A 50-year-old New York man was sentenced to three years of federal probation and ordered to pay over $150,000 in restitution to his former employer following his guilty plea to two counts of mail fraud. The sentencing was announced on December 18 by US Attorney Carla B. Freedman and Craig L. Tremaroli, Special Agent in Charge of the Albany Field Office of the Federal Bureau of Investigation (FBI).
At his previous change of plea hearing, the defendant, who was the former executive director of a medical center, admitted to submitting fraudulent expense reports to seek reimbursement for the purchase of continuous positive airway pressure (CPAP) machines.
As part of the scheme, he provided false invoices to his employer, claiming he had paid thousands of dollars for medical equipment that was never purchased. Unaware of the fraud, the medical center issued and mailed reimbursement checks to him.
In total, the defendant admitted to stealing over $150,000 from his former employer. In addition to his term of probation, he was sentenced to six months of home confinement and fined $5,500.
Compliance Perspective
Issue
Failure to implement a system that adheres to generally accepted accounting principles (GAAP), with appropriate checks and balances and an annual audit by an independent Certified Public Accounting (CPA) firm, may be considered neglect of a facility’s fiduciary duty to protect residents’ financial assets and the facility’s own assets, violating state and federal laws. Every nursing facility must have a dual control system for financial transactions and the purchasing of supplies. All transactions should be legal, thoroughly reviewed, and approved by a second party to prevent the misappropriation of funds. Misappropriation can result in fines, sanctions, and imprisonment.
Discussion Points
- Regularly review and update policies to ensure that a checks and balances system is in place. This system should prevent any single individual from having the authority to both approve invoices and write checks, reducing the risk of embezzlement and fraud.
- Train staff in the accounting and billing departments to recognize suspicious activities, and encourage them to question any irregularities. Ensure that they understand how to report any concerns about criminal behavior—either directly to their supervisor or anonymously through the facility’s Hotline.
- Periodically audit the facility’s financial records, including resident accounts, company invoices, bank statements, and credit card accounts, to detect possible misuse or embezzlement of funds. Any potential issues should be immediately addressed and investigated.
*This news alert has been prepared by Med-Net Concepts, Inc. for informational purposes only and is not intended to provide legal advice.*
