Games People Play

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26082954 - social security card, money and stock market numbers

There are two types of mind games. Individuals who want to maintain a healthy brain keep their mind active by completing activities such as crossword puzzles, Sudoku, learning how to play a musical instrument or doing something they’ve never done before. The other type of mind games involves engaging in actions that psychologically affect others. (Usually not in a good way, I might add.)  Today, you will learn about a psychiatrist from Hobe Sound, Florida who you might think would be the last person to play mind games due to the nature of his profession. However, that did not stop him from stealing about $800,000 from the federal government through a Social Security Disability fraud scheme and a tax fraud scheme he carried out over seven years. (He deliberately played a game of deception with the federal government.)

According to court documents, the psychiatrist claimed he was unable to work and filed a claim with his private disability policy in 2002. (As a result, he began receiving disability payments from the private insurance company.) One year later, the doctor also applied for Social Security disability benefits. (Again, his claim was approved.) The Social Security Administration (SSA) began paying the supposedly disabled man Social Security disability benefits. There was nothing wrong with this situation until the psychiatrist neglected to inform the SSA that he had returned to work. In fact, he was gainfully employed by a Pennsylvania hospital making more than $1.6 million in income. (That amounts to about $230,000 a year in salary, not including the disability payments he was receiving simultaneously.)

Not only did the psychiatrist fail to report to his private insurance company and the SSA that he had gone back to work, he also took steps to conceal his income from the private insurance company, the SSA and the Internal Revenue Service (IRS). (As you can guess, nothing good came from that really bad decision.) The steps he took amounted to directing his income to be paid to nominee individuals and corporations. Today’s fraud article also mentions that although he filed personal tax returns, he did not report his $1.6 million in income. And, another nail that sealed his coffin was the submission of fraudulent documentation to his insurance company that falsely stated he was not working.

All of the lies finally caught up with the doctor who tried to outmaneuver the government. The Hobe Sound, Florida psychiatrist pleaded guilty to tax fraud and Social Security Disability fraud.

When sentenced, the doctor faces a maximum sentence of five years in prison for tax evasion, 20 years behind bars for wire fraud, and five years for Social Security fraud. Then, on top of that he could receive a period of supervised release and will have to pay $451,026 in restitution to the SSA, $341,032 to his private insurance company and an amount to be determined by the IRS, plus monetary penalties. (Notice that the government doesn’t play any mind games. Prosecutors simply tell it like it is: if you think you can get away with committing fraud against the government, be mindful of the outcome of today’s case.)

Today’s “Fraud of the Day” is based on a Department of Justice press release entitled, “South Florida Doctor Pleads Guilty to Tax Evasion and Disability Fraud,” released on November 20, 2018.  

A South Florida doctor residing in Hobe Sound, Florida, pleaded guilty today to tax evasion, wire fraud, and Social Security disability fraud, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division and U.S. Attorney Ariana Fajardo Orshan for the Southern District of Florida.

According to court documents and information provided to the court, Arthur John Kranz was a doctor specializing in psychiatry.  Beginning in 2002, Kranz made a claim on his private disability policy that he was unable to work, and began receiving disability payments from his insurance company.  In December 2003, Kranz submitted an application to the Social Security Administration (SSA) for disability benefits, which was later approved. Kranz then began receiving SSA disability payments in addition to the private disability insurance payments.  Kranz was required to notify his insurance company and the SSA if he returned to work.

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.