Detecting and Combatting Family Medical Leave Act Fraud in the Workplace

The Family and Medical Leave Act was passed with the best of intentions. The 1993 law requires all but very small employers to grant time off to employees to care for sick or injured family members, or to take time off to seek care and recovery for themselves in the event of a medical emergency.

However, it does have the potential for abuse. And workers have been abusing the law for their own purposes at their employers’ expense. Yes, leave granted under the FMLA is unpaid (unless the employer decides to provide paid leave). But it does make it tough on employers trying to schedule around weekends, holidays and special events.

Are your employees abusing the FMLA? Here are some of the warning signs:

  • Increased requests for FMLA leave around weekends and holidays.
  • Frequent Monday and Friday absences for FMLA
  • More FMLA requests during special events around town, such as Mardi Gras in New Orleans, or a big music festival.

What actions can you take to protect yourself? One idea: Monitor workers’ Facebook and other social media pages. Are the images and status updates consistent with the workers’ story?

In one recent case, Jaszczyszyn v. Advantage Health Physician Network, an employer terminated an employee after a co-worker found that she had been posting images of herself enjoying a local Polish music festival.  She had also left messages with her employer saying she was in too much pain to go to work the following Monday. After an investigation, the company let her go. Jaszczyszyn sued her employer, claiming her employer was interfering with her right to take leave under the FMLA.

Jaszczyszyn lost the case at the local level, then appealed and lost again.

So employers can take action to terminate employees caught in FMLA fraud. But it’s important that the employer be on a firm factual footing, because when a worker asserts that they were entitled to the protections of the Family Medical Leave Act the burden of proof shifts to the employer to show that the employee was committing fraud.

Why do employees do this? It could be to enjoy a weekend off with friends despite work responsibilities. Or they could be using the FMLA as cover to work another job.

So what can employers do?

Collect time-stamped photos or Facebook status posts showing that the employee was not where he or she said he would be. Obviously, if an employee is claiming medical leave for his own illness or injury, a news story proclaiming him to be the winner of the Ironman Triathlon over that same weekend would indicate that he was not as hurt as he claimed to be. (But he may need medical leave by the end of the weekend!)

Conduct an investigation. Bring in the workers’ known friends and colleagues, one at a time, and ask them what they know of the suspected workers’ activities and plans for the weekend.

Hire a private investigator. These professionals will conduct discreet surveillance of the workers’ home and photograph or videotape the workers’ activities – or lack of same. Remember that some jurisdictions have laws restricting recording or taping without consent so know the laws in your area. You may want all your recordings with no audio.

If the employee is using the FMLA act as a cover to work a second job, naturally it won’t be difficult to establish with video surveillance. In other cases the truth may not be so clear-cut.  You will also want to compare anything collected on video with any restrictions the employee claimed due to medical conditions necessitating medical leave. The law protects employers, too, provided they make a reasonable and considered decision based on their honest belief and a thorough review of the evidence available at the time.

One side benefit of surveillance: When word gets out that an employee was fired for FMLA fraud, or that the company can and will hire a private investigator to pursue possible FMLA fraud, others will be less likely to attempt the same thing.


Tips for Business Owners to Prevent Fraud within Their Companies

Building an anti-fraud environment is the best way to prevent it successfully. When fraud is committed, it is important to take immediate action to prevent future occurrences by discouraging additional attempts. One of the most powerful fraud deterrents is a good manager who is alert to the signs and actively works to discourage it. It is important to identify any control level deficiencies to determine how to remedy them, and business owners should remember that prevention is key to lowering the need for extensive fraud detection. Consider the following control ranges for improvement.
Physical Security Physical security is used for fraud prevention by monitoring the level of access to computer systems, documentation and assets to lower the chances of unauthorized use and damages. From checks to computer stations, assets can encompass a wide array of items. Access to assets should always be restricted, protected and limited to a small range of accountable individuals. Databases, bank accounts and all other sources of income or important information should be treated with care. To determine what needs to be the most protected, pinpoint all assets that are vital parts of the business’ operations.
One especially important aspect of this is computer systems. These systems should always be controlled tightly to protect data integrity and prevent misuse, and companies should keep the Data Protection Act in mind when devising a plan for protecting their computer systems. Threats to data systems can come from within the company or from hackers outside of it. In addition to this, the computer itself could possibly be stolen. It is important to back up information in a location away from the server or computer. Expensive computers containing a large amount of data or programs should be properly insured, because losing them can put a dent in a company’s income.
Responsibilities Groups and individuals within the company should be given a list of responsibilities, and they should be encouraged to work together to achieve common goals in the most efficient manner. Some important principles to keep in mind include the following:

