Jefferson County caseworker diverted welfare checks to pay her own rent and utilities

Rampant fraud in welfare reported -
Grand jury finds system failures, Stumbo says flaws serious
Brammer, Jack. Lexington Herald-Leader, Sept. 30, 2006, pg. A1.

FRANKFORT -- A special Franklin County grand jury report released yesterday found widespread failure to guard against rampant fraud in the state's welfare system, particularly theft by government employees.

The grand jury led by Attorney General Greg Stumbo's office said in an 11-page report that it had outlined "systemic deficiencies we believe contribute to ongoing welfare worker and recipient fraud, and deserve to be addressed in order to make the system less susceptible to such fraud and the resultant loss of millions of dollars in desperately needed funds for the Commonwealth."

"The grand jury has made one thing perfectly plain -- the state's welfare system is riddled with fraud," Stumbo said in a statement. "This is a perfect example of the fox guarding the henhouse. When hard-earned tax dollars are stolen, an independent investigator is a must. We will be watching closely to see that the Cabinet (for Health and Human Services) takes this opportunity to immediately implement the recommendations of the grand jury."

Health and Human Services Secretary Mark Birdwhistell, who was appointed to the position last November by Gov. Ernie Fletcher, said in a statement that he will review the report's recommendations. But he said the cabinet already may have addressed some of the issues.

The cabinet's Department for Community Based Services "continually updates me on its ability to detect and deter fraud," Birdwhistell said. He noted that the agency two weeks ago rolled out a statewide reorganization aimed at lowering caseloads and creating greater consistency in services.

The grand jury was empaneled by former Franklin Circuit Judge William Graham at Stumbo's request in June 2005. The request came after Stumbo's special prosecutions division and Kentucky Bureau of Investigation found evidence of widespread mismanagement by the cabinet. Assistant Attorney General Barbara Maines Whaley worked with the grand jury and state Auditor Crit Luallen assisted in the investigation, identifying tens of thousands of suspicious transactions.

Between March 21 and August 14 this year, the grand jury heard testimony from 40 witnesses and returned indictments charging 10 people with a total of 136 felony counts of assistance program fraud, forgery and perjury. Eight of the individuals indicted were employees or former employees of the cabinet or one of its contractors.

The report said the evidence leads the grand jury "to suspect that the indicted cases of fraud -- both the ones we returned and those brought elsewhere -- are the 'tip of the iceberg.'"

Deputy Attorney General Pearce Whites said the 10 indictments represent more than $700,000 in losses to the state welfare system, but total fraud could run into the millions of dollars.

Whites was critical that the cabinet in 2005 under then-Secretary James Holsinger refused to renew a $1.4 million contract with Stumbo's office to investigate welfare fraud.

"There should be law enforcement personnel outside the cabinet to eradicate this fraud," Whites said, stressing that he was not saying the cabinet should renew the contract with Stumbo's office. Yesterday's grand jury report suggested that the cabinet consider reinstating its contract with Stumbo's office.

Holsinger said at the time the contract was not renewed that his cabinet had in place a more efficient, comprehensive system to crack down on welfare fraud. Nine investigators have been hired since July, and they investigate all cases of fraud and refer cases directly to local prosecutors.

Birdwhistell said yesterday he is confident the evidence collected by the grand jury "demonstrates that the cabinet's decision in 2005 not to renew its contract with the Office of Attorney General for criminal investigation of welfare fraud was in the Commonwealth's best interest."

"From July 1, 2004, to July 1, 2005, the attorney general's office investigated 210 such cases, referring 80 to prosecutors at a cost of $15,000 per case. From July 1, 2005, to July 1, 2006, the Office of Inspector General (in the cabinet) investigated 436 cases, referring 188 cases to prosecutors at a cost of $3,670 per case," Birdwhistell said.

"This change has clearly allowed us to increase the number of cases worked and forwarded for prosecution while decreasing the cost of such investigations."

Stumbo said Birdwhistell was mistaken in that the attorney general's office adjudicated 217 cases during fiscal year 2004-2005 for an amount of $2.23 million.

