Widespread fraud reported in Social Security Administration's Disability Program

A two-year investigation by the Senate Permanent Subcommittee on Investigations has found widespread fraud in the Social Security Administration's Disability Program.

The fraud is so rampant, and disability cases have so proliferated in recent years, that the Social Security's Disability Trust Fund may run out of money in only 18 months, says Sen. Tom Coburn, R-Okla., whose office undertook the investigation.

Coburn’s report on widespread fraud, released Monday, focuses in large part on a veritable "disability claim factory" allegedly  run by attorney Eric C. Conn out of his small office in Stanville, Kentucky, a region of the country where 10 to 15 percent of the population  receives disability payments.

The report documents how Conn allegedly worked together with Administrative Law Judge David Daugherty  and a team of favored doctors with checkered pasts, including suspended licenses in other states, who rubber stamped approval of disability claims. In most cases, the claims had been prepared in advance with nearly identical language by staffers in Conn's law office.

The report found that over the past six years, Conn allegedly paid five doctors almost $2 million to provide favorable disability opinions for his claimants.

In 2010, the last year for which records are available, Daugherty approved 1375 disability cases prepared by Conn's office and denied only 4 of them - an approval  rate that other administrative law judges have described as nearly  impossible.

The report found, "Judge Daugherty telephoned the Conn law firm each month and identified a list of Mr. Conn’s disability claimants to whom the judge planned to award benefits. Judge Daugherty also indicated, for each listed claimant, whether he needed a “physical” or “mental” opinion from a medical professional indicating the claimant was disabled."

Coburn's report found that, "over a four-year period from 2006 to 2010, the Social Security Administration paid Mr. Conn over $4.5 million in attorney fees." And that, "Mr. Conn was the third highest paid disability law firm in the country due to its receipt of over $3.9 million in attorney fees from the Social Security Administration."

The report says that when Senate staffers and the Social Security Administration’s Office of the Inspector General began an investigation based on tips from whistle blowers, Conn and Daugherty began communicating with disposable, pre-paid cell phones. It also alleges they contracted with a local shredding company to destroy 13 tons of documents. Conn also allegedly destroyed all the computer hard drives in his office.

In 2011, the SSA placed Daugherty on administrative leave. He retired shortly after that.

Coburn told CBS's “60 Minutes” that Conn's legal fate is now in the hands of the Justice Department.

The alleged  fraud highlights an endemic problem in Social Security disability benefit awards. The Coburn report says a random examination of 300 case files by Congressional staff found more than a quarter of  the case files “failed to properly address insufficient, contradictory, or incomplete evidence,” suggesting a high rate of fraud or abuse.

Disability payments have skyrocketed across the U.S. in recent years. At the end of August 2013, more than 14 million Americans were receiving disability benefits The Social Security Administration has blamed aging baby boomers and the lingering effects of the recession as two causes, but another appears to be  the SSA's  attempt  to reduce the  back-log of disability cases.

That, in turn , has led to  less scrutiny of individual case files, which can be hundreds of pages long.