FBI Cleveland

Health Care Fraud

Cleveland’s Squad 10 investigates all forms of fraud affecting both government sponsored and private insured health benefit programs. These programs include the following provider frauds:

• Hospital
• Nursing Home
• Medical Transport
• Home Health Care
• Durable Medical Equipment
• Laboratory/Clinic

Fraud in these areas may include bribes/kickbacks, charging for services not rendered, charging for equipment not delivered, drug diversion, managed care abuses and upcoding for services.

Cleveland’s Squad 10 maintains liaison with federal, state, and private insurance investigators as well as the United States Attorney’s Office to aggressively detect, pursue and prosecute health care fraud offenders.

Information regarding possible health care fraud should be reported to the Cleveland division at (216) 522-1400. All information will be treated confidentially.

Money Laundering

Money laundering (ML) generally occurs in connection with some other type of unlawful activity and crosses all Cleveland FBI investigative programs, including white collar crime, drugs, violent crime, terrorism, and national security. Money laundering is a process or series of actions through which income if illegal origin is concealed, disguised or made to appear legitimate to evade detection, prosecution, seizure and taxation. Illicit proceeds must be laundered to make it appear as though the funds were generated through some legitimate means. This allows criminals to enjoy the "fruits" of their criminal activity without raising suspicion.

Money laundering represents a significant threat to the United States and its financial infrastructure because of its magnitude, as well as its tendency to corrupt individuals and financial systems. In effect, almost every crime involving money violates the ML statutes. The threat to the United States is increased because the trans-national nature of money laundering complicates money laundering’s discovery and subsequent investigation. In addition, successful money laundering facilitates and encourages the underlying criminal activity.

Telemarketing Fraud

Telemarketing fraud is a pervasive crime problem in Cleveland. It is perpetuated by illegal telemarketing firms that exist to defraud unsuspecting consumers through fraudulent representations and promises.

Many illegitimate businesses and organizations use telemarketing techniques, such as multiple telephone solicitations and mass mailings. Legal initiatives of that type generate over $500 billion per year in sales, and that figure is expected to continue to increase. However, a congressional report prepared in 1991 estimated that telemarketing fraud costs American consumers $40 billion yearly.

Internet-Facilitated Fraud

Internet-Facilitated Fraud is defines as any fraudulent scheme in which one or more components of the Internet, such as Web sites, chat rooms, and E-mail, play a significant role in offering nonexistent goods or services to consumers, communicating false or fraudulent representations about the schemes to consumers, or transmitting victims’ funds, access devices, or other items of value to the control of the scheme’s perpetrators. Fraud being committed over the Internet is the same type of white collar fraud the Cleveland FBI has traditionally investigated but poses additional concerns and challenges. The Internet appears to be a perfect manner to locate victims and provides an environment where the victims don’t see or speak to the perpetrators.

Anyone in the privacy of their own home can create a persuasive vehicle for fraud over the Internet, and the expenses associated with the operation of a "home page" and the use of electronic mail (E-mail) are minimal. Internet fraud does not have traditional boundaries, not all victims report fraud.

Financial Institution Fraud

One of the highest priorities within the Cleveland’s White Collar Crimes Program, Financial Institution Fraud (FIF) involves fraud or embezzlement occurring within or against financial institutions that are insured or regulated by the U.S. Government. Financial institutions are threatened by a wide array of frauds, including commercial loan fraud, check fraud, counterfeit negotiable instruments, mortgage fraud, check kiting, false applications, and a variety of traditional and non-traditional FIF scams.

The government’s successful prosecution of bank failure cases is largely the result of the use of task forces to combine the efforts of federal law enforcement and regulatory agencies. With the recent decrease in the number of bank failure cases, investigative focus has shifted to check fraud, counterfeiting, and loan fraud.

Advances in technology and international aspects of fraud schemes have increased the complexity and severity of the types of bank frauds being perpetrated. With the advent of democracies and a global economy, financial institution fraud investigations are becoming more commonplace at the international level.

The emergence of criminal groups involved in check and loan fraud are among the most serious FIF crime problem in the Cleveland division. A number of criminal groups have immigrated to this country, analyzed the American banking system, and exploited the vulnerabilities in the banking system through fraudulent negotiable instrument and loan fraud schemes. Much of the fraud perpetrated by these groups involves large-scale check fraud, counterfeiting, and loan fraud. These groups steal millions of dollars from financial institutions by conducting numerous fraudulent transactions that, in some cases, are too small to attract law enforcement’s attention.

Bankruptcy Fraud

Over the past decade, professionals involved in the bankruptcy system have seen a decrease in the stigma attached to an individual filing for bankruptcy, making bankruptcy relief more widely accepted than ever before. The changing economic climate in the United States has also led to the significant rise in filings. The number of bankruptcies filed each year has risen dramatically.

The FBI has exclusive investigative jurisdiction over bankruptcy fraud matters and the Cleveland divisions works closely with the United States Trustee’s Office. The Cleveland division concentrates its efforts on individuals and businesses who conceal assets, dismantling petition mills that prey upon poor victims, and individuals who make fraudulent multiple interstate bankruptcy filings.