"The Cabinet for Health and Family Services has utterly failed to keep pace with the record recoveries posted by the office of the attorney general," Stumbo said. "Having only referred, not adjudicated, 198 cases during fiscal year 2005-2006, for a total adjudicated amount of $317,397."

Birdwhistell added that the lack of a contract with Stumbo's office "in no way indicates a lack of cooperation. The Office of Inspector General continues to work collaboratively with all law enforcement agencies in the state."

Grand jury's recommendations for curbing welfare fraud:
* Reduce caseload for each state caseworker.

The average caseload per caseworker is about 800 cases, the grand jury report said. In a 37.5-hour week, a worker carrying 800 cases would have 2.8 minutes each week to spend on each case. "It is apparent that the cabinet needs more caseworkers."

* Improve communication between the Cabinet for Health and Family Services' Assistance Programs and vital statistics division to make sure payments do not continue after a recipient dies.

Auditor Crit Luallen found that about 7,400 payments were made from July 1, 2004, to June 30, 2005, to food stamp accounts after the recipients had died.

In one case, a recipient who died in August 2004 still had $1,000 in her account as of March 2006.

* Use existing staff more efficiently. Some duties could be assigned to support staff such as assisting with yearly case updates and verifying correct addresses on returned mail.

* Assess the current process of giving caseworkers authority to award benefits. Some caseworkers get this authority after only eight months on the job, the grand jury said.

* Require all caseworkers to sign a document acknowledging they are subject to prosecution if they commit fraud and vigorously enforce the prohibition against a worker's involvement in a family member's case.

* Consider instituting photo ID cards to be used by recipients of benefits other than food stamps.

* Require all persons who are physically able to appear in person in local offices to apply for food stamp benefits.

* Freeze food stamp accounts after three months if the card has not been used, or immediately upon notification of the death or disqualification of a recipient.

Under the current system, funds continue to be added to a food stamp account for up to nine months even though the recipient has not used the card.

Welfare-fraud indictments returned previously by the special grand jury:

--LaTannya Turner, a state caseworker in Jefferson County, was indicted on 25 felony counts, as well as a persistent felon charge.

Her charges include submitting forged proof of employment to illegally obtain child care benefits and issuing about $37,000 in Family Alternative Diversion program checks that were supposed to go to recipients for expenses such as rent and utility bills.

Turner is charged with diverting the checks to pay her own rent and utilities, or with simply cashing the checks.

--Marion Cornelius, a Jefferson County caseworker, was indicted on 11 felony counts totaling about $33,000 in fraudulent payments. She is accused of fabricating welfare cases to obtain money and submitting forged documents to get illegal child care benefits.

--Devin Steadmon, the daughter of former caseworker Marion Cornelius, was indicted on four felony counts of welfare fraud in connection with giving false information to obtain food stamps and other benefits worth about $12,000.

--Sharlene Pitts, an Anderson County caseworker, was charged with 16 felony counts for using the food stamp card of a recipient who had asked that her food stamp benefits be terminated because of her improved financial status.

The caseworker is charged with using the card at stores in five counties for three months.

--Leslie Cook, a caseworker in Caldwell County, is charged with one felony count of Assistance Program fraud for using her position and knowledge of the system, and providing false information to obtain Medicaid benefits for a member of her family who was not entitled to them.

--Miguel Castro and Sylvia Tooley, supervisors in the Warren County office of Department for Community Based Services, were indicted for felony Assistance Program fraud. They allegedly manipulated the Medicaid system to pay more than $40,000 for a woman who could have gotten private health insurance through her husband's employer.

--Lydia Johnson, a retired Jefferson County caseworker, was indicted for alleged felony Assistance Program fraud and perjury for using her dead mother's food stamp card on 30 occasions over 13 months after her mother's death.

--Michelle Howard, an employee of the contractor administering the Child Care benefits in Harlan County, was charged with felony Assistance Program fraud for intentionally deleting information from a computer so that benefits would continue to be paid to a woman who no longer was entitled to them.

--Shirl Gresham was charged with felony Assistance Program fraud for using her mother's food stamp card 44 times at stores in Jefferson County after the mother died.