Memorandum
From: U.S. Representative Debbie Wasserman Schultz (D-FL20), Chair, Democratic National Committee
To: Interested Parties
Date: January 27, 2012
Re: Romney’s Involvement in Damon Corporation’s Medicare Fraud
Mitt Romney has staked his entire candidacy on the rationale that his private-sector experience makes him uniquely qualified to handle the economic challenges facing our nation. But the more voters learn about his time at Bain Capital, the more they learn that his private-sector experience was less about creating jobs and more about making profits at any cost.
We already know that at Bain Capital, Romney and his partners made hundreds of millions of dollars by closing more than a thousand plants, stores, and offices, laying off American workers and outsourcing their jobs to other countries, and taking companies they acquired into bankruptcy for their own profit. This reality of Romney’s private-sector experience is greatly at odds with his rhetoric of being a job creator and greatly at odds with what the American people are looking for in their elected leaders.
Now, as Romney campaigns across Florida, including courting voters in my congressional district, he must answer troubling questions about his time as a board member at Damon Corporation, a medical testing company that was fined more than $119 million in criminal and civil fines for a large-scale Medicare defrauding scheme, and his debunked story about his role in uncovering and reporting the fraud to federal investigators.
Unfortunately, Medicare fraud is an all-too familiar issue for Florida voters. In addition to being one of the states hardest hit by Medicare cost increases due to fraud, they’re now seeing the consequences of electing Rick Scott, a former hospital executive who has been described as the “Madoff of Medicare.” In 1997, Scott was forced to resign as the CEO of Columbia/HCA after the company was found to have carried out the worst Medicare fraud in U.S. history. As our governor, Scott has consistently put corporate profits before priorities like education and job creation and is paying for it with an approval rating of just 26 percent.
On behalf of my constituents in Florida’s 20th District, many of whom have already paid the price for Medicare fraud, I believe that Mitt Romney must provide answers to his involvement in the Damon Corporation case—what he knew about the fraud being carried out, why he falsely claimed to have stopped it, and why he failed to notify federal investigators and shareholders about the company’s illegal activities.
Damon Corporation: “Corporate Greed Run Amok”
After Bain Capital acquired Damon Corporation in 1990, Romney sat on the company’s board until 1993, when Bain Capital sold Damon to Corning Inc. Romney personally made $473,000 off the sale and Bain Capital tripled its initial investment, making a profit of $7.4 million over a four-year period for its investors.
Just three years after Romney and Bain Capital cashed in on this sale, Damon Corporation pled guilty to a federal conspiracy charge of defrauding Medicare of $25 million. The Boston Globe laid out Damon’s elaborate fraud scheme:
“Damon defrauded the government, according to court documents, with a system known as Labscan. Labscan performed a series, or ‘panel,’ of blood tests for a flat fee, which was charged to Medicare. But the forms that doctors were given to order tests from Damon also included tests that were not covered by the fee. By checking the box for a panel of tests, doctors unwittingly ordered tests that were unnecessary and cost the Medicare program millions of dollars. Damon induced the doctors to order the special tests, saying they would not have to pay for them, the government said.” For this fraud, Damon was forced to pay a record $119 million in civil and criminal fines. The $35.3 million criminal fine that Damon paid was not only the largest criminal fine ever levied in Massachusetts, but it was also the largest criminal fine levied in a Medicare fraud case.
"Then U.S. Attorney Daniel Stern characterized Damon’s fraud “a case, pure and simple, of corporate greed run amok.”
Romney’s Problem with the Truth at Damon Corporation
Just as troubling as Damon Corporation’s criminal misdeeds are Mitt Romney’s conflicting stories about what he knew about Damon’s fraudulent activities and whether he acted to stop them.
During his 2002 run for governor, Romney told reporters that, while sitting on the board of Damon Corporation, he “blew the whistle” and “put in place a program to stop [the fraud] immediately.” His story was backed up by his spokesman Eric Ferhnstrom, who said that Romney “acted to uncover the fraud at Damon.” [Boston Globe, 10/25/02; Associated Press, 10/10/02]
Despite making these claims repeatedly, Romney was unable to provide any proof that he took any action to put a stop to Damon’s fraud. In fact, court records show that Damon’s fraudulent activities persisted until Corning Inc. put a stop to them and even then-U.S. Attorney Donald Stern said that there was no proof that Romney did anything to alert investigators of the company’s illegal actions.
After Romney’s claims to have been a whistle-blower were proven false, he backtracked on his story, saying that his firm had hired a law firm to look into suspicious activities, but had never notified federal investigators of their findings. And in 2007, his campaign aides went a step further by insisting that reporters mischaracterized his claim to have blown the whistle on Damon’s fraud in the first place.
Medicare Fraud: Bad for Florida Seniors
Today, 48 million people rely on Medicare for the medical treatments and prescription drugs they need to stay healthy – including 3.4 million Floridians. But Medicare fraud costs the taxpayers billions of dollars every year. The most recent estimates suggest that Medicare made $48 billion in improper payments in FY2010, as criminals defrauded taxpayers and took advantage of vulnerable seniors.
Florida has been particularly hard hit by Medicare fraud; for example, in Miami-Dade County, costs for home health care increased 1,300% in just six years due largely to fraudulent billing. Because it drives up overall costs, criminal activity means higher premiums and copays for people with Medicare. Whether they were billing for services they never provided and patients they never saw, or providing illegal kickbacks to providers, those making fraudulent charges enrich themselves by increasing costs for Medicare beneficiaries.
What Damon Means for Mitt Romney
Mitt Romney’s experience with Damon Corporation—from profiting off of Medicare fraud to misleading the public about his role in uncovering the fraud- underscores troubling questions about Romney’s record of seeking profits at any cost and saying anything to get elected. Romney has repeatedly claimed that his success in the private sector has been—and would continue to be—an asset for the country, but it’s increasingly clear that Romney’s success came through questionable means at the expense of hardworking taxpayers. Laying off workers, defrauding Medicare, bankrupting companies, and storing millions of dollars in notorious off-shore tax havens may have brought Romney success as a corporate raider, but these aren’t the qualities that would serve America’s middle class families well.
Along with his persistent dishonesty with voters about everything from his voting record to the number of jobs he “created” at Bain Capital, his false claim that he acted to stop Medicare fraud occurring under his nose at Damon Corporation shows that he simply cannot be trusted to level with the American people.
