Auditor says DHS concealed alleged fraud even after welfare…

JACKSON, MISS (Mississippi Today) –

Shortly after last year’s arrests in the largest reported public embezzlement scheme in state history, a whistleblower disclosed several previously unreported fraud allegations to the welfare department regarding one of its federal grant recipients.

Federal authorities and internal investigators at Mississippi Department of Human Services eventually began investigating the subgrantee, 100 Black Men of Jackson, an agency spokesperson told Mississippi Today on Tuesday.

But when the State Auditor’s Office later asked state agency officials at two separate meetings in 2020 if they knew of any other potential fraud, they did not relay the report, the audit released Tuesday said.

The February 2020 internal report claimed that an employee of 100 Black Men falsified timesheets to pay people who were not working at the nonprofit and that they were using federal money to buy personal items for staff and their family, according to the audit, which did not name the organization.

Ricky Jones, who has served as president of 100 Black Men of Jackson since March, said his organization just learned about the investigation last week when DHS notified them they would not be receiving a welfare grant this year. Jones said he had no knowledge of any alleged fraud and that the nonprofit had cooperated with audits from the department as well as the auditor’s office.

“We’re taken aback by this,” Jones said.

Jones said as a result of the lost funding, 100 Black Men had to cancel some upcoming afterschool and ACT prep programs, but that they would continue other services, such as administering vaccines and a student field trip to Alabama.

DHS spokesperson Danny Blanton rejected the auditor’s narrative that the department concealed fraud reports from the auditor’s office. Blanton explained that the U.S. Department of Health and Human Services’ Office of Inspector General had told the state agency not to interfere with its investigation and that the auditor’s office was already aware of the federal investigator’s involvement.

The audit, on the other hand, said that when the auditor’s office pressed DHS agency officials about the fraud tip, “some members of executive management still did not inform auditors of the fraud, or expressed to auditors that the fraud tip was ‘minor’ and involved an incident of an employee using a business care for personal use, and of an employee ‘sleeping on the job.’”

By the time these meetings occurred — in April, July and August of 2020 — former welfare department director John Davis, who was indicted last year for his critical role in the alleged scheme, had been retired for about a year.

Gov. Tate Reeves appointed the agency’s current director, Bob Anderson, in March of 2020.

Anderson has ushered in new procurement practices and financial controls to increase accountability among the department’s welfare grantees.

“The agency has still not adopted a comprehensive approach to responding to and reporting suspected fraud; additionally, the agency did not take all the needed steps to verify suspected fraud was investigated timely and misappropriated monies were returned,” the audit stated.

The audit released Tuesday also criticized the welfare department for continuing to fund two now-embattled nonprofits well into fiscal year 2020, as Mississippi Today first reported last July, even after learning that the auditor suspected they were responsible for the misspending of tens of millions of welfare dollars, the audit said.

The two nonprofits ran an anti-poverty program called Families First for Mississippi, through which most of the money that was allegedly stolen, $4.15 million, or potentially misspent, $94 million, flowed.

One of the nonprofits, Mississippi Community Education Center, shuttered after law enforcement arrested its owner Nancy New, while officials at the other nonprofit, Family Resource Center of North Mississippi, have not faced criminal charges.

Blanton also said that since the department was still under contract with the nonprofits in the last months of 2019, the beginning of fiscal year 2020, it could not simply cut off their funding while auditors were investigating allegations.

“We could not cease funding until we had that letter from the state auditor (in January 2020). And at that point we did,” Blanton said.

The auditor’s office contradicted this notion, stating that the department has an obligation to ensure grant monies are expended properly.

Instances of fraud and abuse in Mississippi’s welfare system were widespread, including among other organizations who received subgrants from the Families First nonprofits. Representatives for the nonprofits have not returned several calls and emails over the last year.

Emails obtained by Mississippi Today provide greater insight into the scope and type of foolery occurring within the federal grants.

Mississippi Today retrieved a 2017 email from Family Resource Center director Christi Webb, in which she described to Davis allegations of blatant deception at one of their partners, the local community action agency in Greenville, Warren-Washington-Issaqueena-Sharkey Community Action Agency or WWISCAA.

