Last month news broke about a wide-spread fraud that caused Medicare to lose roughly $1.2 billion. While this case is noteworthy for the huge price tag attached to it and the brazen nature in which seniors were targeted, similar scams are going on across the country that don’t get the same headlines. CPAs can play a role keeping their clients safe from fraud schemes like these by educating them on the importance of keeping their personal information safe and being cautious about who they communicate with — both online and offline.
To better understand how frauds like this work and how people can protect themselves, I spoke with Randal A. Wolverton, CPA/CFF. Wolverton is a member of the AICPA’s FLS Fraud Task Force and is a former FBI agent who specializes in financial crimes. He currently provides financial crime instructional programs to numerous local, state and federal law enforcement entities, various state and federal agencies, businesses and banking institutions and provides articles and insights on preventing fraud on his blog.
James Schiavone: How does a scheme like this get discovered? What role do CPAs play in these frauds, specifically in tracking the money?
Randal Wolverton, CPA/CFF: Because of the inherent risks of fraud to the Medicare system, there’s a well-established process for identifying, investigating, charging and dismantling large scale conspiracies designed to defraud it. And this case is a good example of that process working.
The U.S. Department of Health and Human Services, the FBI and the IRS Criminal Investigative Division, among others, continually focus on prevention and detection of fraud in Medicare. This case is one example of this process. To identify these problem areas, the agencies will monitor complaints from the public, data-mine huge sets of claims data to spot suspicious trends, conduct appropriate field audits to drill deeper into problem areas and conduct complex financial analyses to follow money from the victims through the entire process to the ending place. And ultimately, they may recommend civil and criminal actions where warranted.
The public might not be aware, but many CPAs serve as federal investigators in a wide-variety of agencies including as non-law enforcement Forensic Accountants in organizations such as the FBI to assist in the forensic analysis of financial records. CPAs can be found in auditing roles within various agencies as well as internal and external auditing roles with the subject companies. The work product of CPAs who serve as auditors is often used for evidentiary purposes.
JS: How can people prevent themselves from being victims or unwitting accomplices to fraud?
RW: When I present to senior citizen groups about the risks of financial exploitation, I encourage them to think about the issue from the perspective of the scammer. That means becoming more aware of how fraudsters identify victims and work to gain their trust, as well as the tactics they use to obtain and transfer money and how they manipulate the victims to conceal their conduct. This leads to discussions about how to protect their money and belongings, their Personally Identifiable Information (PII) and their computers or smartphones — because that is what the criminals are targeting.
To prevent fraud, people must understand and practice good online and social media behavior to protect their money and identification. Seniors must understand that most everything they send in a digital format has the potential to be harvested and used by other persons. The information can legally be sold to advertisers, but it also has the potential to be obtained and used by criminals to target victims. The criminals contact victims online, work to gain trust and ultimately request that they do something, such as deposit checks from other victims and move money through bank accounts at the behest of the criminals.
The specific case from last month involves telemedicine practices. While many telemedicine businesses play an important role in providing medical services to underrepresented population areas, this area has been seriously abused by criminals. The system can be exploited by prescribing unnecessary medical services and devices to victims to defraud Medicare and Medicaid. We see that patients who completed online pain surveys were later solicited by both legitimate businesses and fraud driven businesses. The PII provided by people answering surveys can and is sold by brokers to other components in the health care process.
The lesson is, seniors should be very cautious about the information they provide to surveys and other social media outlets and realize that this information can be obtained and brokered by a variety of people and ultimately used against them.
JS: Why are the elderly often targeted by schemes like this? How can they stay safe?
RW: This telemedicine case specifically targeted senior citizens because they qualify for Medicare and Medicaid. The goal is to obtain the PII of the elderly, establish contact, convince the victims to additional medical procedures, order unnecessary medical equipment and then charge the taxpayers through Medicare and Medicaid. Seniors can stay safe by learning and practicing good cyber hygiene, recognizing the signs of financial exploitation and being very cautious when providing their PII. If they have any concerns, they should communicate them immediately to trusted family, caretakers or their CPA or attorney.
JS: What should people do if they feel like someone is attempting to defraud them or a loved one?
RW: Known or suspected fraud should be reported to local law enforcement authorities or state and federal authorities if needed. If Medicare, Medicaid or private insurance is involved, always report known or suspected fraud. Many state and federal agencies offer reporting hotlines for fraudulent activity and provide preventions tips for the general public.
Those who have older loved ones should also be able to recognize signs of financial exploitation and work diligently to open lines of communication with potential victims to overcome loneliness or cognitive deterioration developments.
The AICPA’s Eye on Fraud reports are free resources all CPAs can use to stay up to date on emerging schemes that fraudsters are using to take advantage of individuals and businesses. In turn, CPAs can add value to their clients by keeping them abreast of the evolving best practices in fraud prevention and detection.
And if you happen to discover one of you clients in a victim of ID theft, the AICPA has a comprehensive checklist to help them navigate the aftermath and get their financial life back in order.