It was reported last month that the workers’ compensation system managed by the city of Baltimore was the victim of fraud that lasted more than a year. Between November 2020 and January 2022 over 300 unauthorized transactions drained a total of $317,241.71 from the city’s Compensation Claims Corporate Checking Account. According to Baltimore Inspector General Isabel Mercedes Cumming, they found “358 individual transactions. And when broken down, 22 persons of interest.” Cumming also told the media that they “cannot discuss the details due to an ongoing federal investigation.” She added that the vast majority of transactions were conducted by out-of-state persons. She said, “It definitely was not something done locally.”
Thank God for that. We can all rest easier knowing local miscreants weren’t at fault. Instead, we should cast a suspicious eye toward those scoundrels next door in Delaware. Never trust a state that is smaller than your own, I always say.
It was reported that the improper withdrawals “were difficult to detect because the account maintains a $0 balance at the end of the day, making small changes in the bank service fees the best barometer of suspicious activity.” I’m not sure what the end-of-day balance has to do with anything. My checking account usually has a $0 balance at the end of the day, yet I would likely notice 358 transactions that took $317,241.71 from it.
Of course, that is probably because I would have been overdrawn by $317,240.71. But I digress…
Seriously, has the city of Baltimore’s workers’ compensation system never heard of the concept of “balancing the checkbook?” They should look into it. It is a relatively new concept, being around, well, since the beginning of checking accounts; at least since the 1500s, when Dutch people learned they could get free toasters by giving their money to “cashiers” who agreed to charge them exorbitant fees, operate with unreasonably short business hours, and pay their debts from those funds with the use of note’s written by the owner of the cash ordering them to do so.
Wildly inaccurate history lesson aside, I sense I’ve digressed once more…
It was reported that the city’s contracted TPA, Sedgwick, which administers the compensation fund with the city law department, was receiving monthly statements on the account, rather than a daily list of account transactions. Sedgwick found evidence of suspicious activity and reported the matter to the Office of Inspector General (OIG).
Now, as is so often the case with these stories, this is where it gets weird(er).
The City Solicitor, whose office actually manages the city’s workers’ compensation program, praised the OIG for ferreting out the fraud. His statement said, “Your office discovered that the Automated Clearing House fund transfers were fraudulent and worked with law enforcement.”
That is significant. From what I hear “working with law enforcement” in Baltimore is rare these days.
Still, the statement sounds like it omits a couple of important points. Never mind that it took a private third party to advise them something was amiss, and that the office responsible for oversight appears to have suffered from financial presbyopia, we can still praise the guy who filed the report of the house burglary that occurred while we slept.
That is some powerful lemonade made with those lemons.
The current City Solicitor’s law office took over management of the program in 2018 when his predecessor terminated a contract with the private law firm that had been overseeing it. The savings at the time were reported to be $300,000, or by my ciphering, $17,241.71 less than the theft that occurred while they managed the program themselves.
To be fair, the OIG did recover a substantial portion of the funds. After reviewing the evidence put before them, the bank credited the account with $291,000. That meant the final loss for the city was $26,270. Bear in mind, that doesn’t mean the bad guys were necessarily held accountable. It is possible the loss was just shifted to other parties. The investigation is apparently ongoing.
The City Solicitor praised the outcome by saying of the OIG, “Your office also worked with the finance department to alert the city’s bank to these issues and recover a large portion of the fraudulent ACH fund transfers. Thank you for the invaluable work you do for the city.”
Invaluable work, indeed. The kind of work necessary when you neglect to balance your checkbook in the first place…