“…(T)heir immediate supervisor called a meeting with the staff in Myersville and told them that they had to document names of clients and activities performed in that center. They explained to her that there had been no activities and no clients and they were told to come up with some regardless. We received sign in sheets and some activities that had been ‘conducted.’

“To make sure before actually calling their hand on this,” Webb continued, “I contacted another licensed social worker with a master’s degree who had been employed by them under our Families First grant. She explained that she quit due to fear of losing her license and the requirements of the supervisor. She explained that they were absolutely doing nothing in either center.”

Webb said she and her organization’s financial officer visited WWISCAA’s Greenville Center and found just one vehicle in the parking lot. Before they exited their car, a woman was unlocking the door and waving them in.

The center’s director “had made a call to her warning her that we were there. There was a reception area, a 10 x 10 room with two tables and 6 chairs and another office.” On a separate visit, she said, they found no employee present.

Webb attached a letter in her email to Davis, showing her organization had terminated their contract with WWISCAA. The community action agency did not return calls to Mississippi Today Tuesday morning.

New sent a similar email to former Department of Human Services Director Christopher Freeze, who took over for Davis a few months after Davis retired in 2019. New described issues with their partner, Victory Sports Foundation owned by former football player Paul Lacoste, who was paid to conduct a boot camp-style fitness program, often attended by professionals and lawmakers.

“As we do with all of our partners that receive Families First funding through Mississippi Community Education Center, we evaluate their services and outcomes and review their expenses,” New wrote. “In doing so, we have identified concerns with Victory Sports’ expense reports and services. Also, we have had a number of complaints concerning his services. We are verifying those as well to determine the validity of such. We certainly do not want to falsely accuse. Therefore, while doing our due diligence, Paul LaCoste was asked not to use Families First for Mississippi’s brand and his funding was suspended. We do appreciate the partnership with Victory Sports and Paul’s work. However, in saying that, we want to be good stewards of all financial support. I just wanted you to be aware of this information in case this comes up.”

The audit released less than a year later said that according to its budget, Victory Sports used the nearly $1.4 million welfare subgrant to pay for staff and coaches, a program design fee, equipment, an onsite nurse, marketing and other administration costs, and to purchase a $20,000 trailer and a $70,000 vehicle.

The report also said Victory Sports charged a fee for participants in the boot camp to attend and it did not conduct any kind of eligibility to ensure it was serving those in need. Paul Lacoste did not return calls Tuesday morning.

The welfare agency’s documentation, or lack thereof, shows Mississippi Community Education Center and Family Resource Center of North Mississippi did not, as New stated, evaluate the services and outcomes of its grantees. Their own outcome reports that they sent the state each month, which were meant to show how many people they served, contained nonsensical figures, Mississippi Today first reported.

Together, the nonprofits paid more than $3 million to retired WWE wrestler Ted DiBiase Jr. for little more than inspirational speaking and promotion and paid a six-figure salary to retired football player Marcus Dupree, plus covered the $9,500-a-month mortgage on his horse ranch.

The welfare agency possessed no records showing the outcomes of those programs, an agency spokesperson said.

Mississippi Community Education Center has also failed to turn over documents the agency needs to complete its forensic audit or conduct a full grant closeout — the department’s process for ensuring the nonprofit complied with grant requirements and spent the funds properly.

“MDHS is concerned about the authenticity of MCEC documents due to submission of numerous versions of the same request in a monitoring visit,” Anderson wrote to the auditor’s office in March in response to the latest report. “This inability to validity MCEC’s records is further complicated by the fact that the principals of MCEC are currently under indictment and essentially unavailable to MDHS to review any further documentation or answer questions.”

Nancy New and her son Zach New are scheduled to attend trial on welfare embezzlement charges in October. Davis may face trial in September.

 

Original Story

Mississippi incorrectly paid out $118 million in unemployment benefits…

JACKSON, MISS (Clarion-Ledger) – The Mississippi Department of Employment Security incorrectly paid out nearly $118 million in unemployment claims during the early days of the pandemic, according to a report from the State Auditor’s Office.

