EYE on OIG - July 13, 2006

Contents:

• In the News
• OI Case Highlights
• OCCIG Activities
• Office of Audit (OA) Activities
• Around OIG
• SSA OIG Fraud Hotline Stats

In The News

SSA OIG Hosts Annual PCIE/ECIE Training Conference and Retreat

Together with it's co-host, the Smithsonian Institution's Office of Inspector General, SSA's OIG planned and hosted the 2006 Annual President's Council on Integrity and Efficiency/Executive Council on Integrity and Efficiency Annual Training Conference and Retreat on May 1-4, 2006 at the Renaissance Waterfront Hotel and Conference Center in Portsmouth, Virginia. The theme of this year's conference was "Adapting to Change - The Changing Role of the Inspector General Community." The meeting was attended by approximately 90 individuals with representation from each of the 57 PCIE and ECIE member organizations.

Speakers were drawn from both the public and private sectors to address the changes in traditional IG workloads as well as to discuss how more contemporary issues like hurricane disaster relief and global terrorism are affecting IGs' work. Guest speakers included Dateline NBC's Chris Hansen, Sam Kharoba of First Capital Technologies, Frank Vogl of Vogl Communications and Joe Mancusi from the Center for Organizational Excellence. Among others, government speakers included Clay Johnson from OMB, Andre Hurtubise from Service Canada and Marilyn Glynn from the Office of Government Ethics. Several IG employees participated on two panels addressing their best practices in preventing fraud, waste and abuse.

The tidewater area of Virginia provided the perfect setting for this annual retreat. On the evening of Wednesday, May 3 attendees had the option of touring the U.S.S. Bataan, an amphibious assault ship stationed at the Norfolk Naval Base. The U.S.S. Bataan was the first Navy vessel to arrive in the hurricane-ravaged Gulf Coast shortly after Katrina's landfall in Louisiana. In addition to learning about the ship's primary mission and structure, tour attendees received a firsthand accounting of the humanitarian relief rendered to the victims of the Gulf Coast hurricanes. OIG is proud of its success in hosting this annual meeting. Attendees gave high marks to every session with an overall conference evaluation score of 4.42 on a scale of 1 to 5.

Office of Investigations (OI) Case Highlights

Postal Service Employee Sentenced to 30 Months in Prison for Theft of Disability Benefits

Our New Haven office investigated a woman employed by the United States Postal Service who fraudulently received $137,591 in disability benefits from both SSA and the Office of Personnel Management (OPM) between 1996 and 2005. She left the Postal Service in 1996, and filed claims for disability benefits in April and September 1999, alleging that she was unable to work because of various physical ailments that precluded her from gainful employment. The woman was awarded SSA disability benefits retroactive to September 1996 and received benefits until her conviction in August 2005. The United States Postal Inspection Service obtained extensive video surveillance footage of the woman between August 2000 and April 2001 which showed her engaging in activities inconsistent with her alleged disabilities. Our subsequent investigation determined that she had made misleading and fraudulent statements and representations about her medical condition to SSA during the benefit application process.

Our investigation led to indictments of both the woman and her husband for wire fraud, mail fraud, and conspiracy to commit wire fraud, and in August 2005, she was found guilty after a jury trial. She was sentenced in March 2006 to 30 months’ incarceration and 3 years of supervised release. Also, she was ordered to pay a $6,000 fine and $137,591 in restitution to SSA and OPM. The woman’s husband was acquitted of all charges.

Bar Owner Convicted of Social Security Fraud for Receiving More Than $84,000 in Benefits

Our OI office in Omaha, Nebraska opened an investigation after receiving information indicating that the owner and manager of a bar was fraudulently receiving Social Security disability benefits. The information also indicated that the man employed another disability recipient under her daughter’s identity. Our investigation, and a subsequent search warrant served at the owner’s residence and bar, confirmed the allegations. Social Security records indicate that the man repeatedly lied to SSA about his work activities. For example, he stated on his initial disability application that he owned the bar but did not engage in any active work there. As a result of his deception, SSA determined that the man had been overpaid $84,218 in benefits for which he was never eligible.

In September 2005, the bar owner was indicted on conspiracy to defraud the United States, mail fraud, Social Security fraud, and false statements. The indictment on mail fraud was later dropped, but the bar owner was found guilty on all of the remaining charges at trial. He was sentenced in March 2006 to serve 12 months and 1 day in prison and 3 years’ probation, and ordered to pay full restitution to SSA.

