The article reports that the defendant, a manager at a convenience store in North Carolina, traded EBT cards for cash and allowed EBT holders to buy unapproved items like cigarettes.  (Cigarettes are not a food group.)  The investigation found that customers “would buy cigarettes or other low-priced items, and [she] would ring up the transactions and return cash to the customers.”  What was her incentive?  She usually retained about “40 cents of each benefit dollar.”  She also fraudulently caused the contractor handling the SNAP EBT transactions “to wire thousands of dollars” to the convenience store “from which she then made withdrawls for her personal use.”  (Of course, she did.)

Now, she’s going to prison (Maybe she can bum a cigarette off a cellie) for food stamp fraud and money laundering.  A federal judge sentenced her to 27 months in prison and three years of supervised release.  Plus, she owes the U.S. Food and Nutrition Service – the agency that oversees the SNAP program – $1 million in restitution.  (Good!  The taxpayers called, and they want their money back!)

In addition to discussing the defendant’s case, the article notes that SNAP is a $78 billion program, and that participation is at an all-time high.  That means there are a lot of people out there who need the benefits the program has to offer.  It also means that we have to find the fraudsters.  If one defendant owes $1 million in restitution for her crimes, what is the total cost of fraud to the program?

The article reports that starting in 2002, a Texas businessmen set up professional employer organizations, or PEOs, which from the outside appeared to have been created to help small businesses outsource the management of finances for their companies.  The PEOs claimed to have been taking money from the small businesses to pay the Internal Revenue Service (IRS) for legitimate reasons, including employment payroll taxes.  In reality, the PEO executives were pocketing and squandering the money.  (Bet they bought some new cars.)

The pyramid scheme came in when the executives continued to create new PEO firms so they could walk away from the tax liability; the businesses that hired the firms thought this was already handled by the services.  Not only did the PEO executives steal the money that belonged to the IRS, they are also accused of taking money for workers’ compensation insurance that was not always provided.

By 2008, when the pyramid scheme was discovered, the PEO executives had obtained more than $110 million from tax fraud.

Currently two executives have pleaded guilty – one of which has already served five years in prison for bank fraud committed in the 1990s.  (Didn’t learn the lesson after 5 years in the big house?  Now that’s a slow learner.)  Not only did he already serve time for a similar crime, this executive also used money from the current tax fraud case in order to pay for the restitution of his previous case – which came out to $1.2 million.  (So he paid for his former case with stolen money?  A class act.)

The two fraudsters could face up to 20 years in prison, but the government has decided to hold off their sentencing until more suspects are found in the case.  The IRS has also promised to work with the small businesses that were victims of the PEO firms.

This case is a classic reminder to keep an eye on your money.  Here, the small businesses thought they were doing themselves a favor by hiring the PEOs to manage their money, including paying taxes.  Instead, the PEOs bilked the businesses – and, in turn, the taxpayers – out of hundreds of millions of dollars.

So, here are the questions of the day:  could a similar pyramid scheme be lurking in your jurisdiction?  And, if so, how could they be detected?

The article reports that a Florida couple has been indicted by a grand jury on charges of conspiracy to defraud the U.S. Department of Education, student loan fraud and mail fraud. (If true, they added a new twist to their wedding vows: to love, honor and fraud) Authorities allege that the couple formed a company and “then recruited people who did not otherwise qualify for student loans and sent fraudulent applications to local colleges seeking student aid.” The article says the checks, which totaled $17,000, were sent directly to the company. (If multiple checks went to one address shouldn’t that raise a red flag?)

The allegations describe a brazen attempt to defraud taxpayers through the student loan program. It is important to note that these are simply that: allegations. The defendants are innocent until proven guilty. Even so, the scenario posed in the story raises a key question: how can student loan fraud be stopped? The allegations here center on using multiple identities all located at the same address to perpetrate fraud. It then follows, that the solution to stopping the fraud lies in leveraging identity-based filters to detect phony identities before sending the checks.

So, the question of the day is: does your government program need an identity-based solution to detect fraud?

The article reports that six individuals were arrested in connection with a case involving $5 million of unemployment and disability fraud. Authorities allege that “all six people are accused of forming a series of companies with the Employment Development Department beginning in 1989,” with the last one being formed in 2011. According to the article, the companies claimed to be “farm labor contractors that provided labor to harvest various agricultural crops” in California counties. Instead, investigators claim that the individuals sold wages to hundreds of people in Northern California. It noted: “the defendants would charge an individual between $250 and $1,000 in wages. The buyer, who never performed any work for the suspect companies, would then claim to be laid off and file for unemployment or disability benefits, or, in some cases both.”