Of the incorrect payments, some were cases of stolen identity, some were part of international unemployment fraud schemes, some went to people who never lost their jobs and others went to people who were in jail, the report says.

“It’s more important than ever to understand the mistakes that were made when money was flowing so freely during COVID,” Mississippi State Auditor Shad White said in a statement.

The Department of Employment Security cannot yet determine how much unemployment money was given to fraudsters and how much was incorrectly paid to people who made mistakes filing for benefits, according to Stephanie Palmertree, director of finance and compliance for the Mississippi State Auditor’s Office.

In its report, the auditor’s office suggests many of the wrong payments went undetected by the Mississippi Department of Employment Security, or MDES, because its staff were overwhelmed by the sheer number of unemploymentclaims filed at the pandemic’s start. MDES waived most of the usual criteria for Mississippians to receive unemployment benefits, making it easier for people to defraud the state, the report says.

One of the criteria lifted during the onset of the pandemic was that claimants must actively search for work while receiving unemployment benefits. Because the requirement was set aside, applications were approved en masse, leading to inmates receiving benefits, according to the auditor’s report.

Additionally, the system that checks Social Security numbers to verify a person’s identity was down during the early months of the pandemic, making it easier to collect benefits using a false identity.

Although MDES incorrectly paid claimants roughly $118 million, the amount is about 5.5% of the $2.1 billion in unemployment benefits the agency paid out in fiscal year 2020, which ended in June of that year.

“This is an incredible percentage considering the circumstances,” MDES Executive Director Jacqueline Turner said in a written response to the auditor’s report.

Turner acknowledged a number of improper payments and overpayments occurred, but disagreed with the auditor’s assertion that MDES improperly waived its usual criteria. It’s not clear how much of the $118 million is state money, and how much of it was federal assistance.

Turner said the agency was following new criteria set out in executive orders issued by Gov. Tate Reeves and then-President Donald Trump. Because Mississippi was under both federal and state-declared emergencies, any executive orders supplanted existing law, Turner said.

“MDES respectfully disagrees with this findingbecause it does not acknowledge or allow for the existence of this pandemic, or the radically new and different federal programs implemented during the disaster,” Turner wrote in her response letter to White.

Mississippi is not the only state to determine it paid unemployment benefits to people who were ineligible to receive the money. California and New York lost hundreds of millions, if not billions, to fraudsters. A report from Iowa’s Workforce Development program director showed that state paid out at least $30 million in fraudulent claims.

Any overpayments of unemployment benefits after June 2020 will be publicly accounted for in next year’s audit, according to White’s office. It’s not clear how much money MDES has paid out in unemployment claims since June 2020.

 

Original Story

Mississippi reaches $55.5M settlement with Medicaid contractor Centene over…

JACKSON • Mississippi has reached a $55.5 million settlement deal with health care giant Centene following an investigation into whether the state’s largest Medicaid contractor was overcharging taxpayers for pharmacy benefits.

A joint announcement from Attorney General Lynn Fitch and State Auditor Shad White said the out-of-court arrangement, finalized Saturday, was one of the largest civil settlements following an auditor investigation in Mississippi history.

It came following two years of investigation into whether Centene — the nation’s 24th-largest company — had been inflating its bills to the Division of Medicaid, which covers some of the state’s most vulnerable and needy residents. Centene did not admit fault under the agreement.

“I do not care how large or powerful the company is, Mississippi taxpayers deserve to get what they paid for when the state spends money on prescription drugs, and we will stand up for the taxpayers if they do not get a square deal,” White said in a statement.

Fitch said she wants to ensure Mississippians are “not being cheated by Centene or anyone else. This settlement makes clear that the days of hiding behind a convoluted flow of money and numbers are over.”

In Mississippi’s Medicaid managed care system, Centene subsidiary Magnolia Health and two other contractors oversee health insurance benefits for about 485,000 poor adults and children, disabled people, pregnant women, and others. The Division of Medicaid pays the companies a set rate per patient.

