Super PACs find a friend in LLCs

he says. Medicare also fingerprints some applicants and makes unannounced site visits to providers’ and suppliers’ offices to weed out scammers.

The money made off Medicare fraud is often beyond the government’s reach, because it’s rapidly spent or hidden in offshore accounts. Even when cheats are caught, the chances are “you will hardly recover anything of the funds you paid out,” says Seto Bagdoyan, director of audit services for the U.S. Government Accountability Office (GAO), which has issued reports critical of CMS’s failure to snag sham enrollees.

The U.S. has recouped only $1 million in the Nicaragua case. When the defendants were arrested last October, one was leasing six new Mercedes-Benz sedans and living in a 14,000-square-foot Miami mansion, according to investigators. Only one of the 11—the son of the Managua doctor—reported significant assets, about $429,000 in a bank. Four told the court they couldn’t afford lawyers. Eight cooperated with the investigation, according to the U.S. Department of Justice. Six have already been sentenced and received prison terms ranging from 15 months to four years.

The scammers primarily enrolled people into a Medicare Advantage Plan run by Coral Gables-based Florida Healthcare Plus, which was liquidated earlier this year. Health-care companies that sell Medicare Advantage Plans for the government are paid a fixed rate each month for every member, giving them an incentive to enroll as many as possible and keep the cost of treatment low. At Florida Healthcare Plus, former Chief Operating Officer Pedro Hernandez decided to enroll former U.S. residents living in Nicaragua and the Dominican Republic, where health care is cheap, according to the indictment. Five other employees at the company were also charged. A lawyer for Hernandez declined to comment.

The company’s Medicare contract covered just a few Florida counties, so recruiters told prospective patients they couldn’t get the free medical care without an address in one of the counties. Along with the bus ads, Nostrum and other clinics in Managua drummed up interest with full-page newspaper ads and informational sessions at local hotels. (The clinics weren’t charged in the fraud.) American expats who saw the promotions, which promised care with no copays, tipped off U.S. Embassy officials. Investigators discovered that recruiters collected commissions of as much as to $300 for every enrollee. One man who’d been living in Managua since 2002 told U.S. agents he was instructed to use his nephew’s address in Lake Worth, Fla.

In June, the GAO found that Medicare providers had registered about 24,000 patients at suspicious addresses. They included P.O. boxes at privately run mailing-services stores and a fast-food restaurant. “It’s still an ongoing challenge,” says Peter Budetti, who oversaw fraud investigations at CMS until 2013 and is now an attorney at Phillips & Cohen in Washington. “Bad guys are always trying to find new ways to game the system.” —David Armstrong

The bottom line Florida health-care companies illegally billed the government $25 million for services to people in Nicaragua.

Campaign Finance Another Way to Mask Super Rich Donors

LLCs that contribute to campaigns aren’t required to disclose backers

“You have every right to do everything you want with your money” In January, Ted Cruz’s quest for the presidency got help from a limited liability company called V3 231. The LLC was listed as the source of a $250,000 donation to a super PAC supporting the conservative Republican senator from Texas. For anyone wondering what V3 231 is, or who controls it, there were few clues. A lawsuit filed in federal court mentions the company once owned a hotel in Brooklyn, N.Y. A search on the Internet reveals the name of the hotel’s now defunct developer. One of the developer’s former executives, reached on his mobile phone, says another man controls the LLC. That guy’s name, the former executive says, is Ben Nash.

Nash was a 17-year-old yeshiva student from Brooklyn when he discovered a knack for selling cell phones. He dropped out of school and eventually made a fortune reselling used or surplus phones. His company, PCS Wireless, is targeting $1 billion in sales this year, according to Business Insider. Now 32, Nash has grown wealthy enough to dabble in Brooklyn real estate and philanthropy. He picks up the phone right away when reached at his headquarters in suburban New Jersey. He allows that he had dinner with Cruz a few months back, but he says he doesn’t think he gave the candidate as much as $250,000. “We give to a lot of charity over here,” he says. He ends the call promising to investigate. “I do want to check, for my own personal interest.”

The next day, Nash’s spokesman, Robert Barletta, confirms that Nash was behind the $250,000 donation. In an e-mail, Barletta calls the donation “transparent and fully within federal campaign finance laws” and motivated by Cruz’s support for Israel.

When the Supreme Court ruled in 2010 to end a ban on corporate spending to influence elections, detractors envisioned an era when huge companies like Wal-Mart Stores or ExxonMobil would dominate politics in pursuit of profits. The reality is proving far different. Most business donations are coming from little-known LLCs whose founders and officers often don’t have to be disclosed anywhere. In a few cases, it’s so difficult to identify the source that the donations might as well be anonymous.

That alarms groups worried about the influence of money in politics. “When we’re talking about these huge contributions, it’s a way to buy corrupting influence without any public accountability at all,” says Fred Wertheimer of Democracy 21, a Washington nonprofit. Since 2012, Democracy 21 and the Campaign Legal Center have filed four complaints with the Federal Election Commission challenging big donations through LLCs. The commission is deadlocked along party lines and has yet to take any action.

Some lawyers say closing the LLC loophole would require legislation. “I would advise a donor that you have every right to do everything you want with your money,” says Dan Backer of DB Capitol Strategies in Alexandria, Va. “If that LLC chooses to make a contribution, that is the right of that LLC.”

Donors seeking anonymity can also give to nonprofit advocacy