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Lawyer in alleged multimillion dollar disability fraud remains in jail

An attorney accused of conspiring with a former judge and doctors in an alleged multimillion dollar disability fraud must remain in jail until a decision is made whether he is a flight risk.
  
Eric Conn appeared in a federal court in Kentucky on Thursday following his arrest earlier this week. Prosecutors want him to stay in jail until the trial.

The 55-year-old Conn is accused of being a central figure in a conspiracy to deliver $600 million in improper benefits to about 2,000 claimants in eastern Kentucky coal country.

 This was “irrespective of the claimants’ actual entitlement to benefits,” according to a statement by the U.S. Justice Department.

The alleged scam netted Conn more than $5 million from the Social Security Administration, a portion of which he passed on to two co-defendants also charged with fraud, according to an indictment against the three men.

Former administrative law judge, David Black Daugherty, 81, of Myrtle Beach, North Carolina, and clinical psychologist, Dr. Alfred Bradley Adkins of Pikeville, Kentucky, face fraud and other charges. Both have been charged and released.  Two other doctors, and one other individual, appear as co-conspirators in the indictment but have not been charged.

Conn and Adkins would produce the paperwork needed for claimants, who were then directed to Daugherty, who signed off on the benefits, the indictment states.

 At the detention hearing Thursday in the U.S District Court in Lexington, an FBI agent said Conn told half a dozen employees that he was not going to jail and would flee the United States.

Agent Mary Trotman told the court the primary bank account for the attorney’s firm, the third largest disability law firm in the country, received $44 million in deposits from 2005 to 2015, of which $23 million came from the Social Security Administration, according to a report in the Lexington Herald Leader.

In addition, Conn travels abroad often and has sent hundreds of thousands to foreign countries, the agent said, adding he also might try to influence the trial as he already faces charges of destroying evidence and interfering with witnesses.

Defense lawyer Abbe Lowell asked Magistrate Judge Robert E. Weir to release his client, claiming Conn traveled but always returned to Kentucky. Lowell said Conn’s business fortune was earned honestly.

Daugherty, Conn and Adkins were charged April 1 with conspiracy to commit mail and wire fraud. The 18-count indictment was unsealed Tuesday. Conn also faces charges of obstruction, making false statements, money laundering, and structuring bank withdrawals to avoid triggering an automatic report to federal authorities. A total of $9,500 was withdrawn every month to be paid, in part, to Daugherty.

But the case is notable as the indictments were handed down 10 years after suspicions were first raised about Conn’s activities, and his relationship with Daugherty. Concerns were raised within the SSA offices in Huntington, West Virginia, where Daugherty was based.

 And the charges come three years after a congressional investigation, hearing and report into what was happening in the heart of the Appalachians.

 A scathing report by the Senate Homeland Security and Governmental Affairs Committee found that Daugherty awarded what would amount to $2.5 billion in benefits in the last years of his career.

Over a nearly seven year period, from 2005 to his retirement in mid-2011, Daugherty awarded disability benefits to 8,413 individuals, according to the congressional report.

The judge was prolific in the number of claims he signed off on. This was despite his work schedule. Often, the report detailed, the judge would turn up for work at the SSA offices in Huntington, West Virginia, just to sign in for the day, then leave. He would return to the office at the end of the work day to sign out, then go home.

Former Sen. Tom Coburn, of Oklahoma, a ranking member of the committee, has consistently called for prosecutions, and has criticized the Department of Justice in the past for failing to act.  

The U.S. Attorney for West Virginia earlier declined to prosecute the case, and the decision to finally move comes just before the five year statute of limitations. It came after an assistant U.S. Attorney was brought in from Kansas to lead the prosecution.

But it is also notable that the disability benefits of 900 of Conn’s clients - in one of the poorest areas of the country - were cut off last year as the investigation into his activities heated up once again. Two committed suicide before the benefits were restored, although reviews of the cases will be carried out.