Category: Daily News

The Secret Service has detected a large-scale foreign attack on the U.S. unemployment system that is processing record numbers of jobless claims amid the pandemic, according to The New York Times.

In a Secret Service memo obtained by the Times, the agency described the attack as a well-organized Nigerian fraud ring that could lead to “potential losses in the hundreds of millions of dollars.”

“We are actively running down every lead we are getting,” Roy Dotson, a special agent who specializes in financial fraud at the Secret Service, said in an interview with investigators obtained by the Times.

The attackers are reportedly using previously obtained Social Security numbers and other personal information to claim unemployment benefits.

Since March, more than 36 million people have filed for unemployment amid shutdowns triggered by the coronavirus pandemic. The sudden increase in jobless claims has overwhelmed state unemployment systems.

The attack was first reported in Washington state, where people who did not file for unemployment reported receiving benefits they didn’t ask for.

The attack adds yet another obstacle as state governments work to send out unemployment benefits in a timely manner.

At Western Washington University in Bellingham, Wash., more than 400 out of roughly 2,500 employees have been targeted with fraudulent claims, the university’s spokesman told the Times.

“This is a gut punch,” Suzi LeVine, the commissioner of the Washington State Employment Security Department, told the newspaper.

Though Washington state has been the primary victim of the attack, there is evidence that the fraud has occurred in Florida, Massachusetts, North Carolina, Oklahoma, Rhode Island and Wyoming.

A new California Workers’ Compensation Institute (CWCI) study on the Independent Medical Review (IMR) process used to resolve California workers’ comp medical disputes finds that the number of IMR determination letters, fueled by a sharp decline in prescription drug disputes, fell 11.3% from 2018 to 2019, with data from the first quarter of 2020 showing the decline is continuing.

The CWCI study examined data from more than one million IMR decision letters that were issued from 2014 through March 2020 in response to applications submitted to the state after a Utilization Review (UR) physician modified or denied a medical service requested for an injured worker. As in prior studies.

State lawmakers expected IMR volume would decline over time as providers became familiar with the treatment guidelines, but the number of IMR determination letters increased steadily over the first five years of the program — the only exception being a modest 2.6% decline in 2017.

The 2019 tally, however, shows the IMR letter volume finally did drop sharply, falling to a five-year low of 163,899, down 11.3% from 2018, while the count from the first quarter of this year shows the decline is continuing, as the letter count from the first three months of 2020 fell 4.9 percent below the total from the corresponding period of 2019, dropping to a 5-year low of 38,981.

The year-to-year declines in letter volume were noted in all 8 regions of the state, with the biggest reduction in letter count noted in the Bay Area, which had about 6,200 fewer letters in 2019 than in 2018, a decline of more than 14%, though the rural, sparsely populated Northern Counties and Sierras showed the biggest percentage decline (26.3%).

As in prior years, a small number of physicians continued to drive much of the IMR activity in 2019, with the top 1% of requesting physicians (106 doctors) accounting for 41.2% of all disputed service requests determined by IMR in 2019; and the top 10 individual physicians alone accounting for 9.9% of the disputed requests.

IMR outcomes have shown little variation as IMR physicians in 2019 upheld 88.2% of UR doctors’ modifications or denials of services, compared to 88.6% in 2018, and 88.5% in the first quarter of 2020.

Uphold rates last year ranged from 74.9% for evaluation/management services to 92.7% for acupuncture; physical therapy; and durable medical equipment, prosthetics, and supplies.

The mix of services reviewed by IMR physicians in 2019 showed prescription drug requests continued to top the list, accounting for 41.1% of the IMRs (and 30.9% of those were for opioids), though that was down from 46.4% in 2018 and down from nearly half of all IMRs in 2015, prior to the adoption of new opioid and chronic pain guidelines in late 2017, and the implementation of the workers’ compensation prescription drug formulary in January 2018.

United States Attorney David L. Anderson, Special Agent in Charge James K. Wahleithner of the U.S. Department of Veterans Affairs’ Office of Inspector General, Criminal Investigations Division (“VA OIG”), and Chief of Police Martin Sizemore of the Veterans Affairs Police Service, Palo Alto Health Care Division announced that a federal grand jury in San Jose indicted Dr. John Giacomini for Abusive Sexual Contact,

According to the indictment, Giacomini, 71, of Atherton, is alleged to have subjected the victim, a subordinate doctor under Giacomini’s supervision, to unwanted and nonconsensual sexual contact in December of 2017 while both were on duty at the Veterans Affairs Hospital in Palo Alto, Calif.

At the time, Giacomini was the Chief of the Palo Alto VA’s Cardiology Department. He had served in this position for over 30 years and also served on the medical faculty at Stanford University.

Since the alleged sexual battery happened on federal property, the VA OIG referred the matter to the U.S. Attorney’s Office for federal prosecution. Giacomini no longer works at the Palo Alto VA Hospital or Stanford University.

Giacomini made his initial appearance by telephone on May 14, 2020. Giacomini is currently released on a $200,000 bond under the supervision of the United States Pretrial Services Office in San Jose. Giacomini’s next court appearance is scheduled for July 7, 2020, for a status conference before the Hon. Beth L. Freeman, United States District Judge.

