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CHAPTER 3-700 - FRAUD OR ABUSE

1. Purpose and Scope. This Chapter provides procedures for reporting instances of known or suspected fraud or abuse under the Longshore and Harbor Workers' Compensation Act (LHWCA) and its extensions. Instances of known or suspected fraud or abuse are to be investigated by the Office of Workers' Compensation Programs (OWCP) and reported to the Regional Solicitor if the allegations pertain to program matters in which private sector or Special Fund monies are involved. If the allegations pertain to Federal employees or contractors, if paid from Government funds, they are to be reported in accordance with the procedures contained in section 8900 of the ESA Manual of Administration.

2. Policy. The detection and prevention of fraud or abuse in the Longshore Program is of the highest priority. Complaints of alleged fraud or abuse may be brought to the attention of the DO by Employers, Carriers, or other parties. All OWCP personnel are responsible for reporting actual or suspected fraud or abuse, through appropriate channels to the Department of Labor.

3. Statutory Provisions. Section 31(a)(1) of the Act provides that

any claimant or representative of a claimant who knowingly and willfully makes a false statement or representation for the purpose of obtaining a benefit or payment under the Act shall be guilty of a felony, and on conviction thereof shall be punished by a fine not to exceed $10,000, by imprisonment not to exceed five years, or by both.

Under section 31(c), the same penalties apply to

an employer, his duly authorized agent, or an employee of an insurance carrier who knowingly and willfully makes a false statement or representation for the purpose of reducing, denying, or terminating benefits to an injured employee, or his dependents . . . .

Other provisions pertaining to fraud or abuse include sections 15(a), 28(e) and 38(a) and (b) of the Act.

4. Types of Fraud or Abuse Not Covered by These Procedures. The procedures contained in this chapter do not apply to known or suspected instances of fraud, abuse, or criminal conduct by or involving OWCP personnel, contractors, or under the War Hazards Compensation Act which involve the payment of government funds. These are to be reported in accordance with the procedures contained in section 8900 of the ESA Manual of Administration.

5. Procedures.

a. Receipt of Report or Information of Suspected Fraud or Abuse.

(1) A suspected instance of fraud or abuse in a LHWCA claim will, in general, be reported to the CE or DD by the Employer or Insurance Carrier. The report may be made verbally or by letter. If reported verbally, the informant should be requested to submit a written statement of the suspected violation and to provide supporting information or documents that led to the discovery or suspicion.

(2) Instances of alleged fraud or abuse in LHWCA claims may also come to light in the course of formal hearings before an Administrative Law Judge, who may, in the Decision and Order, refer the matter to the OWCP for appropriate action on the information. Such referrals should be carefully considered by the DD and RD, and should be investigated if warranted by the facts.

b. Action by Person Receiving Complaint. If the verbal or written report is made to a CE, he or she will immediately prepare a memorandum for the DD, describing in detail the known or suspected violation. If additional investigation or material is needed to support the allegation, it should be indicated if the person making the complaint will conduct the investigation or provide any additional material that may be needed.

c. Action by the DD. Upon receipt of the complaint, the DD will review the information or evidence (including the case file) and will forward the complaint to the RD by narrative memorandum which shall include a summary of the complaint and other relevant information from the case file and the DD's recommendation regarding prosecution and the kinds of additional investigation, if any, that may be needed to resolve the matter. The RD will then refer the matter to the Regional Solicitor for review and concurrence of the proposed actions and guidance regarding any additional investigation which may be appropriate. The Regional Solicitor will refer the matter back to the RD for implementation of the proposed investigation by the DD if the matter is not in posture for referral to the U.S. Attorney. The DD will direct or conduct the investigation as follows:

(1) If the complaint was made by the employer/carrier, they should be requested to furnish whatever evidence is needed to support the complaint so that a decision can be reached regarding referral for prosecution.

(2) If the employer/carrier will not provide the needed evidence, or if the complaint was made by a person known to the claimant who is not willing or is unable to furnish the necessary evidence to support the complaint, all relevant information should be obtained from this person and the DD should attempt to obtain the needed evidence as outlined in subparagraphs d and e, below. If a surveillance investigation of a claimant is needed to support the complaint, or some other form of on site visit is needed, the use of Wage and Hour investigators or FBI agents should be considered. See subparagraphs e(5) and e(6), below.

d. Kinds of Evidence Required. The kinds of evidence needed to support the fraud allegation will differ from case to case depending on the nature of the allegation. It is important, however, that as much evidence as possible be obtained in each case so that a successful prosecution will be possible. The listing below identifies some of the kinds of evidence that should be obtained to support prosecution of a fraud allegation.