$2 M ID Theft Scheme Nets Man 63 Months in Prison

Our Seattle office undertook a four-year investigation which identified an identity theft ring across four States. The scheme consisted of two stages: first, the suspects obtained genuine government identification cards using fraudulent documents; then used the fictitious identities to defraud numerous financial institutions and merchants. The investigation identified that the scheme’s ringleader and his daughter provided false supporting documentation to several State licensing agencies, which issued identification documents to co-conspirators in aliases using other individuals’ SSNs. Our agents recovered approximately 200 false supporting documents, including birth certificates, military discharge documentation, rental agreements and marriage licenses. Using the victims’ SSNs and false identification, these individuals were able to open bank accounts, write bad checks to merchants, and withdraw cash from victims’ banks. The estimated fraud loss from this scheme is $2,000,000 in bank fraud and merchant fraud.

While our agents were executing a search warrant on the ringleader’s public storage locker, he arrived to drop off more stolen merchandise. He fled, but was subsequently arrested. The man and his daughter were indicted for conspiracy to commit, and the actual commission of, both bank fraud and SSN misuse. The man pled guilty to the SSN misuse charge and was sentenced to 63 months in prison and 3 years’ supervised release, and ordered to pay $172,122 in restitution to various businesses. Most of the other individuals involved in this scheme have also been indicted on various Federal charges.

Disability Recipient Concealed Earnings and Firearms

An investigation by our Phoenix office revealed that that a man who had been collecting Title II disability benefits for himself and his daughter since 1990 had, in fact, been self-employed as an insurance salesman from September 1994 forward, and had worked continuously since 1991. Various work documents seized during the execution of a search warrant on the man’s residence showed that he had worked various jobs from the time he began receiving SSDI. In all instances, however, the man had failed to report his work activity to SSA from 1991–1998. In addition, our investigation revealed that an Order of Protection was issued against the man in 2001, which prohibited him from possessing a firearm. During the execution of the search warrant, two firearms were discovered. The man was indicted for theft of Government funds and concealing or failing to disclose information. He was found guilty by a jury and sentenced in March 2006 to 18 months’ incarceration followed by 2 years’ supervised release, and ordered to pay restitution to SSA of $88,800.

OCCIG Activities

Supreme Court Declines To Hear Misleading Advertising Case

On May 30, 2006, the U.S. Supreme Court declined to consider constitutional challenges to Section 1140 of the Social Security Act raised by the United Seniors Association, Inc. (USA), now doing business as USANext. Section 1140 protects Social Security program words and symbols from being used in a manner that conveys a false sense of affiliation with SSA. OIG had earlier proposed a $554,196 penalty against USA for violating Section 1140 through its mailing of communications in envelopes that misled recipients into believing the mailing had some connection with SSA. A three-judge panel of the 4th U.S. Circuit Court of Appeals upheld the original hearing decision which found that USA consistently refused to cooperate with OIG’s compliance efforts and deliberately contravened the law. The decision found that USA’s envelopes created a “serious threat to the ability of the Social Security Administration to communicate freely with the public”and that the proposed penalty was reasonable. This case sends a clear message to companies who would seek to cloak their misleading intentions in Constitutional protections

Illinois Siblings Conceal Nearly $1,000,000 to Obtain SSI Benefits

In order to continue receiving SSI benefits, a Chicago woman concealed nearly $1,000,000 in resources (including retirement accounts, stocks, and real estate, as well as approximately $1,000 per month in income she received for cleaning the medical offices of a relative), and falsely reported to SSA that her only income consisted of her Social Security benefits. Moreover, while acting as her translator, the subject's brother provided false information to SSA regarding her resources, despite the fact that he knew or should have known about his sister's resources. As a result of the concealed income and assets, the subject improperly received $14,445 in benefits. SSA is currently collecting the overpayment. OCCIG imposed a Civil Monetary Penalty (CMP) of $35,000 upon the subject and $15,000 upon her brother for their false statements and misrepresentations, for a total of $50,000.

New York Car Salesman Conceals Work Activity to Collect Disability Benefits

A successful New York car salesman, who owned and managed three separate car dealerships, concealed his work activity to collect Disability Insurance Benefits. Although he returned to work a few weeks after surgery, he told SSA that he was unable to return to work. Pursuant to a Joint Investigation with the New York State Attorney General’s Office regarding fraudulent schemes in car dealerships, OIG learned that the subject owned and managed three business ventures despite his allegation of disability to SSA. The subject’s employees reported that the subject sold vehicles himself and directly supervised the staff. Additionally, he maintained an office at the car dealership where he met with customers, bank representatives and sales managers on a daily basis. In a CMP action, OCCIG identified seven individual false statements that the subject provided to SSA to facilitate the improper receipt of benefits. During the course of the negotiation, the subject maintained that he did not return to work although the evidence documents that he worked at the car dealership on a full-time basis each day. Ultimately, OCCIG imposed $25,000 in CMPs against the subject.

