Ring­leader pleads guilty in dis­abil­ity fraud con­spir­acy

The Washington Times Daily - - FRONT PAGE - BY STEPHEN DINAN

A ring­leader in one of the big­gest So­cial Se­cu­rity dis­abil­ity fraud cases in U.S. his­tory has pleaded guilty to fil­ing more than 1,700 bo­gus ap­pli­ca­tions, bilk­ing the gov­ern­ment out of po­ten­tially a half-bil­lion dol­lars.

But the ad­min­is­tra­tion is strug­gling to fig­ure out how to han­dle the ap­pli­cants, many of whom say that even though their ap­pli­ca­tions were fal­si­fied, their cases are real and they shouldn’t be pun­ished for hav­ing been en­snared by the mas­sive fraud.

Eric C. Conn, a prom­i­nent lawyer in east­ern Ken­tucky, signed a guilty plea late last month ac­knowl­edg­ing the scam, in which he re­cruited and filed at least 1,748 fraud­u­lent ap­pli­ca­tions, com­plete with fake IQ tests or med­i­cal ex­ams. He had a team of doc­tors and psy­chol­o­gists sign off on them, then had a So­cial Se­cu­rity judge rub­ber-stamp them.

All told, his scam left the gov­ern­ment on the hook for more than $550 mil­lion in life­time ben­e­fits, with more than $46 mil­lion doled out as of Oc­to­ber, Conn ad­mit­ted in his plea deal.

Cases are pend­ing against Ad­min­is­tra­tive Law Judge David

Black Daugh­erty, who rub­ber-stamped the ap­pli­ca­tions, and against Al­fred Bradley Ad­kins, a psy­chol­o­gist who made up men­tal health eval­u­a­tions to support hun­dreds of the bo­gus ap­pli­ca­tions.

But the crim­i­nal cases have en­snared Conn’s clients, most of whom say they have valid claims of dis­abil­ity even if the fraud ring cheated on their ap­pli­ca­tions.

So­cial Se­cu­rity of­fi­cials said they have sent 1,456 of the cases through an­other So­cial Se­cu­rity judge and about 55 per­cent of them have been deemed un­de­serv­ing. An­other 45 per­cent have been up­held ei­ther in full or in part.

So­cial Se­cu­rity wouldn’t say whether any of those re­jected cases have been cut off nor whether it has been able to claw back any of the tens of mil­lions of dol­lars paid out to peo­ple whom the agency has deemed un­wor­thy of ben­e­fits.

“Fraud is tak­ing away ben­e­fits for le­git­i­mately dis­abled,” said for­mer Sen. Tom Coburn, an Ok­la­homa Repub­li­can who led an ex­haus­tive Se­nate in­ves­ti­ga­tion in 2013 that helped ex­pose the un­prece­dented scope of the scam.

Af­ter the fraud was first con­firmed, So­cial Se­cu­rity moved quickly to send out 900 no­tices to peo­ple whose ap­pli­ca­tions were han­dled by Conn. The no­tices said their ben­e­fits would ex­pire in 10 days.

Fear ran through the West Vir­ginia and Ken­tucky com­mu­ni­ties Conn had preyed upon. Ned Pillers­dorf, a Ken­tucky lawyer, said at least three sui­cides are di­rectly linked to So­cial Se­cu­rity’s sus­pen­sion of ben­e­fits and as many as six could be linked.

Af­ter the first cou­ple of sui­cides, Rep. Harold Rogers, a Repub­li­can who rep­re­sents east­ern Ken­tucky, stepped in. At the time, Mr. Rogers was the pow­er­ful chair­man of the House Ap­pro­pri­a­tions Com­mit­tee, and he per­suaded So­cial Se­cu­rity to con­tinue pay­ing the ben­e­fits.

Mr. Rogers said Conn’s plea agree­ment shows that the jus­tice sys­tem is work­ing. He said the real vic­tims in the case were hon­est dis­abled res­i­dents whose cases got snared in the scheme.

“Conn pur­pose­fully took ad­van­tage of the most vul­ner­a­ble among us and stole mil­lions of tax­payer dol­lars,” the con­gress­man said. He said now that Conn has ad­mit­ted to the scheme, So­cial Se­cu­rity should speed up the re­view process to make sure those who qual­ify for dis­abil­ity ben­e­fits get their checks with­out dis­rup­tion.

The sit­u­a­tion has been dev­as­tat­ing for Floyd County, where Conn had his law of­fices, and for sur­round­ing coun­ties that rank among the poor­est in the coun­try.

“This is the worst two years of my life,” Mr. Pillers­dorf said. “It’s such a dark cloud over this county. You’ve got 800 lo­cal peo­ple who’ve lost their ben­e­fits walk­ing around here.”

