Shameless Social Security Disability Scams

In Utah a video was discovered that depicted a 40-year old man rocking out to music while playing an air guitar. Another video showed a 31-year old woman playing the drums at one of her band’s concerts. These videos would be amusing or entertaining if they were not evidence of social security disability fraud. The 40-year old man had been collecting thousands of dollars in disability payments claiming that his sore muscles would not allow him to work or leave his house. The 31-year drummer had been collecting social security disability checks for 4 years based on suffering from a mental impairment that resulted in “low energy.” Fraudulent social security disability scams are not new. The media regularly reports videos and other evidence of purportedly disabled people engaged in vigorous activities that would be difficult if not impossible if the worker was truly injured or in some other way incapable of earning an income. However, a recent scam that was uncovered by the federal government is particularly shocking as it involved an attorney and a judge.

Conn and Daugherty
Attorney runs a private law practice in Stanville, Kentucky that focuses on helping clients secure Social Security Disability Insurance (SSDI) benefits. According to a report issued by the Senate Homeland Security and Governmental Affairs Committee, the Social Security Administration (SSA) paid Conn over $4.5 million in attorney’s fees from 2006 to 2010. This made Conn the 3rd highest paid disability lawyer in the country. All of these fees were from cases heard by Judge David B. Daugherty, a SSA administrative judge. Of the 1375 cases brought before Daugherty by Conn only 4 were denied, giving Conn 99.7% approval rate. A South Carolina disability attorney notes that this is astounding considering that on average the social security disability approval percentage of cases reviewed by administrative judges is only 62%.

The Conn-Daugherty scheme was brought to the attention of officials by whistle-blowers. The ensuing investigating uncovered the use of physicians with suspended licenses, $96,000 in unexplained deposits to Daugherty’s bank accounts, the use of disposable cell phones, shredding of tons of documents, and the destruction of computer hard drives. Daugherty has since retired and Conn is being investigated by the Department of Justice.

Rampant Social Security Fraud
While the facts and figures associated with the Conn-Daugherty scam are surprising, this scam is only a small part of the overall problem of fraud involved in SSDI benefits. SSDI fraud takes several different forms including making false statements on an SSDI application, using falsified documents such as an altered social security card, or concealing information, such as failing to report an improvement in a medical condition or failing to report the death of a recipient. A report recently released by the Senate Permanent Subcommittee on Investigations discovered that fraud is so rampant that the Social Security Disability Trust Fund could run out of funds in 18 months. In recent years the number of people receiving SSDI benefits has skyrocketed from 6 million in 2002, to 9.4 million in 2010 and as of August, 2013, 13 million. SSA officials attribute the increase to the aging population. However, a simple gleaning of records show sloppy work in the review and processing of applications and a clear effort to quickly work through the backlog of cases. As a result it has become relatively easy to get away with fraud. For example, the SSA is supposed to conduct Continuing Disability Reviews (CDRs) to determine the status of claimants. Due to lack of sufficient staff CDRs are not routinely completed. Because of this scams such as the one perpetrated by an Oregon woman who collected her father’s SSDI checks for 26 years after he died, are widespread and often go undetected.

How to Stop the Fraud
The Social Security’s Office of the Inspector General set up a hotline for people to phone in tips on SSDI fraud. A report can be anonymous, but the SSA encourages people to disclose their names as it makes it easier to investigate the possible fraud. For the 5 month period from October 1, 2011 through March 30, 2012, the OIG received 63,368 allegations of fraud. Based on these allegations the SSA opened 3,969 cases that resulted in 703 criminal convictions.

While the hotline, CDRs, and other procedures that the SSA has in place are necessary, they are clearly not the complete answer to the problem. The SSA has an annual budget of over $12 billion with a deficit of $47 billion at the end of 2012. Clearly more emphasis needs to be focused on ridding the system of fraudulent claimants. Do you think new procedures need to be implemented? Or should more of an effort be made to make current systems, such as the CDRs, effective?