Social Security lawyer Conn charged with fraud, money laundering

Eric C. Conn, the flamboyant Eastern Kentucky lawyer who hired beauty queens and plastered himself across billboards under the nickname “Mr. Social Security,” is charged with defrauding the federal disability benefits programs of more than $600 million.

In an indictment unsealed Tuesday, a federal grand jury found probable cause to believe that Conn, 55, conspired to rig hundreds of disability claims from 2004 to 2012 with a Pikeville psychologist, Dr. Alfred Bradley Adkins, and a Social Security Administration appeals judge in Huntington, W.Va., David B. Daugherty.

Conn falsified medical documents to make his clients appear disabled and paid Adkins and other doctors $300 to $450 a piece to sign completed evaluations supporting his clients’ appeals, according to the indictment. Inside the Social Security bureaucracy, Daugherty arranged for Conn’s appeals to be assigned to him, collecting $9,000 to $9,500 every month from the lawyer in exchange for guaranteed approvals, according to the indictment.

“I’m excited about this. I hope these guys rot in jail for stealing money we didn’t have on behalf of people who weren’t really proven to be disabled,” said former U.S. Sen. Tom Coburn, an Oklahoma Republican who led a 2013 Senate investigation into Conn and Daugherty’s working relationship. “The claimants in this case were not innocent. They knew a scam was going on. Some of them may actually be disabled, but they got themselves a shyster lawyer.”

Sarah Carver, one of two case technicians at the Social Security Administration who filed a whistleblower lawsuit against Conn, Adkins, Daugherty and others in 2011, alleging benefits fraud, said the indictments aren’t enough.

“My main concern is whether the SSA will finally acknowledge the fraud and hold accountable the managers who had knowledge of it for years,” Carver said. “Some of those managers were allowed to retire with their full benefits. Others were actually promoted to higher positions.”

Conn, Adkins and Daugherty face charges including mail fraud and wire fraud, conspiracy to retaliate against a witness, destruction of evidence, making false statements and money laundering. The most serious charges carry criminal penalties of up to 20 years in prison and up to $250,000 in fines. The government also seeks $11.67 million in forfeited assets.

Attorneys for the men declined to comment Tuesday.

The indictment lists three unnamed “unindicted co-conspirators,” including two other doctors Conn used over the years and one of his former office managers.

Conn and Adkins, arrested Monday night and jailed in Pike County, both clanked into a courtroom in Lexington on Tuesday for their arraignment with chains binding their wrists and ankles. Daugherty, now retired and living in Myrtle Beach, S.C., also was arrested, but he was not present on Tuesday.

U.S. Magistrate Judge Robert E. Wier allowed Adkins to be released on his own recognizance, pending an initial trial date set for June 7. Adkins’ medical license has been suspended, said his attorney, Jonah Stevens.

However, at the urging of prosecutors, Wier ordered Conn to stay in jail until a detention hearing on Thursday.

If Conn is released, he’s likely to either harass witnesses in the case or flee the country, Assistant U.S. Attorney Trey Alford told the judge. Employees of Conn’s Floyd County law firm say Conn has sworn he would escape to Cuba to avoid prison, and he has been wiring hundreds of thousands of dollars to overseas accounts, Alford said. The lawyer recently put his Pikeville home on the market for $1.9 million, suggesting he has an exit plan, Alford said.

“If he were to leave, to cross a border, he could go to wherever he has stashed some money and flee,” Alford said.

Conn’s defense team includes former Kentucky Chief Justice Joseph Lambert and Lambert’s one-time chief of staff, James Deckard. Arguing unsuccessfully for Conn’s release, Deckard waved his client’s passport in the air and said Conn would agree to surrender it. Conn has cooperated with the U.S. Department of Justice investigation so far, Deckard said, including a recent trip to Washington, D.C., to provide a requested handwriting sample.

Conn has specialized in disability benefits appeals for more than 20 years. He practices out of a chain of interconnected trailers along U.S. 23 near the Floyd and Pike county line, on a lot fronted by a one-ton, 19-foot-tall statue of Abraham Lincoln.

Conn is known in Eastern Kentucky for his aggressive advertising, appearing on television and billboards; hiring Ralph Stanley to shoot a music video for him; and printing his toll-free phone number across tight shirts worn by young, buxom cheerleaders whom he called his “Conn Girls.” A few years ago, Conn hired Miss Kentucky USA for $70,000 a year to serve as his office’s public relations director, a position most small-town law firms don’t have.

However, the lawyer also drew unwelcome attention to himself. In 2002, he resigned from his practice before the U.S. Court of Appeals for Veterans Claims during an investigation into allegations of professional misconduct. In 2013, Conn pleaded guilty to a misdemeanor campaign-finance violation for trying to funnel money into the re-election campaign of Kentucky Supreme Court Justice Will T. Scott.

A decade ago, two case technicians for the Social Security Administration in Huntington — Carver and Jennifer Griffith — grew suspicious about Daugherty’s blanket approvals for Conn’s clients. They complained to their superiors and ultimately filed a whistleblower lawsuit. In return, they said, their concerns were ignored, and they were harassed by their bosses. The office’s chief judge hired a private investigator to tail Carver and try to videotape her in incriminating acts.

But word of the women’s complaints spread. In 2011, the Wall Street Journal published a detailed story about Conn and Daugherty. That was followed by more news coverage and scathingly critical reports issued by U.S. Senate and House committees. Conn declined to testify at a televised Senate hearing in October 2013, asserting his Fifth Amendment right to not incriminate himself. Adkins pleaded ignorance, saying his background was in vocational rehabilitation.

“When I began performing consultative examinations for disability purposes, I had no idea how the disability benefits determination process worked,” Adkins testified. “I do not now, nor have I ever, denied having signed the RFCs (residual functional capacity forms) when they had been completed by Mr. Conn’s office staff. However, when I did so, I had no idea that doing so was against any type of procedure or accepted standard.”

Daugherty — who retired in 2011, on the heels of the Wall Street Journal story — refused to appear at the Senate hearing. Days later, police in Barboursville, W.Va., found him unconscious in his car in a church parking lot, an empty liquor bottle and an empty pill container at his side. A garden hose was connected from the car’s exhaust pipe to a rear window to flood the passenger compartment with carbon monoxide. Daugherty was hospitalized for an unspecified length of time after the incident.

Many people expected indictments to be handed up after the congressional reports, but nothing happened, said Coburn, the former senator.

“We sent all this evidence we had accumulated to the U.S. attorneys in West Virginia and in that part of Kentucky,” Coburn said. “It was a slam-dunk case. I mean, we had witnesses, we had bank records, we had the medical files, we had everything. But for whatever reason, nobody wanted to move on it.”

Finally, last May, the Social Security Administration acted by telling hundreds of Conn’s former clients that it would cut off their disability checks and redetermine their eligibility. The agency said it suspected that claims Conn submitted for his clients included fraudulent information.

The news sent a shock wave through Eastern Kentucky because disability income is a big part of the region’s economy. In Floyd County, Conn’s home base, more than 10 percent of the population drew disability benefits in 2014 from the federal Supplemental Security Income program.

After a request by U.S. Rep. Hal Rogers, R-Somerset, Social Security officials agreed to continue people’s disability checks while redetermining their eligibility. Those hearings continue.

John Cheves: 859-231-3266, @BGPolitics

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