Managing Mass Claim Fraud Investigations: Lessons Learned ... › uploadedFiles › ... ·...

Kenneth C. Citarella

Managing Director, Investigations

Managing Mass Claim Fraud Investigations: Lessons Learned from the Gulf Oil Spill

June 18, 2012

Deepwater Horizon

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Deepwater Horizon

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Statistics

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4.9 billion barrels of oil780,000 cu. meters86 days491 miles of shoreline affected4,200 sq. miles of Gulf closed to shipping

May 21, 2010, Fishery Closure

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June 28, 2010, Fishery Closure

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Gulf Coast Claims Facility

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U.S. and BP create GCCF

Kenneth Feinberg becomes Independent Trustee of Compensation Fund

August 23, 2010, begins operation

Parallel to Class Action

Limitations

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Claim Resolution PoliciesInternal OperationsGCCF Timeframe – 8/10 to 3/12Number of InvestigationsInternal Affairs

Gulf Coast Claims Facility

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Feinberg Rozen

Worley Brown Greer Garden City Group

PWC Guidepost Solutions

Gulf Coast Claims Facility

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Guidepost SolutionsProject Manager

Deputy Project ManagersTeam ManagersCase Managers

InvestigatorsTX LA MS AL FL

GCCF Phases

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Emergency Assistance Program

Quick Pay

Interim Payment

Final Payment

GCCF Statistics – March 9, 2012

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Claimants 574,881– Individuals 454,026– Businesses 120,855

Represented by Counsel 92,963

Claims 1,061,405

Payments $6.1 Billion

Types of Claims

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Removal and Clean Up CostsProperty DamageLoss of Earnings or ProfitsLoss of Subsistence Physical Injury or Death

Investigation Referrals

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K. Feinberg testifies on January 27, 2011, that 7,575 claims might be fraudulentReceive explanation with eachSingle ClaimMulti-Claim– Numerous sub-schemes– Spin offs and false leads– Add-onsPattern of referrals shifts over time

Investigation Referrals

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Common ReasonsSuspicious documents– fishing, pay stubs, banking, tax, financialsSuspect identity, employer, vesselCommon addresses, email, fax, factsInconsistency among related claims

Investigation Referrals

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Generate ReferralsFind related claimsLeads from:

EmployersWitnessesClaimantsInformants

No investigation without formal referral

Investigation Process - 1

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1) Referrals from GCCF2) Database entry with document migration3) Review for assignment4) Assign to team5) Assign to Case Manager6) Investigation Plan7) Assign to Senior Investigator8) Assign to Field Investigator

Investigation Process - 2

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1) Investigator reports uploaded2) Acquired documents uploaded3) Feedback4) Completed?5) Case Manager proposes closing category6) Team Manager concurs7) Team Managers closes, except for possible

fraud

Investigation Process - 3

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1) Case Manager drafts fraud report2) Team Manager reviews3) Editor reviews4) Project Manager or Deputy5) Distribute to GCCF6) GCCF reviews for possible referral to DOJ

Investigation Database

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Case Management– Intake– Assignment– CommunicationPerformanceQuality ControlDocument StorageCompliance

Investigation Database

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Inherited database from prior BP investigation teamLimitations apparentCustom designMigrationTraining

Case Managers

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Started with 3– All investigators– Add prosecutors– Plan, run, and writeSeparated for multi-claims– Who is bestCreate teams– Who is best managerPeak at 9042 at transition

Case Managers

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Where find?– Friends and former coworkers– People they know– Suppliers

Never advertised

Downsizing

Invoice Management

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Format and contentExpect audit– DOJ– BPStandardize all contractor invoices form and contentRemove non-billable activities

Closing Categories

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Possible FraudNo Proof of LossNo Independent SupportOkay

Set by GCCF

GCCF decides

The Great Dilemma

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The Underground EconomyWhat are taxes?No SSNNo bank accountsNo business records

Could still be legitimate

The Great Dilemma

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Family fishing businessFather captainMother and children deckhandsAll-cash businessNo financial recordsRegistered vessel, licensed captain fishing permitNever filed taxes or reported small percentage

The Great Dilemma – The Investigation

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Confirm documentsInterview family– Know fishing– Look the partIdentify purchasersInspect vessel– Right kind and registered– Seaworthy

Closing Criteria

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Totally up to GCCFNot tax dollarsNot insurance companyNo criminal law definitions of insurance fraud apply

Retrain the law enforcement mind

Claim Form Signature Page

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Problems Arising from LawEnforcement Mentality

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Inclined to investigate too thoroughly

Not a law enforcement functionLaw of criminal fraud does not applyNot preparing for prosecutionInterviewing for a confession

Investigator Procedures

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Guidepost business cards and PI identificationGCCF confirmation number“Here to help” attitudeBurden on claimantNo opinion or encouragementSecurity and confidentialityDeadline letters

Investigator Procedures

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Responding to complaints– All but one unfounded– Immediate terminationAcquiring documentsClosed case filesLaw enforcement contact

