U.S. Senate report on disability fraud focuses on southern West Virginia and eastern Kentucky

WASHINGTON, D.C. — A new Congressional report alleges retired Social Security Administrative Law Judge D.B. Daugherty from Huntington conspired with Eric Conn, an eastern Kentucky attorney, to defraud the Social Security Disability Insurance program.

The extensive report from investigators with the U.S. Senate Committee on Homeland Security and Governmental Affairs was released earlier this week on Capitol Hill.

The report focused on the high number of disability appeals Daugherty approved, prior to his retirement in 2011, for residents in an area along the West Virginia and Kentucky border, calling it a “case study” on system abuse.

“I think this report confirms the worst fears of a lot of Americans who, they know they pay taxes to fund this program to pay disability benefits and they wonder whether that money is being abused,” said Damian Paletta, a “Wall Street Journal” reporter who first raised questions about Daugherty in 2011.

“According to this report, there was widespread abuse, potential collusion and maybe even conspiracy.”

The U.S. Senate report concluded the following after a multi-year investigation, “By 2011, Mr. Conn and Judge Daugherty had collaborated on a scheme that enabled the judge to approve, in assembly line fashion, hundreds of clients for disability benefits using manufactured medical evidence.”

Records showed Daugherty approved almost 100 percent of the disability cases he considered.  The national average approval rate is 62 percent.

In his last years in the role, the investigation showed Daugherty signed off on more than $2.5 billion in disability benefits and many of those benefits went to Conn’s clients.

Between 2006 and 2010, the Social Security Administration paid Conn’s firm more than $4.5 million in attorney fees for cases Daugherty heard on appeal.

Paletta said the report alleged Conn was running a “claim factory.”

“In many cases, the clients would go to Eric’s office and see either a mental doctor or physical doctor, there in the office for a brief review.  Those forms would always be filled out, it sounds like, by the law firm, not actually the doctor.  The doctor would, pretty much, just sign them and then people would get their benefits,” he said.

Investigators said bank records from 2003 to 2011 showed Daugherty regularly made cash deposits to his own accounts and refused to explain the origin of the funds.  In all, the unexplained deposits totaled $96,000.

At this point, neither Daugherty nor Conn have been charged with any federal crimes and U.S. Justice Department officials are not talking about a possible criminal probe.  Both Conn and Daugherty are named in a civil lawsuit from former workers in Daugherty’s Huntington office.

Conn refused to answer questions from members of the U.S. Senate Committee on Homeland Security and Governmental Affairs Monday, citing his right to protect himself from self incrimination.  Daugherty is expected to be called to testify at a future hearing.

A story on CBS’ “60 Minutes” this week focused on the case.  The story estimated almost 12 million people are on disability now, a number that has jumped 20 percent during the last six years.  With the current $135 billion annual budget, the SSDI program is on course to run out of money by 2016.

On Tuesday’s MetroNews “Talkline,” Paletta said many people depend on their disability checks and the money should be there for future legitimate cases.

“This program was designed to help people with physical impairments who can’t work get some sort of financial lifeline and access to medical care and, there’s no doubt about it, there’s a tremendous amount of people who do have severe issues that need this program and rely on it,” he said.

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