Why it pays to watch for shell schemes


Shell companies should be a concern for health payers because criminals use these companies to launder money and facilitate fraud, according to an article in this month's issue of Fraud Magazine.

Also called "front companies," shell corporations are empty vehicles often used for black market business transactions. Their purpose is to hide fraud, including the origin of ill-gained money and those who commit crime.

Hiding perpetrators through shell companies is a specialty of organized criminals. Their fraud schemes may be layered so those who mastermind them are removed from actual criminal conduct, as Rebecca Pyne, a U.S. Justice Department trial attorney, told FierceHealthPayer: Anti-Fraud in an exclusive interview. Organized criminals may use shell companies to direct schemes and profit from them but insulate themselves from engaging in criminal acts.

Shell companies may have different forms and lifespans, Fraud Magazine noted. Some criminals create these companies for one purpose and then discard them, while other criminals use preferred fronts repeatedly.

When criminals find a scam that works, they form new companies to bill the same healthcare fraud scheme, according to Assistant U.S. Attorney Ted Radway. "With a small sum of money, time and patience, fraudsters can set up a very elaborate web of shell companies in little time ... creating a shell network of deception," Fraud Magazine stated.

Schemes involving vacant store fronts and suppliers that only exist on paper characterize durable medical equipment (DME) fraud, ACP Internist reported.

And DME fraud is a significant threat: Sixteen percent of criminal investigations performed in 2010 for publicly-funded insurance programs involved DME suppliers, ACP Internist noted. Power wheelchair scams are particularly noteworthy, as FierceHealthPayer: Anti-Fraud previously reported.

To guard against DME fraud cloaked by shell companies, doctors and investigators should confirm that they're dealing with a legitimate equipment company that has a physical location as opposed to only an Internet address, ACP recommended.

For more:
- read the Fraud Magazine article excerpt (used with permission)
- here's the ACP Internist article (used with permission)

Related Articles:
DOJ's Rebecca Pyne on fighting fraud by organized crime
Assistant US Attorney Ted Radway on fighting Medicaid fraud
Medical equipment fraud schemes worth watching
Feds pursue power wheelchair abuses
GAO: Medicaid managed care needs better watchdogs