If convicted, Giacomini faces a maximum sentence of two years of imprisonment, a fine of $250,000, restitution, supervised release, and a special assessment. However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt.

Assistant U.S. Attorneys Jeffrey Nedrow and Marissa Harris are prosecuting the case with the assistance of Jessica Leung and Susan Kreider. The prosecution is the result of an investigation by the VA OIG and the Veterans Affairs Police Service.

Early last month, a Rhode Island bank received an application for a $144,050 loan under the Paycheck Protection Program, the massive federal effort to assist small businesses hurt by the coronavirus crisis.

The application purported to be on behalf of the owners of Remington House, a restaurant on Post Road in Warwick, R.I. It listed 18 employees and an average monthly payroll of $46,000.

But when a bank official drove past the building, there were indications that the restaurant had been shut down before the pandemic. There were dumpsters on the property and notices ordering the stoppage of work were posted on the door and windows.

The once-popular restaurant had been closed since November 2018, according to federal prosecutors, who this week charged two men with conspiracy to commit bank fraud.

The case is the first criminal fraud prosecution in connection with the paycheck program. Industry officials warn that it will not be the last – not by a long shot. In fact, individuals who are working with banks to combat misconduct in the $660 billion program – including former California banking commissioner Walter Mix – estimate that fraud rates could be as high as 10% to 12%.

Those estimates, which are based on initial reviews of loan files at dozens of banks, are roughly consistent with what has happened after other disasters. In the aftermath of Hurricane Rita and Hurricane Katrina, a government audit found that around 16% of applicants for federal disaster assistance used invalid information. If 10% of the PPP’s funding went to fraudsters, taxpayers would be defrauded by tens of billions of dollars.

Assistant Attorney General Brian Benczkowskil told The Wall Street Journal earlier this week that prosecutors are mounting a broad search for fraud, and that they will apply scrutiny to the conduct of banks, in addition to the actions of borrowers.

Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza have pledged to review all PPP loans of $2 million or more.

Also in recent weeks, many banks have begun accepting applications from new small-business customers, which has left them more vulnerable to fraud.

Existing small-business customers are generally seen as safer, because bankers have already satisfied rules that require them to know those customers. Often, they have met the business owner face-to-face and shaken hands.

“The risk of fraud in the first round was probably not very significant because everybody was cherry-picking their customers,” said Adam Jiwan, chairman and CEO of Spring Labs, a Los Angeles technology company that offers tools to ferret out fraud. “The likelihood of fraud in phase two is high, as banks move beyond their existing relationships.”

The relatively late addition of online lenders to the program may have also increased the risk of fraud, since those companies are less likely than traditional banks to have a personal relationship with their customers. On the other hand, online lenders may have relatively sophisticated risk management procedures.

Omnicare, Inc., a subsidiary of CVS Health and a provider of pharmacy services to long-term care facilities, has agreed to pay the United States a $15.3 million civil penalty to resolve allegations that it violated federal law by, among other things, allowing opioids and other controlled substances to be dispensed without a valid prescription, United States Attorney Nicola T. Hanna announced today.

The Cincinnati-based Omnicare operates “closed door” pharmacies – meaning they were not open to the public – that deliver controlled substances to nursing homes and other long-term care facilities (LTCFs).

Omnicare makes daily deliveries of prescription medications to residents of LTCFs, and it also pre-positions limited stockpiles of controlled substances at LTCFs in “emergency kits,” which are to be dispensed to patients on an emergency basis. These emergency kits, which often include opioids and other controlled substances that are commonly abused and diverted, remain part of Omnicare’s inventory and must be tightly controlled and tracked. The controlled substances may be dispensed only pursuant to a valid prescription.

The United States alleged that Omnicare violated the federal Controlled Substances Act in its handling of emergency prescriptions, its controls over the emergency kits, and its processing of written prescriptions that lacked required elements such as the prescriber’s signature or DEA number.

The federal investigation found that Omnicare failed to control emergency kits by improperly permitting LTCFs to remove opioids and other controlled substances from emergency kits days before doctors provided a valid prescription. The investigation also revealed that Omnicare had repeated failures in its documentation and reporting of oral emergency prescriptions of Schedule II controlled substances.

As part of the settlement agreement announced today, Omnicare agreed to pay the $15.3 million civil penalty and entered into a Memorandum of Agreement with the Drug Enforcement Administration that will require Omnicare to increase its auditing and monitoring of emergency kits placed at LTCFs.

“Omnicare dispensed powerful opioids without valid prescriptions and failed to inform federal authorities of significant losses of opioids and other drugs,” United States Attorney Hanna stated. “With the opioid crisis still a very real concern, every entity that handles dangerous drugs will be held accountable to ensure powerful narcotics are properly dispensed and not diverted to the black market.”

“Omnicare failed in its responsibility to ensure proper controls of medications used to treat some of the most vulnerable among us,” said DEA Acting Administrator Uttam Dhillon. “DEA is committed to keeping our communities safe by holding companies like Omnicare accountable for such failures, while ensuring continuity of care and necessary access to emergency prescription drug supplies.”