Transcript The New Faces of Compliance

Fraud Prevention
&
Tools of The Trade
Risk Management Agency
Special Investigation Branch
Senior Investigator
Mark Price
Background
June 2000
The Agricultural Risk Protection Act of
2000 (ARPA)
The Federal Crop Insurance Act (the Act)
Section 515: Program Compliance and
Integrity
Background (Cont.)
Section 515: Program Compliance and
Integrity.
Provided the Risk Management Agency (RMA)
with a nationwide fact-finding network through
a formalized alliance with the Farm Service
Agency (FSA)
Directed that RMA and FSA share insured
producer data to identify and correct reporting
inconsistencies between the programs
Funded the use of data warehousing and data
mining information analysis technologies
Background (Cont.)
Since June 2000, the principle focus of
RMA’s Compliance function has been
implementing Section 515 of the Act
Section 515 required that RMA and FSA
form an alliance and, along with the 17
insurance providers, work together to
improve program compliance and
integrity
Implementation
RMA efforts have been focused on:
Training FSA and RMA personnel on the
new provisions of the Act and resulting
procedures
Developing the FSA/FCIC program
consultation process through Insurance
Services Regional Offices
Establishing a process for FSA to assist
RMA and the Insurance Providers in an
annual claims audit role as part of RMA’s
quality-control process
Implementation (Cont.)
Developing procedures for referring
potential crop insurance program errors,
fraud,waste and abuse between FSA and
RMA
Integrating the data reconciliation
process between FSA and RMA
Initiating the data warehousing and data
mining project
Implementation (Cont.)
Establishing a sanctions function to
facilitate the imposition of penalties (such
as fines, debarments and
disqualifications)
Establishing a Special Investigations
Branch (SIB) to enable more focused and
timely responses to high-profile cases
that would strain the capabilities and
resources of existing RMA Regional
Compliance Offices (RCO)
Claims Audit
Legislative Requirement
FSA will assist in auditing a
statistically appropriate number of
claims paid by insurance providers
Milestones
Procedure published in 4-RM
Handbook, FCIC Program Integrity
Data Mining and Warehousing
LEGISLATIVE REQUIREMENTS
Information technologies known as data mining and
warehousing shall be used to administer and enforce
Section 121 of ARPA
Develop procedures to identify sales agents or loss
adjusters who were associated with loss claims that
were greater than 150 percent of the mean for the
area
IMPLEMENTATION
Let contract to establish data warehouse.
Data Mining project initiated
Single step in a multi-step research project
Data Mining and Warehousing
RESULTS
 IMPLEMENTING PROCEDURES BASED ON ANALYSIS
 TARGETS ATTENTION OF COMPLIANCE
EFFORTS
 REFERRALS TO:
RISK MANAGEMENT AGENCY
INSURANCE PROVIDERS
FARM SERVICE AGENCY
RESULTS-Referrals
Fiscal Year 2001 results
Spot Check Referrals
1763 Referrals sent to FSA
4-RM Referrals
Received 413 referrals from FSA on
form AD-2007
NRCO Data Mining Summary
2001
2002
2001 Spot Check Reviews (FSA)
2002 Spot Check Reviews (FSA)
Crop
Policies
Reviewed
Minnesota
All
13
$22,384
$178,123
$12,708
Montana
All
1
$623
$4,915
$4,877
North Dakota
All
47
$362,380
$2,072,966
$1,203,643
South Dakota
All
18
$154,652
$1,097,757
$459,741
Wisconsin
All
$158,916
$1,350,002
$28,635
State
13
92
Premium
Reviewed
Liability
Reviewed
Indemnity
Reviewed
$698,955 $4,703,763 $1,709,604
State
Crop
Policies
Reviewed
Iowa
All
57
Minnesota
All
160
Montana
All
27
North Dakota
All
519
South Dakota
All
179
