Claimant fraud and our duty/response?

[bartleby]

An ALJ wishes to allow a claimant benefits beginning in 2003. Upon closer inspection, the earnings record shows earnings of over $8,000.00 in 2004 and $9,500.00 in 2006. The earnings are listed as self-employment income in the earnings record. The representative says the "earnings" are actually gifts from his family to help support him. His parents send in a letter stating same and note that it was reported as income so he could take his son off of his taxes. It would appear that he reported the amounts as income so he would qualify for the earned income credit, thus giving him a tax refund of more than he paid in. According to the IRS, this is criminal tax fraud. The dilemma is what responsibility do we have? Do we report him to the IRS for tax fraud? Do we deny the years of 2004 and 2006 due to his "income"? Is there any established procedure regarding this? I welcome the input from our learned members. Thank you.

[chieftain]

I think there is still a significant question as to whether the earnings are a result of substantial gainful activity. Were payments spread out over the entire year? I'm not sure you can deny based upon the "income" alone.

I don't have a solid answer on the tax fraud issue. You hate to see abuse of the system this way. More troubling to me is the representative (assuming the rep is a lawyer) who is advancing the argument. It's a shame there is no Rule 11 in administrative law.

[barkley]

It is impossible for you to know fer sure where the fraud is - the income tax filings or the statements to you. I'd be inclined to tell the rep that unless dad files an amended tax form correcting the misrepresentation, you have to hold him at his word that the payments represent self-employment earnings.

[jcse]

I agree. I can't believe an atty would have the chutzpah to argue this, esp. an admission to criminal tax fraud?? but then I've heard everything... Cl. can't report the $$ as "income" and then later come back and argue it was a gift. And the ALJ really doesn't have to entertain a discussion on the merits of this argument. The Cl should not be able to "benefit" from his tax fraud in Soc. sec.'s forum. Note, however, that the 2006 earnings are not quite SGA. As to obligations, SSA and IRS are "crossover" agencies..whatever is reported to IRS is communicated to SSA and vice verse. It is not within the ALJ's jurisdiction to "police"
this type of activity, but he can send the case back to the Dist. Office for development on the fraud issue and possible referral to the IG's office.

[zero]

Jan 14, 2009 8:38:29 GMT -5 barkley said:

It is impossible for you to know fer sure where the fraud is - the income tax filings or the statements to you. I'd be inclined to tell the rep that unless dad files an amended tax form correcting the misrepresentation, you have to hold him at his word that the payments represent self-employment earnings.

This is a great topic and kudos to the thread-starter. Obviously, the inconsistent statements trash the credibility of the claimant. While you can't know for sure which story is a lie, the general rule of fact-finding is that if you have no other way of determining the truth, you should adopt the version most adverse to the lying party.

And yes, I would consider calling your local AUSA to discuss whether it might be interested in a perjury (or tax fraud) prosecution.

[decadealj]

Like many other ALJs, I prosecuted criminal cases in federal and state courts for many years. One of the most frustrating parts of our jobs I think is that I often feel like I am an accessory to fraud, waste and abuse, the very crimes I spent a good part of my life attacking. We can't just call our former partners in Justice and report cases where there is probable cause to suspect fraud; we are required to follow the agency policy to report such activity and the agency response is often pathetic at best. The first case I had as an ALJ was I received a letter from a claimant's next door neighbor with a video of the claimant cutting firewood with an axe. I referred it for investigation. The neighbor had requested that he not be identified. The result was the claimant was confronted by an H&Hs investigator and told that his neighbor reported him! As for management fraud, I have come very close to filing a criminal information against a group supervisor who has falsely reported the status of cases in CPMS to mislead regional management officials and make themselves look good at the end of the month. It is what it is- doesn't make it right.

[privateatty]

Jan 14, 2009 7:55:35 GMT -5 @chieftain said:

I think there is still a significant question as to whether the earnings are a result of substantial gainful activity. Were payments spread out over the entire year? I'm not sure you can deny based upon the "income" alone.

I don't have a solid answer on the tax fraud issue. You hate to see abuse of the system this way. More troubling to me is the representative (assuming the rep is a lawyer) who is advancing the argument. It's a shame there is no Rule 11 in administrative law.

The Rules of Practice and Procedure in federal admin law where I practice specifically incorporate the FRCP and supplements same. Any Rule 11 violater has a short shelf life in terms of how they do down the road...its a relatively small bar. Bottom line, "as ye sow, so shall ye reap."

[chieftain]

Jan 14, 2009 12:33:58 GMT -5 privateatty said:

Jan 14, 2009 7:55:35 GMT -5 @chieftain said:

I think there is still a significant question as to whether the earnings are a result of substantial gainful activity. Were payments spread out over the entire year? I'm not sure you can deny based upon the "income" alone.

I don't have a solid answer on the tax fraud issue. You hate to see abuse of the system this way. More troubling to me is the representative (assuming the rep is a lawyer) who is advancing the argument. It's a shame there is no Rule 11 in administrative law.

The Rules of Practice and Procedure in federal admin law where I practice specifically incorporate the FRCP and supplements same. Any Rule 11 violater has a short shelf life in terms of how they do down the road...its a relatively small bar. Bottom line, "as ye sow, so shall ye reap."

