Set the prisoners free…and then what?


Fraud fighters funnel tremendous amounts of time and effort into detecting, investigating and helping to prosecute people who commit insurance crimes. That last step of the process — punishing people who defraud — is running up against a trend sweeping the nation: prison depopulation.

Grappling with crumbling budgets, state after state is facing the reality that they can no longer afford to incarcerate growing numbers of criminals, especially non-violent ones.

The number of prisoners in the U.S. is at an all-time high. The U.S. imprisons more people than even China, which has four times the number of citizens. Sooner or later, something has to give. That something, in part, is pressure to resist handing out prison sentences for white-collar crime, including insurance fraud.

Not only is there pressure on judges to resist incarcerating white-collar criminals, but sentences are becoming shorter. At least 19 states have taken action to cut their prison population by reducing sentences. Mississippi began allowing non-violent prisoners to be considered for parole 60% earlier than usual. New York, Rhode Island, Minnesota, Michigan, and New Jersey enacted similar sentence-cutting measures for low-risk inmates.

Budgets aren’t the only reason states are taking action. Overcrowding is another factor. California — under a Supreme Court order — will soon release at least 30,000 convicts to ease inhumane conditions. How many fraudsters currently locked up in California prisons will be let out to continue plying their trade?

This trend not only will put more white-collar criminals back on the streets, but likely will create a disincentive for prosecutors to take these cases in the first place. Plus, deterrence for committing fraud will diminish.

Michigan prosecutor Kym Worthy recently expressed her disappointment in Michigan’s prison system, pointing out that arsonists are keenly aware of the state’s lenient policies, and knowingly perpetrate these crimes because they “know they can get away with it.”

Fraud fighters and prosecutors need to meet this trend head on and come up with creative ideas as alternatives to long prison terms.

Out of necessity, some jurisdictions already are employing such measures. In Texas, one district attorney has cut plea bargains with auto giveup scammers to require them to appear in video PSAs talking about how dumb their crimes are and the impact on their lives. A prosecutor in Florida recently cut a deal with convicted clinic owners to fund a public outreach campaign about the cost of such crime and to alert citizens to report shady clinics.

Public service spots and public speaking mandates by remorseful fraudsters would further put a face on this crime, creating a lasting impression in the consumers’ experience, in a more direct way than reading about a conviction.

Public embarrassment is good, but much more thought needs to go into alternative sentencing. Increased fines on professionals who defraud would be a good start. Perhaps medical professionals who defraud should be sent to third-world countries for a couple years to provide free care. Convicted lawyers might be sentenced to long-term jobs at nonprofit legal centers providing services to the poor. Whatever alternatives, they must be sure, swift and somewhat painful to serve as deterrents.

If our criminal justice system fails to hand out effective punishment, deterrence will continue to diminish and fraud will continue to flourish.

Florida may fire all fraud prosecutors?

Florida signThis is welcome news if you’re a fraud artist in the Sunshine State:

The Florida Senate General Appropriations Committee hears a proposal to eliminate all seven insurance fraud prosecutors. Several departments made presentations to the Florida’s senate appropriations committee Thursday morning. The state agencies were told to show lawmakers what cuts they could make to reduce their budget by 20-percent. They were also supposed to tell them how severely those cuts would affect their department. One of the more severe cuts proposed would eliminate all seven insurance fraud prosecutors.

The Coalition has contacted this committee and strongly urged them to reject this idea. We also issued the following news release today:

WASHINGTON, March 20—A proposal to fire seven insurance fraud prosecutors in Florida is a foolish idea that would hurt consumers and play into the hands of insurance crooks, the Coalition Against Insurance Fraud warned state legislators today.

The coalition is shocked that the Florida Senate General Appropriations Committee is considering eliminating all of the state’s insurance fraud prosecutors.

“Florida—like many other states—faces serious economic problems. But eliminating fraud prosecutors would increase insurance crime and drive up costs for consumers,” said Dennis Jay, executive director of the coalition.

The proposal was among several presentations to the Senate committee this week to show how the state could reduce its budget 20 percent. Eliminating the fraud prosecutors was one of the most-drastic ideas.

The fraud prosecutors were created largely to deal with widespread and costly staged-accident rings and other auto scams. Florida citizens already pay among the nation’s highest auto premiums. Staged crashes also place all motorists at risk of injury, he continued. Consumers can ill-afford higher auto premiums in this recession, nor can the state afford the continued costs that investigating fraud imposes on its resources.

“It is disturbing that an effort to reduce state spending that serious thought is being given to reducing Florida’s commitment to fight insurance fraud,” Jay added.

Walter Dartland of the Consumer Federation of the Southeast also criticized the idea. “It’s beyond belief that legislators would consider such a move when insurance fraud is increasing across the state. It’s tantamount to giving a stimulus package to fraud perpetrators,” Dartland said.

Florida recently expanded the number of fraud prosecutors from two to seven. But the state still lags far behind states such as New Jersey, which has 31 prosecutors; Pennsylvania, which has 22 prosecutors; and Massachusetts, which has 11 prosecutors, he said.

Local prosecutors would handle insurance cases if the fraud prosecutors are eliminated. But the fraud prosecutors were created to ease the burden on the State Attorney’s Office, which doesn’t have the staff or budget to adequately handle insurance-fraud cases, Jay added.

Fraud fighters in Florida should let this legislative committee know eliminating prosecutors is a bad idea. Send an e-mail or call the chairman of the Appropriations Committee. Click on the name below to view contact information.

Appropriations Committee Members:
. Chair: Senator Carey Baker (R)
. Vice Chair: Senator Alfred “Al” Lawson, Jr. (D)
. Senator Dave Aronberg (D)
. Senator Charles S. “Charlie” Dean, Sr. (R)
. Senator Steve Oelrich (R)

Computer crash may let fraudsters off the hook

Doctor in jailProsecuting medical providers under the best of circumstances is never easy, but when your evidence suddenly evaporates in cyberspace, it’s a nightmare. That’s apparently what happened at the Medicaid fraud unit within the Office of Attorney General in Texas:

“A massive computer crash that destroyed hundreds of the state attorney general’s confidential documents may prevent scores of Medicaid fraud prosecutions and has revealed serious problems with a newly expanded state outsourcing of computer services . . . In an apparent oversight, the documents lost were not backed up – meaning that evidence crucial to convicting dishonest health-care providers who ripped off the state’s health insurance program for the poor may never be recovered.”

In all, 81 cases and eight-month’s work by 13 people in the AG’s office are out the window, according to reports this morning.

May this serve as a valuable lesson to fraud-fighters everywhere.

Update: October 30, 2008: The state of Texas has fined IBM $900,000 for failing to backup the AG’s data, according to this report. Ouch!