Trickle Down Fraud | Nonprofit Fraud Blog

Reposted from the This Week in Nonprofit Fraud Blog – August 25, 2014
It Pays to Blow the Whistle

Photo courtesy of Office of the Inspector General, Social Security Administration

August 18, 2014: The Carondelet Health Network has agreed to a $35 million settlement to resolve allegations of a long-running health care overbilling scheme. Between 2004 and 2011, Carondelet, which operates two hospitals, filed fraudulent expense reimbursements to the state and federal government for non-reimbursable services, profiting by untold millions in the process. A former employee stepped forward as a whistleblower, resulting in a federal investigation and lawsuit. The whistleblower, Jacqueline Bloink, will receive $6 million of the $35 million under the qui tam provisions of the False Claims Act. Shortly before becoming aware of the federal investigation, Carondelet conducted an “internal review” which uncovered these billings and voluntarily repaid $24 million to Medicare and Medicaid. Under the terms of the settlement, Carondelet has admitted no wrongdoing.

See more on this case at Arizona Republic

Lessons Learned

  • With a fraud of this size and scope, many employees would have known there was a fraud taking place. It takes a lot of courage to be a whistleblower, and Ms. Bloink was rewarded considerably for taking a stand against the corruption at her organization.
  • Carondelet had the opportunity to make full restitution and disclosures regarding the billing discrepancies that had taken place. While Carondelet made a limited disclosure of overpayments and made a substantial repayment, the U.S. Department of Justice determined these efforts were neither timely nor adequate and continued to pursue their case.

Raffa Forensic Practice Tips:

  • According to the 2014 Association of Certified Fraud Examiners’ Report to the Nations, tips continue to be the number one method of uncovering ongoing frauds
  • Does your organization have an anonymous hotline for employees and others to report any suspected fraud, waste, or abuse?

Trickle Down Fraud
Marine Resources

Photo courtesy of Jan Kronsell, licensed under Creative Commons Attribution-Share

August 20, 2014: Tina Shumate, a former Mississippi Department of Marine Resources (DMR) manager has pled guilty in state court to felony charges of signing false travel documents and receiving reimbursements for expenses totaling $350 which she did not incur. Shumate began a two year prison sentence immediately after court proceedings and was ordered to pay $14,091 in restitution. Despite the low dollar amount associated with the fraud, the charges carried felony status in Mississippi due to her being “in a position of public trust.” Shumate was also facing a federal indictment for conspiracy and fraud related to a corrupt land deal involving DMR’s former Director, Bill Walker, which was dismissed after her guilty plea on the state charges. Seven other DMR employees have been found to have participated in a series of department-wide frauds; one additional employee awaits trial.

See more on this case at The Sun Herald and

Lessons Learned

  • Individuals in a position of public trust have a fiduciary duty to the people who they serve. Mississippi’s laws meant that even for a relatively “minor” theft, Ms. Shumate’s violation of this trust means she will go to prison.
  • This is a perfect example of fraudulent behavior trickling from the top down. Shumate’s boss, the Director of DMR, was also involved in a fraudulent scheme, as were numerous subordinates.

Raffa Forensic Practice Tips:

  • With fraud occurring at this organization from the top down, it reminds us of the importance of tone at the top.
  • Does your organization emphasize ethical behavior and have a formal Code of Ethics for employees?
  • Does your organization require expense reports to be reviewed prior to reimbursement?


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 and the Nonprofit Fraud Prevention Institute at

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:
Leslie C. Kirsch, CFE, Manager:

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