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April 17, 2017 06:00 PM

SD Consultant Embroiled In $14M in Fines For False Food Stamp Claims

A South Dakota consulting firm is accused of helping states break federal laws.
  
Two states must pay the feds back $14 million for false food stamp claims, after taking the advice of the South Dakota consultant who specializes in the Supplemental Nutrition Assistance Program known as SNAP.   

KELOLAND News Investigates has been looking into Julie Osnes' history with South Dakota's food stamp program and why Virginia and Wisconsin say they will try to recover millions of dollars in fines from her consulting firm. 

Osnes ran the food stamp program in South Dakota for two decades. She now helps other states reduce errors and earn lucrative federal government bonuses. 

Now two states say Osnes encouraged them to use dishonest practices to get those bonuses and they may try to come after her for the money. 

Osnes' bio on her consulting firm website touts her experience running South Dakota's Department of Social Services Food Stamp Program.  

Under her tenure, South Dakota's program had an accuracy rate of more than 95 percent which earned the state millions in extra federal funding over a 16-year-period.

Osnes took her experience to more than two dozen other states.  However Virginia and Wisconsin each face $7 million in fines for putting what the feds call, Osnes' dishonest practices, into effect to gain millions in bonuses. 

The Wisconsin Department of Health Services hired Osnes to reduce the state's error rates with SNAP. 

The feds claim the Wisconsin department discouraged food stamp recipients from cooperating with information requests.  The Justice Department also says they selectively applied requirements and policies to overturn and reduce errors.  Wisconsin social workers also asked food stamp recipients leading questions to get the answers it wanted to reduce errors and took out information on documents sent to the USDA. 


Julie Osnes Consulting got a performance bonus for low error rates in Wisconsin, earning nearly three-quarters of a million dollars during the course of the company's contract. 

In Virginia, the Department of Justice says, Osnes coached social workers to “use whatever means necessary" to find a benefits decision "correct” to earn the government bonuses. 

Virginia Social Services told the feds if it couldn't make a SNAP benefits decision correct, workers dropped the case.  When quality control workers in Virginia complained to their supervisors about Osnes' methods, saying they violated federal law, they faced retaliation and were pressured and intimidated.

 

Both Virginia and Wisconsin have fired Julie Osnes Consulting.
 
While two dozen states used Julie Osnes' consulting only Virginia and Wisconsin are being ordered to pay money back. 

KELOLAND's Angela Kennecke reached Julie Osnes by phone today, but she hung up on her.

She also took down her website. 

However, her attorney Jamie Damon of Pierre later returned the call on Osnes behalf and issued a statement to us calling the Department of Justice news release slander. You can read the full statement below:


In this email DOJ means Department of Justice and JOC means Julie Osnes Consulting.  QC means Quality Control. 

DOJ reached settlements of $7.1 million with Virginia and $6,991,905 with Wisconsin. 

As part of this settlement, DOJ allowed both Virginia and Wisconsin to blame JOC for their apparent misapplication of SNAP Policies and Procedures in the QC Review Process.

The Virginia settlement states, In 2010 Virginia retained JOC to reduce its SNAP error rate.  Virginia claims that JOC trained VDSS QC workers to:

1.    “Use whatever means necessary” to find a case correct rather than finding an error”.

2.    When QC staff could not find a way to make a benefits decision correct, they were instructed to “find a reason to drop the case or eliminate the error from the sample”.

3.    Virginia admitted that JOC’s outcome driven methods “injected bias into the case review process because it was designed to lower the reported error rate by falsifying errors as correct or eliminating them from the sample”   

The Wisconsin settlement states that JOC was contracted in 2008 and that, based on instructions from JOC, Wisconsin implemented several improper and biased Quality Control practices, including:

1.    Finding a basis for dropping error cases from the review by discouraging beneficiaries from cooperating with information requests

2.    Selectively applying requirements and policies to overturn and reduce errors

3.    Asking beneficiaries leading questions to obtain desired answers to eliminate potential errors

4.    Arbitrating any and all differences with USDA.

5.    Subjecting error cases to additional scrutiny with the goal of overturning an error or dropping a case.

6.    Omitting verified information in documents made available to USDA.


Settlements:

Based on this admission, DOJ and Wisconsin agreed that bonuses received in 2009, 2010 and 2011 were bonuses that Wisconsin was not entitled to.

