Investigating the Fraud Investigator | Nonprofit Fraud Blog

Reposted from the This Week in Nonprofit Fraud Blog – May 26, 2014

Fraud From the Top Down

Top Down Fraud
Photo courtesy of Alan Diaz, AP

May 27, 2014: Roslyn Dogan has been found guilty of conspiracy to commit healthcare fraud and two counts of healthcare fraud for a brazen and complex scheme to defraud Medicare of $258 million over the course of seven years. Dogan served as co-owner and operator of Serenity Center of Baton Rouge and marketer for Shifa Community Health Center of Baton Rouge. Dogan admitted Medicare-eligible psychiatry to these facilities regardless of the patients’ need for services, then instructed administrators and therapists to falsify treatment records to include services they did not receive for the purpose of increased billings. A patient recruiter for a related facility was also convicted of conspiracy to commit healthcare fraud and conspiracy to pay and receive healthcare kickbacks. James Hunter was paid $1,500 per week in cash to direct patients to the partial hospitalization program at the facility. Additional employees, including the medical director, two facility administrators, two office managers and multiple therapists who were involved in this widespread fraud have also been convicted. The investigation remains ongoing and further convictions are expected.

See more on this case at KPRC Houston

Lessons Learned

  • Fraud involving collusion tends to result in larger losses and is very difficult to uncover. This was a widespread, complex and structured system of fraud which operated on many different levels with many individuals from the top of the organizations on down.
  • Rest assured – if managers are committing fraud, lower level employees will see it and will themselves be more likely to commit fraud. Tone at the top is critical in fraud prevention.

Raffa Forensic Practice Tips:

  • Anyone is capable of committing fraud. No one in an organization should be above suspicion.
  • Does your organization have an anonymous hotline for employees and business partners to report suspected fraudulent activity?

Investigating the Fraud Investigator

Oxfam
Photo courtesy of The Daily Telegraph

May 27, 2014: Edward McKenzie-Green, former head of counter-fraud at Oxfam, was sentenced to 29 months in jail for defrauding the charity of more than £64,000 over a 9-month period, while he was tasked with investigating charity workers performing volunteer work after the 2010 Haiti earthquake. An internal investigation was initiated due to McKenzie-Green’s unprofessional and erratic behavior, later determined to be due (in part) to an addiction to prescription drugs. This audit of the counter-fraud department – completed after McKenzie-Green’s resignation – uncovered 17 suspicious payments to two fictitious companies set up and controlled by McKenzie-Green. He would deposit these payments into the bank account of his father or friend, then transfer the cash to his own account and spend it. According to the prosecutor, “[McKenzie-Green] was given a golden handshake of £29,000. The payment was made after he signed a declaration that he had not done anything that might constitute gross misconduct.”

See more on this case at The Daily Telegraph

Lessons Learned

  • If an employee’s behavior or demeanor changes dramatically, an organization should consider the reason. In this case, drug addiction helped drive the perpetrator to commit his fraud, and was also responsible for his “unprofessional and erratic” behavior.
  • Remember, a fraudster has already violated your trust, and will not hesitate to do so again. Oxfam asked McKenzie-Green to certify that he had not done anything that would “constitute gross misconduct,” which he signed, knowing it was a lie.

Raffa Forensic Practice Tips:

  • Know your employees! Managers should establish a baseline for “normal” employee behavior and inquire when employees deviate from this norm.
  • Does your organization conduct recurring background checks on employees with access to assets or authority to enter into new business relationships?

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 http://www.raffa.com/ProfessionalServices/Forensic/ and the Nonprofit Fraud Prevention Institute at http://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

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