SHELL GAMES: A Reuters Investigation
Articles in this series explore the extent and impact of corporate secrecy in the United States.
ATLANTA (Reuters) - Basic computer-assisted sleuthing can turn up shell companies involved in Medicare frauds. But U.S. government officials overseeing the program have only just begun using those techniques.
Tracking down the people behind those shells is even more difficult — and U.S. states are resisting steps that might help crack such cases.
A Reuters analysis of state incorporation records suggests that relatively simple steps can help identify fraud. Reporters scrutinized corporate filings for more than 60 purported Medicare providers in Florida, Georgia and other states.
Using Google Maps, site visits and calls to officers listed in the incorporation records, Reuters identified more than two dozen fictitious addresses, a half dozen stolen identities, and changes in corporate officers or owners that federal law enforcement agents say may signal fraud.
Some 35 of the entities were part of a criminal fraud ring that has been shut down. But 26 of the entities reviewed by Reuters remain Medicare providers.
Edward Pound, a spokesman for the Recovery Accountability and Transparency Board, which monitors the $787 billion stimulus fund for possible fraud, reviewed Reuters’ data. He said the findings “could lead to criminal investigations.”
The board referred Reuters’ findings to the Department of Health and Human Services’ Office of Inspector General.
In the U.S., companies are registered at the state level, with state secretaries. But few if any states are conducting the kind of basic examination of incorporation data that turned up the kinds of tips found in the Reuters analysis.
A spokesman for Florida Secretary of State Kurt S. Browning said his office conducts no checks on the validity of corporate information, including whether an address for a company is real or whether officers and directors have criminal records.
In Georgia, anyone can register a corporation for a $50 fee. Brian Kemp, the Georgia Secretary of State, says he has no power to spot attempts by criminals to register fraudulent companies or to weed out bogus firms. “If you fill the paperwork out and send your money in you are registered,” he says.
Even after a shell scam is detected, it can be hard to identify the criminals behind the company. In the fight against shell company-enabled Medicare fraud, two bills introduced this year in Congress would help U.S. investigators pierce the veil of corporate secrecy. But the effort is bogged down amid opposition from state regulators.
Bills introduced in August by Sen. Carl Levin (D-Mich.) and in November by Rep. Carolyn Maloney (D-N.Y.) would require states to collect the names of the real - or “beneficial” - owners of certain types of firms. States currently don’t collect such data. If they did, U.S. law enforcement officials say, it would be harder for fraud rings to perpetrate their crimes by hiding their identities behind nominee officers and owners.
Secretaries of State and business groups have lobbied strongly against the bills. Since 2008, the Senate version has been defeated twice. State officials say the legislation would infringe on states’ rights and impose excessive costs at a time when the economy is struggling.
“Our members are particularly concerned about the significant amount of additional resources and staffing that would be needed to carry out this extra work, particularly at a time when many states are dealing with serious budget shortfalls and cutbacks,” says Kay Stimson, a spokeswoman for the National Association of Secretaries of State, a trade group that represents state regulators.
That means federal investigators chasing Medicare fraud will have to continue trawling sketchy corporate records for clues. “We almost expect that the Secretary of State data is going to be fraudulent,” says Derrick L. Jackson, special agent in charge of the southeast region for the Department of Health and Human Service’s Office of Inspector General. (Editing by Blake Morrison and Michael Williams)
Reporting By Brian Grow