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Kenneth C. Citarella
Managing Director, Investigations
Managing Mass Claim Fraud Investigations: Lessons Learned from the Gulf Oil Spill
June 18, 2012
Deepwater Horizon
2
Deepwater Horizon
3
Statistics
4
4.9 billion barrels of oil780,000 cu. meters86 days491 miles of shoreline affected4,200 sq. miles of Gulf closed to shipping
May 21, 2010, Fishery Closure
5
June 28, 2010, Fishery Closure
6
Gulf Coast Claims Facility
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U.S. and BP create GCCF
Kenneth Feinberg becomes Independent Trustee of Compensation Fund
August 23, 2010, begins operation
Parallel to Class Action
Limitations
8
Claim Resolution PoliciesInternal OperationsGCCF Timeframe – 8/10 to 3/12Number of InvestigationsInternal Affairs
Gulf Coast Claims Facility
9
Feinberg Rozen
Worley Brown Greer Garden City Group
PWC Guidepost Solutions
Gulf Coast Claims Facility
10
Guidepost SolutionsProject Manager
Deputy Project ManagersTeam ManagersCase Managers
InvestigatorsTX LA MS AL FL
GCCF Phases
11
Emergency Assistance Program
Quick Pay
Interim Payment
Final Payment
GCCF Statistics – March 9, 2012
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Claimants 574,881– Individuals 454,026– Businesses 120,855
Represented by Counsel 92,963
Claims 1,061,405
Payments $6.1 Billion
Types of Claims
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Removal and Clean Up CostsProperty DamageLoss of Earnings or ProfitsLoss of Subsistence Physical Injury or Death
Investigation Referrals
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K. Feinberg testifies on January 27, 2011, that 7,575 claims might be fraudulentReceive explanation with eachSingle ClaimMulti-Claim– Numerous sub-schemes– Spin offs and false leads– Add-onsPattern of referrals shifts over time
Investigation Referrals
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Common ReasonsSuspicious documents– fishing, pay stubs, banking, tax, financialsSuspect identity, employer, vesselCommon addresses, email, fax, factsInconsistency among related claims
Investigation Referrals
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Generate ReferralsFind related claimsLeads from:
EmployersWitnessesClaimantsInformants
No investigation without formal referral
Investigation Process - 1
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1) Referrals from GCCF2) Database entry with document migration3) Review for assignment4) Assign to team5) Assign to Case Manager6) Investigation Plan7) Assign to Senior Investigator8) Assign to Field Investigator
Investigation Process - 2
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1) Investigator reports uploaded2) Acquired documents uploaded3) Feedback4) Completed?5) Case Manager proposes closing category6) Team Manager concurs7) Team Managers closes, except for possible
fraud
Investigation Process - 3
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1) Case Manager drafts fraud report2) Team Manager reviews3) Editor reviews4) Project Manager or Deputy5) Distribute to GCCF6) GCCF reviews for possible referral to DOJ
Investigation Database
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Case Management– Intake– Assignment– CommunicationPerformanceQuality ControlDocument StorageCompliance
Investigation Database
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Inherited database from prior BP investigation teamLimitations apparentCustom designMigrationTraining
Case Managers
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Started with 3– All investigators– Add prosecutors– Plan, run, and writeSeparated for multi-claims– Who is bestCreate teams– Who is best managerPeak at 9042 at transition
Case Managers
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Where find?– Friends and former coworkers– People they know– Suppliers
Never advertised
Downsizing
Invoice Management
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Format and contentExpect audit– DOJ– BPStandardize all contractor invoices form and contentRemove non-billable activities
Closing Categories
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Possible FraudNo Proof of LossNo Independent SupportOkay
Set by GCCF
GCCF decides
The Great Dilemma
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The Underground EconomyWhat are taxes?No SSNNo bank accountsNo business records
Could still be legitimate
The Great Dilemma
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Family fishing businessFather captainMother and children deckhandsAll-cash businessNo financial recordsRegistered vessel, licensed captain fishing permitNever filed taxes or reported small percentage
The Great Dilemma – The Investigation
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Confirm documentsInterview family– Know fishing– Look the partIdentify purchasersInspect vessel– Right kind and registered– Seaworthy
Closing Criteria
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Totally up to GCCFNot tax dollarsNot insurance companyNo criminal law definitions of insurance fraud apply
Retrain the law enforcement mind
Claim Form Signature Page
30
Problems Arising from LawEnforcement Mentality
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Inclined to investigate too thoroughly
Not a law enforcement functionLaw of criminal fraud does not applyNot preparing for prosecutionInterviewing for a confession
Investigator Procedures
32
Guidepost business cards and PI identificationGCCF confirmation number“Here to help” attitudeBurden on claimantNo opinion or encouragementSecurity and confidentialityDeadline letters
Investigator Procedures
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Responding to complaints– All but one unfounded– Immediate terminationAcquiring documentsClosed case filesLaw enforcement contact
Investigator Procedures
34
Two for all claimant interviews– No recording– No signed statementsThrough counselAsk nicelyNo emails with claimants
