Medicare fraud runs deep in prescription drug program

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Crooks are taking advantage of lax oversight in Medicare’s Part D prescription drug program to obtain highly addictive drugs including oxycodone, Ritalin, and methadone, according to results of a federal probe.

The report by an independent inspector said Medicare can’t verify all the prescriptions it pays for, leaving the system open to exploitation by criminals using fake medical ID numbers and the identities of dead doctors.

The Centers for Medicare and Medicaid Services, which administer the federally funded health insurance program, isn’t adequately confirming that prescriptions are written by physicians, according to the investigation by the Office of the Inspector General at the Department of Health and Human Services.

Pharmacies and other Medicare contractors are supposed to enter a number that identifies prescribers. But in many cases, that information is being left blank or assigned a dummy number, last week’s report found. The missing information doesn’t always indicate fraud and could include clerical errors, but without prescriber identifiers, it’s hard for investigators to determine.

The report showed the agency paid $20.6 million for 228,000 prescriptions for so-called schedule II drugs with invalid prescriber IDs in 2007. The agency paid for about $1.6 billion worth of schedule II drugs during that same time period.

Investigators said the prescriptions with invalid IDs represented a small portion, but are alarming because schedule II drugs include heavy-duty painkillers and stimulants that are frequently trafficked.
Critics say pharmacies are getting around safeguards in the system, making it nearly impossible for federal health officials to track whether a licensed doctor prescribed the drug and in what quantities.

“It’s similar to placing a combination lock on a gate to protect what’s inside but then allowing any combination to open the gate,’’ said Robert Vito, a regional inspector general for the Department of Health and Human Services, during testimony before Congress last year.

Investigators recommended that contractors not be paid for Schedule II prescriptions that have an invalid doctor ID number, but Medicare officials worried stricter oversight could hamper legitimate patients’ access to medications.

The Associated Press

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Controversial L.A. Better Business Bureau chief rescinds resignation

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The head of the Better Business Bureau’s Southern California Chapter, William Mitchell, is attempting to revoke the resignation he tendered in December, while under scrutiny of the national organization for alleged misconduct within the agency. At the time, he said he was resigning for health reasons.

Can we really trust someone who resigns, then quickly un-resigns, for vague reasons?

Now he vows to fight charges that he was responsible for the scandal that exposed how businesses were being given higher ratings if they became dues-paying members of the organization. Mitchell had been credited in the past for devising the letter-grade rating system, which has since been dropped by the organization.

In November, an ABC News investigative team signed up phony businesses for membership in the Southern California BBB, and immediately received A grades. The investigation also looked at businesses that were not members and had very few unresolved complaints, and found that they were given much lower ratings.

Mitchell was also heavily criticized for the salary paid to him annually by the non-profit. According to its 2008 tax filing, Mitchell was paid $409,490 that year. His salary was far more than any local heads of the BBB, and greater than the organization’s national president.

“When I tendered my resignation last month, mainly due to my health, I hoped it would clear the path to better relations between the Council of Better Business Bureaus and the Los Angeles BBB,” Mitchell wrote in his e-mail, a copy of which was obtained by the Los Angeles Times. “However, the Council used my resignation as an opportunity to try to put their own people in place of our Board of Directors and to insert their designee as CEO. If this were to happen, Council would effectively control the LABBB and our considerable assets.”

Mitchell says that the National Council of the Better Business Bureaus wants to take over control of the local agency by inserting their own people as board members.

“Rest assured that we will pull out all stops to defend ourselves against Council’s unlawful overtures,” he said in the memo.

In an interview with the Times on Tuesday, Mitchell said that if he were to leave, there would be no one left to defend the local bureau from the national organization. He did not say what that might entail, or why the local office might have to defend itself.

Mitchell also addressed the salary issue, and said his reported salary had been inflated by vacation pay and bonuses, and that his actual base salary was only $340,000.

