Monday, July 5, 2010

US Export-Import Bank rocked again by fraud

The US Export-Import Bank (Ex-Im Bank) is rocked once again by fraud and scandal in El Paso, Texas. See the recently unsealed federal indictment below.

The mission of the Ex-Im Bank sounds great: to assist in the export of US goods and services to foreign countries. It does so by guarantying loans made by US banks to companies for the purchases of US goods that are exported, in this case to Mexico. If the borrower defaults on loan repayments, the Ex-Im Bank, as guarantor, pays off the remaining loan balance to the private bank. But guess who ends up paying the bill when the loan is fraudulent: US taxpayers.

This case is just one in a series of cases coming out of San Antonio and El Paso involving the Ex-Im Bank. One of the recent indictments involves allegations by the Department of Justice against the grandson of the former Mexican Secretary of Defense. In this county, of course, all are presumed innocent until proven guilty. Here is how the San Antonio Express News reports the case:

Mexican Businessman Indicted in Fraud Plot

US v. Gomez (Indictment)

Houston lawyer indicted for ripping off veterans

A Houston attorney and his wife have been indicted for conspiring to misappropriate more than $2 million from the accounts of military veterans, making false statements and tax fraud.

According to the indictment, Attorney Joe Phillips was either appointed by a probate court or otherwise designated to serve as the legal guardian and fiduciary for a number of incompetent veterans. In that role, he opened and maintained bank accounts to receive benefit payments from the VA and the SSA to pay the ordinary and customary living expenses of the incompetent veterans, including but not limited to rent, mortgage payments, utilities and travel. Phillips and his wife are accused of stealing money from the bank accounts of veteran clients entrusted to Phillips by and through his position as their fiduciary/guardian/representative payee by transferring funds into the Phillips’ personal joint bank accounts.

My take on the case: It’s rare to see an attorney indicted on fraud charges. One wonders, however, where the probate court judges were in this case. Texas law provides that only probate courts have the authority to declare a person incompetent. Do the Harris County probate courts have no supervision over attorneys like Phillips? Wonder who tipped off the VA.

Below is the press release from the US Attorney for Southern District of Texas.

USAO - 100629 - Phillips

Friday, July 2, 2010

El Paso Doc indicted for health care fraud-related crimes

The United States has charged El Paso doctor Anthony Valdez with carrying out an estimated $41 million fraudulent health care benefit program billing scheme. Valdez is the owner of the Institute of Pain Management with clinics in El Paso and San Antonio. There is no indication that there is a companion qui tam case. However, the feds are also seeking forfeiture of the good doctor's assets, toys (5 vehicles, a house in San Antonio and El Paso), and a cool $41 million.

My take on the case: Dr. Valdez got the attention several G-men, ranging from the FBI to the Defense Criminal Investigative Service (DCIS) to the IRS-CID (not people you want to mess with). Both the US Attorney’s Office and the Texas Attorney General are involved. No indication that there is a companion qui tam case, but these cases are typically started by an inside whistle blower. Because DCIS and TRICARE are involved, it looks like soldiers and their dependents stationed at Ft. Bliss may have been victimized.

Here is the DoJ press release:

Valdez Medfraud Ind

Army Officer pleads guilty to bribery charges in federal court

United States Army Captain Faustino L. Gonzales of Killeen, Texas, has pled guilty and admitted that in September 2006, he conspired with Chasib Mahdi d/b/a/ General Contracting Company, to receive cash bribes for awarding contracts under the Commander’s Emergency Relief Program for Iraq Reconstruction. Gonzales further admitted that the contracts he awarded to Mahdi, designated for projects near Forward Operating Base, Rustimaiyah, Iraq, were based on inflated prices. Gonzales also admitted that portions of the bribe money were deposited into banks accounts located in Killeen and San Antonio and that he used some of the bribe money to purchase a vehicle in Killeen.

Gonzales faces up to two years in federal prison and a maximum $250,000 fine after admitting to receiving approximately $25,000 in kickbacks in exchange for awarding reconstruction contracts in Iraq. Sentencing is scheduled for 1:00 P.M. on September 8, 2010.