– Clearly define each individual’s responsibilities for activities, resources, targets and objectives. This preventative measure should also include set authority levels with several checks and balances put in place to ensure accountability.

– Create clear lines of reporting with expansive commands that permit supervision. – Avoid relying only on one individual.

– Separate duties to keep abuse opportunities to a minimum. This preventative measure is key to ensuring certain processes are not carried out by only one person.

Supervising Managers must supervise workers properly to discourage fraud commission. There should be checks and balances in place that make managers accountable to one another and the business owner. Random checks are very useful tools, and they are crucial for both prevention and detection of fraud.

Audits This detection measure is a good way to deter people from committing fraud. Audit trails can ensure every transaction is traceable from the beginning to the end.

Monitoring It is important to regularly review company policies to alter them as needed for the most efficient monitoring system. Monitoring is crucial for both detection and prevention. Independent teams have been found to be even more effective than managers in completing this task.

It is also important to have a solid staff and to identify weaknesses in staffing. Budgets should always be implemented and used to pinpoint important limits. Also, there should always be supervision in the development of any new systems. To learn more, contact ACBI at 203-259-7580 or visit our website.


Insurance Fraud Schemes Every Individual Should Know About


According to statistics from the Federal Bureau of Investigation, there are more than 7,000 insurance companies collecting over $1 trillion every year through premium charges. The large size of the insurance industry is part of the reason why insurance fraud is such a big issue today. Insurance fraud costs more than $40 billion every year, which means the average family pays as little as $400 or as much as $700 per year due to premium increases. There are several common fraud schemes used.

Fee Churning
With this type of scheme, several intermediaries accept commissions by way of reinsurance agreements. Initial premiums are reduced until there is no more money for paying claims, and this is done using repeated commissions. Conspirators often set up companies and leave them to pay the claims. Every transaction by itself appears to be legitimate. However, the use of fraud is not apparent until after consideration of the cumulative effect.

Premium Diversion
This involves embezzling insurance premiums and it is the most common type of fraud used. With this scheme, the insurance agent does not send the premiums to the underwriter but keeps the money instead. In some cases, an individual may try to sell insurance without a license, collect premiums and avoid paying any claims.

Asset Diversion
This is the stealing of an insurance company’s assets, and it often happens during mergers or acquisitions of existing companies. It may include acquiring control of insurance companies using borrowed money. Following a purchase, subjects use the items they received to pay the debt. Any leftover assets are diverted to the subject.

Workers’ compensation fraud is another popular scheme where some people claim to provide benefits at lower costs and misappropriate premiums without providing insurance. When powerful storms hit, the fraudsters come out of the woodwork. During the famous Hurricane Katrina in 2005, over $100 billion in damages was sustained. There were well over 1.5 million insurance claims filed, which totaled a little less than $34.5 billion for insured losses. Insurance fraud costs consumed more than $5 billion of the $80 billion in government funds allowed for reconstruction. There several different forms of fraud schemes used after natural disasters. These include the following:

– Exaggerated or false claims filed by policyholders.
– Claims filed by people who do not live in the immediate area.
– Contractor bid rigging and falsification of the cost of repairs.
– Charity fraud scams that waste funds donated for disaster relief.
– Flood damages that are misclassified as fire, theft or wind damage.
– Contractors who require upfront payments for services they fail to perform.

Insurance fraud is something that all people and business owners should be aware of and familiar with. To learn more about this topic, call ACBI at 203-259-7580 or visit our website by clicking here.