PA, that is good information. What is the enforcement mechanism for the rules? Is there a safe harbor provision? I would be really interested to know if as a practical matter, ALJs ever invoke or enforce the rule when sham briefs, etc. are submitted. To expedite matters, it would seem easier to simply assign little or no weight to the argument.

[decadealj]

Privateatty is obviously practicing before a regulatory agency or in adversarial proceedings where the Federal Rules of Evidence and FRCP apply. Unfortunately we are not so blessed and every effort SSA ALJ's have made to bring some sanity to the hearing process has been snuffed by SSA management.

[nonamouse]

I personally don't like to see a claimant have his cake and eat it too. At the very least I would have the fake "earnings" removed from the claimant's record and then recalculate his DLI. I worked on something similar a couple of years ago. I don't believe that you can use the "earnings" as SGA since there is credible evidence that the claimant did not really engage in self-employment. Even if the IRS never gets the person for some type of fraud, he/she won't get to benefit from these fake earnings counting toward their insured status. Perhaps the recalculated DLI will have them expire much earlier and the whole thing can be denied.

Bartleby, I believe that there is a HALLEX section that would apply regarding making a report of this apparent fraud. As a practical matter, I believe these cases are moved along without making a request for an investigation because it gets the case out of the hearing office so that they won't have to take the ding for holding onto an "aged" case.

[appellant]

SSA OGC can "prosecute" any representative (attorney or not) who violates the Agency's Rules of Conduct. I think a referral to you regional OGC office might be appropriate. Of course, OGC can do nothing about the claimant (at least not in the manner I'm thinking of), but they may be able to suspend or disqualify the attorney from further practice before the Agency. At the least, they could put him on notice that his conduct did not go unnoticed.

A referral to the state bar might also be appropriate and may be required to fulfill your own ethical obligation, depending upon your state's "self-policing profession" provisions.

[privateatty]

Works for me, appellant. Good post!

Some reps (lawyers) are like kids, they need to know their boundaries....

[Pixie]

It's against SSA "rules" for a judge to refer an attorney to the state bar. SSA limits the judge to making a report to SSA itself, probably to the HOCALJ, who then would forward the report to region. May or may not get lost at region, but that is all the judge can do.

[deaddisco]

you received the information in connection with the administration of the social security program. the claimant has privacy rights, thus there is very little you can do with that information.

[privateatty]

Jan 14, 2009 12:48:32 GMT -5 @chieftain said:

Jan 14, 2009 12:33:58 GMT -5 privateatty said:

The Rules of Practice and Procedure in federal admin law where I practice specifically incorporate the FRCP and supplements same. Any Rule 11 violater has a short shelf life in terms of how they do down the road...its a relatively small bar. Bottom line, "as ye sow, so shall ye reap."

PA, that is good information. What is the enforcement mechanism for the rules? Is there a safe harbor provision? I would be really interested to know if as a practical matter, ALJs ever invoke or enforce the rule when sham briefs, etc. are submitted. To expedite matters, it would seem easier to simply assign little or no weight to the argument.

One has to ask: if you know you are witnessing a Disciplinary Rule violation, (Rule 11, premeditated, with self-serving; i.e., fee implications), do you have to report that as a matter of Rule? My good friend, the Disciplinary Counsel, will say yes. So whom do you serve, SSA or your Disciplinary Counsel?

I don't know of any ALJ's who invoke Rule 11 per se. No need. In our Courts, the Court has significant latitude if they know the law, which almost all do. There most assuredly is cause and effect. Of course, the admin appellant review may have a different opinion, but then that's what makes case law. And the admin review folks know us too.

[Pixie]

The SSA has no disciplinary rules or violations thereof. The agency is adamant that all the judge can do is to report it within the agency. A judge would be subject to discipline for failing to follow that directive.

The argument could be made that, unlike the claimant, the attorney has no privacy rights, but the agency's response is the same. You must remember that this is a government agency; common sense and logic are checked at the door.

[diablo]

If you suspect fraud - and fraud does seem to be the case here, as it frequently is in "self-employment" cases- please make an anonymous referral to the SSA Office of Inspector General (OIG) in your region. They will have a special agent investigate this. Good catch.

[zero]

I would like to see the Agency argue the MSPB case challenging the discipline of a SSA AJ who reported a crime to law enforcement.

[jcse]

"So whom do you serve, SSA or your Disciplinary Counsel?"

Prvatty, this is a no brainer..just because you become an ALJ for SSA does not mean you ignore professional responsibility. You don't have to decide whether you "serve" SSA or the Disciplinary Board. Of course you have the obligation to report fraud, but it would probably be to the Inspector General (IG) who oversees and investigates SS fraud. The ALJ's jurisdiction is usually limited to what was decided at the initial and recon. levels, namely whether or not claimant is disabled. If the fraud issue is now brought before the ALJ, he should "remand" to the DO/IG before holding a hearing. Let these offices resolve these issues, re-calculate the claimant's earnings record/DLI or whatever, and send it back to the ALJ so he can decide if claimant is disabled. ALJs are not article 3 judges. SSA hearings are informal, quasi-judicial hearings. While the APA gives ALJs broad powers, the power to invoke or enforce Rule 11 is outside his/her jurisdiction.

[privateatty]

If I am so lucky to be chosen as an ALJ by SSA, I'll bring my Disciplinary Counsel opinion (I'm 90% sure what they will say--and I can bring two from two different states) to class with me. Should be interesting.