Ex-judge admits taking $609,000 in bribes in Conn disability fraud

Former Social Security Administrative Law Judge David Daugherty.
Former Social Security Administrative Law Judge David Daugherty.

A longtime Social Security Administration judge took more than $609,000 in bribes in less than seven years to award disability benefits to thousands of clients of well-known lawyer Eric C. Conn, the former judge admitted Friday.

David Black Daugherty, 81, pleaded guilty in federal court in Lexington to two felony charges of accepting illegal gratuities.

The charges carry a maximum prison sentence of four years.

Prosecutors and Daugherty’s attorney agreed that the maximum sentence would be appropriate, though that will not bind U.S. District Judge Danny C. Reeves at sentencing in August, according to the plea document.

Daugherty also agreed to pay the government a judgment of $609,000 as part of his plea.

Conn has also pleaded guilty. He is scheduled to be sentenced in July.

Court documents in the case describe an extensive, long-running scheme by the two to defraud the federal government of disability payments.

Daugherty, who now lives in Myrtle Beach, S.C., became a federal administrative law judge in 1990. His job was to decide appeals in cases where benefits had been denied.

He worked in the Huntington, W.Va., office, which heard appeals from Eastern Kentucky.

That’s where Conn built a practice as one of the top disability lawyers in the nation, promoting himself on television and on billboards.

Conn was flamboyant, working out of an office complex made of five connected mobile homes in Floyd County with a 19-foot-tall statue of Abraham Lincoln out front. He once put a Miss Kentucky USA on the payroll for $70,000 a year as his public relations director.

But Conn admitted he cheated to win, falsifying medical documents to show clients were disabled and paying doctors to sign the evaluations.

Daugherty then arranged for Conn’s cases to be assigned to him — taking files off other judges’ desks in some cases — and rubber-stamped the claims.

Conn said Daugherty told him in October 2004 that his decisions were making Conn a lot of money and asked Conn for $5,000 to pay for addiction treatment for a family member.

Daugherty confirmed that account in his plea Friday.

Conn began paying Daugherty monthly after that.

One of the charges covered in Daugherty’s plea was for cash he took in Floyd County. The other was for bribes he took in Lawrence County, where he met Conn in a parking lot in Louisa from 2006 through 2011 to take cash.

That was after Daugherty stopped bothering to come to Prestonsburg to hear Conn’s cases, instead deciding them without holding hearings.

Daugherty said he called Conn to tell him which cases were coming up on the docket and whether he needed to submit evidence of physical or mental impairment.

From October 2004 to April 2011, Conn made a payment to Daugherty for each favorable decision Daugherty made awarding benefits to a client of Conn.

Daugherty awarded benefits to people represented by Conn in 3,149 cases during that time, according to a court document.

For Conn’s part, he received at least $7.1 million in attorney fees from the Social Security Administration in cases involved in the scheme.

Daugherty’s decisions in those cases would have obligated the government to pay $550 million in benefits, the court document said.

The government actually paid $46.5 million to people that the agency has determined were not eligible to receive before the scheme came to light, according to a document in Conn’s case.

Daugherty retired abruptly in 2011 after federal authorities began investigating. Whistleblowers in the Huntington office had raised red flags about Daugherty and Conn for years.

The Social Security Administration abruptly notified hundreds of Conn’s former clients in May 2015 that it was cutting off their benefits because of suspicions that fraudulent information had been used in their claims, and said it would redetermine whether they would remain eligible.

The move was a blow in Eastern Kentucky, where disability income is a significant part of the economy.

The agency decided not to cut off checks during the re-determination process after Republican U.S. Rep. Hal Rogers interceded.

However, it has gone ahead with the re-determination hearings.

The agency ultimately identified about 1,500 beneficiaries, most of them in Eastern Kentucky, for re-determination hearings, said Prestonsburg attorney Ned Pillersdorf, who led an effort to find attorneys for the people.

When Conn pleaded guilty in March, Pillersdorf said many of the hearings were over and a little less than half the people won decisions to keep their benefits.

That meant about 800 people lost money they depended on, Pillersdorf said, calling it a “humanitarian crisis.”

The people can appeal.

Conn faces up to 12 years in prison. He also agreed to pay the government $5.7 million and pay $46.5 million in restitution to the Social Security Administration.

Charges remain in a case against Pikeville psychologist Alfred Bradley Adkins, who allegedly signed false mental-impairment evaluations of Conn’s clients. Adkins has pleaded innocent.