Securities and Commodities Fraud

Securities trading has dramatically increased since the 1980's, leading to increased opportunities for fraud and misconduct, essentially misrepresentations, committed by investors, employees of brokerage houses, corporate executives or their shareholders, or by other market participants. A 1998 report from the North American Securities Administrators Association, Inc., noted that 31% of U.S. household financial assets are investing in equities, either directly or indirectly, and that investors expected their portfolios to produce average returns of 34% annually over the next 10 years. Over 200 million people had some form of investments in securities in 1998.

The Internet has also provided additional opportunities for investors to gather real-time information, as well as new avenues for those who would defraud the investing public. In a recent report, the Securities and Exchange Commission (SEC) stated that nearly 37% of all individual investor trades are done online, and predictions are that half of all retail securities trades will be done online by the year 2001. Approximately 147 million people use the Internet worldwide (77 million within the United States), and approximately 21% of all domestic households have access to the Internet. The Internet is rapidly becoming the medium of choice for the public at large as a source of information and marketplace for goods and services. However, illicit investment schemes involving stock manipulations, pyramid scams and Ponzi schemes, flourish on commercial bulletin board services as well as other schemes targeting various ethnic, professional, and religious groups.

The Cleveland division has taken an aggressive role in securities and commodities fraud investigations by working closely with the Department of Justice, the SEC, and the Commodity Futures Trading Commission to successfully prosecute these frauds.

Insurance Fraud

The Cleveland divisions efforts to address insurance fraud focus on a variety of fraudulent activities committed by applicants for insurance, policyholders, third-party claimants, or professionals who provide insurance services to claimants. Such fraudulent activities include inflating or "padding" actual claims and fraudulent inducements to issue policies and/or establish a lower premium rate.

Antitrust

Section 1 of he Sherman Act (15 U.S.C. S1) prohibits any agreement among competitors unreasonably to limit competition. Enforcement of the Sherman Act is the responsibility of the Antitrust Division of the United States Department of Justice. The Sherman Act itself declares violations committed after November 1, 1990 to be felonies punishable by a fine of up to $10 million for corporations, and a fine of up to $350,000 or 3 years imprisonment (or both) for individuals. The Sentencing Reform Act of 1984 also created a new alternative fine of twice the gross pecuniary loss or gain resulting from a violation.

Agreements among competitors to fix prices or rig bids or to allocate customers or territories are per se unlawful. Unlike agreements such as joint research agreements or distribution agreements between a manufacturer and its suppliers, agreements that are condemned as per se unlawful surely raise prices or restrict output without creating any plausible offsetting benefit to consumers. Also, such agreements are generally secret, and consumers and potential competitors are defrauded and misled because the conspirators continue to hold themselves out as competitors.

Price fixing is an agreement among competitors to raise, fix, or otherwise maintain the price at which their products or services are sold. Price fixing can take many forms, such as an agreement among competitors to adhere to published list prices. It is not necessary, however, that the conspirators agree to charge exactly the same price for a given item; for example, an agreement to raise their individual prices by a certain increment or maintain a certain profit margin also violates the law. Other examples of price-fixing agreements include those to:

• establish or adhere to uniform price discounts;
• eliminate discounts;

• adopt a standard formula for the computation of selling prices.

• not reduce prices without prior notification to others;

• fix credit terms; and

• maintain predetermined price differentials between different quantities, types or sizes of products.

Usually, but not always, price-fixing conspiracies include mechanisms for policing or enforcing adherence to the prices fixed.

Bid rigging is the way that conspiring competitors effectively raise prices where purchasers--often federal, state or local governments--acquire products or services by soliciting competing bids. Essentially, competitors agree in advance who will submit the winning bid on a contract that a public or private entity wants to let through competitive bidding. Bid rigging, too, takes many forms, but bid-rigging conspiracies usually fall into one or more of the following categories:

Intellectual Property Rights

IPR crime problem in Cleveland has grown exponentially over the last several years. Factors in these changes include the ability to copy massive amounts of digital information combined with the ability to transmit that information around the world in a matter of seconds. Piracy rates over 90% are prevalent in many countries throughout the world. The U.S., which ha a piracy rate of approximately 24%, leads the world in total lost revenue. As a result, global revenue losses for software piracy alone reached $11 billion according to an independent study by the Software Publishers Association. Losses associated with video and music piracy as well as product counterfeiting are also in the multiple billion dollar range. These lost revenues have led to an estimated loss of 750,000 American jobs, according to U.S. Customs. In addition, IPR infringements cheat America of tax revenues and add to the trade deficit. In some cases, consumers are subject to health and safety risks due to the counterfeiting of such profitable products as airplane and automobile parts, infant formula, and children’s toys. In the case of the copyright industries, only a small fraction of those products developed ever became profitable. Unfortunately, the profitable products are stolen outright, by piracy and counterfeiting.