New York Limo Driver Conceals Work to Collect SSI

A New York limousine driver misrepresented his living arrangements and concealed his work activity to collect SSI benefits. Although he was working at the time of his application for SSI benefits, he falsely stated that he was unable to work. Additionally, he concealed his true living arrangements to maximize his receipt of benefits and avoid ineligibility as his wife’s income, if deemed to him, would have made him ineligible for SSI. During an SSI Redetermination, the local field office was alerted to a fraudulent living arrangements scam as the subject, along with several other SSI recipients, purported to reside alone at the same address. An OIG investigation also revealed that the subject had concealed work activity for 6 years. In a CMP action, OCCIG identified eight individual false statements that the subject provided to SSA to facilitate the improper receipt of benefits. Ultimately, OCCIG recovered $20,000 pursuant to a settlement agreement after the subject appealed this matter to the Departmental Appeals Board.

OA Activities

Congressional Response Report: Overpayments in the Social Security Administration’s Disability Program (View Report A-01-04-24065)

We responded to a request from United States Senator Charles Grassley. Senator Grassley requested (1) an audit to focus on producing an improper payment rate for SSA’s disability programs and (2) an analysis of the improper payment prevalence in four diagnosis groups (mental disorders; musculoskeletal system diseases; endocrine, nutritional and metabolic diseases; and injuries). Usually when SSA calculates payment accuracy rates, it follows the Office of Management and Budget (OMB) guidance. However, the Senator requested a statistically valid improper payment rate for SSA’s disability programs without regard to OMB guidance. Therefore, we developed overpayment rates on the basis that—for any medical or non-medical reason—the Agency assessed an overpayment, would have assessed an overpayment, or would not have issued a payment given perfect knowledge of all the facts. To analyze SSA’s data, we (1) quantified overpayments; (2) developed overpayment rates; (3) analyzed payments in four diagnosis groups; and (4) quantified benefits to potentially ineligible beneficiaries—such as those no longer disabled because of medical improvement. First, we estimated overpayments occurring between October 2003 – November 2005 as a result of conditions that existed as of October 2003 or earlier. Using OMB guidance, SSA:

• Detected overpayments totaling about $1.9 billion; and
• Had not yet detected overpayments totaling approximately $3.2 billion.

Second, we developed overpayment rates. Although we believe the overpayment rate is between 3.2 and 3.6 percent of benefits paid, the rate could be as high as 5.2 percent—taking into account the benefits the Agency would not have paid if it had perfect knowledge of all conditions affecting eligibility at the time the payments were issued. Third, when SSA did not already have information indicating possible payment issues, we conducted further analysis. We found 55 percent of the overpayments and payments issued to ineligible beneficiaries were in the four diagnosis groups in the Senator’s request. Similarly, in SSA’s general disability population, 54 percent of beneficiaries were in these same four diagnosis groups. Finally, we estimated about $2.1 billion in benefits were paid to potentially ineligible beneficiaries. This estimate was based on our sample cases where SSA stopped benefits during our review because of continuing disability reviews, income, prison/fugitive status, failure to cooperate, inability to locate, etc. Although our review of medical and non-medical factors could not provide a perfectly developed statistically valid overpayment rate, our analysis provided a point-of-time estimate of the amount of overpayments and payments SSA should not have made to ineligible disability beneficiaries. Further, it provided Congress, SSA and other decision-makers valuable information for making policy decisions—such as whether to provide additional resources for activities related to preventing overpayments and stopping benefit payments to individuals who are no longer eligible for them.