Consumer Alert: Windshield Repair Scams

You’re getting your car cleaned at the carwash. Suddenly a stranger walks up and insists on replacing your windshield for free.

How odd, you think. Your windshield’s in good shape. It doesn’t need replacing.

Your auto insurance will pay for everything, the stranger says. He also promises you free movie tickets and a nice cash rebate that covers your deductible.

Careful — this is a windshield swindle that can create a serious safety hazard for you and your passengers, fleece your insurance company, drive up your auto premiums, and land you in jail.


Replace undamaged windshields. Typically, crooks will convince drivers to replace perfectly good windshields. The crooks then lie to your insurance company that the windshield was seriously damaged and needs repairing. Next they’ll charge your insurer needless and inflated repair costs.

Inflate real damages. Swindlers might replace an expensive windshield that only has a small crack or nick that could easily be repaired at little cost. They might also charge insurers to replace several chips when only one chip was repaired.

Charge for phantom damages. Some con artists charge your auto policy for several windshield replacements without you knowing it. Once they have your insurance information, you’re at their mercy, even after they’ve long disappeared.

Fly-by-night operators. Often the swindlers are fly-by-night operators. They’re poorly trained, work out of pickup trucks in parking lots, and disappear after quickly finishing shoddy repairs. They often approach people at car washes, gas stations, parking lots of convenience stores, or booths at county fairs. The con artists can be aggressive, and continually pester you to do the bogus repairs.

Crooked body shops. Most body shops are honest, but crooked operators may try to involve you in similar windshield scams when you bring your vehicle in for repairs.

High-volume business. Windshield swindlers make their profits from high-volume business. They can replace a windshield quickly and easily, then charge large and costly markups.

Offer freebies. To succeed, the crooks must convince motorists to take part. The con artists make the scam seem innocent, harmless and risk-free. They usually offer an inducement, like free steaks, movie tickets or car washes.

Offer cash rebates. They also may offer you a cash “rebate” or inflate the repair bill to cover your deductible. In states that require insurers to waive the deductible for repairing windshields, crooks may mention this loophole to convince you the repairs really are free.


You and your passengers face a serious safety risk. First, the replacement windshield could be cheap, substandard glass that easily cracks or shatters while you’re driving. Poor optics also may distort your view of the road and hazards. Second, the crook may install the windshield poorly. The windshield thus can pop out if you’re in a crash. Incoming debris then could strike occupants; drivers and passengers could be ejected; and the roof might collapse during a rollover because the windshield is a vital structural component of your vehicle. Third, real repairs can be shoddy. This could make small cracks or nicks quickly grow bigger.

Your auto premium can increase. You’ve just added a needless claim to your insurance record, which could raise your premiums. Fly-by-night operators also can disappear, leaving you without a warranty or contact person if you have a problem.

You could lose your auto insurance. If a crook secretly charges several windshield replacements against your auto policy, you could lose your coverage because multiple claims within a short period can be grounds for cancellation. Then you’ll have the hassle of trying to straighten out your insurance record with your insurer.

Everyone’s auto premiums increase. Windshield swindles increase everyone’s auto premiums in the longrun because fraud losses get passed onto honest policyholders everywhere.

You could face jail and fines. Making a repair claim for a windshield you know is undamaged could get you convicted for insurance fraud. This can mean jail, fines and a permanent criminal record.


• Just say no if you’re approached by a salesperson in a parking lot or other public place… or if the repair firm offers to replace a windshield that isn’t damaged… or they offer you cash rebates to offset your deductible, or promise freebies like free car washes.

• Report the incident to your state insurance department.

• Ask your insurance agent and company for reputable windshield-repair firms.

• Some insurance companies will repair small cracks or chips free of charge. You’re assured of good — and safe — workmanship at no cost. Contact your insurer instead of an untrained con artist if you have a small ding.

Visit our website or call ACBI at 203-259-7580 if you have any questions or would like the name of a reputable glass repair professional.

