Reposted from the This Week in Nonprofit Fraud Blog – February 24, 2014
A Just Reward for Doing Right
February 18, 2014: Vector Planning and Services (VPSI), a defense contractor, agreed to repay $6.5 million to settle allegations that it had inflated invoices sent to the Navy. From 2005 to 2009, VPSI allegedly re-submitted direct costs in its indirect cost invoices on multiple consulting contracts. VPSI also allegedly submitted claims for costs that never actually were incurred. The Department of Justice began to investigate this case when a whistleblower came forward to report the fraud. The whistleblower is set to receive $1.28 million as a reward for their report.
See more on this case at The Washington Post
- Time and again, tips are how we detect ongoing frauds!
- Even a careful review of the invoices submitted by VPSI may not have uncovered this fraud. VPSI was allegedly hiding its overbillings in indirect costs, which many vendors do not fully itemize. It would have been very difficult for the Navy to realize that they were being double-billed for certain costs.
Raffa Forensic Practice Tips:
- Carefully review invoices before approving them for payment, and ask for supporting detail if you need to.
- Does your organization have a formal process for reviewing invoices prior to payment?
- Does your organization have an anonymous tip hotline or other reporting mechanism?
The Good Doctor Goes to Prison
Photo courtesy of Stephen Yang for the New York Post
February 21, 2014: Dr. Peter Lesniewski was sentenced to eight years in prison for his role in a $1 billion disability fraud scheme. The doctor and his co-defendants were convicted of fraudulently providing fictitious support for medical appointments and tests as evidence of supposed career-ending disabilities. Lesniewski was paid $800-$1,000 per patient for his role in the fraud. In total, the fraudulent claims paid to “disabled” Long Island Rail Road employees approved by Lesniewski and others exceeded $1 billion. He is the 32nd person convicted in connection with the scheme. He was also ordered to repay over $70 million to the Railroad Retirement Board, equal to the fraudulent claims directly due to his personal involvement.
See more on this case at The New York Post
- The collusion of so many co-conspirators helped this fraud balloon in size over many years. Fraud involving collusion is pervasive and pernicious, and can be very difficult for an organization to uncover.
- This case hinged on the conviction of two “lynchpin” doctors, who played an oversized role in approving bogus claim documents.
Raffa Forensic Practice Tips:
- While collusion can be difficult to detect, smart internal controls can help reduce your risk and protect your organization.
- Has your organization considered controls to help detect collusive fraud, such as job rotation or mandatory vacations?
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