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Managing Mass Claim Fraud Investigations
Managing Mass Claim Fraud Investigations: Lessons Learned from the Gulf Oil Spill Kenneth C. Citarella Managing Director, Investigations June 18, 2012 Deepwater Horizon 2 Deepwater Horizon 3 Statistics 4.9 billion barrels of oil 780,000 cu. meters 86 days 491 miles of shoreline affected 4,200 sq. miles of Gulf closed to shipping 4 May 21, 2010, Fishery Closure 5 June 28, 2010, Fishery Closure 6 Gulf Coast Claims Facility U.S. and BP create GCCF Kenneth Feinberg becomes Independent Trustee of Compensation Fund August 23, 2010, begins operation Parallel to Class Action 7 Limitations Claim Resolution Policies Internal Operations GCCF Timeframe – 8/10 to 3/12 Number of Investigations Internal Affairs 8 Gulf Coast Claims Facility Feinberg Rozen Worley PWC Brown Greer Garden City Group Guidepost Solutions 9 Gulf Coast Claims Facility TX Guidepost Solutions Project Manager Deputy Project Managers Team Managers Case Managers Investigators LA MS AL FL 10 GCCF Phases Emergency Assistance Program Quick Pay Interim Payment Final Payment 11 GCCF Statistics – March 9, 2012 Claimants – – Individuals Businesses 574,881 454,026 120,855 Represented by Counsel 92,963 Claims 1,061,405 Payments $6.1 Billion 12 Types of Claims Removal and Clean Up Costs Property Damage Loss of Earnings or Profits Loss of Subsistence Physical Injury or Death 13 Investigation Referrals K. Feinberg testifies on January 27, 2011, that 7,575 claims might be fraudulent Receive explanation with each Single Claim Multi-Claim – – – Numerous sub-schemes Spin offs and false leads Add-ons Pattern of referrals shifts over time 14 Investigation Referrals Common Reasons Suspicious documents – fishing, pay stubs, banking, tax, financials Suspect identity, employer, vessel Common addresses, email, fax, facts Inconsistency among related claims 15 Investigation Referrals Generate Referrals Find related claims Leads from: Employers Witnesses Claimants Informants No investigation without formal referral 16 Investigation Process - 1 1) 2) 3) 4) 5) 6) 7) 8) Referrals from GCCF Database entry with document migration Review for assignment Assign to team Assign to Case Manager Investigation Plan Assign to Senior Investigator Assign to Field Investigator 17 Investigation Process - 2 1) 2) 3) 4) 5) 6) 7) Investigator reports uploaded Acquired documents uploaded Feedback Completed? Case Manager proposes closing category Team Manager concurs Team Managers closes, except for possible fraud 18 Investigation Process - 3 1) 2) 3) 4) 5) 6) Case Manager drafts fraud report Team Manager reviews Editor reviews Project Manager or Deputy Distribute to GCCF GCCF reviews for possible referral to DOJ 19 Investigation Database Case Management – – – Intake Assignment Communication Performance Quality Control Document Storage Compliance 20 Investigation Database Inherited database from prior BP investigation team Limitations apparent Custom design Migration Training 21 Case Managers Started with 3 – – – Separated for multi-claims – Who is best Create teams – All investigators Add prosecutors Plan, run, and write Who is best manager Peak at 90 42 at transition 22 Case Managers Where find? – – – Friends and former coworkers People they know Suppliers Never advertised Downsizing 23 Invoice Management Format and content Expect audit – – DOJ BP Standardize all contractor invoices form and content Remove non-billable activities 24 Closing Categories Possible Fraud No Proof of Loss No Independent Support Okay Set by GCCF GCCF decides 25 The Great Dilemma The Underground Economy What are taxes? No SSN No bank accounts No business records Could still be legitimate 26 The Great Dilemma Family fishing business Father captain Mother and children deckhands All-cash business No financial records Registered vessel, licensed captain fishing permit Never filed taxes or reported small percentage 27 The Great Dilemma – The Investigation Confirm documents Interview family – – Know fishing Look the part Identify purchasers Inspect vessel – – Right kind and registered Seaworthy 28 Closing Criteria Totally up to GCCF Not tax dollars Not insurance company No criminal law definitions of insurance fraud apply Retrain the law enforcement mind 29 Claim Form Signature Page 30 Problems Arising from Law Enforcement Mentality Inclined to investigate too thoroughly Not a law enforcement function Law of criminal fraud does not apply Not preparing for prosecution Interviewing for a confession 31 Investigator Procedures Guidepost business cards and PI identification GCCF confirmation number “Here to help” attitude Burden on claimant No opinion or encouragement Security and confidentiality Deadline letters 32 Investigator Procedures Responding to complaints – – All but one unfounded Immediate termination Acquiring documents Closed case files Law enforcement contact 33 Investigator Procedures Two for all claimant interviews – – No recording No signed statements Through counsel Ask nicely No emails with claimants 34 Investigators Kept BP operation – Local talent Former law enforcement – No access to BP investigation All levels Peaked at about 225 35 Law Enforcement Relations GCCF set protocols – National Center for Disaster Fraud Parallel federal