A federal grand jury returned an indictment on July 2, 2021, charging two homecare companies’ officials with one count of conspiracy to commit bank fraud and four counts of bank fraud. One of the individuals charged was a Chief Operating Officer of a homecare corporation, while the other individual was the Chief Financial Officer of one the home care companies within the homecare corporation.
The indictment alleges that from April 2016 until March 2017, both homecare officials were involved in a scheme to defraud three banks by fraudulently obtaining money and credits from the three banks. It is alleged that the two homecare officials orchestrated and executed a check kite between accounts at two of the banks, wherein they deposited hundreds of checks between multiple accounts they controlled at both banks and took advantage of the float when they passed the checks, timing the exchanges to artificially inflate the account balances. In so doing, the two homecare officials caused two of the banks to honor checks and payments drawn against accounts with insufficient funds and put the financial institutions at risk.
The indictment further alleges that on March 8, 2017, the chief financial officer of the home care corporation learned that accounts under his control at one of the banks had an overdraft and the bank would only accept a certified check to cover the deficit. To cover the overdraft and prevent the kite from collapsing, the two homecare officials allegedly added a third bank, into the scheme by issuing over 20 checks for approximately $4 million drawn from different accounts at that bank and deposited them into multiple accounts at a different bank. However, the accounts used at one of the banks did not have sufficient funds to cover the checks deposited into the other bank. In fact, the accounts at the bank they were trying to draw from had less than $2,000 available. The following day, March 9, 2017, the defendants used the artificially inflated balances to obtain four certified checks totaling $2.1 million from one of the banks and deposited them into different accounts at yet another bank to cover the overdraft. This bank suffered a financial loss when it discovered that the two homecare officials had used the inflated accounts to obtain certified funds.
The Federal Bureau of Investigation (FBI) is investigating this case.
Compliance Perspective
Issue
The Centers for Medicare & Medicaid Services (CMS) requires skilled nursing facilities to have a compliance and ethics program that is effective in preventing and detecting criminal, civil, and administrative violations under the Social Security Act, and in promoting quality of care. Routine audits should be conducted of monetary transactions, and the results of the audits should be reported to the compliance and ethics committee and to the governing body. The audits should have a corrective action plan if a discrepancy is found, and all discrepancies should be investigated and rectified immediately. It is imperative that every facility has an effective compliance and ethics program to reduce the likelihood of healthcare fraud, waste, and abuse of government funds.
Discussion Points
- Review your policies and procedures for operating an effective compliance and ethics program. Ensure that your policies are reviewed at least annually and updated when new information becomes available.
- Train all staff on your compliance and ethics policies and procedures upon hire and at least annually. Document that these trainings occurred and file the signed document in each employee’s education file.
- Periodically review to ensure that appropriate audits of financial records are being conducted and reported to the compliance and ethics committee and the governing body. Ensure all staff are aware of compliance and ethics concerns and understand their responsibility to report any concerns of compliance and ethics violations to their supervisor, the compliance officer, or via the anonymous hotline.
FOR MORE INFORMATION ON THIS TOPIC VIEW: FRAUD MODULE 7 – AUDITING, MONITORING, RESPONDING, INVESTIGATING, AND LITIGATING RESPONSIBILITIES.