Social Media as a Tool Against Insurance Fraud

Social media is changing the nature of insurance fraud investigations, as sleuths uncover connections among criminals by digging through popular websites — and find that scammers are often their own worst enemies.

The scam seemed easy enough. A woman worked in the facilities department at a company that awarded a maintenance contract to a firm secretly run by her husband. Soon after, he started billing for all kinds of services — most of which were not actually rendered. The fraud seemed simple enough to execute — and with insiders at both companies, it could prove hard to detect.

“He pads invoices and she pays them,” said Chris Giovino, partner in charge of forensics at Dempsey Partners. “They were outwardly stealing from the company.”

But in this case, the fraudsters didn’t count on Giovino, who spent 30 years as a special agent with the Drug Enforcement Administration. Giovino had the requisite expertise in mining social media and databases for clues about fraud, and his investigation led him all over the Internet, from Facebook to LinkedIn to the White Pages. He eventually found an address associated with the maintenance vendor that matched an address associated with the couple’s grown children. Giovino had hit the bull’s-eye.

Investigations like Giovino’s are becoming more typical, as insurance companies and third-party investigators say that mining social media sites is an essential part of insurance-related fraud research. No longer is social media a peripheral, cutting-edge tool used in investigations. These days, it’s a pillar of the process.

And with insurance fraud accounting for $30 billion, or 10 percent of losses in the property and casualty insurance industries in the United States each year, according to the Insurance Information Institute, investigators need any effective methods they can get their hands on. Adding to the need is that the fraudsters, especially ones attacking company’s cyber security, are using methods that investigators may not have even heard about yet.

Aaron Soline, a manager at the National Insurance Crime Bureau, said that when he started investigating insurance fraud many years ago, he typically had nothing to go on but a name, maybe an address. With the advent of the connections generated by social media, Soline said he can now find photos, employment information, past education, date of birth and even see who people interact with. It all helps paint a more complete picture of a potential fraudster and the crime for which they are being investigated.

Any discussion of social media starts with Facebook. With more than 950 million users, chances are that site alone is likely to yield information about would-be thieves. In fact, investigators are often helped in their quest by the very subjects they are looking for. Even though Facebook recently upgraded its privacy settings after mounting criticism, “a lot of people don’t care about the privacy settings [on Facebook] or don’t know how to use them,” said Soline. “Twitter has privacy [settings] but most people don’t engage those either.”

Private Web page settings hamper investigations, said Kelly Cory, president and CEO at Keystone Investigative Services Inc., but plenty of people couldn’t be bothered with engaging privacy settings. “If they’re blocked, they’re blocked, but you’d be surprised at how many people don’t think of that,” she said.

Facebook’s newly added location services allow users to “check in” at places to tell friends that they are at a bar, restaurant, park or even a different city, and it turns out that that tool is a big help to investigators. Here’s why: A trucker “checks in” at a bar on his Facebook page at 5:43 p.m. on Friday. He later climbs into his rig and minutes later plows into three cars at a strip mall parking lot. Police reports indicate the accident took place at 7:39 p.m., and the trucker claims he was on his way to deliver his load. Both true, but the Facebook entry reveals there’s more, and investigators have a reason to ask if the trucker was hitting the bottle before the accident.

Similarly, if an injured worker’s Facebook page indicates he or she “checked in” at the gym, it’s also probable they were working out, leading investigators to question an injury claim filed by a worker pumping iron at the gym.

Investigators stop short of “friending” the person they are probing. That’s because contacting claimants who are represented by attorneys violates the law, said Cory, and “friending” could certainly be seen as a form of contact.

“You don’t want to get into an area where it’s entrapment,” she said.

Scouring the Internet for clues about fraudulent activity may sound easy. Investigators could just run searches on Facebook, LinkedIn and Twitter, then get more background research using Google or Bing, and call it a day.

But the process can actually be quite cumbersome, experts said.

Dead ends persist, false positives abound. A search for “John Smith” could yield thousands of people across the country. So investigators painstakingly try to connect information about people to corroborate the information. Doing so efficiently is paramount.