Investigators
35
Kept BP operation– No access to BP investigationLocal talentFormer law enforcement– All levels
Peaked at about 225
Law Enforcement Relations
36
GCCF set protocols– National Center for Disaster FraudParallel federal investigations from DOJ HotlineDOJ requests for documents and interviewsStand-down requestsCoordinate through GCCFGCCF refers fraud reports to DOJ
Quality Control
37
All investigator reports reviewed before postedOlder investigationsCold investigationsInvestigators believe doneEncourage disagreements and decisionsCase and Team Managers agree for non-fraud casesThree-level review for fraud reports
Reporting to GCCF
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Daily Investigation List– With Aging ReportDaily Closure Reportad hoc requestsAttorney representation issuesStandard correspondenceDOJ complianceReferral requestsHigh-profile investigations
Confirmation
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Provide business card with Guidepost name and address“Gulf Coast Claims Investigator”Toll-free confirmation numberList of all investigators and contact numbers– Update as needed
Preparers
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ClergyLawyersAccountantsCommunity ActivistsCould be hub of a scheme– Creating similar false documentsCould be a dupe– Accepting what claimants reportCould be genuinely helpful
Medical Records
41
Physical injuries allegedly caused by spill, usually clean-up workAsked for waiver from claimantShowed submitted medical records to physician to determine authenticity not diagnosis
Tax Forms and Financial Records
42
Contact accountantSome refused to cooperate without permission from claimantSome cooperatedOne accountant admitted falsifying many forms to inflate claims so clients would get adequate compensation
Working Environment
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BPSpeedTransparencyFairnessFraud PreventionPressure– Public– Politicians– Media
Guidepost in Gulf Media
44
Guidepost in Gulf Media
45
Stories differ on whether their investigators are identifying themselves as working for the GCCF…What’s been your experience?A certain disenfranchised citizen would like to hear about it…Have a nice day.Reddit
Written by D…. T….. February 8, 2011 at 5:29 AM
Guidepost in Gulf Media
46
This company is causing me a headache. They want to verify my tax documents and bank statements. I think their only doing that cause its taking gccf longer than 14 days to settle a quick payment..its been 42 days and now they say guidepost is investigating my documents yeah ok if you want to go ahead but when u finished I don’t even want the 25000 offer now my paperwork is so legit that now I’m going for the full review. Guidepost and gccf both fraudulent not us.ms d…..February 8, 2011 at 5:48 AM
Guidepost in Gulf Media
47
“two men dressed in black”
“generic looking business card”
“hired to find ways to deny claims”
“These men are not your friends and claimants should not speak to them.”
Guidepost in the Gulf Media
48
“should not show up at your door and ask questions”
“sign of intimidation”
“This is unreasonable, immoral, unjust and thug behavior.”
Guidepost in the Gulf Media
49
Disenfranchised Citizen – 2/12/11“As I wrote a few days ago, a new phenomenon is occurring on the Gulf Coast. Some claimants who have applied for the quick pay from the GCCF, an application the GCCF stated would be automatic for people who had received an EAP and would require no further review, have suddenly found their EAP’s under investigation for fraud. Guidepost Solutions, the investigative arm of Ken Feinberg’s GCCF, have been making contact and making demands of claimants.”
Guidepost in the Gulf Media
50
“Dear Claimant:“The GCCF has received your Quick Payment Final Claim Form and Release. After investigating certain aspects of the documents and information that you previously provided to us relating to your Emergency Advance Payment claim, we have determined that there is insufficient reliable evidence to support your Quick Payment claim and that further investigation is required…”
Investigations
51
All from public informationTypical examplesProsecutions solely up to DOJ / USA Offices– Wire fraud– Mail fraudFew state prosecutions
Investigations
52
Confessions!Thought no one would look“Everyone else getting paid”Legitimate claims supported by false documentLegitimate EAP claims morph into false interim or final One successful false claim becomes a scheme
“Fishing” Vessels
53
“Fishing” Vessels
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“Fishing” Vessels
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“Fishing” Vessels
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“Fishing” Vessels
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Search Warrant
58
Tax company suspected in alleged BP fraud by Paul Murphy / Eyewitness Newswwltv.comPosted on March 2, 2011 at 6:29 PMNEW ORLEANS -- The sign on the door reads Fast Track Tax Service. But, according to documents in support of a search warrant, uncovered by 4 Investigates, federal authorities suspect the Airline Highway office in LaPlace was used for more than just tax preparations.The affidavit indicates during the course of a criminal investigation that began late last year, agents suspect Fast Track's computers, copiers and printers may have been used to manufacture and submit fraudulent disaster assistance claims with BP and the Gulf Coast Claims Facility.
Search Warrant
59
According to the affidavit, 81 claims were filed, requesting $4.9 million in compensation from BP, and the alleged plan involved the creation of fake "Captains’ Letters" indicating that the person making the claim was a deckhand on a fishing boat that lost income as a result of the oil spill.According to investigators, the alleged enterprise netted more than $500,000 in payments.