Los Angeles Times

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Chicago government agencies ignore do-not-hire list of banned employees

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What seems like a no-brainer in transparent governance is being ignored or resisted in some Chicago-area government agencies.

Employees who are fired by the city for wrongdoing are put on a list called the do-not-hire list, signally other city departments that an employee was terminated for cause, and they should not be rehired in another city department.

Despite the presence of the list, some of the employees on it are showing up in other city departments. To make matters even worse, many other city agencies including the City Council, the Chicago Public Schools and the Park District, have not agreed to use the list, and hire offending employees anyways.

A court-appointed city monitor and the city’s inspector general have long pushed for the hiring restrictions on the “blacklisted” employees, although they say that the city doesn’t do enough to effectively enforce the rules.

“The city still hasn’t used it to ensure these same people haven’t been hired at sister agencies, each of which are either controlled by, or whose leadership is appointed by, the mayor,” said Jon Davey, a spokesman for Inspector General Joseph Ferguson.

Mayor Richard daily’s administration says that it’s been trying to get other city agencies to go along with the list, but Jenny Hoyle, a spokesperson for the city’s Law Department, said nothing yet has been formalized.

Some critics fear that once a new mayor is elected later this year, the new administration may drop the list altogether.

When first asked in 2009 by the Chicago Tribune for a copy of the list as a public records request, the city’s Human Resources Department refused to provide it claiming that it was as “unwarranted invasion of personal privacy.”

The list, called “Ineligible for Rehire – Indefinite,” contains the names of workers that have been terminated for committing crimes or violating city policy.

The list includes the names of employees that have criminal convictions, have broken state or federal statutes, violated the city’s hiring plan, committed workplace violence, harassment or discrimination, or have been found guilty of wrongdoing by the inspector general’s office.

The current list contains the names of 218 employees that were fired, or resigned after being told they would be fired, and covers only the period from 2007 through 2009.

At least three employees on the current list have turned up in other city departments, according to the Tribune. One of those, an employee in the inspector general’s office that was fired for shoplifting but later acquitted, was rehired in a similar position in the Chicago Public Schools.

Information from: Chicago Tribune

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Kilpatrick’s aide to cooperate with prosecutors in corruption case

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Marc Andre Cunningham, the top aide to ex-Mayor Kwame Kilpatrick has apparently agreed to cooperate with government prosecutors in their city hall corruption case against the disgraced mayor, according to The Detroit News.

An order signed by U.S. District Judge Gerald E. Rosen pushed back the hearing date for Cunningham’s sentencing to April 14, signaling that the one-time top city hall official was ready to turn against his friend and former frat-house brother. The date is one day after a status conference hearing on the criminal case against Kilpatrick.

Cunningham pleaded guilty to charges that he took $300,000 in commissions from an investment firm that he helped secure $30 million of city pension funds to manage. Cunningham admitted that he paid a portion of the commission to Kilpatrick’s father Bernard, as a bribe to make the deal happen.

After the transaction, Cunningham was made Kilpatrick’s executive assistant. Later he was appointed head of the Detroit Film Office.

Cunningham pleaded guilty to one count of conspiring to commit bribery, and faces up to 37 months in prison.

The Detroit News

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Plea deals rejected by city council members in Bell corruption scandal

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The former City of Bell officials accused of looting the small blue-collar community of millions of dollars appeared in court on Monday, as Los Angeles County Deputy District Attorney Edward Miller outlined the case against them.

All eight dependents charged with public corruption appeared in court, although the principal targets of the district attorney, city administrator Robert Rizzo and his assistant Angela Spaccia, were excused early. They are scheduled to return for a separate hearing next week.

Remaining in the courtroom of Judge Henry J. Hall were council members Oscar Hernandez, Teresa Jacobo and George Mirabal, and former council members Luis Artiga, George Cole and Victor Bello. The preliminary hearings, which are expected to last all week, will determine if prosecutors have enough evidence to bind them over for trail.