“It’s actually really boring and tedious. You have to know when to stop or else you can spend 20 hours going into a dead end,” said Giovino. “That’s what separates the good investigators from the bad ones.”

Perhaps nowhere has social media made more inroads in rooting out insurance scams than in workers’ compensation.

An “injured” worker posts a photo of himself riding a mechanical bull. A Facebook friend unwittingly shares a photo of a “disabled” worker playing basketball in a recreational league game. A claimant on temporary total disability posts a video to YouTube of herself in a dance competition.

Cory recalled a time when she was investigating a person claiming to have a back injury, then found a photo posted to a social media site of the individual participating in a karate class. It’s that kind of evidence that can crack a case — and get an insurance company’s attention. “When you put that picture in the report, the clients eat that up,” she said.

Social media has become a godsend for investigators, and fraudsters are often so inept that they verge on the amateurish: They share information about their crimes and invite capture. “People like to show friends they’re riding a jet ski or show them that they’re out and about and doing things,” said Soline of the NICB, “so they end up posting it.”

Jim Quiggle, director of communications at the Coalition Against Insurance Fraud in Washington, D.C., said workers’ comp insurers seem the most pleased with how social media is helping them find fraud.

“People love to brag about how they ripped off insurance companies. They can’t keep their mouths shut,” he said. “People post photos of themselves in Aspen on a black diamond slope” when they should be home nursing an injury.

Brian Smidt, vice president of data analytics at the NICB, said swindlers of all types get caught because they share too much on social media sites. A claimant who reports his motorcycle stolen in March, but then posts a photo of himself riding it in May, practically solves his own crime as investigators can use technical clues to figure out when online photos were taken.

Smidt said there have been many times when his team has presented an individual with evidence of claims fraud gathered on social media sites, and the claimant has subsequently retracted his or her claim. Those cases are easy, as they practically solve themselves, he said.

Investigators find social media particularly useful to track the connections between fraudsters, which can tip law enforcement off to larger, more sophisticated crime rings. “It’s unlikely you’d crash into a car full of people you are friends with on Facebook, when you previously admit that you don’t know them,” said Soline.

Tracking down larger, more organized crime rings is much more satisfying, experts said. If a doctor and an attorney have been working together on fraudulent auto accident cases, are they connected through Facebook or LinkedIn? Are they using Twitter to set up dinner plans?

“It helps locate different relationships you might not be aware of,” said Soline.

Al Marrazzo, manager of the special investigations unit at ESIS Inc., agrees. If a person has a slip-and-fall at a store — then a series of searches find that they live in a house with two people who also have pending slip-and-fall cases — that’s a suspicious coincidence. “Nobody slips and falls that many times,” he said. “There is so much more information at our desktops that we didn’t have in the past — who they are, who they associate with and links through the Internet to other names.”

ESIS, the third-party administrator that manages claims for the ACE Group, hires private firms to investigate fraud — and they are required to conduct Internet and social media website searches as part of their investigations.

That can mean big money savings.

An investigation of an injured worker may lead to an adult basketball league website, and provide the date, time and location of a game. Surveillance teams show up at the game — meaning they only need to be paid for that one occurrence, not days and days of surveillance that might turn up nothing.

Brian Wilson, head of the Special Investigations Unit at Zurich North America, said social media has been a great tool in helping its investigators confirm identities of individuals since they are able to find photos, vehicle information, location, manner of dress or interests. That can help Zurich investigators — who are often former law enforcement officials and claims professionals — create a timeline of the fraud.

But Wilson is careful not to take information on the Internet at face value. Instead, he uses it to corroborate or dispute information from traditional investigative methods such as interviews or records checks.

“There is no formula” for investigations at Zurich, he said. Investigators start with what they have and move quickly, especially because information on the Internet has a “shelf life,” and needs to be discovered before it’s taken down. Auctions on eBay eventually come to an end and are removed from the site. Newspaper stories get archived. People take down YouTube videos. Investigators need to work fast to make sure they get all the information before it disappears.

(From Risk & Insurance, October 2012)