Florida Couple with Many Names
60
Charged with using 34 stolen identities to file GCCF claimsAddresses in LA, MS, AL, and FL panhandle$340,000 sent to account in TX credit unionAlso charged in other disaster frauds from– Hurricane Gustav in LA– North Dakota flooding– Tropical Storm Irene in NY
Florida Couple with Many Names
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Mail drops in NYC, AL, MI, CA, FL, IL“I don’t have an account”
Florida Couple with Many Names
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Florida Forgeries
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Letter allegedly from manager of lumber yard for $16,500 claim– Never lost job– Lied to FBILetter allegedly from employer at deli for $7,200 claim– Had voluntarily quit– Witness tampering with federal GJ witnessLetter allegedly from hotel management for $3,844 claim– Fired for misconduct as a pool cleaner
Wife of Former N.O. Police Officer
64
False seafood sales receipts used in claimHusband involved in Danziger Bridge cover upClaims husband worked at hotel and fished after left NOPDStarted at hotel 3 weeks after oil spill$22,600 and $11,307 paidGuilty plea, facing 20 years
False Injuries
65
Alabama claimant alleged loss of income and physical injury from clean up– Reviewed records and interviewed clients who
allegedly canceled contracts– Interviewed other members of clean-up crew
Crewman on tending vessel filed a claim for $45,000,000 for physical injuries and PTSD.
Backyard Fishing
66
$14,700 paid to Alabama fishermanFalse tax returns and payroll stubsFalse financials from a real company he never worked forBoat in the backyard
False Employment Documents
67
Mother and son “worked” for staffing company– $18,500 in two payments – payroll stubs allegedly from AL
restaurant– $13,800 – payroll stubs allegedly from AL aerospace
company
May be obvious on face or require employer assistance– Payroll stubs– Employer letters– W-2 and 1099 forms – “live” or altered
Nonexistent Businesses
68
Smitty’s Catering in AL$800,000 in false claims for 45 “employees”Fake bank statements and termination letters$63,600 paid“Owner” received $3,800
“Owner” of Alabama cleaning business collected $35,000 for “losing” $800 a week in income
Real Business / False Claim
69
LA food mart was sold prior to the oil spill but owner still put in claim for $42,000
Oil Spill in the Gulf?
70
Michigan man indicted for submitting false MS tax documents and business license for a business he “owned”– $180,000 claim
FL East Coast fisherman claimed $100,000 in lost income
Dead Claimant
71
NC woman adopted identity of dead sister who had lived in New Orleans$15,600 in lost income allegedClaimed was laid off from real seafood companyClaimant used her mother’s NC addressFabricated driver’s license, termination letter, and eviction notice
Dead Claimant
72
Internet search found obituaryMother helped investigatorsCalled us to prove she was realPrior disaster fraud convictionsPleaded on eve of trial
Shrimp Beheaders
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“Shrimpheaders” – 517 false claims all based on a common false hardship letter alleging loss of employment as a shrimp head remover.
False Paystubs
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“5 New Orleans Restaurants” – 37 claims alleging employment at 5 restaurants, all with similar false paystubs.
“ADP Payrolls” – 54 claims all using a similar false paystub, usually allegedly issued by ADP for the purported employer.
Bribery Offer
75
Investigator offered $1,000,000 bribe to provide a favorable report on two $16,000,000 claims by one businessman.
Very Crowded Crabbing Boat
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“Schedule C” – 81 claimants used copies of documents supporting legitimate father/son claims alleging they were all deckhands on one crab boat.
Helping Your Friends
77
“Wild Magnolias” – 25 claims from “employees” of two businesses supported by fabricated documents prepared by one ex-employee.– $248,328 claimed; $10,500 paid.
Fast Food Scheme
78
Initiated by informant111 claims investigatedAt least 100 fraudulent28 fast food chain employers
Fast Food Scheme
79
Common false documents– Employment letters– Social Security cards– Residential addresses– Telephone numbers– Email addresses– Paystubs
Fast Food Scheme
80
Lessons Learned
81
Single email systemSingle databaseCooperative planning early and oftenAll phases of operation are interrelated, so keep each other informedPlanning very difficult due to highly irregular referral rate
Constant re-organizationOperational chokepoint is a shifting target
Lessons Learned
82
No career path but personnel will often act as if there isReassignments hurt feelingsDiscuss law enforcement early onAssume you will be overwhelmed and that everyone else isKeep a sense of humorUnderstand client’s objective
Lessons Learned
83
Database function and designBurnoutGood people will leaveAssign work to best people to keep them interested and on teamReport format and contentRepeat, review, and remind
Thank You
84
Kenneth C. CitarellaManaging Director, InvestigationsGuidepost Solutions LLC415 Madison Ave, 11th FloorNew York, NY 10017212-817-6700
“Association of Certified Fraud Examiners,”
“Certified Fraud Examiner,” “CFE,” “ACFE,” and
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Association of Certified Fraud Examiners, Inc.
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