Don't commit insurance fraud, warns prosecutor

December 11, 2006

Pharmacists who commit insurance fraud better watch out. Not only are regulatory authorities going to come after them the way they do after the Italian Mafia, they're going to use every forensic trick in the book that investigators on the TV show "CSI" employ-and more.

Those words of warning came from Christopher M. Shaw, senior district attorney of Westchester County, N.Y., who spoke at a legal seminar sponsored recently by the Arnold & Marie Schwartz College of Pharmacy & Health Sciences in New York.

According to Shaw, New York has the largest Medicaid bills and is the epicenter of insurance fraud in the country. No longer can pharmacists who run afoul of insurance law expect to be treated with the leeway once afforded white-collar criminals. Today there has been a sea change in attitude. Pharmacists who knowingly defraud their insurance carriers will be prosecuted in the most aggressive manner possible under the law. "You'll be treated as a common criminal," he warned the audience of 500 pharmacists.

Pharmacists might not necessarily receive a target letter or undergo an audit before they find investigators on their doorsteps with a search warrant, Shaw continued. Sometimes the licensing board won't get involved until the very end. His office uses all kinds of tactics to gather evidence, from bugs to pinhole cameras to use of informants, he said. Many investigations are multi-agency operations involving organizations such as the departments of health, education, and taxation; the attorney general's office; the inspector general; FBI; Internal Revenue Service; Drug Enforcement Administration; local police; etc. "We will spare no resources to root out insurance fraud," he asserted.

What are the penalties pharmacists can expect? It depends on what kind of crime was committed. There are five levels of fraud, Shaw explained. Fraud in the fifth degree is a misdemeanor with maximum punishment of incarceration of a year or less in county jail. Fraud in the fourth degree, a felony, is committed when property with a value in excess of $1,000 is wrongfully taken. "If I indict you on a felony, you will be held to a felony and you will lose your license," he declared.

A third-degree crime involves submitting fraudulent claims in excess of $3,000, second-degree $50,000, and first-degree over $1 million. First-degree offenses entail a maximum sentence of up to 25 years in state prison. What's more, Shaw cautioned, unlike federal prisons, which segregate white-collar criminals from rapists, murderers, and drug dealers, state prisons have limited accommodations. So "you are just as likely to end up in Sing Sing as anybody else." The sentence meted out will also look at whether you have any prior criminal history and the amount of money you stole, he added.

With pharmacists submitting hundreds of claims every day, it's possible they could make an isolated mistake here and there. Shaw reassured the audience that they are culpable only if there was intent to defraud insurance companies. Most insurance fraud starts out as one small rationalization at a time, Shaw observed. But over time, these discrete commissions build up to become a series of crimes and second nature to the perpetrators.

If you lied on a claim, it's not enough for you to cancel it, Shaw went on. A change of heart and reversing course doesn't make you not guilty, he stressed. As long as you completed and submitted a fraudulent claim, even if the insurance company denies the claim, law enforcement can come after you.

Shaw ended by saying that his goal is not to frighten pharmacists but to give them fair warning so that they'll practice with a good understanding of what insurance fraud encompasses. "Hopefully you'll operate your business more wide-eyed and you won't make that first rationalization," he concluded.