Investigators identified nearly 2,000 cases of potentially phony disability claims stemming from a massive Social Security fraud scheme, but three years after the scam was first exposed, the government says it’s still struggling to stop the payments.
Only slightly more than 300 cases have been disqualified, and Social Security is still “in the process of effectuating those terminations,” the agency told The Washington Times just days after the accused ringleader and two lead accomplices were indicted on federal fraud charges.
Despite three investigations into suspicions of massive fraud, Social Security officials say they are assuming all of the applications are genuine until they can prove otherwise. That means taxpayers are on the hook for millions of dollars in potentially bogus payments while investigators carry out case-by-case reviews.
“They should have been suspended until they were proved disabled,” said former Sen. Tom Coburn, who led a congressional investigation that first exposed the scam in 2013.
Since then, two other probes — one by Social Security’s inspector general and now one by federal prosecutors — have sustained the accusations and led to charges announced last week against Eric C. Conn, a Kentucky lawyer; psychologist Alfred Adkins; and David B. Daugherty, a former federal judge.
Investigators said Mr. Conn would write up applications and fake medical reviews, including bogus X-rays, then send them to Mr. Adkins and at least two medical doctors who would sign off on them. Mr. Conn would then file the applications with the local Social Security review office, where Mr. Daugherty, an administrative law judge, would pick them out of the pile and rubber-stamp them, according to the 18-count federal indictment.
Sometimes Mr. Daugherty would even suggest to Mr. Conn ways he could alter his reports so the applicants appeared to be even more disabled, the indictment said.
Under Social Security’s rules, Mr. Conn was entitled to some of the beneficiaries’ payments as a fee for helping them apply, and he shared that money with his co-conspirators — more than $10 million that the government is now trying to recover — the indictment says.
The cost to taxpayers for fraudulent benefits could reach $600 million in Social Security and Medicare benefits if the applications aren’t revoked, prosecutors said.
Yet there are dozens of deserving applicants who got caught up in the fraud, said Justin J. Marcum, a West Virginia lawyer who is representing 43 of them in a case against Mr. Conn.
“These individuals are in a mess,” said Mr. Marcum, who is also a member of the state House. “People are losing everything. It’s just sad that Eric Conn made millions of dollars, and he disgraced the legal profession.”
For now, almost all of the 1,800 cases identified as potentially fraudulent are still getting paid, thanks to pressure from Rep. Harold Rogers, Kentucky Republican.
In May 2015, Social Security said it tried to halt benefits across the board after its inspector general reported on the fraud. But Mr. Rogers, chairman of the powerful Appropriations Committee that controls all government agency budgets, stepped in to warn the agency to keep benefits flowing.
“Most of the people who utilized Mr. Conn’s services to obtain benefits are not the criminals and should not be treated as such. Quite on the contrary, many with debilitating diseases, like terminal cancer, called congressman Rogers asking for his help after they fell victim to an alleged illegal scheme,” said Danielle Smoot, a spokeswoman for the congressman.
She also said three people were reported to have committed suicide after the abrupt cancellations, making the benefits a matter of life or death for some of the people caught up in the fraud.
An attorney for Mr. Conn did not respond to requests for comment Monday.
Mr. Marcum said the 43 cases he has taken all appear to be valid claims, and the benefits were all restored on an interim basis. But he said part of the problem is that applicants are having to go back and reconstruct cases they made as long as eight years ago.
He also said some of the other applicants who got caught in the scam are having a tough time finding lawyers to take their cases because lawyers like Mr. Conn get paid upfront by Social Security for getting someone on the rolls — not for aiding them in rehearings of their cases.
Investigators initially identified some 1,800 cases as potentially fraudulent. An initial review found some 300 of those cases appeared to be good even when Mr. Conn’s evidence was tossed out, leaving 1,500 cases that were remanded for a review.
Of those, judges held hearings in 1,209 cases and rendered decisions in 667. About half of those have been rejected, Social Security spokeswoman Dorothy J. Clark said.
“Cases that have received unfavorable decisions will be terminated. The agency is in the process of effectuating those terminations,” she said.
The scam ran from 2004 to 2012, investigators said.
In announcing the indictments last week, Howard S. Marshall, special agent in charge of the bureau’s Louisville office, said Kentucky has had a “historical willingness” to overlook these kinds of matters but the charges show that is coming to an end.
“Although cleaning up Kentucky is a long and difficult process, today’s announcement is another step toward ending public corruption and taking back the commonwealth from those who corrupt it,” he said.