experiences through rotational details in various positions.

On March 5, 2008, the Inspector General announced the LDP participant selections. From the Office of Investigations: Donald Jefferson, Misha Kelly, Michael McGill, Elias Papoulias, Antonio Puente, and Joseph Velling. From the Office of Audit: Jeffrey Brown and Deborah Kinsey. From the Office of the Chief Counsel: Joscelyn Funnie. Congratulations to all of the LDP selectees.

New "Fraud Advisory" Feature on OIG Website

Following a spate of telephone fraud schemes targeting Social Security beneficiaries around the country, and in coordination with SSA's Office of Communications, the Office of the Inspector General recently added a new feature to its website. "Fraud Advisories" provide the public with valuable information about fraud schemes as they arise in different regions, and give readers important tips to help them avoid becoming victims. Click here to view current OIG fraud advisories.

Our website provides guidelines for reporting fraud and a way to submit an allegation to our Fraud Hotline. For more information, click here.