Risk managers could be charged with fraud
August 1, 1999 2 minutes read
Columbia fraud case
Risk managers could be charged with fraud
But you likely will not be the first targets
For risk managers, the answer is yes. You probably won’t be the prosecutor’s first choice for fraud charges, but if you have taken on the role of compliance officer or a similar position with considerable authority, you could have reason to worry.
As with the Columbia investigation, federal prosecutors are most likely to press charges against upper-level executives, says Stephen Meagher, JD, an attorney with Phillips & Cohen in San Francisco. The four Columbia defendants are three chief financial officers and one reimbursement coordinator. "The charges are going to be brought against those responsible for making final decisions for how a hospital accounts for something," Meagher says. "Those cooperating with the government as witnesses are generally those at a lower level who were directed to do something as part of the fraud."
Not just anyone with knowledge of fraud is a likely candidate for charges. If, as risk manager, you had knowledge of the fraud and urged your superiors to end it, a prosecutor probably would view you more as a potential witness. If you knew about the fraud and did nothing to stop it, that might make you more tempting as a target for criminal charges but still not at the top of the list. Prosecutors always want to go for the big fish, and in most hospitals and hospital systems, the risk manager will not be seen as a big fish.
"Prosecutors work up the chain as much as they can, so the higher you are, the more your risk for being held responsible," Meagher says. "The best targets are always going to be those who had some financial incentive for perpetrating the fraud. If your bonus is affected by the year’s bottom line, that’s a pretty good motive for the fraud charges."
But the risk manager’s vulnerability can vary from one organization to another. As risk managers take on more responsibility in some settings, the increased responsibility comes with increased risk of prosecution for any fraud. Particularly if you have taken on the role of compliance officer, prosecutors could determine that you had substantial responsibility and authority for preventing the fraud. Some risk managers are compliance officers, and some compliance officers have much greater authority than the average risk manager, Meagher notes.
"For those who have the authority to make decisions about disclosing a huge reimbursement mistake or saying you sit on it, for instance, I would say you might very well be a target," he says. "But if you have to report it up the chain and let some senior vice president make a decision, then obviously the risk manager does not have the authority and in that instance would not be a target."
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