Innocence is not enough: Lessons in law and life
Agency falsely accused of Medicare fraud
On the morning of Nov. 2, 1989, an elderly lady sat as usual in her rocking chair on the front porch of her little house across the street from Wichita Home Health Service. She rocked slowly, gazing out over the placid street. Thursday’s gray morning light brightened slowly around her. It was going to be another mild day in Wichita Falls, a city of 94,000 in north Texas, just below the Oklahoma border.
Then the FBI raided Wichita Home Health.
Half a dozen plain cars and a rental truck converged in the front parking lot. Agents wearing "FBI"-emblazoned parkas swarmed from the vehicles and stormed into the office building, guns drawn.
As the elderly lady hurriedly dialed the local television station to find out what was happening, the FBI was simultaneously raiding branch offices far to the south in Victoria, Beaumont, and Port Arthur. The agencies, all freestanding and Medicare-certified, were founded in 1969 by Ruth L. Constant, RN, BSN, MSN, EdD.
No one at the TV station knew the story, but the news director called his wife, who worked at the Wichita agency. An unfamiliar male voice answered and said tersely, "She can’t talk now."
The news director then called a newspaper editor, who assigned the story to a reporter. The reporter confirmed that the FBI had indeed raided Wichita Home Health, but no one was sure why. Days later, as the story began to unfold, people learned that Constant, a 30-year home care veteran and former member of the board of directors of the National Association for Home Care (NAHC), was suspected by the FBI of defrauding Medicare.
Fired employee made accusations
What observers didn’t know at first was that Constant had been falsely accused by a former employee whom she had fired for embezzling agency funds. Nor did anyone know Constant would be subjected to an exhausting, unrelenting investigation for the next 15 months as the FBI and the U.S. Attorney’s Office in Houston doggedly tried to build a case.
"For fifteen months they threatened me and tried to get me to admit guilt," Constant says in a Texas drawl. "They told me, If you would admit to one thing, this would end.’ I said, Look, I don’t know what to admit to. I don’t do fraud. If I made a mistake, OK, but don’t accuse me of fraud.’"
Her story, which she shares with others through various speaking engagements, is a textbook lesson for all providers, hospital-based or freestanding, in employee relations, Medicare accounting practices, justice, and old-fashioned concepts like honesty, integrity, and trust. It also is a story that shows sometimes you are presumed guilty and must prove your innocence.
She has even written a book, which she hopes to publish. One publisher passed on it because the story involved no sex, violence, or indictment of the author.
Although never charged with any crime, Constant had been accused by Katy Dawson, the agency accountant, of falsifying Medicare records and accepting a year-end payment illegally. Dawson, who had worked in the Beaumont office for 11 years, also told the FBI that Constant had been fined by Medicare. This, apparently, was all the grounds federal investigators needed to pursue their case.
Federal authorities could not be reached for comment.
Constant explains, "At the end of the year, Medicare tallies up what your expenses are and what they have paid you. You are paid on productivity based on the previous quarter. At the end of the year you do a cost report. On the basis of our 1986 cost report, it looked like we owed Medicare money in the Beaumont office."
But in 1987, Medicare sent the Beaumont office a $100,000 check, Constant says. "Katy called and said it was our settlement for the cost report. Katy said she had already checked with Blue Cross/Blue Shield, and they said the amount was right. I questioned the check, but you don’t question the auditors in Medicare."
Constant was to learn that her trusted accountant had never called the intermediary about the overpayment.
Then the oops’ letter arrived
A year later, Constant received what she calls "one of those oops’ letters from Medicare, saying we owed $100,000, plus another $100,000 plus interest, plus an overpayment to the Port Arthur office for a total of nearly $300,000."
Although she had to borrow money to meet the payroll, Constant didn’t suspect anything was amiss until she received a phone call in 1989 from the Beaumont bank saying a $1,500 check had bounced.
"I knew this couldn’t be right," Constant says. "I investigated, and much to my dismay, I discovered she had been writing checks to herself." Constant says Dawson started out writing small amounts, but gradually increased them as time passed. "She had written $15,000 worth of checks in one month. I was in shock."
The checks had been written on the Beaumont and Port Arthur payroll accounts. When Constant finally reviewed the bank statements, she saw the checks were all written in even amounts without any FICA or withholding deductions. "Nobody gets paid an even $1,000. It wouldn’t take any idiot long to find the checks and figure that out."
Constant blames herself for not keeping closer watch on the money, admitting she never looked at the bank statements that were mailed to her headquarters in Victoria. She simply forwarded them to Dawson unopened.
Dawson, realizing she had been caught, ran to investigators the day she was fired, Constant says, and accused her former employer of defrauding Medicare. Then came the raid, accompanied by a 15-page FBI affidavit saying Constant had once been fined $300,000 by Medicare for trying to "hide relationships between agencies" and accusing her of falsifying records and billing for visits that never were made.
The irony of the whole thing, Constant says, is being accused of falsifying records.
"Two things new employees are required to memorize," she says. "One, which is imprinted in their name tags, is from our mission statement. To provide the very best home care possible.’ The other is, What’s the quickest way to get fired from this agency? To falsify a record.’ And I have fired people over the years. I don’t care if they have falsified a patient’s blood pressure."
She has always done things by the Medicare book. "It’s their ball game and their rules, and I play by the rules," she explains. So when she discovered that her most trusted employee had been embezzling, she followed the rules.
"I filed charges against the woman, turned her in, turned over the cancelled checks with her signature, reported it to the local Medicare division, and reported it to the Medicare auditors."