investigations from DOJ Hotline DOJ requests for documents and interviews Stand-down requests Coordinate through GCCF GCCF refers fraud reports to DOJ 36 Quality Control All investigator reports reviewed before posted Older investigations Cold investigations Investigators believe done Encourage disagreements and decisions Case and Team Managers agree for non-fraud cases Three-level review for fraud reports 37 Reporting to GCCF Daily Investigation List – With Aging Report Daily Closure Report ad hoc requests Attorney representation issues Standard correspondence DOJ compliance Referral requests High-profile investigations 38 Confirmation Provide business card with Guidepost name and address “Gulf Coast Claims Investigator” Toll-free confirmation number List of all investigators and contact numbers – Update as needed 39 Preparers Clergy Lawyers Accountants Community Activists Could be hub of a scheme – Could be a dupe – Creating similar false documents Accepting what claimants report Could be genuinely helpful 40 Medical Records Physical injuries allegedly caused by spill, usually clean-up work Asked for waiver from claimant Showed submitted medical records to physician to determine authenticity not diagnosis 41 Tax Forms and Financial Records Contact accountant Some refused to cooperate without permission from claimant Some cooperated One accountant admitted falsifying many forms to inflate claims so clients would get adequate compensation 42 Working Environment BP Speed Transparency Fairness Fraud Prevention Pressure – – – Public Politicians Media 43 Guidepost in Gulf Media 44 Guidepost in Gulf Media Stories differ on whether their investigators are identifying themselves as working for the GCCF… What’s been your experience? A certain disenfranchised citizen would like to hear about it… Have a nice day. Reddit Written by D…. T….. February 8, 2011 at 5:29 AM 45 Guidepost in Gulf Media This company is causing me a headache. They want to verify my tax documents and bank statements. I think their only doing that cause its taking gccf longer than 14 days to settle a quick payment..its been 42 days and now they say guidepost is investigating my documents yeah ok if you want to go ahead but when u finished I don’t even want the 25000 offer now my paperwork is so legit that now I’m going for the full review. Guidepost and gccf both fraudulent not us. ms d….. February 8, 2011 at 5:48 AM 46 Guidepost in Gulf Media “two men dressed in black” “generic looking business card” “hired to find ways to deny claims” “These men are not your friends and claimants should not speak to them.” 47 Guidepost in the Gulf Media “should not show up at your door and ask questions” “sign of intimidation” “This is unreasonable, immoral, unjust and thug behavior.” 48 Guidepost in the Gulf Media Disenfranchised Citizen – 2/12/11 “As I wrote a few days ago, a new phenomenon is occurring on the Gulf Coast. Some claimants who have applied for the quick pay from the GCCF, an application the GCCF stated would be automatic for people who had received an EAP and would require no further review, have suddenly found their EAP’s under investigation for fraud. Guidepost Solutions, the investigative arm of Ken Feinberg’s GCCF, have been making contact and making demands of claimants.” 49 Guidepost in the Gulf Media “Dear Claimant: “The GCCF has received your Quick Payment Final Claim Form and Release. After investigating certain aspects of the documents and information that you previously provided to us relating to your Emergency Advance Payment claim, we have determined that there is insufficient reliable evidence to support your Quick Payment claim and that further investigation is required…” 50 Investigations All from public information Typical examples Prosecutions solely up to DOJ / USA Offices – – Wire fraud Mail fraud Few state prosecutions 51 Investigations Confessions! Thought no one would look “Everyone else getting paid” Legitimate claims supported by false document Legitimate EAP claims morph into false interim or final One successful false claim becomes a scheme 52 “Fishing” Vessels 53 “Fishing” Vessels 54 “Fishing” Vessels 55 “Fishing” Vessels 56 “Fishing” Vessels 57 Search Warrant Tax company suspected in alleged BP fraud by Paul Murphy / Eyewitness News wwltv.com Posted on March 2, 2011 at 6:29 PM NEW ORLEANS -- The sign on the door reads Fast Track Tax Service. But, according to documents in support of a search warrant, uncovered by 4 Investigates, federal authorities suspect the Airline Highway office in LaPlace was used for more than just tax preparations. The affidavit indicates during the course of a criminal investigation that began late last year, agents suspect Fast Track's computers, copiers and printers may have been used to manufacture and submit fraudulent disaster assistance claims with BP and the Gulf Coast Claims Facility. 58 Search Warrant According to the affidavit, 81 claims were filed, requesting $4.9 million in compensation from BP, and the alleged plan involved the creation of fake "Captains’ Letters" indicating that the person making the claim was a deckhand on a fishing boat that lost income as a result of the oil spill. According to investigators, the alleged enterprise netted more than $500,000 in payments. 