Prosecutors allege that the part-time council members were each paid over $100,000 per year , largely for serving on multiple bogus city commissions that rarely met. Some of the phony commissions were called the Solid Waste and Recycling Authority, The Community Housing Authority, The Surplus Property Authority and the Public Finance Authority.

Miller said “They paid themselves for doing almost no work” and “robbed the citizens of over $1.3 million.”

In most California cities, council members are usually paid a few hundred dollars per month, or nothing at all.

The newest council member, Lorenzo Velez, the only official not charged in the scandal, was receiving $620 per month and had not yet been made a paid member of the phony commissions. When the salary scandal was first reported in the Los Angeles Times last summer, he said he wasn’t even aware of the existence of any of the commissions.

The district attorney’s office confirmed that it offered a plea deal to the six council members on Monday, in which they would be sentenced to two years in prison and make full restitution of the monies they received. All six defendants reportedly rejected the offer.

Prosecutors said  that city council members stood by and did little besides cash paychecks as Rizzo ran the city as a fiefdom, systematically looting it by overcharging property taxes, arbitrarily assessing licenses and fees on businesses, and making millions of dollars in unauthorized loans.

Rizzo’s total compensation in 2009 was more than $1.5 million.

Rizzo and Spaccia were not offered deals by the prosecution, and will be back in court for the next round of hearings on Feb. 14 when evidence against them will be presented.

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Bell, California officials in court on corruption charges

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Eight current and former officials of the city of Bell arrived in court Monday for a preliminary hearing to determine if there is sufficient evidence to try them on charges of looting the working-class Los Angeles suburb of $5.5 million.

Meanwhile, a prosecutor confirmed that attorneys for six of the eight have had preliminary discussions about reaching a possible plea bargain.

The eight — including the mayor, vice mayor and former city manager — are named in dozens of counts of misappropriation of public funds in a scandal that District Attorney Steve Cooley described as “corruption on steroids” on the day they were taken from their homes in handcuffs last September. Former City Manager Robert Rizzo is also charged with falsifying public documents in an effort to hide the scandal.

Outside court, Deputy District Attorney Jennifer Lentz Snyder confirmed prosecutors had discussed a possible plea bargain with attorneys for all of the officials except Rizzo and former Deputy City Manager Angela Spaccia. Snyder declined to discuss possible terms of the deal, saying the talks were only preliminary.

“We have been contacted about a possible disposition in this case,” she said. “We have provided a response.”

Rizzo, the former Bell city manager who was paid an annual salary and compensation package of $1.5 million a year, faces the most charges — more than 50 counts.

Others charged are Mayor Oscar Hernandez, Vice Mayor Teresa Jacobo, Councilman George Mirabal, former Mayor George Cole, former Councilman Luis Artiga, former Councilman Victor Bello and former Assistant City Manager Angela Spaccia.

Spaccia received an annual salary of $376,288 and the mayor and council members were paid about $100,000 a year for their part-time service to the city of about 40,000 people. Hernandez, Jacobo and Mirabal all face a March 8 recall election.

Authorities have said Rizzo was the ringleader of a scandal that went unchecked for years in which officials illegally paid themselves the huge salaries as well as made low-interest, unapproved loans to themselves and other city employees who ranged from high-ranking police officers to rank-and-file recreation attendants.

The money, according to local and state officials, came from property taxes and business license fees that had been raised illegally, as well as other funds, such as gas taxes, that were never intended for such use. The result, according to a recent report from Bell’s interim city manager, is that Bell is as much as $4.5 million in debt and on the brink of bankruptcy.

All eight defendants appeared briefly before Superior Court Judge Upinder S. Karla on Monday and agreed to have the cases brought against them combined for one preliminary hearing, which is expected to last at least a week.

All have pleaded not guilty and all but Bello are free on bail. He appeared in court in an orange jail jumpsuit, the others in business attire.

The scandal came to light last summer when the Los Angeles Times reported on the salaries of Rizzo and others, prompting outrage in the blue-collar city just east of Los Angeles where one in six people live in poverty.

