Conn, 56, pleaded guilty to one count of stealing from the Social Security Administration and one count of paying illegal gratuities to a federal judge.
Conn, who lives in Pikeville, admitted he submitted false documentation for clients seeking disability payments and paid off a federal administrative law judge who approved the claims.
“I submitted or allowed the submission of medical records that I knew to be fraudulent in nature,” Conn said when U.S. District Judge Danny C. Reeves asked him to describe his illegal conduct.
Conn admitted he submitted false documents in “well over” 1,700 cases, the Department of Justice said.
Conn declined comment after the hearing. However, his attorney, Scott White, said people “should reserve judgment” about Conn’s role in the fraud until after the trial of two others charged in the case.
The other defendants are David B. Daugherty, a former Social Security judge accused of rubber-stamping benefit claims for Conn’s clients in return for payoffs, and Pikeville psychologist Alfred Bradley Adkins, who allegedly signed false mental-impairment evaluations of Conn’s clients.
Conn faces up to 12 years in prison, though his sentence will likely be lower under advisory federal guidelines. He is to be sentenced July 14.
He agreed to pay the government at least $5.7 million he received as a result of engaging in fraud. His plea agreement also calls for $46.5 million in restitution to the Social Security Administration.
Conn was indicted last April on more than a dozen charges, including mail and wire fraud, conspiring to retaliate against a witness, destroying evidence and money laundering.
Those charges will be dismissed as part of his plea arrangement.
Reeves allowed Conn to remain out of jail pending sentencing, but continued an earlier order of home detention.
Conn built a lucrative practice specializing in federal disability cases, promoting himself on television and on billboards throughout Eastern Kentucky.
He worked out of an office complex made of five connected mobile homes in Floyd County with a 19-foot-tall statue of Abraham Lincoln out front, hired bluegrass music legend Ralph Stanley to appear in a music video for him and once put a Miss Kentucky USA on the payroll for $70,000 a year as his public relations director.
Conn will sell his house and forfeit the office complex and Lincoln statue to help pay the government.
The Social Security Administration paid Conn’s firm $23 million from August 2005 to September 2015 for his work, according to one court order, making him one of the top earners in the program nationally.
However, whistleblowers in the Huntington, W.Va. office of the Social Security Administration, which handles appeals of cases from Eastern Kentucky, raised red flags about Conn’s relationship with an administrative judge there, David B. Daugherty.
A federal investigation ultimately led to charges that Conn falsified medical documents to show his clients were disabled, and paid doctors $300 to $450 apiece to sign completed evaluations supporting the claims.
Then, Daugherty allegedly arranged for Conn’s cases to be assigned to him — even allegedly taking over cases after they’d been assigned to other judges — and approved the claims, often without holding hearings.
Conn said in his plea agreement that the scheme went back to October 2004.
Daugherty told Conn at a hearing that his rulings were making Conn a lot of money, and then solicited $5,000 from Conn to help a family member with addiction rehabilitation, Conn told prosecutors.
Conn said that when he didn’t pay right away, Daugherty called him later the same day, reminded him of Daugherty’s favorable rulings and said he “needed to have that money,” the agreement said.
Conn, knowing the success of his practice depended in part on a good relation with Daugherty, paid him. The next month, Daugherty told Conn he would be needing $10,000 a month, the plea agreement said.
When Conn paid the first $10,000, Daugherty said, “Let’s not be stupid here,” cautioning Conn against withdrawing more than $10,000 at a time from his bank account to pay Daugherty because the bank would have to report the transaction.
After the scam had been going on for some time, Daugherty told Conn to come up with more varied false medical reports to avoid suspicion.
Conn paid Daugherty $8,000 to $14,000 a month from late 2004 through the spring of 2011, when Daugherty quit after Social Security investigators began an inquiry, according to the agreement Conn signed Friday.
Conn confirmed he destroyed records after learning of the investigation.
Conn’s plea deal said Adkins began doing mental-impairment tests on his clients in 2004. Adkins said he spent more than three hours with people, but in fact spent 30 minutes and estimated their IQ — rather than actually testing — and assigned scores to make them appear more disabled, Conn’s plea agreement said.
Adkins didn’t like doing the assessments, however, so in 2006, he told Conn to fill them out himself, saying “It’s all bull---- anyway,” according to the plea.
Conn created several standard templates on impairment and filled them out, and Adkins signed them, Conn told authorities.
The plea agreement said Conn faked X-ray reports as well, and lists two unnamed, unindicted co-conspirators who allegedly took part in the fraud.
The claims for Conn clients approved by Daugherty and others based on fraudulent documents obligated the SSA to pay $550 million in lifetime benefits, and the government actually paid $46.5 million to people that the agency has determined were not eligible to receive, the plea document said.
Daugherty and Adkins have pleaded innocent.
Two former employees in the Huntington SSA office, Jennifer Griffith and Sarah Carver, said they tried for years to bring attention to suspected wrongdoing by Daugherty and Conn.
The two, who faced retaliation after making reports to superiors and ultimately left the agency, attended Conn’s plea hearing.
“I’m glad to see that someone is finally being punished,” Griffith said.
However, both said there were others in the agency who took part in improper or illegal conduct.
They are suing under the federal False Claims Act, which allows whistleblowers to get a portion of the money the government recovers in fraud cases.
In May 2015, nearly a year before Conn was indicted, the Social Security Administration abruptly notified hundreds of his former clients that the agency would suspend their checks while redetermining if they were still eligible.
The agency said it was taking that action because there was reason to believe some cases Conn’s firm handled included fraudulent information from four doctors.
The move was a blow in Eastern Kentucky, where disability income is a significant part of the economy.
The agency decided not to cut off off checks during the re-determination process after Republican U.S. Rep. Hal Rogers interceded.
However, SSA went ahead with re-determination hearings.
The agency ultimately identified about 1,500 beneficiaries, most of them in Eastern Kentucky, for re-determination hearings, said Prestonsburg attorney Ned Pillersdorf, who led an effort to find attorneys for the people.
Most of the hearings are over, and a little less than half the people won decisions to keep their benefits, meaning about 800 people lost money they depended on, Pillersdorf said.
“It’s a humanitarian crisis,” Pillersdorf said.
People who lost benefits can appeal.
Pillersdorf is representing former Conn clients in a class-action lawsuit that seeks damages from him. His guilty plea is good news in that effort to get people money, Pillersdorf said.
Full Article & Source:
Well-known disability lawyer Eric Conn pleads guilty in federal fraud case