59 Florida Couple with Many Names Charged with using 34 stolen identities to file GCCF claims Addresses in LA, MS, AL, and FL panhandle $340,000 sent to account in TX credit union Also charged in other disaster frauds from – – – Hurricane Gustav in LA North Dakota flooding Tropical Storm Irene in NY 60 Florida Couple with Many Names Mail drops in NYC, AL, MI, CA, FL, IL “I don’t have an account” 61 Florida Couple with Many Names 62 Florida Forgeries Letter allegedly from manager of lumber yard for $16,500 claim – – Letter allegedly from employer at deli for $7,200 claim – – Never lost job Lied to FBI Had voluntarily quit Witness tampering with federal GJ witness Letter allegedly from hotel management for $3,844 claim – Fired for misconduct as a pool cleaner 63 Wife of Former N.O. Police Officer False seafood sales receipts used in claim Husband involved in Danziger Bridge cover up Claims husband worked at hotel and fished after left NOPD Started at hotel 3 weeks after oil spill $22,600 and $11,307 paid Guilty plea, facing 20 years 64 False Injuries Alabama claimant alleged loss of income and physical injury from clean up – – Reviewed records and interviewed clients who allegedly canceled contracts Interviewed other members of clean-up crew Crewman on tending vessel filed a claim for $45,000,000 for physical injuries and PTSD. 65 Backyard Fishing $14,700 paid to Alabama fisherman False tax returns and payroll stubs False financials from a real company he never worked for Boat in the backyard 66 False Employment Documents Mother and son “worked” for staffing company – – $18,500 in two payments – payroll stubs allegedly from AL restaurant $13,800 – payroll stubs allegedly from AL aerospace company May be obvious on face or require employer assistance – – – Payroll stubs Employer letters W-2 and 1099 forms – “live” or altered 67 Nonexistent Businesses Smitty’s Catering in AL $800,000 in false claims for 45 “employees” Fake bank statements and termination letters $63,600 paid “Owner” received $3,800 “Owner” of Alabama cleaning business collected $35,000 for “losing” $800 a week in income 68 Real Business / False Claim LA food mart was sold prior to the oil spill but owner still put in claim for $42,000 69 Oil Spill in the Gulf? Michigan man indicted for submitting false MS tax documents and business license for a business he “owned” – $180,000 claim FL East Coast fisherman claimed $100,000 in lost income 70 Dead Claimant NC woman adopted identity of dead sister who had lived in New Orleans $15,600 in lost income alleged Claimed was laid off from real seafood company Claimant used her mother’s NC address Fabricated driver’s license, termination letter, and eviction notice 71 Dead Claimant Internet search found obituary Mother helped investigators Called us to prove she was real Prior disaster fraud convictions Pleaded on eve of trial 72 Shrimp Beheaders “Shrimpheaders” – 517 false claims all based on a common false hardship letter alleging loss of employment as a shrimp head remover. 73 False Paystubs “5 New Orleans Restaurants” – 37 claims alleging employment at 5 restaurants, all with similar false paystubs. “ADP Payrolls” – 54 claims all using a similar false paystub, usually allegedly issued by ADP for the purported employer. 74 Bribery Offer Investigator offered $1,000,000 bribe to provide a favorable report on two $16,000,000 claims by one businessman. 75 Very Crowded Crabbing Boat “Schedule C” – 81 claimants used copies of documents supporting legitimate father/son claims alleging they were all deckhands on one crab boat. 76 Helping Your Friends “Wild Magnolias” – 25 claims from “employees” of two businesses supported by fabricated documents prepared by one ex-employee. – $248,328 claimed; $10,500 paid. 77 Fast Food Scheme Initiated by informant 111 claims investigated At least 100 fraudulent 28 fast food chain employers 78 Fast Food Scheme Common false documents – – – – – – Employment letters Social Security cards Residential addresses Telephone numbers Email addresses Paystubs 79 Fast Food Scheme 80 Lessons Learned 9 9 9 9 9 Single email system Single database Cooperative planning early and often All phases of operation are interrelated, so keep each other informed Planning very difficult due to highly irregular referral rate 9 9 Constant re-organization Operational chokepoint is a shifting target 81 Lessons Learned 9 9 9 9 9 9 No career path but personnel will often act as if there is Reassignments hurt feelings Discuss law enforcement early on Assume you will be overwhelmed and that everyone else is Keep a sense of humor Understand client’s objective 82 Lessons Learned 9 9 9 9 9 9 Database function and design Burnout Good people will leave Assign work to best people to keep them interested and on team Report format and content Repeat, review, and remind 83 Thank You Kenneth C. Citarella Managing Director, Investigations Guidepost Solutions LLC 415 Madison Ave, 11th Floor New York, NY 10017 212-817-6700 84 “Association of Certified Fraud Examiners,” “Certified Fraud Examiner,” “CFE,” “ACFE,” and the ACFE Logo are trademarks owned by the Association of Certified Fraud Examiners, Inc. The contents of this paper may not be transmitted, re-published, modified, reproduced, distributed, copied, or sold without the prior consent of the author.
