What Happens at the NYC Bureau of Fraud Investigation?

New clients call me every day when they receive a letter from the Bureau of Fraud Investigation at the NYC Human Resources Administration.  The letter says that their eligibility for Medicaid or Family Health Plus is being investigated.

The new client's first question is always the same:  Will I go to jail?

The answer is:  It depends on how you respond to the letter.

Here are three actual cases that I handled recently with three very different outcomes.

Unexplained Bank Deposits

A woman who received one of these letters was very worried because her bank statements showed a large deposit -- more than $40,000 -- that was inconsistent with the very low income she had listed on her application for Medicaid benefits.  The same amount was also reported on her tax returns as "income," but she had not reported that amount as income when she re-certified that she was eligible for Medicaid benefits.

After talking with the client, I learned that she took the money out of her IRA because she was facing foreclosure and needed the money to save her home.

She was in luck.  While the money was considered "income" for tax purposes, it was not considered income for Medicaid purposes.  Under New York Medicaid rules, a one-time withdrawal from an IRA, 401-k, or other retirement plan is considered liquidation of an asset.  Withdrawals from retirement plans are only considered income if they are made on a regular basis over time.  This is just one of the many complicated rules governing Medicaid that most people -- including many lawyers -- do not know.

The client and I went in to see the investigator with an IRA statement showing that this was a one-time withdrawal.  The investigator literally apologized for causing unnecessary anxiety and said she hoped the client would be able to save her home.  Case closed.

Blatant Fraud

Another client came to me with a very serious problem.  He had flat-out lied on his application and re-certifications for Medicaid benefits.  He wrote that he earned only $400 per week when, in fact, he earned closer to $4,000 per week.  Plus he owned businesses that paid the leases on luxury cars that he and his wife drove for both business and pleasure.

Not only was this client facing the possibility of serious Medicaid fraud charges, but he also faced the possibility that the investigators at the Bureau of Fraud Investigation would refer his case to the tax authorities and other law enforcement agencies for serious civil and criminal investigations.

After reviewing the client's financial records, we decided the best option was to admit that he was not eligible for Medicaid benefits and negotiate a settlement.  The investigator presented the client with a very large claim -- tens of thousands of dollars -- for benefits the government had provided to the client and his family.  I was able to negotiate two options for the client to get out of this mess.  He could pay the claim in monthly installments over a period of 10 years with no interest or penalties.  Or he could receive a discount if he paid the claim in full.

The client took out his checkbook, paid the claim, and received a discount.  The Human Resources Administration signed a settlement agreement stating that the payment resolved all claims against him, that no further action would be taken against him, and that his case would not be referred to any other government agency.  Case closed.

Penny Wise and Pound Foolish Puts the Client in Handcuffs

A husband and wife received letters from the Bureau of Fraud Investigation asking them to come in for an interview and to bring all their financial records, including tax returns, bank statements, mortgage documents, etc.

This couple decided not to call a lawyer.  They went to the meeting on their own and tried to convince the investigators that they had done nothing wrong.  They blamed an insurance agent for misleading them.  The agent, they said, told them to list only the income on their pay stubs.  The agent said they were not required to list other income they received from rental properties and a home-based business.  When asked why they listened to the agent when the application forms clearly state that all income must be disclosed, the couple told the investigators that "everyone does it."

The claim against this couple, about $15,000, was much smaller than the claim against the man who settled his case by admitting his wrongdoing and writing a check.  But the investigators were not impressed by the couple's excuses and attempt to blame others.  So they referred the case to the District Attorney's office.

Several weeks later, the husband and wife were arrested and placed in handcuffs in front of their children.  They spent a night in jail in separate cells.  They were charged with four different felonies that carried possible sentences of four years in prison on each count.  Because the husband was not a U.S. citizen, he also faced deportation if he was convicted of one of the felonies.

That is when they decided to call a lawyer.

It took almost three months of negotiations, but I was able to convince the District Attorney to let the couple avoid felony convictions (and the husband's deportation) by pleading guilty to misdemeanors and paying $15,000 in restitution plus a $5,000 fine.  They were not sentenced to any prison time.

If they had called a Medicaid fraud lawyer when they received the Bureau of Fraud Investigation's letter, there is a very good chance that they would not have been arrested or placed in handcuffs, they would not have spent a night in jail, they would not have paid a $5,000 fine, and they would not have criminal records.  And the legal fee would have been much less than what I had to charge them for three months of work.

The moral of these real-life stories is crystal clear.

If you receive a letter from the Bureau of Fraud Investigation concerning your eligibility for Medicaid, call an experienced Medicaid fraud defense attorney immediately to protect your rights.  You can reach me at (212) 601-2728 or click here to reach my law offices via email.  The initial consultation is free and completely confidential.

John Howley, Esq.

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