Social Security Fraud, Similar Fault, and Penalties



Social Security Fraud, Similar Fault, and Penalties
Social Security Fraud,
Similar Fault, and Penalties
in Overpayments
Kate Lang
Justice in Aging
Michael Walters
Center for Elder Rights Advocacy,
and Pro Seniors
October 8, 2015
Elder Law of Michigan’s Center for Elder Rights Advocacy is a partner in the
National Legal Resource Center. For more information about CERA, visit For more about the NLRC and to access its many
resources, visit
This webinar was supported, in part, by a grant from the US Department of
Health and Human Services, Administration on Aging (AoA). Grantees
undertaking projects under government sponsorship are encouraged to
express freely their findings and conclusions. Points of view or opinions do
not, therefore, necessarily represent official AoA policy.
This webinar is being recorded and will be
available at following the
A PDF of these materials is currently available at
Today’s Webinar
Remedies Foreclosed
Language from Notice
“Because of your conviction of fraud pertaining to the
$23,941.80 overpayment on your record, we are allowed
to withhold all of our benefits to recover the
overpayment. Therefore, you will not receive any
benefits beginning with the benefits you would have
received in August 2014. We will continue to withhold
all of your benefits until the entire overpayment has
been repaid. Please note that because of the fraud, the
overpayment can not be waived, reconsidered, repaid
via partial payments, or eliminated through bankruptcy.
Please note that this is also true of the overpayment on
your (SSI) record.”
Normal Hotline Advice
Advice on Reconsideration
Advice on Waiver
Advice on Lesser Withholding
Advice on Compromise
These Remedies May Not Apply
Often, the Horse Has Left the
Investigation of Fraud Allegations
• Mostly the jurisdiction of the Office of Inspector
General for non-disability issues.
• Even if discovered by a field office (or other)
employee, generally will be referred to OIG to make
findings and decide on further action.
• Disability cases are investigated by Cooperative
Disability Investigation (CDI) units.
Congressional Pressure on SSA
• There are currently at least 3 bills pending dealing
with Social Security fraud
• H.R.1419
• Social Security Fraud and Error Prevention Act of
• H.R.2359
• Disability Fraud Reduction and Unethical Deception
(FRAUD) Prevention Act
• S. 1929
• Disability Fraud Reduction and Unethical Deception
(FRAUD) Prevention Act
Congressional Pressure
• “Protecting the Safety Net from Waste, Fraud, and
Abuse” (House Ways & Means June 3 2015).
• Frequent OIG reports on fraud and abuse ordered by
• See also, e.g., the
scheduling of hearings
for 1400 disability
beneficiaries in
Kentucky because of
allegations of fraud
made against their
Hotline Strategies
• Note that much of the field office
instructions in POMS have been deemed
“sensitive” and are not available for review.
• Must assess under what provision the
penalty is being assessed.
• Penalties, when there has been no formal
adjudication of fraud, are often subject to
• See, e.g. POMS SI 02301.100 Assessing
SI 02301.100 Assessing Penalties
D. Procedure - when to consider a penalty
Consider whether a penalty may apply whenever you discover
a late report of a change. Follow these decision steps:
Does the change result in a past or future excess Federal
cash payment?
•IF YES, go to Step 2.
•IF NO, a penalty cannot apply. STOP.
Did the recipient or payee accept the excess payment?
(See GN 02604.115 on acceptance of benefits.)
•IF YES, go to Step 4.
•IF NO, go to Step 3.
Does the change result in a future excess Federal cash
•IF YES, consider a penalty if and when the recipient or
payee accepts the excess payment.
•IF NO, a penalty cannot apply. STOP.
Is the recipient a capable adult?
•IF YES, a penalty may apply. Develop good cause, see SI
•IF NO, a penalty cannot apply. STOP.
NOTE: You need not document the file that a penalty
cannot apply.
GN 02604.405 Administrative
Sanctions - Policy
“The mere fact that the person makes a false statement
or fails to disclose material information does not, by
itself, justify imposition of a sanction. You must also
find, based on the reasonable inferences you draw from
the evidence, that the person acted knowingly in making
the false statement or in failing to disclose information,
and that the person knew or should have known that
the failure to disclose material information was
misleading. Remember that NO type of event (like a
double check negotiation) FORCES imposition of a
What is an overpayment?
– When individual receives more money for month
than amount that should have been paid. The
amount of overpayment is difference between
amount received and amount due.
• Statute
– 42 USC§404
• Regulations
– 20 C.F.R.§§404.502 – 545 (Title II)
– 20 C.F.R.§§416.550 – 590 (Title XVI)
• POMS on Recovery Procedures
– GN 02210.000 et seq.