My take on the case: As a former active-duty Army JAG officer who prosecuted a number of officers, I can’t believe Captain Gonzales faces only up to two years of prison. I’ve seen court-martial panels hammer soldiers with much longer sentences for lesser crimes. This Army Captain should have had the book thrown at him. He breached the trust and integrity that we expect of officers. Also, the dirty little secret is that he will remain an Active duty Army officer until the Army gets around to administratively separating him. It’s unknown whether he will continue to draw his salary and benefits.

The case number (Waco Division) is 6:10-cr-00136.

Here is the press release from the US Attorney’s Office:

Gonzales Iraq Plea

Thursday, July 1, 2010

The largest TARP fraud case to date - - this record sure to be topped

Lee Farkas, the former chairman of Taylor, Bean & Whitaker Mortgage Corp., was accused by DoJ of helping run a more than $1.9 billion fraud scheme that unsuccessfully attempted to steal money from the government’s Troubled Asset Relief Program.

The DoJ alleges that Taylor, Bean & Whitaker Mortgage Corp. lied about the health of loans it was servicing for the Federal Housing Administration. The DoJ also alleges that Farkas wrongly attempted to obtain more than $550 million from the government’s bank-bailout fund, making this the largest TARP fraud case to date. The DoJ further alleges that Farkas sought to deceive financial firms and TARP by covering up shortfalls at his closely held mortgage lending company in Florida.

Assistant Attorney General Lanny Breuer had this to say: “The fraud alleged here was truly stunning in its scale and complexity.”

Here is the DoJ press release:

DoJ Press Release (Farkas Indicted)

More promises from CMS that it will police its programs (here Medicare Part D)

Medicare Part D is a federal program to subsidize the costs of prescription drugs for Medicare beneficiaries in the United States. It was enacted as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 and went into effect on January 1, 2006.

Medicare Part D has been a boondoggle for big Pharma and the crooks that use government health care programs as their personal ATM machine. The total federal expenditures for the program for 2008 was $49.3 billion. The projected cost to the federal government from 2009 through 2018 is estimated to be $727.3 billion. (See 2009 Annual Rpt. of the Boards of Trustees of the Federal Hosp. Ins. & Fed. Supp. Med. Ins. Trust Funds, Table III.C19.—Operations of the Part D Account in the SMI Trust Fund (Cash Basis) during Calendar Years 2004-2018, Page 120 (Page 126 in pdf)).

But as with all other government health care programs, there is almost no oversight. Here is what the Government Accountability Office has to say about the failure of Centers for Medicare & Medicaid Services (CMS) to police Medicare Part D:

"While CMS oversight of Part D fraud and abuse programs has been limited, the agency plans to expand this oversight, including adding on-site audits (which include interviews and other face–to–face evaluations) in place of the desk audits (reviews of requested documents only) it has completed."

How many times have you heard that this line: "the agency plans to" blah blah blah. The Government simply has too few trained investigators, lawyers, and protocols to police its health care programs. Here is a copy of the full report:

GAO Report (Medicare Part D - CMS Oversight)

Here is the affidavit to the Texas Medicaid fraud case below


Somali immigrant charged in Texas state court with Medicaid fraud

The San Antonio Express News reports today that a Somali immigrant used Somali refugees to commit fraud against the Texas Medicaid program. See the article below.

Refugees Were Pawns in Fraud Case

Alaska Lawyer Files Qui Tam to Challenge State's Prescription of Off-label Drugs

Alaska civil rights attorney Jim Gottstein has filed a novel qui tam suit against Alaska state officials, claiming that their use of a wide variety of prescriptions on poor children amounted to off-label prescribing and fraud against the state Medicaid system, which footed the bill for the prescriptions. Gottstein's complaint has been declined by the federal government, but apparently he is pressing ahead. His qui tam faces a motion to dismiss from state defendants, who claim that the state is free to bill Medicaid for prescriptions for children, even if they are not FDA approved for use in children, and even if they have no indications in any of the three primary published drug compendia which are referred to by the False Claims Act. For more information about this important case, read the rest of Robert Whitaker's article in Psychology Today (below).

Medicating Children_ A “Whistleblower’s” Lawsuit Raises a Novel Legal Question