That was in July of 1989. But Dawson, who had been fired July 17, wasn’t arrested. Nothing happened until the morning of Nov. 2 when the FBI raided all of Constant’s home health offices. Constant later learned that federal investigators were so convinced of her guilt, they promised Dawson immunity from prosecution in return for her testimony.
Employee confessed to embezzlement
And last year, researching her book, Constant discovered that Dawson had failed an FBI lie detector test a few months after the investigation began and had confessed to embezzling the money.
"I have a copy of the handwritten confession," she says.
Finally, after putting Constant and her employees under the microscope for a year and three months, federal investigators gave up. They found nothing to support indicting Constant. On Feb. 21, 1991, another Thursday, Constant’s attorneys Ed McDonough and Ron Woods got a phone call. According to Constant, investigators told her, "If you will not sue us and will let us use your records to put this woman under the jail, we will cease any further investigation."
In May, Dawson pled guilty to embezzlement and income tax evasion and was sentenced the following August to serve 24 months in the federal penitentiary. She was released after 15 months for good behavior and is now free. She had also received two concurrent 10-year state sentences, but she didn’t serve time because the federal sentence negated the state terms.
The court also ruled that Dawson must repay $124,000 to the agency, a lesser amount than what she allegedly stole, Constant says, because records only substantiated that amount was missing. Constant, who says the figure was nearly $300,000, later won a $1 million judgment against Dawson in civil court.
"She is now on probation," says Constant, "paying $150 a month to pay off $124,000 to the agency. When that’s paid off, she starts paying on the million dollars."
The lesson in all this is unsettling for Constant, who admits to being naive.
"I always thought the FBI were the good guys," Constant says. Her voice is laced with irony, but not anger. "They caught the bad guys, the murderers, drug dealers, and people like that. Yet here they were investigating me."
I’m innocent. I don’t need a lawyer’
Convinced of her innocence, Constant refused legal help at first, despite the urging of friends. To her, it was a simple matter of right and wrong, black and white. No gray.
"Do you believe I didn’t hire a lawyer at first?" she says. "A friend of mine, a lawyer, said, Ruth, you need to hire a lawyer.’
"I said, I’m innocent. I don’t need a lawyer.’ Now, how ignorant can you be?" she laughs. "My friend told me, Ruth, the FBI aren’t your friends; they are out to get you, and they will find a way to get you. Don’t be so dumb. Hire an attorney.’"
The ensuing 15 months stretched into a battle of wills: the FBI, allied with the U.S. Attorney’s Office, against Constant and her lawyers. Determined to carry on in spite of the intense investigation, Constant focused on her work, providing health care to the Medicare beneficiaries who account for 95% of her total patient population. Her three locations together average about 8,000 visits a month, she says.
Friends never lost faith
"If I had been guilty I don’t think I could have survived," says Constant, who praises her friends and professional colleagues for keeping the faith. "Never did they make me feel they doubted me or my integrity, even if they might have thought it," she says.
As a demonstration of their respect and support, colleagues at NAHC voted her "Administrator of the Year" for 1990, before the case was resolved.
Beaumont Agency Director Cindy Miles, RN, who was hired the day Katy Dawson was fired, recalls that time without a trace of bitterness. "I was really optimistic about it. In just the brief time I had known Dr. C., I had so much faith in her honesty. I had been there 15 months and had seen the quality of care and all the billing practices.
"Throughout it all, she was very strong. She’s been quite a mentor for me. It’s been a wild ride, but it’s been fun."
Miles points out another irony. She interviewed for her job with Dawson. "She was so nice and likeable. I thought this [job] would be great."
The patients were told of the investigation to allay any fears they may have had about their care. By then the story was all over the local newspapers and television.
"We told our patients, It’s going to be OK.’ No patient left. I don’t remember losing anybody. Not even employees. Most everyone really had a lot of faith in Dr. C."
Miles believes the investigation even helped their business. "No one could believe Beaumont Home Health and Dr. Constant could have committed fraud, even though the newspapers were telling of the investigation."
Miles remembers vividly the day Beaumont Home Health was taken over by the FBI. All the employees were locked inside the building. No one was allowed to leave. The FBI interrogated each employee and loaded up all the file cabinets containing billing records in the rental truck. Phone callers were turned away, even patients. Agents stayed on the scene for about eight hours, guarding all exits.
"Just like you see on 20/20,’" Miles says.
The FBI investigators were in charge. Or so they thought.
Miles disliked being held captive. Everywhere she or anyone else went in the office, an agent followed. Finally, she had had enough. Despite some trepidation, she approached an agent and said, "Listen, I don’t care who you are, every Thursday at 11 o’clock I get my nails done.’ And I did. But how that manicurist painted my shaking hands, I don’t know."
If Miles holds a grudge against the FBI, it is not discernible in her conversation. "The only thing, I guess, is how long they put her [Constant] through the investigation, and never a letter of apology, never a Gee, I sure am sorry.’ I’m still waiting for a Gee, I’m sorry,’" she says.
In retrospect, Constant says Dawson fit the profile of an embezzler perfectly. "She was always there when you needed her, worked late and on weekends. She was very efficient."
That coincided with the work ethic Constant learned from her father, who told his daughter, "If you work eight hours for somebody, and they pay you for eight hours, you give them nine hours to make up for the time you waste.
"My biggest mistake," concedes Constant, "was if I had been more attuned to what was going on, it might not have happened."
The lesson from all of this, she says, is simply, "Always believe in yourself. Trust people, but verify."
And hire a good attorney.
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