July 2000 Topics
Chuecos, Fanning, Melchizedek Fraud, Moral Stress Test, Gaming the System, Pay and Chase, Rug Burn, and Storm Chasers
 

58% of physicians are willing to exaggerate the severity of a patient’s illness and submit deliberately deceptive documentation to an insurance company.
 

Fraud In Other Words: Professional Jargon and Uncensored Street Slang
By Larry C. Adams, CFE, CPA, CIA, CISA
 

Chuecos
Chueco is a Spanish adjective for crooked. Chuecos also is a term for illegal motor vehicles. Chuecos are cars or trucks that are legally purchased in the United States, but used in Mexico where they are unregistered and uninsured. About one in every four vehicles used in Mexico is there illegally. Import taxes drive up the cost of new vehicles in Mexico to 30 percent higher than in the United States. Used vehicles in Mexico cost twice as much as they do north of the border. This causes a high black market demand for chuecos and consequently defrauds the Mexican government of millions of dollars in import taxes and registration fees and ticket fines. Chuecos provide competition for Mexican auto manufacturers and local car dealers. Also they deprive insurance companies of premium payments. Drivers get in wrecks and just walk away from the chuecos. More than 650,000 cars cross into Mexico each year. In December 1999, the Mexican government implemented a new program to deter fraud - any driver with U.S. license plates was required to leave a cash or credit card deposit at the border when entering Mexico. The deposit ranged from $400 to $800 depending on the model year of the vehicle. Each driver was required to pay a nonrefundable fee of $15. Drivers received a hologram sticker for their windshields and could recover the deposits when they left Mexico. The program was dropped after allegations of border officials accepting bribes for auto registration documents, allegations of unauthorized fees for processing documents, threats of Mexican product boycotts, fears of cash robberies on highways, fears of credit card manipulation and theft of numbers, road blockades, longer lines at the border crossings, decreases in border town business, and the inability of tourists and Mexican families to afford the deposits. The program that was intended to reduce import fraud caused more problems than it resolved.
Jim Kolbe, “Mexico’s Car-fee Law a Mistake,” Arizona Republic, December 3, 1999, p. B11.
Mark Shaffer, “Mexico Stole Christmas, Visitor Says,” Arizona Republic, December 3, 1999, p. A1, A23.
Niko Price, Associated Press, “Mexico to Begin Collecting Deposit on Cars at Border,” Arizona Republic, November 27, 1999.
 

Fanning
A diversionary technique used by auto salesmen and financial service representatives. Fanning is common when documents are signed. The salesmen quickly flip past pages of a purchase or loan agreement, or fold the fine print pages out of sight. With this technique, they quickly show the signature lines to the customers and tell them to “sign here” in an effort to keep them from noticing contract terms and other information.
Jo-an Holstein, “Tip-offs to Rip-offs - How to Avoid Con Artists,” Active Times, Arizona Republic, October 1999, p. 20.
 

Melchizedek Fraud
Since 1991, the SEC and numerous press reports have identified the country of Melchizedek as a base for fraudulent schemes involving purported bank charters and bogus corporate documents. Hundreds of investors were promised 300 percent returns on their investments of millions of dollars. Most lost their investments and never received any disbursements from profits. Many of the investors were residents of the Caribbean islands or immigrants from the region. Eventually the investors discovered that Melchizedek is a nonexistent country and its Credit Bank International Co. is a nonexistent bank.
Jeremy Pelofsky, Reuters, “SEC Charges Brooklyn Lawyer in “Melchizedek” Fraud,” AOL News, November 28, 1999.
 

Moral Stress Test (Gaming the System)
An ethical dilemma. Physicians are subjected almost daily to a moral stress test that forces them either to violate their oath to provide the best care for patients or to act dishonestly. A survey published in the Archives of Internal Medicine indicates that 58 percent of physicians are willing to exaggerate the severity of a patient’s illness and submit deliberately deceptive documentation to an insurance company to achieve coverage that is not otherwise available. Physicians associated with HMOs are more likely to support the deceptions. Such manipulation is also called “gaming the system.” Only 25% of the physicians said they would never exaggerate claims. Ethically, these claim exaggerations are different from Medicare and insurance fraud, which are conducted to line the pockets of physicians.
Thomas H. Maugh II, Los Angeles Times, “Doctors Would Fake Claims to Help Patients, Study Says,” Arizona Republic, October 25, 1999, p. A1, A6.
 

Pay and Chase
A reality of life in the insurance world that it is tougher to detect fraud after the fact and collect reimbursement for any amount of overpayments. The insurance provider makes overpayments, then spends a considerable amount of time and resources to recover from the errors. “Pay and chase” is related to the adage “An ounce of prevention is worth a pound of cure.”
Brad Mayo, “Using Forensic Data Analysis in Medical Fraud,” Healthcare Fraud Seminar, Arizona Chapter, Association of Certified Fraud Examiners, October 21, 1999.
 

Rug Burn
Fraud associated with miscodings of Resource Utilization Groups (RUG) and the lack of proper documentation. RUGs are 44 provider billing codes for skilled nursing care facilities for the Arizona Health Care Cost Containment System (AHCCCS). AHCCCS is Arizona’s Medicaid program.
Peter Francis, “Healthcare Fraud in the AHCCCS Program,” Healthcare Fraud Seminar, Arizona Chapter, Association of Certified Fraud Examiners, October 21, 1999.
 

Storm Chasers
Out-of-state contractors who swarm into a community that has encountered severe storm damage from hail, tornadoes or hurricanes. Storm chasers install substandard roofs on business and residences. Typically they target victims who are not insured. The storm chasers quickly collect payments from the victims and leave town.
“Gripe Line”, Arizona Republic, December 6, 1999, p. D2.
 

Larry C. Adams, CFE, CPA, CIA, CISA, has a private practice in Phoenix, Arizona. His latest book is Fraud In Other Words - 1999 Edition.
 

ã Copyright 2000 Larry C. Adams.
All rights reserved.
 

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