Wisconsin
All
23
Wyoming
All
Premium
Reviewed
Liability
Reviewed
Indemnity
Reviewed
2
967
$0
$0
$0
2001 Soybean Yield Switching (Insurance Providers)
Premium
Reviewed
Liability
Reviewed
2002 Yield Switching (Insurance Providers)
State
Crop
Policies
Reviewed
Iowa
Soybeans
5
Minnesota
Soybeans
1
$530
$8,095
$0
South Dakota
Soybeans
2
$47,795
$483,461
$53,390
8
$72,944
$779,748
$129,116
$24,619
$288,192
Indemnity
Reviewed
$75,726
State
All
Crop
All
Policies
Reviewed
39
39
Premium
Reviewed
1190749
Liability
Reviewed
$8,579,435
Indemnity
Reviewed
$1,887,856
$1,190,749 $8,579,435 $1,887,856
2001 Winter Wheat Yield Switching (Insurance Providers)
2002 Added Land/New Producer (Insurance Providers)
State
Montana
Crop
Winter Wheat
Policies
Reviewed
10
10
Policies
Grand Total
110
Premium
Reviewed
$282,020
Liability
Reviewed
Indemnity
Reviewed
$2,470,685
$738,967
$282,020 $2,470,685
$738,967
Premium
Liability
State
All
Crop
Policies
Reviewed
All
63
63
Indemnity
$1,053,919 $7,954,196 $2,577,687
Grand Total
Policies
1,069
Premium
Reviewed
$469,296
Liability
Reviewed
Indemnity
Reviewed
$4,780,689
$485,745
$469,296 $4,780,689
$485,745
INDEMNITIES PAID TO INDIVIDUALS ON SPOT-CHECK LIST
1998-2000 AS OF 02/10/02
$120,000,000
$100,000,000
$80,000,000
$60,000,000
$40,000,000
$20,000,000
$0
1998
1999
2000
INDEMNITIES PAID TO INDIVIDUALS ON SPOT-CHECK LIST
1998-2001 AS OF 02/10/02
$120,000,000
$100,000,000
$80,000,000
$60,000,000
$40,000,000
$20,000,000
$0
1998
1999
2000
2001
Yield Switching Group - Soybeans
$1,800,000
$1,600,000
$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$0
CY1998
al
Tot
CY1999
CY2000
CY2001 (proj)
ity
mn
e
d
In
Yield Switching Group - Soybeans
$1,800,000
$1,600,000
$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
nd
em
ni
ty
$200,000
To
ta
lI
$0
CY1998
CY1999
CY2000
CY2001
Yield Switching Group - Cotton - Projection for CY2001
$14,000,000.00
$12,000,000.00
$10,000,000.00
$8,000,000.00
$6,000,000.00
$4,000,000.00
m
ni
ty
$2,000,000.00
In
de
$-
ta
l
CY1996
To
CY1997
CY1998
CY1999
CY2000
CY2001 (PROJ)
Yield Switching Group - Cotton
$12,000,000.00
$10,000,000.00
$8,000,000.00
$6,000,000.00
$4,000,000.00
m
ni
ty
$2,000,000.00
In
de
$CY1996
To
ta
l
CY1997
CY1998
CY1999
CY2000
CY2001
Fiscal Year 2001
The emphasis on prevention has
produced promising early results.
RMA and Insurance Providers have stopped
close to $15 million in improper payments from
being made in Fiscal Year (FY) 2001, with many
more payments still being investigated.
USDA and the Department of Justice recovered
close to $29 million.
TOOLS OF THE TRADE
CRIMINAL CODE
18USC, 1014 – False Statements or Reports in
connection with FCIC - $1M Up to 30 Years
18USC, 1001 – False Statements – Fines/Time
TOOLS CONT.
18USC, 286 – Conspiracy – Fines/Time
18USC, 287 – False Claims – Fines/Time
CIVIL ENFORCEMENT
31USC, 3801 – False Claims
Affirmative Civil Enforcement – Treble
Damages Plus Fine ($5K-$10k)
7USC, 1506 Civil Fines and Disqualification
TOOLS CONT.
ADMINISTRATIVE REMEDIES
Civil Fines
Disqualification/Suspension of Producers
Debarment/Suspension of Agents, Adjusters,
Company Employees
CRIMINAL/CIVIL PROSECUTIONS
Mother and Son – Plead Guilty to Crop
Insurance Fraud In Minnesota
Criminal Conviction:
 Both defendants plead guilty to making false
statements and conspiring with the processing
facility to falsely report the amount of dry bean
production and value $$ they received for the dry
beans.
 Both defendants were ordered to pay FCIC
restitution totaling $100,330.
 The son was sentenced to prison for 10 months
and supervised release for three years.
CRIMINAL/CIVIL PROSECUTIONS (CONT.)
