FBI Doubles Force Fighting $50 Billion in Cheating
Feb. 03, 1992
WASHINGTON (AP) _ The FBI will double the number of agents investigating medical-care fraud, which the government estimates at $50 billion a year, officials said Monday.
At the same time, prosecutors charged officers of a defunct Denver insurance company with defrauding customers in 14 states. The Justice Department said that Cabot Day Insurance Co. had become ''an engine of fraud'' for its executives, siphoning off $3.75 million.
The Justice Department's announcement appeared calculated to help President Bush get out the message that his administration is concerned about the rising costs of health care.
An internal Justice Department report on medical-care fraud said its release Monday would be timed with the unsealing of charges against Cabot Day.
Bush, reacting to Democratic charges that he has done little to help Americans meet rising medical bills, is expected this week to unveil plans to curb spiraling health-care costs and to extend insurance to millions of Americans.
The FBI said it was creating a health-care fraud unit to consolidate longstanding efforts to prosecute doctors, clinics, medical supply companies and druggists who bilk the government with phony claims.
The General Accounting Office estimates that health-care fraud is a $50 billion-a-year industry.
In addition to the new FBI unit, which will add 50 agents to the current 46, the Justice Department's criminal division was setting up a health-care fraud unit to coordinate prosecutions nationwide.
''Civil and criminal fraud in the health-care industry costs government, private insurers and American citizens billions of dollars each year and poses a threat to the qualify of the nation's health-care system by unscrupulous health-care providers,'' Attorney General William P. Barr said in a statement.
In Philadelphia, prosecutors said officials of Cabot Day had collected $5.72 million in premiums from businesses but paid only $895,000 in claims, leaving a net illicit gain of $3.75 million.
U.S. Attorney Michael Baylson said federal officials began investigating after Pennsylvania consumers complained to the state's Insurance Department.
Insurance regulators then discovered, officials said, that the company and its subsidiaries were not licensed by any state or by the federal government.
In all, 568 employer groups and 11,820 employees and their dependents were affected. The scheme left 3,500 workers facing unpaid health care bills totalling more than $5.74 million when the company closed its doors in 1990, officials said.
In Denver, federal officials arrested Frank O'Bryan, the head of Cabot Day; J. William Vanderveer, and Robert E. Munroe. Officials arrested attorney Fred M. Dellorfano near Boston. Baylson said Neil E. Smith was scheduled to turn himself in to authorities in Denver later Monday.
Baylson said a federal grand jury last week returned a five-count racketeering indictment against the officers and escrow agent of Cabot Day.
The five-count indictment, returned in Philadelphia, charged four officers and an escrow agent of Cabot Day.
Health-care fraud has been a top priority of the Justice Department since 1986 and 100 prosecutors have been working in the field. More than $24 million worth of civil fraud judgments was recovered by Justice Department lawyers in the last two years.
Twenty-five agents will be drawn from the FBI's counterterrorism unit, officials said.
The rest will come from the FBI's foreign counterintelligence division, which is being reduced now that the Cold War has been declared officially over by President Bush. The FBI recently assigned 300 agents who used to chase spies to the fight against violent crime.
The added agents probing medical-care fraud will be assigned to 12 cities: New York; Los Angeles; Chicago; Philadelphia; Newark, N.J.; Dallas; Detroit; Charlotte, N.C.; New Orleans; Las Vegas, Nev.; Miami, and Baltimore.