Concurrent Title II and Title XVI Beneficiaries Receiving Representative Payee and Direct Payments (View Report A-09-05-15144)

In this report, we examined whether SSA had adequate controls to prevent the direct payment of concurrent benefits to individuals who have been appointed a representative payee. As of April 2005, there were 11,399 concurrently entitled Title II and Title XVI beneficiaries receiving both representative payee and direct payments. We estimate these beneficiaries received $166 million in direct payments while the representative payees received $175 million on behalf of the beneficiaries. This included an estimated $49.7 million in benefit payments that SSA sent to different addresses or bank accounts for approximately 1,100 beneficiaries. Further, we found that if SSA does not determine whether the 11,399 concurrent beneficiaries should be paid directly or through a representative payee, an estimated $81.8 million in additional benefit payments will be paid over the next 12 months.SSA needs to improve its controls to prevent concurrent Title II and XVI beneficiaries from receiving representative payee and direct payments. We provided SSA with the 11,399 cases to take corrective actions. Also, we recommended and SSA agreed to: (1) determine whether potential representative payee misuse exists for the 1,100 cases where payments were sent to different addresses, post office boxes, or bank accounts; (2) develop a systems edit/alert to prevent and/or detect instances in which concurrent payments are made directly to a beneficiary and a representative payee; and (3) remind SSA technicians to verify whether beneficiaries are concurrently entitled when making representative payee determinations.

Payments Resulting from Disability Insurance Actions Processed via SSA’s Manual Adjustment, Credit and Award Processes (MADCAP) System (View Report A-04-05-15042)

Section 223 of The Act requires that SSA provide monthly DI benefits to eligible individuals who meet specific disability requirements. SSA’s automated systems process monthly DI payments. However, when SSA’s automated or direct input systems cannot completely process an action, authorized technicians at SSA’s program service centers must manually process the actions through the MADCAP system and MADCAP completes certain actions that result in payments. From July 1 through September 30, 2004, SSA issued about $578.4 million in MADCAP payments, with single payments ranging from $1,000 to $29,999.99 to Disability Insurance (DI) beneficiaries. We determined whether DI payments completed through the MADCAP system were accurate and approved. We reviewed a random sample of 250 DI MADCAP payments issued between July 1 and September 30, 2004 that were $1,000 or greater. Also, because payments of $30,000 or more are not paid through the MADCAP system, but through SSA’s Single Payment System (SPS), we judgmentally selected and reviewed six MADCAP payments equal to or greater than $29,999 to ensure their accuracy and to make certain the payments through the MADCAP system were appropriate. MADCAP payments of $3,000 or more did not always have documentation for the required approvals. Of the 250 sampled MADCAP payments, 166 were for $3,000 or more. Of those, 112 payments lacked evidence of such approval. The six additional MADCAP payments reviewed exceeded $3,000. However, we could not find evidence of approval for one of these six payments. Also, we determined that five of the six DI MADCAP payments equal to or greater than $29,999 were multiple payments involving one benefit action to the same individual. Although the total benefits paid for each of the actions was correct, we believe the payment for these benefit actions would have been more appropriately made through the Single Payment System. We recommended and SSA agreed to: (1) remind staff to verify supporting documentation; (2) provide guidance on documenting approval of MADCAP payments of $3,000 or more; and (3) ensure payments of $30,000 or more are processed through the SPS.

Impact of Statutory Benefit Continuation on SSI Payments Made during the Appeals Process (View Report A-07-05-15095)

Our objective was to evaluate the financial impact when recipients continue to receive SSI payments while appealing a medical decision to have payments stopped. A determination to stop benefits is made when a continuing disability review reveals that the beneficiary no longer meets the requirements for disability benefits. These decisions are made by disability examiners in SSA’s Office of Central Operations and the Disability Determination Services, as well as by disability specialists in the program service centers. The average Office of Disability Adjudication and Review (ODAR) processing time is 420 days for the SSI program. Benefit payments made during the ODAR appeal process are considered overpayments if the decision to stop benefits is upheld. SSA waives the overpayment when the beneficiary did not cause the overpayment. We estimate SSA paid over $199 million in SSI payments to recipients who received an appeal decision from ODAR between October 1, 2002 – September 30, 2004. Of this amount, about $146 million became overpayments when ODAR reached the decision that the recipient was no longer eligible to receive SSI payments. These large overpayments were increased because SSA has an inefficient process for making decisions on medical cessation appeals. Medical cessation appeals should not be processed in the same manner as cases that are not receiving payments. Therefore, appeals that involve benefit payments should be processed separately from those that do not involve payments to avoid or minimize overpayments. The President’s Management Agenda introduced the initiative of improved financial performance throughout Government agencies. SSA’s inefficient process for medical cessation determinations is not in line with the president’s vision. If SSA would develop a process for making decisions in medical cessation appeals in a timely manner, financial performance of the SSI program could be greatly increased. For example, if SSA decreased the processing time on the reconsideration and ODAR medical cessation appeals to 60 and 90 days respectively, overpayments of $106 million could have been avoided for FYs 2003 and 2004. Assuming all things remained equal in FY 2005, SSA could have avoided an additional $53 million in overpayments. Furthermore, SSA could have avoided overpayments of approximately $14 million if payments were stopped timely between levels of appeal. We recommended and SSA agreed to 1) enhance the business process to allow more timely decisions on medical cessation appeals; and 2) remind SSA components of the proper procedures for terminating SSI benefits following medical cessation appeals.