(1) A completed Form LS-200, Report of Earnings, or similar sworn wage statement, covering the period of any alleged employment while in receipt of compensation benefits. It is important that this evidence be obtained in every case of this nature, if possible. The DD, employer/carrier, or National Office for those cases being paid benefits from the Special Fund, may request the claimant to complete an LS-200.

(2) Payroll records covering the period of any alleged employment while in receipt of compensation benefits.

(3) Written statements, interrogatories, or depositions from individuals having knowledge of the alleged fraud or of a claimant's activities which relate to the fraud allegation.

(4) Income tax returns.

(5) Reports from private investigative agencies which may include surveillance films of the claimant.

(6) Reports from credit reporting agencies.

(7) Sworn testimony given at administrative hearings.

(8) Documentary evidence submitted at administrative hearings.

(9) Material contained in other Federal compensation, State compensation, or insurance case files.

(10) Medical records and/or medical receipts.

e. Methods of Obtaining Information. The following methods may be used to obtain the information or evidence needed to properly evaluate a complaint:

(1) Written correspondence.

(2) Telephone calls.

(3) Subpoenas. Subpoenas may be issued by the DD to obtain medical records, payroll records or other documentary evidence.

(4) Informal conferences. Conferences may be held to obtain information and material. If an overpayment of compensation exists, a conference may also be appropriate to determine whether and how the overpayment will be recovered.

(5) Wage and Hour Investigators. If an on site visit is needed to obtain evidence, or to conduct a surveillance of a claimant, the use of Wage and Hour Investigators should be considered. The RD for OWCP should request this kind of assistance directly from the RD for the Wage and Hour Division.

(6) Federal Bureau of Investigation Agents. Depending on the nature of the complaint, or the inability to obtain information or evidence by other means, the use of FBI agents may be considered. If it is not possible to obtain the needed evidence in any other way, the matter should be referred to the Regional Solicitor who will determine if a request should be made to the U.S. Attorney's Office for FBI assistance in the investigation pursuant to section 31(a)(2) of the Act. All such referrals to the U.S. Attorney's Office shall be made by the Regional Solicitor.

f. Action at Conclusion of Investigation. After the investigation has been concluded, and all relevant evidence has been obtained, the DD will refer the matter to the RD by narrative memorandum which shall include a summary of the facts obtained from the investigation, along with copies of all evidence obtained, and his/her recommendation regarding whether the facts warrant referral to the U.S. Attorney for prosecution or whether no basis exists for prosecution and the investigative file should be closed. The matter will then be referred by the RD to the Regional Solicitor for review and concurrence/rejection of the proposed recommendation. If the facts support prosecution, the Regional Solicitor will refer the matter to the U.S. Attorney for appropriate action. If he/she concurs with a recommendation that no basis exists for prosecution, the investigative file may be closed.

g. Maintenance of Fraud Complaint and Other Evidence.

(1) All original information, documentation, and evidence concerning the known or suspected instance of fraud or abuse is to be placed in a manila folder, separate from the case record, and in a secure file cabinet. These investigative files are to be maintained alphabetically by the name of each individual.

(2) Any reports or confidential information gathered by an agency such as the Federal Bureau of Investigation concerning claimants should be maintained in these files. Such information remains the property of that agency and is subject at all times to its control.

(3) Records containing information gathered in connection with investigations concerning possible violation of federal law are to be maintained in a separate system of records, established by DOL/ESA 26. Records maintained in connection with criminal investigations are exempt from disclosure under the Freedom of Information Act, pursuant to section 3(j)(2) of the Privacy Act. See 55 Federal Register 7126-7127 (February 28,1990). Access to these records should be limited to those OWCP and SOL personnel whose official duties require such access.

(4) Any request for the disclosure of information in these files should be referred to the Director, DLHWC. Either the Regional Solicitor or the Associate Solicitor for Employee Benefits must also be contacted before any disclosure is made.

h. Subpoenas Served on OWCP Personnel. Occasionally, subpoenas will be served on individuals by name and will require the appearance of the named individual as custodian of a case file about whom there is also an investigative file of the type specified in subparagraph 5g, above. Usually, the individual subpoenaed will be the DD, but it could be a CE or any other person who might have access to the case record. Anyone receiving or being served a subpoena should refer it to the DD for immediate referral to the Regional Solicitor for guidance in releasing the information requested. Any subpoena served on a National Office employee should be immediately referred to the Associate Solicitor for Employee Benefits to determine whether the procedures set forth at 29 C.F.R. section 2.20, et seq., have been complied with.