The Mississippi investigation was focused on one portion of the state’s Medicaid managed care system under Centene — pharmacy benefit managers. These subcontractors, known as PBMs, serve as middlemen between insurance companies, drugmakers and pharmacies. They manage drug benefits, negotiate drug prices and reimburse pharmacists.

Mississippi started investigating Centene in 2019, when White hired a specialist law firm from Ridgeland to scrutinize the corporation’s pharmacy benefit system under the Division of Medicaid. Fitch’s office earlier this year confirmed it was also probing the company over the pharmacy benefit issue with the help of the same firm, Liston & Deas. The firm is set to be paid about $2.8 million of the settlement money, according to its agreement with the state.

The AG’s office had said its investigation was similar to a recently-filed lawsuit in Ohio alleging the company had bilked that state out of tens of millions of dollars.

Ohio on Monday announced it had also reached a settlement with Centene, for $88.3 million.

In a news release, Centene noted it did not admit fault by agreeing to the settlements. It said the claims by Mississippi and Ohio were focused on pharmacy benefit services provided by one of its subsidiary, Envolve Pharmacy Solutions. Centene said in 2019 it had “proactively restructured” its pharmacy benefit business to create “a more transparent relationship” with health plans. Envolve will no longer operate as a full PBM, it said, instead only providing administrative services.

“We respect the deep and critically important relationships we have with our state partners,” Brent Layton, Centene’s president of Health Plans, Markets and Products, said in a statement. “These agreements reflect the significance we place on addressing their concerns and our ongoing commitment to making the delivery of healthcare local, simple and transparent.”

The St. Louis-based company, which brought in revenues topping $111 billion last year, said it is in discussions to settle with other states that have also been investigating its pharmacy benefit practices. It said it has set aside $1.1 billion to deal with the issue, on top of the payments to Ohio and Mississippi.

Kansas, Arkansas, Georgia, Oklahoma, New Mexico, Washington, D.C. and possibly other states are reportedly also considering litigation against Centene, according to the Ohio Capital Journal and The Wall Street Journal.

The Daily Journal first reported the existence of a probe by Mississippi agencies into Centene. Monday’s announcement by White and Fitch noted the Mississippi investigation had been reviewing invoices from Envolve.

“Contracts required payments be capped by certain industry-standard prices, and the PBM (Envolve) was charging Medicaid more than the allowed price cap,” the statement from White and Fitch said.

In addition to the $55.5 million payment, Centene must “provide full transparency related to the adjudication and payment of all pharmacy benefit claims” going forward with the state, according to the settlement.

The Division of Medicaid recently agreed to extend Centene’s contract into 2022. An agency spokesman declined to comment Monday and referred questions to the AG’s office.

White declined to say whether Medicaid should have extended Centene, noting it was a “judgment call,” and that the agency had been kept in the loop about the details of his office’s probe. The auditor added he believes there are enough protections in place to ensure Centene does not overbill the state going forward.

Managing pharmacy benefits is a lucrative business. Magnolia paid its PBMs more than $1.1 billion from 2016 to 2020, sometimes as much as $25 million a month, according to figures provided by the Division of Medicaid. Taxpayers ultimately picked up the tab by reimbursing Magnolia.

Ohio was the furthest along in pursuing Centene, having already filed a lawsuit earlier this year. That suit — which officials said was similar to Mississippi’s inquiry — had alleged three areas of wrongdoing: requesting reimbursements for amounts already paid by the state, failing to disclose the true cost of pharmacy services, and artificially inflating drug dispensing fees.

Court papers alleged Centene’s Ohio subsidiary, Buckeye Health Plan, “knowingly provided inflated pharmacy cost information to (Ohio’s Medicaid agency) as part of a deceptive scheme designed to maximize the profitability of its parent company, Centene, at the expense of the Ohio Medicaid Program and the citizens of the State of Ohio.”

In Mississippi, White said his office noticed Ohio’s initial findings about PBMs in 2018, and wanted to do a similar analysis of the companies in Mississippi. That led to contracting with Liston & Deas, he said, and by last year, officials were confident that the state had been overpaying for pharmacy benefits, and Centene would need to pay it back.