He re­cruited lawyers from across the coun­try to de­fend the ben­e­fi­cia­ries and said the re­sponse was over­whelm­ing.

Mr. Pillers­dorf said part of the prob­lem is that the gov­ern­ment has sealed the case files, mean­ing those who think they have valid dis­abil­ity cases can’t even get ac­cess to their own in­for­ma­tion.

At least one fed­eral judge, Amul R. Tha­par, has agreed with them.

In a vig­or­ous opin­ion, Judge Tha­par said al Qaeda ter­ror­ist sus­pects are at least al­lowed to chal­lenge the gov­ern­ment’s de­ci­sions. But in the case of the So­cial Se­cu­rity ap­pli­cants, the gov­ern­ment vi­o­lated their due process by de­cid­ing that all of the ap­pli­ca­tions sub­mit­ted by Conn were bo­gus.

Mr. Pillers­dorf said the peo­ple Conn de­frauded weren’t in­tend­ing to be part of his scam.

“There’s been zero — and I mean zero — ev­i­dence that any Conn client was in­volved,” he said.

The de­tails of the scheme are stun­ning and ex­pose the ex­tent of the ef­fort to run the op­er­a­tion. They also could give in­ves­ti­ga­tors leads on how to spot other fraud schemes.

Conn dubbed him­self “Mr. So­cial Se­cu­rity,” was known for flam­boy­ant com­mer­cials and even had a crew of “Conn Hot­ties” — young women he dis­patched to com­mu­nity events in skintight T-shirts that ad­ver­tised his law firm and its phone num­ber, 1-800-232-HURT.

Fil­ing dis­abil­ity cases can be lu­cra­tive. Lawyers are able to col­lect 25 per­cent of back pay on ben­e­fits al­ready due, up to a max­i­mum of $6,000. Conn earned $5.8 mil­lion from his bo­gus cases.

In the plea deal, Conn pinned blame for or­ches­trat­ing the scheme on the So­cial Se­cu­rity judge, Mr. Daugh­erty.

Conn said the judge first ap­proached him to shake him down for $5,000 in cash to cover ad­dic­tion re­ha­bil­i­ta­tion treat­ments for the judge’s niece. The judge point­edly told Conn that he had a lot of power over dis­abil­ity cases that came through the lo­cal of­fice.

Af­ter a sec­ond shake­down a month later, to cover yet an­other re­ha­bil­i­ta­tion treat­ment, Conn said he fig­ured it was go­ing to be­come a monthly prob­lem, so they worked out an ar­range­ment un­der which Mr. Daugh­erty would be paid $400 for ev­ery ap­pli­ca­tion he ap­proved from Conn.

Conn said Mr. Daugh­erty even be­gan grab­bing cases that were sup­posed to go to other judges, ap­prov­ing the ap­pli­ca­tions with­out even hold­ing a hear­ing.

Mr. Daugh­erty made as much as $14,000 a month from the op­er­a­tion, paid in smaller in­stall­ments af­ter Mr. Daugh­erty warned Mr. Conn about Trea­sury Depart­ment rules that tracked pay­ments larger than $10,000.

Since Mr. Daugh­erty wasn’t even hold­ing hear­ings, Conn had to bol­ster the case record, so he cre­ated a sta­ble of doc­tors and psy­chol­o­gists to fab­ri­cate IQ tests and med­i­cal eval­u­a­tions that were so ex­treme that they qual­i­fied for dis­abil­ity on their face.

The Wall Street Jour­nal ex­posed the fraud in a 2011 ar­ti­cle that noted Mr. Daugh­erty had a big work­load and an as­ton­ish­ingly high ap­proval rate for the cases he took. One of the em­ploy­ees in the So­cial Se­cu­rity of­fice had blown the whis­tle.

Conn said Mr. Daugh­erty begged for them to “keep our mouths shut.”

“Don’t get scared and run off to the feds,” Mr. Daugh­erty said, ac­cord­ing to court doc­u­ments.

Conn be­gan to search out and de­stroy records of the fraud and even had one of his law firm em­ploy­ees fal­sify a video to try to get the whistle­blower fired by dis­cred­it­ing her ac­cu­sa­tions against the scam.

Conn pleaded guilty last month to fraud and bribery charges. Last week, Judge Tha­par ruled that Conn owes $12 mil­lion in dam­ages and $19 mil­lion in penal­ties. He also owes the gov­ern­ment $5.8 mil­lion to cover the fees he earned for sub­mit­ting the more than 1,700 bo­gus cases.

Some of the penalty money would go to two for­mer So­cial Se­cu­rity em­ploy­ees who blew the whis­tle on the fraud.

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