Investigator Procedures

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Two for all claimant interviews– No recording– No signed statementsThrough counselAsk nicelyNo emails with claimants

Investigators

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Kept BP operation– No access to BP investigationLocal talentFormer law enforcement– All levels

Peaked at about 225

Law Enforcement Relations

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GCCF set protocols– National Center for Disaster FraudParallel federal investigations from DOJ HotlineDOJ requests for documents and interviewsStand-down requestsCoordinate through GCCFGCCF refers fraud reports to DOJ

Quality Control

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All investigator reports reviewed before postedOlder investigationsCold investigationsInvestigators believe doneEncourage disagreements and decisionsCase and Team Managers agree for non-fraud casesThree-level review for fraud reports

Reporting to GCCF

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Daily Investigation List– With Aging ReportDaily Closure Reportad hoc requestsAttorney representation issuesStandard correspondenceDOJ complianceReferral requestsHigh-profile investigations

Confirmation

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Provide business card with Guidepost name and address“Gulf Coast Claims Investigator”Toll-free confirmation numberList of all investigators and contact numbers– Update as needed

Preparers

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ClergyLawyersAccountantsCommunity ActivistsCould be hub of a scheme– Creating similar false documentsCould be a dupe– Accepting what claimants reportCould be genuinely helpful

Medical Records

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Physical injuries allegedly caused by spill, usually clean-up workAsked for waiver from claimantShowed submitted medical records to physician to determine authenticity not diagnosis

Tax Forms and Financial Records

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Contact accountantSome refused to cooperate without permission from claimantSome cooperatedOne accountant admitted falsifying many forms to inflate claims so clients would get adequate compensation

Working Environment

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BPSpeedTransparencyFairnessFraud PreventionPressure– Public– Politicians– Media

Guidepost in Gulf Media

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Guidepost in Gulf Media

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Stories differ on whether their investigators are identifying themselves as working for the GCCF…What’s been your experience?A certain disenfranchised citizen would like to hear about it…Have a nice day.Reddit

Written by D…. T….. February 8, 2011 at 5:29 AM

Guidepost in Gulf Media

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This company is causing me a headache. They want to verify my tax documents and bank statements. I think their only doing that cause its taking gccf longer than 14 days to settle a quick payment..its been 42 days and now they say guidepost is investigating my documents yeah ok if you want to go ahead but when u finished I don’t even want the 25000 offer now my paperwork is so legit that now I’m going for the full review. Guidepost and gccf both fraudulent not us.ms d…..February 8, 2011 at 5:48 AM

Guidepost in Gulf Media

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“two men dressed in black”

“generic looking business card”

“hired to find ways to deny claims”

“These men are not your friends and claimants should not speak to them.”

Guidepost in the Gulf Media

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“should not show up at your door and ask questions”

“sign of intimidation”

“This is unreasonable, immoral, unjust and thug behavior.”

Guidepost in the Gulf Media

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Disenfranchised Citizen – 2/12/11“As I wrote a few days ago, a new phenomenon is occurring on the Gulf Coast. Some claimants who have applied for the quick pay from the GCCF, an application the GCCF stated would be automatic for people who had received an EAP and would require no further review, have suddenly found their EAP’s under investigation for fraud. Guidepost Solutions, the investigative arm of Ken Feinberg’s GCCF, have been making contact and making demands of claimants.”

Guidepost in the Gulf Media

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“Dear Claimant:“The GCCF has received your Quick Payment Final Claim Form and Release. After investigating certain aspects of the documents and information that you previously provided to us relating to your Emergency Advance Payment claim, we have determined that there is insufficient reliable evidence to support your Quick Payment claim and that further investigation is required…”

Investigations

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All from public informationTypical examplesProsecutions solely up to DOJ / USA Offices– Wire fraud– Mail fraudFew state prosecutions

Investigations

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Confessions!Thought no one would look“Everyone else getting paid”Legitimate claims supported by false documentLegitimate EAP claims morph into false interim or final One successful false claim becomes a scheme

“Fishing” Vessels

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“Fishing” Vessels

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“Fishing” Vessels

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“Fishing” Vessels

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“Fishing” Vessels

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Search Warrant

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Tax company suspected in alleged BP fraud by Paul Murphy / Eyewitness Newswwltv.comPosted on March 2, 2011 at 6:29 PMNEW ORLEANS -- The sign on the door reads Fast Track Tax Service. But, according to documents in support of a search warrant, uncovered by 4 Investigates, federal authorities suspect the Airline Highway office in LaPlace was used for more than just tax preparations.The affidavit indicates during the course of a criminal investigation that began late last year, agents suspect Fast Track's computers, copiers and printers may have been used to manufacture and submit fraudulent disaster assistance claims with BP and the Gulf Coast Claims Facility.

