Federal retirees often enjoy generous pensions, but some manage to keep getting paid even after they're dead and buried.
Each year, investigators uncover dozens of cases of federal retirees or their spouses continuing to collect retirement checks after death, records obtained through the Freedom of Information Act show>
Usually, relatives, friends or caretakers take the checks and cash them, hoping the government won't notice. Many of the thieves face criminal charges once caught, but not all of them end up before a judge. And in some cases, years pass before the fraud comes to light.
But some suspects manage to avoid criminal prosecution because the statute of limitations runs out or because prosecutors simply decline to press charges.
In one recent example, the wife of a deceased U.S. Postal Service employee entitled to collect retirement pay died in 1997, but the benefits continued for another nine years, resulting in more than $170,000 in overpayments. The woman, a resident of a nursing home in Texas, had a man handling her finances who had signed paperwork agreeing to "promptly notify the Office of Personnel Management" of her death. But that didn't happen.
Instead, the case fell through the cracks. After the investigator for OPM's Inspector General left the office, the case "had not been investigated further since February 2009 due to a lack of resources and higher priority agency cases," a May 11 memo closing the case states. The statute of limitations, which gives officials five years to bring a case after learning about a possible fraud, eventually ran out.
In another case, the U.S. Attorney for the Middle District of Florida declined to prosecute a man who collected more than $40,000 in retirement benefits paid to the spouse of a federal employee after her 2003 death, records show. The man, whose name was redacted in documents provided to The Washington Times, told an investigator he knew he was supposed to tell the government about beneficiary's death, but he didn't bother.
"Due to lack of ... employment, he didn't really care to make any notification because he needed the money," investigators wrote in an internal memo summing up the case.
Under the federal retirement system, only federal employees or their spouses are eligible for payments, though in some special cases a child who is a minor or enrolled in college can be eligible. Family members and legal guardians are supposed to notify OPM when the retiree dies.
"The family members should not expect OPM to find out on its own (that a beneficiary has died)," said Michelle Schmitz, assistant OPM inspector general for investigations. "Fraud against the federal benefit programs has real consequences and financial costs not only for federal employees and annuitants who participate in the program, but for American taxpayers as well because it is the federal government that pays the price."
Ms. Schmitz said the inspector general's office routinely gets referrals of suspected retirement fraud from OPM. She said OPM and the inspector general in recent years have been working together to catch fraud and improper payments at an earlier stage. She also said officials try to prevent the statute of limitations from affecting pending cases.
"There are many reasons why the statute of limitations may run out on a case," she said. "One must remember that multiple agencies and offices are involved in these retirement fraud cases."
She said OPM administers the retirement program and refers suspicious cases to the inspector general for investigation, then both agencies coordinate with the Treasury Department to stop fraudulent payments and recoup money. The Justice Department ultimately decides whether to file criminal charges.
"A backlog or unexpected problem in any of these offices can affect a case's overall timeline," she said.
Bill Zielinski, associate director for retirement services at OPM, said even if prosecutors turn down a case, officials can still pursue administrative action to recoup debts owed to the government, including having Treasury withhold future tax returns.
Mr. Zielinski said OPM conducts weekly and annual "death match" reports, comparing its files with those at the Social Security Administration to learn about any unreported deaths. He said reports from April 1, 2010 to March 31, 2011 resulted in more than $37 million in savings to the federal retirement fund.
"Anyone that learns of the death of an individual that receives an annuity or other payment from OPM should report the death as soon as possible," he said. "In our experience, the more timely that OPM receives the report of death, the less likely that fraud will be committed," he said.
Taxpayer watchdogs say the post-death payouts highlight a broader problem of improper payments by the federal government that involve Social Security, Medicare and Medicaid, retirement and other programs costing taxpayers billions of dollars. A 2009 report by the Government Accountability Office (GAO), noted that federal agencies reported about $72 billion in improper payments during fiscal 2008, with Medicaid accounting for nearly $19 billion alone.
"We know improper payments are rampant," said Leslie Paige, spokeswoman for the D.C.-based Citizens Against Government Waste. "Now that we've got this gigantic debt and unprecedented deficits, you would hope that this would be a big issue for people. We're bleeding money."
Dave Williams, president of the Taxpayers Protection Alliance, said even in seemingly small dollar cases, it sends a bad message to taxpayers when a criminal case is dropped because the statute of limitations runs out.
"Whether a person is alive or dead is pretty clear cut," he said. "It shouldn't take five years.
From January 2009 through March 2011, the inspector general for OPM uncovered fraud in more than 160 cases involving retirement payments for federal workers or their spouses who were dead. More than one-fourth of those cases were declined for prosecution, according to records reviewed by The Times. In a few cases, the statute of limitations ran out, while in others a suspect died before the investigation ended.
But most of the suspects end up in court, where prison sentences are common. One of the bigger cases in recent years involved the son of two deceased federal employees who continued receiving federal retirements checks he was not supposed to get for eight years. By the time the government took notice and halted the payments, $427,754 had been paid out.
The name of the man who collected all that cash is redacted in the inspector general's case documents provided to The Times, but his identity can be confirmed through federal court records, which are public.
Russell B. Miller, Jr. received one year and one day in prison when he appeared in Alexandria federal court after pleading guilty to theft. His defense lawyer noted that Miller had moved in with his ailing father to care for him and that he had told the Social Security Administration about his father's death in 1998. But he didn't say anything to OPM, and the money didn't stop coming.
While Miller didn't forge any paperwork to get the money, he didn't take any action to stop the payments, either. His attorney said in court papers that Miller, "a smart, college-educated, hardworking man," was "very remorseful" and intended to return the money.
Though ordered to pay restitution, prosecutors acknowledged in a sentencing memo the chances of the government getting its money back were slim.
Assistant U.S. Attorney Paul J. Nathanson wrote in a court pleading that after over eight years of overpayments, "the funds are spent, and it highly unlikely taxpayers will ever see their losses recouped.
"In these times of federal fiscal austerity, frozen salaries and extraordinary federal deficits, the importance of protecting taxpayer funds has never been greater."
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