COUNTY FRAUD EXPLODES $2 BILLION ANNUAL TAB FOR WORKER, PUBLIC ABUSE.
After downplaying the scope for years, Los Angeles County officials have started to quietly acknowledge that scams by county employees and recipients of county services may be costing taxpayers nearly $2 billion a year.
While there are no exact figures, the county Grand Jury last summer estimated welfare recipients are defrauding taxpayers of $500 million a year. Prosecutors have estimated fraud in the food stamp, in-home care and health care programs costs more than $200 million.
``It's as though in all the public assistance programs -- be it welfare, food stamps, child care or Section 8 housing -- someone put a pot of gold in the middle of the street and walked away from it with very little integrity controls,'' said James Cosper, head deputy in the District Attorney's Office Welfare Fraud Division.
``It's bad throughout the entire county. ... We do two or three major sweeps a year where we go out and arrest people. In case after case, they are driving Beemers, Lexus and Mercedes automobiles, or we have evidence they are taking expensive vacations, going on very nice cruises or living in expensive homes.''
And it's not just service recipients who are defrauding the county. The national Association of Certified Fraud Examiners estimates 5 percent of all business and government agency revenues are lost to employee fraud, waste and abuse each year.
That would mean L.A. County government -- with a $21 billion budget -- loses at least $1 billion a year.
Employee fraud up
Investigations of county employee fraud have surged from 340 in 2000 to 583 in 2005 amid increased calls to a county fraud hotline.
Calls to the hotline hit 621 in 2003-04 and are projected to reach 1,000 this fiscal year.
``(Fraud is) a tremendous problem,'' said Tony Bell, spokesman for Supervisor Michael D. Antonovich, who created the hotline in 1988.
``It's a problem that our office has targeted as a high priority. And we're working with the district attorney to increase the number of investigations.''
The acknowledgment that county fraud is a growing problem follows a warning three years ago by the Citizen's Economy and Efficiency Commission about workers' compensation scams.
Since then, officials have reduced county workers' compensation abuses from $324 million in 2003-04 to $263 million last fiscal year.
And some officials have begun to take more seriously the warnings of the grand jury, prosecutors and the commission about a ``culture of entitlement.''
``I think at this point, very few people could deny that there is very much a culture of corruption in the county of Los Angeles, both from the public sector side, and certainly with the entitlement mentality on the recipient side,'' said Jon Coupal, president of the Howard Jarvis Taxpayers Association.
``The citizenry is very cynical about politics because they see this pervasive fraud, corruption and abuse and also see nothing being done about it.''
Size hurts county
Some county officials, however, say efforts to stem abuse and fraud are in place.
``We have systems in place that try to prevent it from happening,'' Assistant Chief Administrative Officer Sharon Harper said.
And some experts say that simply because of its size, Los Angeles County is a prime candidate for vast fraud.
``The very largest organizations and the very smallest organizations are the ones that get hit the most,'' said Sarah Carson, president of the Los Angeles chapter of the fraud examiners' association.
``The bigger organizations, where so much money is involved, are the prime candidates for those who want to milk the system.''
Although reluctant to make estimates now, County Auditor-Controller Tyler McCauley has previously indicated employee fraud, waste and abuse costs the county about $250 million annually.
And McCauley -- who said he's seen a dramatic increase in the number of people willing to participate in illegal activities -- concedes the county doesn't require enough income and asset proof from welfare recipients.
Child care probed
Department of Public Social Services Director Bryce Yokomizo has disputed estimates by prosecutors and the grand jury on the extent of child care fraud, but recently he told the Board of Supervisors that fraud in the state-controlled portions of the program is a serious problem.
DPSS has 178 fraud investigators and supervisors who helped avert $59 million in welfare fraud last fiscal year, up from $45 million in 2000-01. More than 800 child-care fraud investigations are under way now.
Supervisor Don Knabe said the state estimates up to 7percent of all child-care cases include fraud, but two-thirds of the program is administered by the state, and DPSS can't investigate those cases.
``(The state has) no clear policies in place that meaningfully address program integrity or quality control, let alone a means of preventing criminal activity in child-care programs,'' Knabe said.
``The result is that a majority of child-care funding -- nearly $235 million given out locally ... last year -- is left wide open to fraud.''
Abusing time cards
Concerns about county employee fraud, waste and abuse escalated after investigators discovered employees at Martin Luther King-Drew Medical Center were engaged in widespread workers' compensation and time-card abuses.
County investigators found ``systemic deficiencies'' throughout county government, noting a growing number of employees are being fired and disciplined for time-card abuses and hundreds of investigations are under way.
The Board of Supervisors directed officials last year to revamp time- card protocols, but Chief Administrative Officer David Janssen said those changes cannot be made until a new human resources computer system is installed.
``The fiscal system has been totally redone,'' Janssen said. ``But it will be another year or two before we have a new time-card system.''
The county's overtime costs have shot up from $296 million in 2003-04 to $423 million last fiscal year -- $113 million over budget.
``(Time-card abuse is) a more widespread problem,'' said Marion Romeis, chief of the Office of County Investigations. ``A substantial number of our referrals involve time abuses. It goes across the county.''
Time-card abuse investigations rose from 14 in 2000 to 49 last year.
Romeis attributed the increase to heightened employee awareness of possible problems and the fraud hotline, which makes it easier to anonymously report possible abuse.
But Romeis concedes she doesn't have enough investigators and only investigates the ``very egregious'' cases.
The Board of Supervisors recently funded two extra investigators for Romeis' office, bringing the total to 14. The investigators refer criminal cases to the District Attorney's Office and send other completed investigations to various departments for discipline.
The District Attorney's Office has 273 Bureau of Investigation investigators, some of whom handle county cases.
Since 1999, the District Attorney's Office Public Integrity Division has filed felony charges against 75 county employees, including 28 welfare workers.
``It's much more than has ever been done in the 156-year history of the Los Angeles County D.A.'s Office,'' District Attorney Steve Cooley said.
Despite the large number of prosecutions, critics say only a small proportion of county employees ever are disciplined or charged.
While investigators substantiated 120 fraud hotline cases last year, only 38 -- or 32percent -- led to employees being fired, suspended, transferred or allowed to resign.
While some fault the county Civil Service Commission, Romeis said departments vary in their efforts at disciplining employees.
``Overall, over time, I'd say it's gotten better, but there is still a big discrepancy among departments,'' Romeis said.
Bell said Antonovich's office continues to look for ways to identify and prosecute cases and said the county set up a multidepartment Public Assistance Fraud Task Force that has cracked down on Section8 housing fraud in the Antelope Valley in recent months.
``I think the level of fraud being deterred is up because of our efforts in the welfare fraud and public integrity divisions,'' Cooleysaid. ``But it doesn't mean we've won the war.''
(1) L.A. County fraud investigations
Source: Auditor Controller's Office
(2) Fraud hotline