A federal criminal investigation into systemic fraud related to audits of New York's Medicaid program is targeting numerous supervisors and employees at the state Health Department and the Research Foundation for the State University of New York.
Interviews with people familiar with the matter and documents obtained by the Times Union show that in recent weeks at least seven employees with those agencies received letters from federal prosecutors in Albany notifying them they are targets in the investigation. The letters say evidence is being prepared for presentation to a federal grand jury for indictment in a case involving fraud, health care fraud, falsification of records and conspiracy.
The targeted employees were encouraged to contact prosecutors to discuss a pre-indictment settlement, and to consult attorneys if necessary. The letters were sent by assistant U.S. Attorney Sara Lord, who specializes in white-collar crime cases.
Federal investigators with the U.S. Department of Health and Human Services are pursuing whether the scandal reaches into the upper levels of management for the SUNY Research Foundation and the state Health Department, according to sources briefed on the case. At stake is more than $22 billion in annual matching federal funds for Medicaid. The allegations are that Research Foundation workers, who were under contract with the state Health Department to audit the program, were pushed to manipulate data related to the percentage of ineligible people receiving benefits.
On Saturday, the Research Foundation issued a written statement that shifted focus to an arm of the Research Foundation in Buffalo. People briefed on the investigation said workers at the foundation's Albany headquarters are targets of the probe.
People familiar with the case said several Research Foundation workers have alleged they were fired or retaliated against after questioning the practice of altering data or manipulating information such as residency requirements of Medicaid recipients.
One such employee, Ava Dock, filed a civil complaint against the Research Foundation in U.S. District Court alleging that Research Foundation's ''purpose to underreport New York's error rate for Medicaid claims was to defraud the federal government ... in order to avoid the disallowance of federal matching funds for Medicaid to New York,''
The Research Foundation considers itself a private, not-for-profit agency though its leaders are mostly made up of top SUNY officials. The foundation handles about $1 billion annually in revenues, mostly in research grants from the federal government. Its workers also routinely conduct business on behalf of the state through government contracts, and many of its employees have state government jobs and state e-mail addresses.
This is not the first time NYS and SUNY Research Foundation Have Been Investigated for Fraud