The Associated Press

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Madoff trustee sues JPMorgan Chase for role in massive fraud

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E-mails and other internal documents show that executives at JPMorgan Chase were complicit in Bernard Madoff‘s massive fraud, lawyers seeking to recover funds for his victims said Thursday.

The lawyers work for a court-appointed trustee who filed a $6.4 billion complaint under seal late last year against JPMorgan, the disgraced financier’s primary bank for two decades. The parties agreed to make portions of it public on Thursday.

Among the e-mails cited is one in 2007 in which an unidentified JPMorgan Chase employee recounts being told “there is a well-known cloud over the head of Madoff and that his returns are speculated to be part of a Ponzi scheme.”

The material supports allegations that “the bank’s top executives were warned in blunt terms about speculation that Madoff was running a Ponzi scheme,” attorney Deborah Renner said in a statement. “Yet the bank appears to have been more concerned only with protecting its own investments in (the Madoff firm’s) feeder funds.”

In a statement on Thursday, JPMorgan said the complaint “is meritless and is based on distortions of both the relevant facts and the governing law.” It added that the bank “intends to defend itself vigorously against the unfounded claims brought by the trustee.”

The bank has denied having any suspicions about Madoff, saying it followed all commercial banking regulations in its dealings with him.

Trustee Irving Picard is in the midst of a two-year campaign to recover funds for Madoff’s burned clients with a flurry of lawsuits against financial institutions and brokers. Last year, he filed multibillion-dollar suits against HSBC and UBS AG over similar allegations the banks deny.

Madoff, 72, is serving a 150-year sentence in a federal prison in North Carolina after admitting that he ran his scheme for at least two decades, using his investment advisory service to cheat thousands of individuals, charities, celebrities and institutional investors.

Losses are estimated at around $20 billion, making it the biggest investment fraud in U.S. history.

Picard’s lawyers have accused JPMorgan and its affiliates of being “willfully blind” to “numerous red flags surrounding Madoff,” including the unwavering double-digit returns he reported to wealthy investors on fictitious account statements.

According to the lawsuit, JPMorgan initiated a thorough investigation of Madoff in 2008 after the nation’s financial crisis had begun — and that the inquiry was frustrated at every turn.

Madoff feeder funds “repeatedly found creative ways to dodge questions” about their knowledge of his investment schemes, the suit says. Bank Medici, one of Madoff’s biggest partners, promised to provide various risk reports, but then balked.

By October, a member of the bank’s due diligence team was questioning claims by a big feeder fund, Fairfield Greenwich, that it had access to the secretive office suite where Madoff did business.

“Judging from the lack of thoroughness of some of their other due diligence I am not entirely convinced that Madoff allowed them to actually enter the trading area,” the employee wrote.

Another bank official expressed amazement that the bank and hedge fund executives who were funneling money to Madoff had asked so few questions about his strategy, and observed that some seemed afraid to confront him.

“It’s almost a cult (Madoff) seems to have fostered,” the official wrote.

The complaint also cites a suspicious activity report JPMorgan sent to the Serious Organised Crime Agency in London on Oct. 28, 2008, less than two months before Madoff revealed himself to be a fraud.

The suit says the report concluded Madoff’s balance sheet appears “too good to be true — meaning it probably is.”

The report was triggered in part by a strange conversation that a bank employee had with one of its Madoff investment partners, Aurelia Finance. During that conversation, according to the suit, “Aurelia Finance representatives made threats … referring to ‘Colombian friends’ who could ’cause havoc’ if the bank went ahead with a plan to redeem some of its Madoff investments.”

The JPMorgan employee, the suit says, took that to mean that Colombian drug dealers were somehow involved in the investment deal, and would be angered if the bank dropped out.

JPMorgan began trying to pull more Madoff investments in October, including $167 million placed through Fairfield, according to the suit. By the time Madoff was arrested in December, it had managed to sell off all but $35 million of its stakes in his feeder funds

The Associated Press

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