Miami forensic accountant - Rachlin Fraud on the Fraud...incredible

A federal judge has sharply criticized a Miami forensic accountant overseeing a massive forfeiture stemming from a health care fraud, saying she placed her firm's financial interests ahead of her role as court-appointed receiver.

U.S. District Court Judge B. Avant Edenfield in Savannah, Ga., also criticized Miami-based Rachlin, saying the firm purposely refused to file tax returns until it was paid, racking up fines and penalties.

Marta Alfonso, a partner in the firm's advisory services division, was appointed receiver after Edenfield ordered convicted officials of Miami-based Bio-Med Plus to pay forfeiture, fines and restitution following their convictions for bilking state and federal agencies on expensive AIDS and hemophilia treatments that were never administered.

Alfonso became involved in the case early, testifying as a defense expert, and made the unusual transition to receiver. She did well, recovering $54.1 million thus far on the forfeiture order.

She hired Miami attorney Thomas Tew, one of Tew Cardenas' name partners, as her lawyer in the receivership and farmed out the tax services to her firm.

Alfonso ran into trouble with the judge after filing an emergency motion Feb. 4 to pay Rachlin. The motion was filed after a court-appointed monitor overseeing the forfeiture refused to pay the bill for tax preparation. The monitor cited cost overruns and late filings.

Alfonso told the court that Rachlin should be paid $191,354, of which $127,397 is outstanding. The monitor had set a $76,500 budget cap for the tax returns prepared by Rachlin.

In an April 7 order to show cause, Edenfield said that Alfonso demonstrated a clear conflict of interest by lobbying the monitor on behalf of her firm. "The receiver's conflict has burdened the receivership not only by enabling an excessive budget overrun and the incurrence of unnecessary expenses, but also by causing additional receiver's fees, monitor's fees and attorney fees," the judge wrote.

The judge issued the order after asking both the receiver and monitor to file detailed explanations. Edenfield said the monitor's response was supported by affidavits and other documentation while the receiver's filing by Tew Cardenas attorney Dennis Nowak "was both untimely and unresponsive."

A call to Rachlin for comment was not returned by deadline.

Alfonso is a salaried Rachlin employee who does not share in the firm's profits. She did not return phone calls for comment.

In his order, the judge noted that Alfonso defended her firm, acknowledging mistakes may have been made but saying it was an internal Rachlin issue. She also said the services were reasonably priced even though invoices were $100,000 over budget and late.

Speaking on her behalf, Tew said this is the first dispute between Alfonso and the monitor in three years since she was appointed. He said the receivership would respond to the show cause order by Friday.

Tew said it is commonplace for receivers to tap their own firms for tax services.

Attorneys who are appointed receivers regularly hire their own firms as legal counsel.

"There has been no wrongdoing," Tew said. "We do not believe there is a conflict."

The judge set a hearing for next Tuesday, April 21, so Alfonso can show cause why she should not be removed as receiver and why the court should not seek to recover any wasted assets.

Rachlin bills itself as one of the largest independent public accounting and advisory service firms in the Southeast with 25 partners and more than 225 professionals in South and Central Florida.

Bio-Med Plus was a medical supply company based in Miami and Savannah with about 100 employees. It was acquired by Novis Pharmaceuticals in 2007 after three top Bio-Med officials were accused of cheating users of life-saving blood products. The officials were prosecuted for health care fraud in Georgia, Florida and California.

In his order, Edenfield chastised Alfonso for submitting several bills from Rachlin, ranging from $98,992 to $171,379 for the same tax services. Rachlin filed late tax returns for the receivership for 2006 and 2007, incurring $231,226 in interest and penalties.

The monitor, Madison Associates of Woodbridge, Va., raised questions about the bills after a routine review from April through mid-September 2008.

"Through e-mails, memoranda, revised, re-revised and thrice-revised invoices, the receiver and Rachlin offered a stream of unresponsive and obfuscatory answers to the monitor's inquirers reminiscent of the 'Who's on First?' Abbott and Costello comedy routine," Edenfield wrote in his order.

In a series of e-mails last year, Alfonso declared "we have been paid nothing" for the 2007 tax services after giving blanket approval for a series of misstated and miscalculated Rachlin invoices. She later conceded invoices had been paid, Edenfield said.

Edenfield concluded Rachlin did little from April to July 2008.

"This inactivity suggests that Rachlin negligently allowed late penalties and interest to accrue while it waited for the receiver's collection of its fees in excess of the [$76,500] cap," Edenfield wrote.

The monitor suggested last September that an outside arbiter be engaged in resolving the conflict over the tax return issue with Rachlin, but Alfonso declined the recommendation, the judge's order said.

Alfonso proposed an independent review earlier this month of Rachlin's work to render an opinion on reasonable fees, Tew said.

Edenfield responded in his order, "The opportunity for such review, however, has come and gone."