Search Warrant

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According to the affidavit, 81 claims were filed, requesting $4.9 million in compensation from BP, and the alleged plan involved the creation of fake "Captains’ Letters" indicating that the person making the claim was a deckhand on a fishing boat that lost income as a result of the oil spill.According to investigators, the alleged enterprise netted more than $500,000 in payments.

Florida Couple with Many Names

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Charged with using 34 stolen identities to file GCCF claimsAddresses in LA, MS, AL, and FL panhandle$340,000 sent to account in TX credit unionAlso charged in other disaster frauds from– Hurricane Gustav in LA– North Dakota flooding– Tropical Storm Irene in NY

Florida Couple with Many Names

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Mail drops in NYC, AL, MI, CA, FL, IL“I don’t have an account”

Florida Couple with Many Names

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Florida Forgeries

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Letter allegedly from manager of lumber yard for $16,500 claim– Never lost job– Lied to FBILetter allegedly from employer at deli for $7,200 claim– Had voluntarily quit– Witness tampering with federal GJ witnessLetter allegedly from hotel management for $3,844 claim– Fired for misconduct as a pool cleaner

Wife of Former N.O. Police Officer

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False seafood sales receipts used in claimHusband involved in Danziger Bridge cover upClaims husband worked at hotel and fished after left NOPDStarted at hotel 3 weeks after oil spill$22,600 and $11,307 paidGuilty plea, facing 20 years

False Injuries

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Alabama claimant alleged loss of income and physical injury from clean up– Reviewed records and interviewed clients who

allegedly canceled contracts– Interviewed other members of clean-up crew

Crewman on tending vessel filed a claim for $45,000,000 for physical injuries and PTSD.

Backyard Fishing

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$14,700 paid to Alabama fishermanFalse tax returns and payroll stubsFalse financials from a real company he never worked forBoat in the backyard

False Employment Documents

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Mother and son “worked” for staffing company– $18,500 in two payments – payroll stubs allegedly from AL

restaurant– $13,800 – payroll stubs allegedly from AL aerospace

company

May be obvious on face or require employer assistance– Payroll stubs– Employer letters– W-2 and 1099 forms – “live” or altered

Nonexistent Businesses

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Smitty’s Catering in AL$800,000 in false claims for 45 “employees”Fake bank statements and termination letters$63,600 paid“Owner” received $3,800

“Owner” of Alabama cleaning business collected $35,000 for “losing” $800 a week in income

Real Business / False Claim

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LA food mart was sold prior to the oil spill but owner still put in claim for $42,000

Oil Spill in the Gulf?

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Michigan man indicted for submitting false MS tax documents and business license for a business he “owned”– $180,000 claim

FL East Coast fisherman claimed $100,000 in lost income

Dead Claimant

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NC woman adopted identity of dead sister who had lived in New Orleans$15,600 in lost income allegedClaimed was laid off from real seafood companyClaimant used her mother’s NC addressFabricated driver’s license, termination letter, and eviction notice

Dead Claimant

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Internet search found obituaryMother helped investigatorsCalled us to prove she was realPrior disaster fraud convictionsPleaded on eve of trial

Shrimp Beheaders

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“Shrimpheaders” – 517 false claims all based on a common false hardship letter alleging loss of employment as a shrimp head remover.

False Paystubs

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“5 New Orleans Restaurants” – 37 claims alleging employment at 5 restaurants, all with similar false paystubs.

“ADP Payrolls” – 54 claims all using a similar false paystub, usually allegedly issued by ADP for the purported employer.

Bribery Offer

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Investigator offered $1,000,000 bribe to provide a favorable report on two $16,000,000 claims by one businessman.

Very Crowded Crabbing Boat

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“Schedule C” – 81 claimants used copies of documents supporting legitimate father/son claims alleging they were all deckhands on one crab boat.

Helping Your Friends

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“Wild Magnolias” – 25 claims from “employees” of two businesses supported by fabricated documents prepared by one ex-employee.– $248,328 claimed; $10,500 paid.

Fast Food Scheme

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Initiated by informant111 claims investigatedAt least 100 fraudulent28 fast food chain employers

Fast Food Scheme

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Common false documents– Employment letters– Social Security cards– Residential addresses– Telephone numbers– Email addresses– Paystubs

Fast Food Scheme

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Lessons Learned

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Single email systemSingle databaseCooperative planning early and oftenAll phases of operation are interrelated, so keep each other informedPlanning very difficult due to highly irregular referral rate

Constant re-organizationOperational chokepoint is a shifting target

Lessons Learned

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No career path but personnel will often act as if there isReassignments hurt feelingsDiscuss law enforcement early onAssume you will be overwhelmed and that everyone else isKeep a sense of humorUnderstand client’s objective

Lessons Learned

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Database function and designBurnoutGood people will leaveAssign work to best people to keep them interested and on teamReport format and contentRepeat, review, and remind

Thank You

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Kenneth C. CitarellaManaging Director, InvestigationsGuidepost Solutions LLC415 Madison Ave, 11th FloorNew York, NY 10017212-817-6700

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