The Reality of Fraud

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Reality television became a phenomenon in the late 1990s and early 2000s. These statistics show there are several reasons why the genre is so popular. Whether viewers just like the interpersonal drama, find the shows to contain mindless drivel that helps them forget about their day-to-day life, or they just want the background noise on, reality shows don’t usually tell the real story (despite being called “reality tv”). Today’s fraudsters from St. Paul, Minnesota committed Medicaid fraud with the hopes of using the illegally gained government funds to produce a reality show about their lives. (As you might guess, the reality show was cancelled before it even got started, because the Medicaid program gave their idea very poor reviews.)

Twin brothers from St. Paul and one brother’s wife from Minnetonka were involved in a Medicaid fraud scheme that cost the government healthcare program nearly $14 million over more than a decade. (The defendants not only cheated the Medicaid program, but also honest taxpayers and the nation’s most vulnerable citizens.) The threesome accomplished the fraudulent scam through multiple healthcare businesses that provided nursing and home care services. (These businesses received federal and state funding from both Medicaid and Medicare.)

 When one of the brothers was convicted of felony theft by false representation in 2003, he was barred for life from participating in federal or state healthcare programs. Despite that ruling, he conspired with his wife to set up a new healthcare company called Model Healthcare, to continue the ruse. (While the company was incorporated using his wife’s name, it was the brother who actually managed the business. The wife never revealed that her convicted and barred husband was still involved in the business.)

The new business received more than $18 million from Medicaid, although it was ineligible to do so because of the convicted brother’s involvement. (And, that wasn’t the only problem.) The brothers also failed to pay more than $3 million in payroll and Federal Insurance Contribution Act (FICA) taxes to the Internal Revenue Service (IRS), even though they had been withheld from their employees’ wages over eight years. (Those withheld funds made it into the bank accounts of the fraudsters, who attempted to develop a reality show based on their lives, purchased expensive housing, took a Caribbean cruise, and bought luxury retail items.)

Another co-conspirator involved in the scam happened to be the former mayor of Stillwater, Minnesota and a Certified Public Accountant (CPA). The brothers employed the CPA to provide bookkeeping, payroll, accounting and tax-related services for them. The CPA knew that the brothers were deducting taxes from their employees’ wages, but not remitting them to the IRS. (But, he made no effort to correct their fraudulent business practices and continued to falsify tax forms and assist his clients with tax avoidance.)

The four co-conspirators all admitted guilt for their part in the multi-million dollar Medicaid fraud and tax fraud conspiracy that lasted for more than a decade. The 52-year-old brother, who was previously convicted, will serve a sentence of eight years in prison, three years of supervised release and pay $8.9 million in restitution. His twin brother will serve five years behind bars, three years of supervised release and pay more than $24.5 million in restitution. The 43-year-old wife of the previously convicted brother will serve 15 months in jail, two years of supervised release and pay more than $402,000 in restitution. Their former CPA will serve between three and four years behind bars and pay a fine of between $3,000 and $30,000 plus a restitution amount to be determined. He has decided not to seek re-election as mayor of Stillwater. (I’d say that was a good decision.)

So, back to our regularly scheduled program about the reality of fraud. These fraudsters had the illusion that they could get rich and famous by using the government to fund their reality tv show and a luxurious lifestyle. (I’m not exactly sure what was so interesting about their lives in the healthcare business, but who am I to judge?)  These four fraudsters are perfect for the role in a dramatic reality series that shows exactly what happens to criminals who attempt to defraud. (The closing scene fades to black with the ominous sound of a jail door closing. Now that is real tv.)

 Today’s “Fraud of the Day” is based on an article entitled, Business Owners Sentenced in Connection to Health Care Fraud, Tax Conspiracy,” posted on on February 8, 2018.

The Belfrey brothers and one of their wives have all been sentenced to serve time behind bars in a multi-million health care fraud and tax conspiracy that authorities say lasted years.

And they collectively must pay nearly $14 million in restitution.

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.