Reposted from the This Week in Nonprofit Fraud Blog – December 30, 2013
The Creamery That Wanted More
Photo courtesy of Frontiersman.com
December 24, 2013: Kyle Beus, a co-owner of the Mantanuska Creamery in Anchorage, pled guilty to three counts of wire fraud and three counts of making false statements to the U.S. Department of Agriculture. In order to gain the additional funding, Beus asked his suppliers to inflate invoices submitted to a USDA loan program, as well as forge additional invoices for work that was never completed. The total loss to the government was $9,000 but the fraud involved much larger amounts. Beus claims that the false statements made to the Department of Agriculture in order to procure the necessary funds to run the creamery and that he never intended to use the monies for any other means than to run the business. The U.S. District Court Judge hearing the case delayed the sentencing until an evidentiary hearing could be held in order to “understand the matter fully.”
See more on this case at Frontiersman.com
- Inflated or fictitious invoices are a common tool used by fraudsters to illicitly obtain payments.
- Rationalization on the part of a fraudster is seen in every fraud case. In this case, the creamery owner rationalized his fraud by claiming that he was just using the money to run the business.
Raffa Forensic Practice Tips:
- Monitor relationships between suppliers and those with procurement authority; an overly close relationship may be a red flag for corruption fraud.
- Does your organization have a method of monitoring employee-vendor relationships?
An Ambulance Ride to Nowhere
December 26, 2013: Rural/Metro has settled with the federal government for $2.8 million in relation to allegations that the company fraudulently billed Medicare for ambulance trips between hospitals. The Arizona company was billing Medicare for emergency trips that were actually non-emergency rides between hospitals; emergency trips are reimbursed by Medicare at a higher rate. Rural/Metro said it settled the case to avoid the time and money of a legal fight, adding that the settlement does not include any finding of wrongdoing. Interestingly enough, on six separate occasions over the last fifteen years, Rural/Metro has paid a fine or settled allegations over their billing practices. Rural/Metro has also filed for Chapter 22 bankruptcy, in which the Delaware court approved eliminating around fifty percent of their debt.
See more on this case at AZ Central
- It is important that you conduct due diligence on contractors prior to an official relationship. In this case, Rural/Metro had an extensive history of billing-related issues which is a major red flag.
- Up-coding of medical charges to receive larger reimbursements is a very common fraudulent practice in the Medicare program!
Raffa Forensic Practice Tips:
- Make sure you conduct due diligence on potential partners and vendors, and that you monitor ongoing relationships to ensure they are performing as expected.
- Does your organization have a formal monitoring process for ongoing vendor relationships to check for improper overbillings?
DON’T BE THE NEXT VICTIM OF FRAUD!
The Raffa Forensic Accounting Services Practice offers a wide variety of fraud prevention and detection services including Fraud Risk Assessments, Background and Workplace Investigations, Fraud and Internal Investigations, Transactional Due Diligence Investigations, Anti-Fraud Consulting and Training, and Computer Forensic Analysis.
For more information on the Raffa Forensic Accounting Services Practice please visit us at www.raffa.com/ProfessionalServices/Forensic/ and the Nonprofit Fraud Prevention Institute at www.raffa.com/Fraud.
You can also contact the following Raffa professionals with any questions or if your organization needs assistance in fraud prevention:
Lawrence J. Hoffman, CPA/CFF, CVA, CFE, Senior Partner: Lhoffman@raffa.com
Leslie C. Kirsch, CFE, Manager: Lkirsch@raffa.com