December 19, 2014

White-Collar Crime

Fraud Inc.

White-collar crime is big business in Florida, generating more money than manufacturing. Medicare fraud alone adds an estimated $12 billion to the state's economy.

David Villano | 7/1/2008

Like many hardworking immigrants, 39-year-old Eduardo Moreno arrived in south Florida with pennies in his pocket and dreams of striking it rich. By late 2006, the Cuban-born Moreno was running a fast-growing cluster of medical supply companies and clinics and living the good life, with a spacious lake-view home in Miami and a fleet of cars that included a $200,000 Rolls-Royce Phantom.

White-Collar Crime
Crime is big business in Florida, generating more money than manufacturing. Medicare fraud alone adds an estimated $12 billion to the state’s economy.
[Photo: Paul Taylor/Getty Images]

Moreno and his fortune are both long gone. Investigators say Moreno’s businesses amounted mostly to an elaborate scheme to divert millions of dollars in fraudulent Medicare claims into his private bank account. According to a federal indictment, Moreno’s companies — Brenda Medical Supply, Faster Medical Supply and RTC of Miami — routinely recruited patients for the sole purpose of billing the government for drug infusion therapies and for medical equipment such as electric wheelchairs, scooters and therapeutic mattresses.

In many cases, officials say, the drugs were unnecessary or never administered and the equipment — including air mattresses costing $868 apiece — was never delivered. More than $7 million in Medicare claims remains under scrutiny.

Moreno, arrested a year ago on multiple fraud charges, isn’t around to speak in his own defense. He skipped out on a $450,000 bond and remains a fugitive.

But even if all $7 million in Medicare claims turns out to be spurious, that sizable haul makes Moreno just another bit player amid a host of fraudulent enterprises — healthcare fraud, mortgage fraud, consumer fraud, insurance fraud and other categories of white-collar crime — that collectively amount to one of Florida’s biggest industries.

The Value of Florida Fraud
Florida’s top industries and where selected illegal activities would rank.

Florida GDP (2006): $713.5 billion
Industry Value
(billions)
Share of GDP
Services $231.7 32.5%
Finance, insurance& real estate 170.6 23.9
Government 78.9 11.1
Retail trade 56.6 7.9
Construction 55.8 7.8
Wholesale trade 47.0 6.6
Illegal activity1 36.7 5.1
Occupational fraud2 36.7 5.1
Manufacturing 35.9 5.0
Information 28.8 4.0
Transportation & public utilities 29.9 4.2
Medicare fraud3 12.0 1.7
Trade-based money laundering4 8.2 1.1
Agriculture, forestry & fishing 6.3 0.9
Source: Enterprise Florida
Estimates:
1 International Monetary Fund
2 Association of Certified Fraud Examiners
3 U.S. Department of Justice
4 John Zdanowicz, Florida International University
Internet Fraud
Top five states by share of internet perpetrators (2007)
State % of U.S. Internet fraud
California 15.8%
Florida 10.1
New York 9.9
Texas 7.0
Illinois 3.6
Source: 2007 Internet Crime Report, Internet Crime Complaint Center, prepared by FBI and National White Collar Crime Center
Insurance Fraud
Insurance fraud convictions by state (2006)
California 1,717
Florida 606
New York 473
New Jersey 364
Source: Coalition Against Insurance Fraud
Recent headline-making cases include a $194-million hedge fund scheme out of West Palm Beach; a $12-million pump-and-dump securities scam in Fort Lauderdale; $6 million swindled from investors in a bogus anti-aging product in Pompano Beach; and a Fort Lauderdale viatical life insurance scam that netted more than $826 million from thousands of victims.

By itself, Medicare fraud in south Florida adds up to big business. In 2007, for example, 197 people were arrested in south Florida and charged with submitting hundreds of millions of dollars in bogus Medicare claims. In one case, a Miami air-conditioning repairman posed as a pharmacist to bilk the government out of $14 million, claiming he was producing aerosol medications. In another, clinic owners allegedly pocketed $12.5 million in Medicare reimbursements, substituting saline solution for expensive HIV medications.

The prosecuted cases, says R. Alexander Acosta, U.S. Attorney for the Southern District of Florida, are just “the tip of the iceberg.”

In many ways, the fraud industry in Florida resembles the state’s legitimate business community — highly entrepreneurial, comprising mostly small businesses that collectively add up to a lot of economic activity. While crooked politicians and multimillion-dollar scams grab the headlines, experts say the majority of fraud schemes in Florida are committed by the white-collar equivalent of the petty criminal. “These people are often very entrepreneurial, hardworking, but they’ve found a way to break the law, and they’re not afraid to do it,” says Acosta.

Attaching a dollar amount to overall fraudulent activity in the state is tricky. Some experts cite an International Monetary Fund estimate that as much as 5% of the world’s GDP is generated through fraudulent business activity. As a percentage of Florida’s GDP, that calculation would top $36 billion. The Association of Certified Fraud Examiners cites a similar number — 5%, or another $36 billion a year statewide — as the estimated loss in corporate revenue from various forms of occupational fraud: Inventory and payroll theft, skimming, billing schemes.

But while the sums seem large and the cases generate big headlines, fraud in Florida isn’t, overall, disproportionate to the state’s size. In bank, internet and consumer fraud, for example, the state ranks from second to fourth in the nation — consistent with its population rank.


Tags: Banking & Finance, Healthcare

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