A company that operates seventeen skilled nursing facilities has filed a lawsuit against their former Chief Financial Officer (CFO) for defrauding their company to obtain double paychecks for more than a year, and improperly sending more than a half-million dollars into her own construction company. The filed complaint accuses the former CFO of extensive fraud, deception, conspiracy, and theft.
According to the complaint the former CFO improperly took $280,000 from the company in double paychecks, and $556,750 in improper wire transfers to her own construction company. In October 2019, the skilled nursing company and its owners directed the former CFO to move her salary, along with several other employees from their books to another related health care entity. The former CFO confirmed in an email the next month that she had done as they requested.
In May 2021, the skilled nursing company learned of the problem when an employee alerted it as a payroll irregularity. The employee told the skilled nursing company that they had been paid double for the same pay period, once from the skilled nursing company and once from the other entity. When the employee asked the former CFO about the double payment, the former CFO told the employee that she had also received double payments from both entities for the same time period, but the check from the skilled nursing company was invalid, since the account from which it was written from was supposedly closed.
The employee brought the issue to the attention of the skilled nursing company’s executives who opened an investigation. When the skilled nursing company asked the former CFO about the double payments, the former CFO told the investigators the same story as she had told the employee. The former CFO also produced a spreadsheet showing that she was only being paid by the other entity and not the skilled nursing company.
The skilled nursing executives contacted the outside payroll company to confirm and was told that the former CFO had been paid from both the skilled nursing company and the other entity since December 2019. They discovered that the spreadsheet had been fraudulently manipulated to hide her activities.
When confronted, the former CFO confessed to being double paid and stated that she had spent all the money. The skilled nursing company continued to investigate and discovered that the former CFO’s construction company had been hired to perform construction related services in the Spring of 2020 and had received an unapproved additional wire transfers worth $556,750, over a five-month period using false invoices. Additionally, the investigation revealed that the former CFO sent a $30,00 wire transfer to her daughter in July of 2019. The daughter was not employed by the skilled nursing company, nor did any work for the company.
Compliance Perspective
Issue
Every nursing facility should have a double check system in place for all monetary transactions. All transactions should be legal and checked and approved by a second party to prevent misappropriation of funds. Misappropriation of funds can result in fines, other sanctions, and imprisonment. Additional detailed information is available in the Med-Net Corporate Compliance and Ethics Manual, Chapter 2 Financial Integrity.
Discussion Points
- Review the facility’s policy on accounting and the use of facility funds. Update as necessary.
- Train appropriate staff on your policies for financial accounting and the protection and approved use of facility funds. Document that these trainings occurred and file in each employee’s education file.
- Periodically audit to ensure that all monetary transactions have been double-checked and approved by a second party, and that all transactions have been previously approved. Ensure that an independent audit is conducted at least annually.
