control, and governance
Fraud findings | From the Headlines
Fraud expert Art Stewart responds to real-life fraud cases — ripped from the media headlines — by sharing tips aimed at helping internal auditors navigate the massive fraud universe and deter would-be fraudsters.
MAY 13, 2013
Bloomberg Businessweek reports that the U.S. Justice Department is probing Armonk, N.Y.-based IBM over corruption allegations in Argentina, Bangladesh, Poland, and Ukraine, adding to bribery charges from the U.S. Securities and Exchange Commission (SEC). In Poland, the department is focusing on a transaction that involves allegations of a former IBM employee selling to the Polish government. In an April 30 filing, IBM said the Justice Department is investigating whether the company violated the U.S. Foreign Corrupt Practices Act (FCPA). It also stated that IBM is cooperating with the investigations.
Recent enforcement activities, both in the United States and internationally, show that companies with foreign operations cannot treat payoffs to foreign officials as the “cost of doing business.” There has been a significant spike in FCPA investigations and prosecutions by the Department of Justice and the SEC in recent years — from nine in 2003 to 91 in 2008. As the number of FCPA enforcements and the size of the penalties levied continue to grow, knowing how to mitigate the risks and put in place effective anti-corruption controls is critical. It is not enough for a company to point to the mere existence of a compliance program — regulators and prosecutors also are looking for evidence of an effective program.
Typically, an effective compliance program will include:
Auditors can help combat various forms of corruption by:
When performing these tasks, auditors should consider several questions:
APRIL 29, 2013
RESUSCITATING MEDICAL FRAUD PREVENTION
Forbes reports that a New York area cardiologist has pleaded guilty to charges that he committed health care fraud, admitting to billing Medicare Part B, Medicaid, and numerous private insurers “for unnecessary tests and unnecessary procedures based on false diagnoses and for medical services rendered by unlicensed practitioners.” In total, the cardiologist billed Medicare and Medicaid more than US $70 million from 2005 to 2012.
The cardiologist is scheduled to be sentenced in July. The crimes for which he has pled guilty carry a maximum total sentence of 15 years. He is also subject to fines and will be required to pay restitution.
The damage caused by medical fraud is significant, including injury to or death of the patient and financial loss of taxpayer money. The U.S. Federal Bureau of Investigation estimates that approximately US $80 billion a year is lost as a result of medical fraud. Yet, some might argue that Medicare appears to have left itself vulnerable to fraud. Fundamentally, physicians are trusted to uphold ethical standards and practices in their submission of Medicare bills. Checks and balances reside in the U.S. government’s health administration compliance programs, aided by whistleblower initiatives. The range of medical fraud is broad, and includes kickbacks, bribery, deliberate misdiagnosis and mistreatment, and fraudulent billing.
Internal auditors will no doubt recognize the main kinds of fraudulent billing activities to which the New York cardiologist pleaded guilty, and other similar cases currently in the media, as they resemble many types of financial fraud committed against nonmedical organizations. These include fraudulent billing for services:
Beginning in 2013 under the U.S. Affordable Care Act, physician practices will be required to create compliance programs to help them avoid fraudulent activities and ensure they are submitting true and accurate claims. Internal auditors have an opportunity to play a direct role or to advise about physician compliance programs by:
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