State

This judge helped Eric Conn steal millions. Now he’s headed to prison.

Former Social Security Administrative Law Judge David Daugherty walked into the Federal Courthouse in Lexington, Ky, on April 19, 2016.
Former Social Security Administrative Law Judge David Daugherty walked into the Federal Courthouse in Lexington, Ky, on April 19, 2016. palcala@herald-leader.com

A former administrative law judge was sentenced Friday to four years in prison for taking more than $600,000 in bribes during the largest fraud in the history of the Social Security program.

David B. Daugherty, 81, was charged with Eric C. Conn, the flamboyant Floyd County lawyer who built one of the nation’s largest federal disability practices before it crashed down amid charges that he cheated to help clients get benefits.

Daugherty apologized for his illegal conduct and asked U.S. District Judge Danny C. Reeves to not send him to prison right away, saying he needed to help his 80-year-old wife prepare financially and emotionally for his absence.

Reeves turned him down, noting Daugherty pleaded guilty three months ago.

“You’ve had all summer to prepare for this,” he told Daugherty.

Reeves also said Daugherty tried unsuccessfully to kill himself after he pleaded guilty, and that he didn’t want to give Daugherty another opportunity to try suicide.

Reeves ordered Daugherty taken into custody immediately after sentencing him. An officer took him from the courtroom in handcuffs.

The judge also sentenced Daugherty to be on supervised release for a year after he finishes his prison sentence and to perform 200 hours of community service in that time.

Reeves ordered Daugherty to pay $93.8 million in restitution to the Social Security Administration and to the Medicare and Medicaid programs to make up for the benefits he awarded improperly, though he said it’s unlikely Daugherty will pay even a fraction of that amount.

Daugherty is also supposed to pay the government $609,000 under his plea deal.

Daugherty, who now lives in Myrtle Beach, S.C., became a federal administrative law judge in 1990. His job was to rule on requests for disability benefits.

He worked in the Huntington, W.Va., office. Judges there heard cases from Eastern Kentucky, where Conn represented thousands of people.

The two took part in a long-running scheme in which Conn submitted false documentation of his clients’ physical and mental problems to justify their claims, and Daugherty took bribes from Conn to award benefits.

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

Daugherty admitted that 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.

Conn made payments to Daugherty from October 2004 to April 2011, according to a court document. Daugherty awarded benefits to people represented by Conn in more than 3,100 cases during that time, according to his plea agreement.

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 cases in which Conn bribed him would have obligated the government to pay more than $550 million in lifetime benefits, the court document said. The scheme came to light before the government paid all those benefits, however.

Daugherty retired abruptly in 2011 after federal authorities began investigating.

Conn pleaded guilty to submitting false information to Social Security and to making illegal payments to Daugherty.

He was on home detention awaiting sentencing when he absconded June 2, cutting the electronic monitoring device from his ankle and disappearing.

The FBI released video of Conn taken at two stores in New Mexico soon after, but has since said there is no new information to release about the search. He was sentenced to 12 years in prison in absentia last month.

A third man charged with Conn and Daugherty, Pikeville psychologist Bradley Adkins, was convicted of signing false mental-impairment evaluations for Conn to use in disability claims.

He is awaiting sentencing.

The sentence for Daugherty under advisory guidelines ranged from six years and six months to eight years and one month, based on factors such as the amount of money involved in the fraud.

However, the maximum sentence on each of the two charges on which he pleaded guilty — taking illegal gratuities — was two years, for a total of four.

Prosecutor Elizabeth Wright said the government took Daugherty’s age and health problems and other factors into account when negotiating the plea with Daugherty, and felt the sentence was appropriate.

Reeves disagreed, saying the sentence he was limited to imposing based on the charges in Daugherty’s plea was not adequate. He called it a “sweet deal” and noted that Adkins pointed to Daugherty as the main culprit in the fraud.

“It’s not anywhere near an appropriate punishment,” Reeves said.

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