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$22.7M injunction sought in case

Oct. 26, 2013 @ 11:54 PM

HUNTINGTON — Two whistleblowers, credited with revealing alleged waste within Huntington's Social Security Office, want a federal judge to protect $22.7 million in proceeds garnered by disability claims attorney Eric Conn, one of two targets in the whistleblowers' civil lawsuit.

Their motion for a preliminary injunction was filed this month in Pikeville, Ky., while Conn pushed for complete dismissal of the nearly two-year-old lawsuit. The lawsuit alleges Conn and Administrative Law Judge David B. Daugherty of Huntington engaged in a scheme to improperly award Social Security disability benefits to hundreds of applicants.

U.S. District Judge Amul R. Thapar heard arguments for and against the dismissal Oct. 9 in Covington, Ky. He then took the matter under advisement with no decision entered as of midday Friday.

The lawsuit specifically claims Daugherty assigned himself cases, conducted sham proceedings and awarded Conn's clients benefits without justification, while Conn utilized medical experts who provided false or fraudulent testimony and used Daugherty for claims denied elsewhere.

In their request for an injunction, whistleblowers Sarah Carver and Jennifer L. Griffith lean upon a congressional investigation that concluded Conn has received $22.7 million in attorney fees and cost reimbursements from the Social Security Trust Fund since 2001. It describes Conn as a flight risk with a history of sending money overseas. The request says the two fear that without an injunction, those earnings will dissipate and leave the government "with an inability to restore even a small percentage" of fees and disability claims already paid from the Trust Fund.

Carver, a senior case technician, and Griffith, a former master docket clerk, both worked at the agency's 9th Street Plaza location in Huntington when the alleged abuses occurred. They stand to receive a percentage of any funds recovered should they succeed on the government's behalf.

The Justice Department has twice declined opportunities to intervene in the civil litigation, and federal prosecutors for eastern Kentucky and southern West Virginia are mum on any criminal investigation.

U.S. Attorney Booth Goodwin, assigned to the Southern District of West Virginia, said Monday he could neither confirm nor deny the existence of any criminal investigation into the alleged abuses.

Meanwhile, the U.S. Senate Committee on Homeland Security and Governmental Affairs continues its inquiry, weeks after hearing testimony from the whistleblowers and releasing its own investigative report. Among its findings was an estimate stating Daugherty's unusually high productivity and approval rate awarded more than $2.5 billion in lifetime benefits to Conn's clients and others during the judge's final years on the bench.

U.S. Sen. Claire McCaskill, D-Mo., attended the hearing and told the women she doubts it would be their last time testifying.

"This report gets my heart beating a little faster as a former prosecutor," she said at the Oct. 7 hearing. "If you put some good prosecutors on these set of facts, and I think you're going to find something more than the pressure to move a docket quickly."

Carver and Griffith's congressional testimony preceded appearances by Conn, three doctors and Charles Paul Andrus, who was chief administrative law judge at the Huntington office during the period the alleged scheme occurred.

Daugherty failed to appear at the hearing despite a subpoena, and Conn invoked his Fifth Amendment right against self-incrimination.

The whistleblowers have since filed a motion for Thapar to take notice of Conn's refusal to testify, while also noting Daugherty's absence, in deciding whether to dismiss their lawsuit.

Conn, in a motion filed by his attorneys Tuesday, objected to any negative inference being drawn between his decision not to testify in Washington and his standing in the civil case. It states Conn has not invoked any Fifth Amendment protections in the civil case and "adamantly disputes the Senate Report and its conclusions."

Conn's attorneys believe permitting such an inference, especially before Thapar decides upon their motion to dismiss, would lead to an "absurd situation" during which he would testify about the Senate report and negative inferences of invoking the Fifth Amendment, even though no such assertion has been made in the civil case.

"That cannot be the case," the motion states.

Conn's attorneys, based in Louisville, Ky., argue the whistleblowers' lawsuit does not link their client to any specific filing of a false claim for disability benefits. Instead, they claim the allegations are based on speculation and conjecture, saying it is no secret Conn represented numerous clients whose cases were processed by the Huntington office.

"Knowledge of this fact is not equivalent to knowledge that the claims for disability were false or fraudulent in nature," according to an Oct. 7 filing. "Conn asks that the Court put an end to what can only be described as a fishing expedition."

The whistleblowers' attorneys, based in Lexington, Ky., contend their lawsuit meets the required specificity to survive Conn's motion to dismiss. That includes specific examples of when Daugherty assigned himself cases and information how specific claims can be located.

"The complaint passes muster if its factual claims are plausible," according to a Sept. 23 response to Conn's motion to dismiss. "Once a complaint satisfies this test, however, it must be permitted to proceed 'even if it strikes a savvy judge that actual proof of those facts is improbable, and 'that a recovery is very remote and unlikely.'"

The whistleblowers cited an affidavit from Jamie Lynn Slone, a former Conn employee, in their argument for the $22.7-million injunction. Slone's affidavit said her former boss, in reaction to a May 2011 article in the Wall Street Journal, considered leaving the United States for Cuba to avoid any criminal extradition.

The affidavit also states Conn defied the advice of his own attorney as he ordered certain documents be destroyed, saying "this is my office and I will do what I want."

"There is no way I am going to jail," Slone's affidavit quotes Conn as saying. "If I was paying D.B. (Judge Daugherty) I wouldn't be dumb enough to leave a paper trail."

The whistleblowers also used the affidavit to link Conn to other foreign associates. It states he would try to smuggle certain women into the United States, including an abandoned effort in November 2011 to pay a Toronto man $20,000 to rent a boat in St. Kitts and use it to sneak Conn's fiancée into Florida.

The affidavit also links Conn to a man in Thailand, to whom the eastern Kentucky attorney would send varying amounts of money as support for his fiancées or women he was dating. Slone's affidavit noted she reviewed emails from the Thailand man stating the payments, billed as "Oriental Fashion," would cover apartments, vehicles, English classes, cosmetic surgery, spa treatments and a person paid to look after the women.

"The potential harm to Plaintiffs, and thus the United States, is likewise irreparable," the motion for an injunction states. "The requested preliminary injunction is the only way to protect them, and the United States from ongoing damage while this matter proceeds to trial."

Aside from Conn's position that the lawsuit fails to state any specific filing of a false claim, his attorneys also argue for an outright dismissal on grounds the whistleblowers were not the original sources of a voluntary disclosure, the statue of limitations have expired and that Thapar's court lacks jurisdiction due to Daugherty's standing as a senior executive branch official.

Conn's attorneys cite a work manual in stating Carver and Griffith already had an obligation to report fraud. Attorneys for the women counter, arguing their clients were not hired as fraud investigators, so their gathering of information was voluntary and their reports to the government investigators and assistance in a Wall Street Journal report make them the original source.

Attorneys for the whistleblowers further contend their lawsuit falls within the statute of limitations. They also point to Daugherty's failure to tout his former standing as senior executive branch official as evidence no jurisdictional concerns exists.

Daugherty, answered the whistleblowers' lawsuit on his own behalf, denying many of the allegations and saying he lacked knowledge or information sufficient to form a belief about others. His answer closed with a demand for a jury trial, according to the Sept. 9 filing in U.S. District Court.

Follow Curtis Johnson via Twitter @curtisjohnsonHD and http://facebook.com/curtisjohnsonHD.

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