February 08, 2008

D.A. Announces Multimillion-Dollar Child Care Fraud Ring

LOS ANGELES – District Attorney Steve Cooley announced today that more than 50 people have been charged in a massive child care fraud ring that, in part, was run out of federal prison by a convict serving a narcotic trafficking term.

Taxpayers have lost at least $3 million to the fraud and Cooley said the Legislature and other federal, state and local government leaders must adopt measures to prevent the continued looting of the public treasury by crooks.

Cooley said in a prepared statement that he for years urged changes in subsidized child care programs. The Los Angeles County Grand Jury and the Economy and Efficiency Commission in 2006 adopted many of his recommendations. Implementation has lagged.

“Multibillion-dollar programs such as subsidized child care must have an integrity component,” the District Attorney said. “Not enough is being done at the federal, state and local levels to protect taxpayer money.

“There needs to be more scrutiny of who is licensed,” Cooley added. “For a convicted felon to get a license – much less perpetrate the fraud while in prison and continue the fraud while on parole – illustrates this point painfully.”

Cooley noted that the county Department of Public Social Services (DPSS) led by Philip L. Browning, director, was instrumental in the investigation that led to the charges filed against 55 individuals. The case – which involves five separate criminal complaints -- is believed to be the largest child care fraud filed to date in the nation.

Although the District Attorney was largely critical of lack of government response to recommendations to prevent fraud in publicly funded child care programs, he praised Supervisors Don Knabe and Michael D. Antonovich for their efforts to prevent fraud. Knabe sponsored legislation to fight child care fraud. Antonovich was instrumental in establishment of a North County team of District Attorney investigators funded by DPSS who work with other task forces to combat public assistance fraud.

The North County team put together the current case, Cooley said. It took the lead as dozens of investigators with the District Attorney’s Bureau of Investigation fanned out throughout Los Angeles County early today to arrest those named as defendants in the case.

Assistant Head Deputy District Attorney James Baker of the Welfare Fraud Division coordinated filing of the multiple cases. Prosecution will be by Deputy District Attorney Tamia Hope.

Among those named in the complaints are:

Demetrius Eugene, 36, (dob 10/25/71) a former employee of the California Department of Corporations, is named in four of five complaints filed. Eugene, of Palmdale, allegedly established six bogus childcare facilities under the name Home Sweet Home Day Care Inc. It is further alleged that he set up family members and friends as purported childcare providers for each business.
Kmond Day, 32, (dob 02/24/75), a Los Angeles man who received his child care license from Community Care Licensing, a state agency. Very shortly after he was licensed, Day was sentenced to a federal prison term for drug trafficking. His wife, Darneicea Day, 28 (dob 11/17/79), an employee at Community Care Licensing, ran the child care operation during his absence. Upon his release from prison, Kmond Day resumed his alleged fraudulent enterprise despite the recent felony conviction. Darneicea Day is charged as a co-conspirator in operation that received more than $400,000.
Evelyn Wade, 62, (dob 12/16/45) and Eric Devon Wade, 35, (dob 11/12/72) of Los Angeles, a mother and son, allegedly operated Grandma and Grandpa Family Child Care, along with the business Alliance Capital Group. Prosecutors allege that Alliance Capital was used to verify the employment of parents along with investing the ill-gotten gains.
Head Deputy District Attorney James Cosper of the Welfare Fraud Division said Eugene and his associates baited welfare recipients with monetary kickbacks, prompting these individuals to apply for subsidized childcare. Eugene and his cohorts allegedly falsified paperwork to create the illusion that these people were employed by Home Sweet Home Day Care as maintenance workers, Cosper said. But authorities believe no legitimate childcare or employment ever existed.

Investigators found that most of the homes serving as childcare fronts were licensed for 14 children, but were only large enough to accommodate six. Furthermore, investigators discovered that, in some instances, children who were allegedly being cared for by Home Sweet Home Day Care providers did not reside in the state.

Cosper said the scheme was operated from an office at 2050 W. Florence Ave. in Los Angeles, where parents receiving aid allegedly signed attendance sheets and picked up kick-back checks.

Parents on the Home Sweet Home Day Care payroll – 70 percent of whom admitted to knowing about the scheme – received roughly $300 per child and were assigned titles based on the number of children reported. For instance, while one child earned parents the title of Maintenance Worker I, four or more children earned parents the title of Supervising Maintenance Worker.

Subsidized child care funds given to welfare-to-work candidates are disbursed by DPSS and the California Department of Education. While DPSS-funded child care agencies are subject to audits, programs funded by the California Department of Education get little oversight. Consequently, the largest child care fraud losses are attributed to state programs.

Like Cooley, Supervisor Knabe has continually lobbied in Sacramento for decisive action on this issue. In 2006, Supervisor Knabe sponsored Senate Bill 1421 (Margett) to address fraudulent activity in child care programs. The bill, which called for a pilot program in Los Angeles County that would test strategies to mitigate child care fraud in state-funded programs, received strong bipartisan support but never got to the floor for a vote.

It did, however, lead to the passage of Senate Bill 84 (Ducheny) which called for a best-practices study, due back by September 2008, for the prevention, detection, and investigation of improper payments and fraud in all subsidized child care programs.

“During these tough budgetary times, it is critical that government put an immediate stop to public assistance fraud,” Cooley said. “We investigate and prosecute hundreds of cases each year, but by the time they reach that stage, the damage is done.”

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For more information on federal criminal defense law, contact the Law Offices of Joseph Shemaria of Los Angeles, California.