A spokeswoman for the U.S. Attorney’s Office said the individuals who purported to work for these companies often couldn’t name their supervisor or the location where they worked. She added: “In order to further the fraud, the defendants used the name ‘Mohammed Khan,’ used each other’s business addresses, repeatedly hired and laid off each other, and continually changed the names of the businesses.” (No, there’s nothing at all suspicious about that.)

As part of the investigation, authorities searched several of the defendants’ homes and businesses and “linked nine automobiles to the suspected scam.” (How much you wanna bet they weren’t from the used car lot down the street?)

The defendants allegedly used the same name to perpetrate the fraud, as well as the names of each others’ businesses and addresses. Of course, the defendants are innocent until proven guilty, but the case is illustrative: these common denominators are red flags – potential anomalies that are critical to uncovering fraud, when it occurs. So, the question for the day is: could your fraud detection system see these anomalies?

The article reported that the defendant used an electronic number provided by the Internal Revenue Service (IRS) to file false tax returns in the names of 14 people, and sought over $53,000 in phony refunds.  Several of the identities she stole were those of U.S. Marines currently serving in Afghanistan.

To perpetrate her scheme, the defendant obtained a list of more than 200 names, dates of birth and Social Security numbers, along with over 100 photocopies of drivers’ licenses and Social Security cards.  Then, she sought an accomplice for the job to help her prepare the tax refunds.  (All good fraudsters need a side-kick)  All she expected from the accomplice was 20 percent of the money earned by filing the fake returns on tax software.  Fortunately for the taxpayers, the accomplice turned out to be a confidential informant from the FBI, who caught her red-handed when she shared the stolen information.

The defendant pleaded guilty to one count of fraud and one count of aggravated identity theft for her plans to steal thousands.  Now she faces the possibility of up to 22 years of prison when her sentencing hearing rolls around in July.  Thankfully, in this case the government was able to catch this fraudster before she stole the money due to the dedication of close surveillance and steady watch.

The article reports that on April 25, the robber held up the mailman at gunpoint and ordered him to drive his mail truck to another location where a car was waiting to pick the thief up.  While en route, the gunman asked where the tax refund checks were kept – and took off with several of them before hopping into a get-away car.  This attack comes only two weeks after 200 pieces of mail were stolen from another mail truck in the area.  (The drug dealers turned tax refund scammers just miss the old days with guns and cars.)  Thankfully, no one was injured in either of Tampa’s April incidents.

Sadly, these aren’t the first incidents of this kind – they just appear to be happening more frequently than ever before.  In December 2010, a Pembroke Pines mailman was shot and killed for his mailbox key – and in June 2011 another mailman from Hollywood, California was held at gunpoint and robbed while on the job.  And on a less violent, but still noteworthy attempt, in 2011 a married couple in New Jersey pleaded guilty to following around mail trucks and stealing tax refund and Social Security checks from mailboxes before the residents could get to them.

There are no suspects in either of Tampa’s April incidents, but Tampa police have released that they are currently working on safety plans for mail carriers.  Furthermore, the IRS has announced a pilot program in Tampa in which local investigators will be able to access actual fraudulent tax returns in order to prove identity theft more easily.  (Identity theft often goes hand-in-hand with tax refund fraud.)

So, the question of the day is: has your jurisdiction seen an increase in violence connected with tax return or another type of government benefit fraud?

The article reports that beginning in December 2003, the New Jersey woman began filling out applications for financial assistance.  In total, she applied for $1.7 million in student loans, and actually received more than $192,000 in assistance through 17 loans.  (More than 10% not too bad!)  She filed the applications under her name and those of family members, along with the correct social security numbers and dates of birth, all of which she used without permission.  (They must all be really close after this.)

At the very least though, this fraudster had some time on her hands and put some real effort into this.  She drafted up fake college enrollment letters and paystubs in addition to the work she put into her supposed ‘co-borrower’ information where she made up falsified biographical data, employment data, financial information and even tax forms.  (Was any of the co-borrower info checked?  If so, how did she get the loan?)  The only thing this fraudster didn’t seem to forge was her address – which she used so the loans would go directly to her.  (Hasn’t she heard of direct deposit?  Fraudsters hate to be inconvenienced.)

