This document discusses cases of fraud in healthcare and financial services. It describes how fraud rings operate by taking advantage of thresholds for action, information sharing limitations, and vulnerabilities in processes. Fraud rings often reuse identities and data elements. Two specific cases are summarized: a $200 million credit bust-out scheme in New Jersey that used over 7,000 synthetic identities, and a $63 million Medicare and Medicaid fraud scheme in Florida where therapists fabricated treatment records. The document promotes the use of predictive analytics to detect fraud schemes earlier and reduce losses.

1. Busting Fraud Rings: The Cases of
Healthcare & Financial Services
October 9, 2013
1

2. It’s about to get a lot worse…
Criminal assaults on
healthcare and financials
services

3. Bad Actors Not Constrained by…
All Content is Confidential and/or Proprietary; © 2011 Bluewater International

4. Bad Actors Know…
• Thresholds for action so that investigations &
prosecutions not triggered
• Information sharing limitations
• How to appear legitimate – customers,
companies...
• Softer targets
• How long it takes to discover schemes
• Vulnerabilities of processes and supply chains
• Identities – real & synthetic - can facilitate all
criminal activities

5. Bad Actors Modus Operandi…
• Most schemes are variations of old ones –
bust outs, money laundering, insider threats,
provider fraud.
• Recycle data elements in complex cases
• Not lone wolves – work in formal or informal
rings and groups
– Specialized skills
– Communications
– Conduct “commerce”
• “Adopt” and compromise new technology

6. Fraud Prediction: NJ Synthetic Identity Bust-Out Case
Synthetic identities, created through the recycling of real
identity information, are the key to credit bust out schemes.
Case summary:
•Fraud ring of 18 individuals perpetrated a bust-out scheme using synthetic
identities, netting over $200 million
•Set up legitimate looking accounts and built credit over several years (2008
– 2012)
•Utilized synthetic identities but many of the data points were used
repeatedly
•Magnitude: 7000 fake identities, 25,000 fake credit cards, and 1,800 fake
drop box accounts for receiving snail mail opened
•Scheme also included fraudulent bank accounts, over 80 phony companies,
and collusive merchants

7. Healthcare: Florida Medicare & Medicaid Fraud Case
• Health Care Solutions Network billed $63M
for purported services from 2004 – 2011
• Therapists and staff altered, fabricated, &
forged thousands of documents to support
scheme.
• “Therapy” – Disney movies, bingo, & BBQs.
• Company paid kickbacks to assisted living
facilities in exchange for patient referral info.
• 15 defendants convicted in two Florida
locations & in one in North Carolina.

8. SNAs Game-Changing Predictive Analytics
• Flag schemes before they do harm, e.g. stop
schemes before they bust out.
• Detect schemes earlier to reduce
victimization and losses.
• Identify relationships between internal
threats and external threats.
• Provide opportunity to perform “continuous
analytics” after initial analysis.
• Reduce risk, fraud, and false positives.

9. Game-Changing Coming Attractions
• ID Fraud Pilot: One or two of the largest
banks in the world
• Fraudulent Claims Pilot: National Center for
Disasters
• Healthcare Risk Pilot: Florida Provider Fraud –
commercial and Medicaid

10. Gary R. Gordon, Ed.D.
Managing Partner
Bluewater International
ggordon@bluewaterintl.com
Website: www.bluewaterintl.com