– SI 02220.000 et seq.
Improper Payments
“Most improper payments, including overpayments,
have other causes not related to fraud, such as errors in
calculating payments, beneficiaries failing to report in a
timely manner an event that affects eligibility, and
beneficiaries misunderstanding program rules.”
– Office of Inspector General, Follow-up Report on
Anti-Fraud Efforts Requested at the January 16,
2014 Hearing On Disability Fraud, February 14,
Improper Payment Rate
(in millions)
FY 2011
FY 2012
FY 2013
Total Benefit
Total Benefit
1.27% $1,239
Total Benefit
1.83% $948
7.34% $3,387
Penalties for Knowing
1) Administrative
2) Civil Monetary
3) Criminal Prosecution
Statute – Administrative
42 USC§1320a-8a
• Administrative Procedure for Imposing Penalties for
False or Misleading Statements
• Penalty:
– Nonpayment of Title II benefits
– Ineligibility for SSI cash benefits
– For certain duration (6 months, 12 months,
24 months)
Administrative Penalties for False or Misleading
• Standard of “knew or should have known, or acted
with knowing disregard for the truth”
• Decision based on evidence and reasonable
inferences, not speculation or suspicion
• Must consider any physical, mental, educational or
linguistic limitations
• Right to appeal as an initial determination
20 CFR§404.459, 20 CFR§416.1340
Administrative Penalties / Sanctions
• Any SSA employee may identify a case where
sanctions may apply at any time during claims
process or in post-entitlement situations
• A finding of fraud/intent to deceive is not required to
impose an administrative sanction
• Can be based on similar fault
POMS GN 02604.400 – GN 02604.460
Statute – Civil Monetary Penalties
42 USC§1320a-8
• Civil Monetary Penalties and Assessments for Titles
• Penalty:
– not more than $5,000 for each such
statement or receipt of benefits, and
– not more than twice the amount of benefits
or payments paid as a result
Civil Monetary Penalties, Assessments and
Recommended Exclusions
20 CFR Part 498
• Basis for CMP:
– Knew, or should have known, that the statement or
representation was false or misleading, or
– Made such statement with knowing disregard for
the truth
20 CFR§498.102
Civil Monetary Penalties, Assessments and
Recommended Exclusions
Due process protections:
• Notice of Proposed Determination, issued by OIG (20
• Hearing before Administrative Law Judge (20
CFR§§498.201 – 498.224)
NL 00703.963 Notification of Withholding to Collect a
Civil Monetary Penalty (and Assessment)
• Note: “If you pay Medicare premiums, we will exclude
that amount from what we withhold to collect this
debt. Medicare coverage will not be affected.”
Statute – Criminal Prosecution
42 USC§408 (Title II)
42 USC§1383a (Title XVI)
• Criminal Penalties for Fraud:
– Guilty of a felony and fined under Title 18 of the US
Code, or
– Imprisoned for not more than five years, or
– Both
Statute – Criminal Prosecution
Criminal Penalties for Fraud:
• Cases pursued by SSA’s Office of the Inspector
General (OIG) through federal and state courts
Remedies Foreclosed
Requesting a waiver;
Negotiating a lower repayment amount;
Discharging in bankruptcy.
Overpayment Waiver
• Separate from merits of overpayment – acknowledging
that overpayment exists in the amount SSA claims
• Asking that overpayment be forgiven
• Can be filed at any time (no deadline); can be filed
repeatedly if circumstances change
• Form 632
• Stops collection IF REQUESTED
• Full appeal rights if denied
Overpayment Waiver
Without fault
Defeat the purpose of the Act
(financial hardship)
Against equity and good conscience
Overpayment Waiver
a) Incorrect statement which individual knew or should
have known was incorrect; or
b) Failure to provide information which knew or should
have known was material; or
c) Acceptance of payment which knew or should have
known was incorrect.
