Taking Advantage of a Disaster | Nonprofit Fraud Blog

Reposted from the This Week in Nonprofit Fraud Blog – September 22, 2014

Cancer Patients for Profit

Photo courtesy of Linda Bartlett, licensed under Creative Commons Attribution-Share Alike

September 17, 2014:
Dr. Farid Fata, an oncologist operating out of Detroit, has pled guilty to fraud and conspiracy for a massive and horrifying medical treatment scheme. Fata purposely misdiagnosed patients who did not have cancer to justify chemotherapy treatment, ordered maintenance doses of chemotherapy for patients whose cancer was in remission and ordered chemotherapy for patients who had advanced levels of cancer and would not benefit from the treatment. Between 2007 and 2013, Fata submitted $225 million in fraudulent Medicare claims, netting $91 million. Fata also pleaded guilty to seeking kickbacks from a hospice in exchange for patient referrals and funding a diagnostics facility which performed unnecessary PET scans for cancer, both acts which helped advance and sustain the scheme. Fata faces up to 175 years in prison and is scheduled for sentencing in February 2015. He also faces nearly a dozen civil lawsuits from patients harmed by his actions.

See more on this case at WDIV Detroit and FBI.gov

Lessons Learned

  • According to a nurse that was formerly employed by Dr. Fata, she reported the issue to regulators in 2010, but no action was taken. This fraud could have been uncovered much earlier if she had been taken seriously, and so much harm to patients could have been avoided.
  • Other doctors in Fata’s practice and at several Detroit-area hospitals are also being targeted by civil suits; law enforcement notes that their investigation into the matter is still ongoing. As one litigant noted, since Fata pleaded guilty to “conspiracy,” doesn’t it stand to reason that many people knew what was happening and were in a position to stop it earlier?

Raffa Forensic Practice Tips:

  • Take reports of potential fraud seriously! You can be found liable for negligence if you do not take proper steps to investigate and resolve allegations.
  • Does your organization have an anonymous hotline for employees and business partners to report suspected fraud, waste, and abuse?

Taking Advantage of a Disaster

Photo courtesy of National Weather Service in Springfield, Missouri, licensed under Creative Commons Attribution-Share Alike

September 17, 2014:
Herlana Latham, a former aid worker with the Economic Security Corporation of Southwest Area (ESC), has been sentenced to 14 months in prison and ordered to pay $6,745 in restitution for wire fraud. ESC is a nonprofit organization which distributed financial aid to landlords renting housing to people displaced by the May 2011 tornado in Joplin, MO.  Latham was responsible for verifying the accuracy and validity of landlords’ information on applications for assistance. She assisted two co-conspirators in fraudulently obtaining rental assistance applications for payment to by knowingly validating the fictitious landlord information on their applications. Checks were then issued by her employer and cashed by the fraudsters. Latham’s co-conspirators have previously been sentenced in the case after their recent guilty pleas.

See more on this case at My Fox Memphis and United States Department of Justice

Lessons Learned

  • Fraud involving collusion is generally difficult to uncover. Fortunately for this organization, this fraud was uncovered quickly, before the conspirators had a chance to steal much money.
  • Disaster fraud is a growing, but often overlooked category of eligibility fraud. With government funds being made available for individuals displaced or otherwise harmed by natural disasters, speed of disbursement is a high priority to ensure needy individuals are served. Both claimants and employees of organizations disbursing funds may take advantage of the chaos and influx of applications to commit fraud.

Raffa Forensic Practice Tips:

  • Paying careful attention to details is paramount when reviewing applications for grants and programs with specific eligibility requirements. Your organization should be certain that applicants are eligible for the funds they are requesting.
  • Does your organization have a formal and robust system to verify applicant eligibility?


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

This entry was posted in Forensic Accounting, Fraud Prevention and tagged , , . Bookmark the permalink.

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