Recently, she pleaded guilty to one count of mail fraud, two counts of tax evasion and one count of aggravated identity theft.  She was sentenced to 61 months in prison.  In addition, once she serves her time in jail, she must undergo five years of supervised release and pay compensation of $136,403.  (What??  Look above.  She received $192,000.  Why is she only repaying $136,403??  Is the difference a reward for taking advantage of the system??  It’s like being paid to rob the government.)

This case offers a prime example of how a fraudster exploited the system by – in many instances – using fake data.  At the same time, it points out exactly how much of the fraud could have been prevented:  by cross-checking the identity of the applicant against a broader set of data, such as public records.  While student loan fraud is the type of fraud perpetrated here, the solution to the problem – use of public records to see a fuller picture of the benefit applicant – is a valuable approach to enhancing existing systems for fraud detection.  So, the question for the day is:  does your agency have a holistic view of its benefit applicants?

The article reports first that a Manhattan man was charged with theft of public funds for allegedly renting out his apartment in a Lower East Side public housing development.  The defendant, who authorities say has lived in Washington (not exactly the same neighborhood) since 2001, allegedly advertised the apartment as a sublet via the Internet and charged tenants $850 a month.

Next, the article focuses on the case of a female defendant from Queens who was charged with theft of public funds and making false statements.  She allegedly “paid roughly $72 a month in rent for a Brooklyn apartment” and falsely claimed the apartment as her main residence.  (If true, what did she do with the apartment?)  Authorities say that she actually lived in Queens and defrauded the government of $123,000 in illegal benefits over eight years.

In this case, the system worked:  the New York City Housing Authority’s investigators discovered the alleged fraud.  (Great work!)  The commissioner for the authority’s Department of Investigation stated:  “Fraudsters continue to create new ways to profit illegally from public housing benefits and apartments.  But DOI investigators are just as innovative, meticulously tracking down the facts and exposing the scams.”

So, the question for the day is:  what are PHAs in your area doing to track down fraudsters?

The article reports a grand jury has indicted seven people, whom authorities allege “conspired to exchange more than $5 million” from the SNAP and Women, Infant and Children (WIC) programs for cash in an alleged scheme that prosecutors say involved 13 stores in Georgia.  (Seven defendants and 13 stores?  If these charges are true, that’s quite an organization.)  All the defendants face “up to 10 years in prison and a fine of up to $250,000, if convicted on one count of wire fraud conspiracy.”  Some of the defendants face additional charges, including stealing government funds and conspiracy to commit money laundering.

And, of course, there’s the money.  Prosecutors are seeking $5 million in restitution, bank accounts and assets – and three luxury cars.  (If the charges are true, this makes sense.  Luxury cars and fraud go together like peanut butter and jelly.)

Obviously, it’s important to remember that the defendants are innocent until proven guilty.  But the case, like the scenario posed above, does point out how the system can be exploited by businesses that are allowed to participate in the food stamp program.  This program exists to help our society’s most vulnerable citizens.  So, we know how fraud can be perpetrated.  The question is…how can it be stopped?

The article reports that the woman was convicted following a two-day trial on two charges of workers’ compensation fraud for filing false claims in 2007 and 2010.  The woman, who worked as an office technician at a California substance abuse treatment center first filed a claim “alleging she suffered a wrist injury while processing inmates’ mail.”  When she filled out her questionnaire, she said she couldn’t write, type and “described her pain as ‘excruciating.’” She received treatment and returned to work.  Here’s the catch…while she wasn’t working, she took college classes and worked two days a week as a student nurse at a medical center.  She was also captured on video at the time “loading heavy textbooks into her car, texting on her cellphone, taking out the trash and carrying heavy grocery bags.”  (So much for the wrist injury.)  She also posted nearly 200 updates on a social networking site.  (Guess she had to update her social network on what she was doing while defrauding the system.)

After two years, she returned to her job at the treatment center.  She worked just 10 hours in two days before filing a second claim for workers’ compensation, this time “alleging injury to her neck and shoulder after lifting a binder.”

Her fraud in both cases totaled $11,000.  (Looks like her wrist didn’t hurt enough to keep her from cashing checks.)

Now convicted of fraud, she faces sentencing in May, where she faces up to five years in prison time and $150,000 in fines.

In California, when people cheat the system, they are cheating the California companies, which fund the workers’ compensation insurance system.  And it is important to remember, that it is just that:  an insurance program.  As with all insurance programs, when people cheat the system, California companies aren’t the only ones who lose money; the other victims are the individuals who really need the help due to a real work-related injury.

So, here’s the question for the day:  how does your state’s workers’ compensation agency catch fraudsters?