JOC’s response to the allegations is that at no time did JOC recommend review processes or procedures that were outside of established review processes as outlined in the governing document, the FNS 310 Handbook. 

FNS staff rereviewed 100% of all dropped cases from both States and had the responsibility to establish whether any dropped case was a proper drop.  In the event that a dropped case was found to be incorrectly dropped, the case would be returned to the State for further documentation.

JOC objects to DOJ’s characterization of instructions given these two States by JOC.  The statements indicate a total lack of understanding of how the QC Review Process works.  DOJ neglects to acknowledge that approximately 50% of all cases completed by these two States were rereviewed by USDA employees and none of the cases were found to have been biased or improperly reviewed.

As to JOC instructions, at no point did JOC instruct either of these States to go outside of USDA established guidelines and procedures.  At no point in this process did DOJ produce any evidence to support these findings.  In fact, it appears DOJ based their findings on statements from a handful of disgruntled employees in these two States.  This does not support a problem with JOC, but rather an internal personnel issue that was apparently mishandled by the state.  These two states appear to have disputes between the QC line staff and managers. 

States contract with JOC to provide advice on proper QC processes and procedures.  This does not imply that JOC is responsible for individual instructions given by State QC supervisors and Managers to line Staff.  JOC does not control how any State chooses to implement recommendations.

JOC has worked in over 30 States during the past 10 years and has been responsible for helping many States improve their QC review process.  JOC contracted States have been awarded over $200 million dollars.  The DOJ press release attempts to discredit JOC and implies impropriety without proof.  Since the investigation and process were conducted as civil proceedings, JOC did not have a right to refute or even see any of DOJ’s alleged evidence in this case.  The law that was applied to these two cases provides a protection for “whistleblowers”.  The “Fair Claims Act”, also provides compensation to whistleblowers and none of this information was disclosed by DOJ. 

It is JOC’s position that the DOJ press release goes beyond the scope of a normal settlement agreement and attempts to slander JOC by introducing statements and opinions that were never shared with JOC.  It is ironic that JOC is being accused of introducing bias into the State QC Review process when it is the Department of Justice that has conducted an investigation based on hearsay and innuendo and that has not provided any proof that the allegations against JOC are even remotely based in fact.

One might conclude that the mere fact that two States have agreed to settlements is an admission of guilt.  While this might be true for the States, it is not true for JOC.  JOC is being accused of being an accessory to State misbehavior without being given any opportunity to present a defense.  Who is to say that the State(s) did not make enhancements to the JOC model without the knowledge or consent of JOC.  JOC would have no way of knowing this and yet, based on the process used by DOJ, any small business, such as JOC, could be destroyed based on the tactics and methods employed by DOJ in this case.

Out of over $200 million in awards for JOC states, the DOJ is contesting less than 7% as being awarded in error.  JOC would offer that this would mean that 93% of the money awarded States that they consulted with was awarded properly.  Somehow, throwing the baby out with the bathwater does not seem appropriate.  JOC cannot be held responsible for actions taken independently by any state.

JOC is a well-respected company and with a great reputation.  FNS and DOJ have set out to destroy this reputation by civil proceedings which I, as JOC counsel believes were meant to shield USDA & FNS from further embarrassment as the result of the 10/15 OIG Report. 

JOC offers advice.  States are free to use JOC’s advice in any manner they see fit and JOC does not sign off on completed cases.  The only thing JOC can be certain of is that instructions were not given that would have resulted in a State going outside of USDA established standards & procedures.  

As an aside I have known Julie Osnes for many, many years.  She is a person of the highest integrity.  Her business dealings reflect that.   She does not advocate “taking any means necessary” but rather consistently advises states to follow federal regulations and not step beyond them.  JOC cannot speak for state management practices since her work never dealt with a state’s employee performance.  JOC dealt with interpretation of federal regulations and how to apply them to cases under review.




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