Fraud Fishing, Part 3: Following the Health Fraud Paper Trail

What sort of paper trail might a fraudster leave?

Because the key to a fraudster's scheme is the appearance of legitimacy, you need to start with the agencies that confer legitimacy on most businesses.

Let's start with the tax rolls. These insurance fraud cases often end up in charges that hinge on unpaid income tax. Remember Al Capone?

Here's one recent example from an FBI press release:

William R. Fry and Dr. Geronimo Rubio were sentenced yesterday in federal court in San Diego to serve 14 months and 12 months in custody, respectively, followed by three years of supervised release following their release from prison. Fry and Rubio each pled guilty to health care fraud and federal income tax felonies in June 2007.

According to court records, Dr. Rubio and Mr. Fry jointly owned and controlled a business called "American Metabolic Institute," in Bonita, California. The defendants operated a health care clinic called "Hospital San Martin," in Tijuana, Mexico. The clinic, under the direction of Dr. Rubio, offered alternative medicines and treatments to patients, many of whom were diagnosed with cancer. In their pleas, the defendants admitted that they submitted false bills to American insurance companies and that each defendant substantially under-reported his true income on his individual federal income tax returns.

You likely never will have access to a business' income tax statements. (If it is a nonprofit, you can see some financials in its IRS Form 990.) But property taxes can provide a window into a business' inner workings, too.

Some counties make it easy to search tax records online, but many do not. Usually everything is recorded under a property address or a county parcel number. The simplest way to find these is through a Nexis or Merlin search. But if your outlet doesn't give you access to those, you can try checking with the county assessor's office. To make the search comprehensive, you will need to jot down the address of the business, the business owner and the business owner's partners.

You will then likely have to spend a few hours in the county treasurer's office using the addresses and parcel numbers to look up tax records for the property in question.

Here you are looking for three things.

First, you want to see whether they have any property worth taxing. A thriving medical office will not only have the physical building that is taxed but it also will have medical equipment that will be taxed, too. To get a sense of how much taxable property an office or clinic should have, compare it to a clinic you know is legit. (Your own doctor's office, perhaps?)

Second, you are looking to see whether the company has paid its taxes. If they owe a lot, this could be a sign of financial distress, at best, or malfeasance, at worst. Dr. Mohammed Tarek Kady and some of his colleagues in San Diego were arrested in April on federal charges related to insurance fraud and overcharging low-income patients. According to my former colleague Hieu Tran Phan at the San Diego Union-Tribune:

They've been charged with grand theft, fraud and prescribing drugs illegally. Kady, who had offices in Chula Vista and San Diego, also is accused of billing insurers for services in the county even though he was traveling abroad.

Kady allegedly was part of what one might call a "fee for free" scam. He charged a fee for something the government says should have been a free service. He was reported to the state Attorney General's Office by an insurance company, Anthem Blue Cross, which should serve as a reminder to reporters that insurance companies should be cultivated as sources because they often are aware of the good stories before everybody else. As Channel 6 in San Diego reported:

In February 2009, an Anthem Blue Cross investigator reported Kady's pediatric office was unlawfully charging fees to patients enrolled in state and federal health insurance plans, Brown said. (His employees Mario Ramirez) Zarco and (Ana) Audelo unlawfully charged patients $50 to $500 for assistance in enrollment in state and federal insurance programs, the attorney general said.  Kady himself unlawfully charged patients an additional $200 to $300 fee to examine their newborn children in a hospital, Brown said. Investigators estimate that Kady unlawfully charged more than $60,000 for services to individuals and families enrolled in health insurance programs, Brown said.

If you look up Kady's office at the San Diego County Treasurer's Office you find that he's behind on his taxes.

What's more, you find the third thing you are looking for: his bedfellows.

Next: Birds of a feather practice questionable medicine together.

Related Posts:

Fraud Fishing, Part 1: Why that corner health clinic might be flush with ill-gotten gains

Fraud Fishing, Part 2: Health scammers are hiding in plain sight