Mother and Son – Plead Guilty to Crop
Insurance Fraud (Cont.)
Civil (Summary Judgment):
 Under the terms of the civil settlement
agreement the son agreed to pay an
additional $12,670 and voluntarily disqualified
himself from future participation in the MPCI
program for a period of three years.
CRIMINAL/CIVIL PROSECUTIONS (CONT.)
Crop Insurance Company Agreed to Pay Civil
Damages and Penalties
Civil Action:
 Fraudulent MPCI claims were filed by a company
loss adjuster on his father’s MPCI policy. The
claims were processed and approved by claims
managers at the company’s regional office in
Fargo, ND. When the company became aware the
claims were potentially fraudulent, they did not
report the suspected fraud to the Risk
Management Agency.
CRIMINAL/CIVIL PROSECUTIONS (CONT.)
Crop Insurance Company Agreed to Pay Civil
Damages and Penalties (Cont.)
Civil Action:
 The settlement agreement requires the
company to pay treble damages and penalties
of $323,616, implement a corporate compliance
plan that establishes a Special Investigative
Unit that is independent from the crop
insurance claims division, regularly report
suspected false claims data to RMA, and
provide annual fraud-prevention training to all
loss adjusters and SIU investigators.
CRIMINAL/CIVIL PROSECUTIONS (CONT.)
Four Farmers Are Charged in Crop Insurance
and Disaster Payment Case
Criminal Indictment:
 Three farmers in North Dakota and one in
Minnesota were charged with illegally profiting from
$1.8 million in crop insurance and disaster
payments resulting from an alleged conspiracy.
 Additional charges were filed against a Minnesota
businessman, who was previously indicted in
connection with the scheme.
CRIMINAL/CIVIL PROSECUTIONS (CONT.)
Four Farmers Are Charged (Cont.)
Criminal Indictment:
 An employee of an Oslo, MN grain cooperative
was accused of enticing farmers to sell wheat at a
discounted price and allegedly providing false or
incomplete information to allow farmers to obtain
crop insurance and disaster aid payments.
 A trucking company was also charged with
conspiracy and money laundering.
CRIMINAL/CIVIL PROSECUTIONS (CONT.)
Wimbledon, North Dakota Man Found Guilty
For role in $14M Crop Insurance and Farm
Program Fraud Scheme
Criminal:
 The North Dakota man, along with his other farm
business entities were found guilty of 19 counts of
fraud, racketeering, tax and conspiracy charges in
federal court in Fargo, ND.
 The jury ordered the defendant to forfeit $5.9M for
money laundering, conspiracy to defraud federal
agencies, false statements and filing false tax
returns in connection with MPCI and FSA farm
program payments.
CRIMINAL/CIVIL PROSECUTIONS (CONT.)
Wimbledon, North Dakota Man Found Guilty
(Cont.)
Criminal:
 According to the indictment, the man conspired
with five other individuals to establish sham
farming operations to avoid MPCI and FSA
program requirements
 The sham farming entities were not eligible for crop
insurance benefits as they did not actually have an
interest or share in the insured crop.
CRIMINAL/CIVIL PROSECUTIONS (CONT.)
Wimbledon, North Dakota Man Found Guilty
(Cont.)
Criminal:
 Production was also shifted between the sham
farming operations in order to receive crop
insurance indemnity payments.
 Each fraud count carries penalties of up to 20
years in prison. Additional financial penalties will be
imposed according to federal guidelines, after the
pre-sentence investigation is complete.
CRIMINAL/CIVIL PROSECUTIONS (CONT.)
Wimbledon, North Dakota Man Found Guilty
(Cont.)
Administrative Action:
 The defendant is a crop insurance agent in North
Dakota. The North Dakota Insurance Department
has served a Cease and Desist order and filed an
administrative complaint to revoke the his agent’s
license.
 RMA has suspended the defendant thereby,
excluding him from participating in the Federal
Crop Insurance Program, as an insured, agent,
owner of an agency selling crop insurance or any
other capacity.
ANTI-FRAUD TRAINING
THE FIRST LINE OF DEFENSE
VIDEO
 CLASSROOM TRAINING
 TRAINERS/FACILITATORS
CD ROM
 COMPUTER BASED/SELF-PACED MODULE
CURRICULUM
 FRAUD INDICATORS
 INTERVIEWING TECHNIQUES
 OBTAINING INFORMATION