Around OIG

2006 Inspector General’s Awards

We are pleased to announce the recipients of the 2006 Inspector General's Award. The Inspector General's Award is OIG's most prestigious honor award and is presented each year to individuals and teams whose contributions and accomplishments have had a significant positive impact on OIG's ability to achieve its goals and objectives. All of these awardees have demonstrated an exceptional level of accomplishment and are worthy of the high commendation this award confers. The individual awardees are:

Kimberly A. Byrd – Office of Audit, Birmingham Audit Division – Ms. Byrd is recognized for her outstanding leadership of the Birmingham and Atlanta Audit Divisions, her role in the SSN Integrity and Protection Team and focus group, and her participation in workgroups related to the Immigration Reform and Terrorism Prevention Act of 2004.

Sarai D. Fenton – Office of Investigations, Kansas City Field Division, Des Moines Office – Special Agent Fenton is recognized for her outstanding investigative efforts during fiscal year 2005 resulting in savings and recoveries totaling more than $2 million.

Phillip W. Hanvy – Office of Audit, Boston Audit Division – Mr. Hanvy is recognized for his outstanding efforts to address improper payments and fraud in SSA’s programs, resulting in significant monetary savings and recoveries for the Agency.

Michael C. McCole – Office of Investigations, New York Field Division, Batavia Office- Special Agent McCole is recognized for the key role he played in the Help the Needy investigation, which was one of the largest terrorist-funded, money-laundering, national security investigations ever initiated by the Federal Government.

Belinda J. Robinson – Office of Investigations, Allegation Management Division – Ms. Robinson is recognized for her exceptional efforts to ensure the successful implementation of the National Investigative Case Management System and her role in training Allegation Management Division staff on the use of the new system.

Stephen L. Vaughan – Office of Investigations, Fugitive Enforcement Division – Mr. Vaughan is recognized for his efforts to ensure the successful creation of the Fugitive Enforcement Division and the expansion of OIG’s Fugitive Felon Program, and for his role in training Fugitive Enforcement Division staff to become certified NCIC terminal operators.

The team awardees are:

Dallas and Atlanta OI Field Divisions Hurricane Katrina Response Team – Ronald R. Jesz, Pamelia M. Koss, Robert S. Latimer, Joseph J. Luna, Wade V. Walters (Dallas Field Division); Mark L. Barnes, Christopher H. Cave, Oswaldo J. Fong (Dallas Field Division, Baton Rouge Office); Carol C. Conner, Gary W. Dickens, Suzanne E. Guenin, David W. Hubbard, Arthur R. Trevino (Dallas Field Division, Houston Office); Roland H. Maye (Atlanta Field Division); Rebecca A. Hart, Steven W. Wood (Atlanta Field Division, Jackson Office); Traci VaLaine Jones (Atlanta Field Division, Birmingham Office) – This award is given in appreciation of the outstanding assistance and coordination these employees provided to the Agency’s post-Hurricane relief efforts in Louisiana, Texas, Mississippi, and Alabama.

Department of Defense Employee Verification Audit Team – Walter E. Bayer, Jr., Richard W. Devers, Cylinda McCloud-Keal, Virginia E. Montelpare (Office of Audit, Philadelphia Audit Division) – The team is recognized for their work on two audits of DOD – Department of Defense Wage Items in the Earnings Suspense File (A-03-04-14041) and Unauthorized Work Social Security Numbers at the Department of Defense (A-03-05-25127) – which should enhance the integrity of DOD’s payroll systems and ensure improved controls related to programs involving Homeland Security.

Please join us in congratulating our colleagues on their significant accomplishments.

SSA OIG Fraud Hotline Stats

From June 26 - 30, 2006, the SSA OIG Fraud Hotline reported the following:

Allegation numbers issued: 1,495

Total allegations received this fiscal year: 74,216

Our website provides guidelines for reporting fraud and a way to submit an allegation to our Fraud Hotline. For more information, visit www.socialsecurity.gov/oig.