20 CFR§404.507 & 20 CFR§416.552
Benefit Withholding
SSA withholds funds from benefits to repay
• Title II: no limit
• (can take full monthly benefit)
• Title XVI: 10% of full check
• (limit of $73 for 2015)
Benefit Withholding
Title II beneficiary can apply for change in amount
withheld using Form 632
• SSA will withhold amount by which income
exceeds expenses
EXCEPT if there is:
• Criminal conviction for fraud
• SSA makes “similar fault” determination
POMS GN 02210.030 Considering Different Rate of
Benefit Withholding
No 10% rate for Title XVI recipient if:
– DOJ or OIG has determined that overpayment
was result of fraud, willful misrepresentation, or
concealment of material information;
– OIG has imposed civil monetary penalty;
– SSA has determined that overpayment resulted
from similar fault, misrepresentation or
concealment of material information
POMS SI 02220.017 SSI Overpayment - Request for
Different Rate of Adjustment, Reconsideration or
Bankruptcy Discharge
Overpayment is considered unsecured debt in
Chapter 7 or Chapter 13 bankruptcy
• Last resort of seeking discharge through
Bankruptcy Discharge
Possible objection to discharge in bankruptcy must be
made whenever overpayment resulted from fraud,
whether or not individual was prosecuted.
Absent fraud, the following guidelines are used to
determine objection for misrepresentation:
• The overpayment was caused by the debtor's false
representation, and
• The debtor intended to deceive SSA, and
• SSA actually and reasonably relied upon the
misrepresentation to its detriment.
POMS GN 02215.196
Determination may be reopened:
Title II:
• Within 12 months for any reason
• Within 4 years for good cause (20 CFR §404.989)
• At any time if obtained by fraud or similar fault
20 CFR§404.988
Title XVI:
• Within 12 months for any reason
• Within 2 years for good cause (20 CFR§416.1489)
• At any time if obtained by fraud or similar fault
20 CFR§416.1488
Fraud or similar fault:
• In making determination, SSA must take into
account any physical, mental, educational, or
linguistic limitation (including any lack of facility
with English)
20 CFR§416.1488(c)
Reopening - POMS
Unrestricted Reopening – Title II
GN 04020.010 – 04020.110
Administrative Finality – SSI
SI 04070.020: Fraud and Similar Fault
Rules for Reopening – Disability Determinations
DI 27505.015: Fraud and Similar Fault
Fraud exists when a person, with intent to defraud, either:
• makes or causes to be made a false statement or
misrepresentation of a material fact for use in determining
rights to Social Security or SSI benefits; or
• conceals or fails to disclose a material fact for use in
determining rights to Social Security or SSI benefits.
Similar fault
Similar fault exists when a person either:
• knowingly makes an incorrect or incomplete statement that is
material to the determination; or
• knowingly conceals information that is material to the
Unlike fraud, similar fault does not require fraudulent intent.
GN 04020.010 A; SI 04070.005 A.11&12
GN 04020.010 Unrestricted Reopening for
Determinations or Decisions Involving Fraud or
Similar Fault
B. Principles related to fraud
1. Establishing the existence of fraud
Determinations of the existence of fraud are
necessary in SSA matters for three purposes:
• Reopening
• Correcting an earnings record
• Prosecution
NOTE: The instructions in this section do not deal with
determining fraud for prosecution purposes.
National Legal Resource Center:
Justice in Aging:
Pro Seniors:
Kate Lang joined Justice in Aging (formerly known as the National Senior
Citizens Law Center) in December 2012 in the Washington, DC office as a
member of the Income Security team, working primarily on Social Security
and Supplemental Security Income-related issues. Before joining Justice in
Aging, she was a staff attorney at the Maryland Legal Aid Bureau where
she was an advocate for low-income older adults and persons with
disabilities. In previous positions, Ms. Lang worked as an advocate at
National Legal Aid and Defender Association and Bread for the City Legal
Clinic in Washington, DC as well as an associate at Doherty, Cella, Keane
and Associates, LLP. She also served as a staff attorney at Legal Services of
Northern California.
Ms. Lang is a member of the California bar. She received her B.A. from
Oberlin College and her J.D. from Fordham University School of Law, and
also has a master’s degree in teaching English to speakers of other
languages from the University of Pennsylvania.
Kate Lang
(202) 683-1997
[email protected]
Michael Walters manages the legal Hotline at Pro Seniors, Inc. in
Cincinnati Ohio. Mike also serves as a project specialist for the Center for
Elder Rights Advocacy. Mike has practiced law since 1991, with an
emphasis in the area of Social Security law as well as elder law. Prior to
admission to the Bar, Mike was a claims representative with the Social
Security Administration, from 1979-1990. Mike is admitted to practice law
in the state of Ohio and the Commonwealth of Kentucky, the Federal
District Courts for the Southern District of Ohio and the Eastern District of
Kentucky, as well as the United States Court of Appeals for the Sixth
Circuit. Mike is a member of the Cincinnati Bar Association, the Northern
Kentucky Bar Association, the American Bar Association, and the National
Organization of Social Security Claimants’ Representatives.
Michael Walters
(513) 458-5532
[email protected]

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