Vermont State Auditor Doug Hoffer is not the only one raising questions about Jonathan Gruber’s billing practices.
On Monday Darcie Johnston, head of Vermonters for Health Care Freedom, told Breitbart News that Gruber may have a “phantom billing” problem.
“Jonathan Gruber has failed to provide any evidence that the $80,000 he’s been paid by the state of Vermont for 800 hours of work he claimed was performed by unidentified research assistants was actually performed, or that these research assistants even exist and were paid,” Johnston told Breitbart News.
“There’s a term in health care for the practice of billing for services not provided. It’s called ‘phantom billing,’ and when doctors or health care providers do this, they face criminal charges.”
Johnston’s comment expands the potential number of legal problems which Gruber may face in connection with his lucrative consulting business, from which he earned an estimated $5 million over the past four years in federal and state contracts.
On Friday, white collar criminal defense attorney Brady Toensing told Breitbart News, “if [an] investigation uncovers sufficient evidence that Gruber padded his bills, he could be charged by the state with contract fraud or by the feds with mail or wire fraud.”
Gruber could also potentially face legal troubles under the federal False Claims Act, which allows whistleblowers to file lawsuits as “qui tam” plaintiffs against individuals or corporations that have defrauded the federal government.
To date, Vermont State Auditor Doug Hoffer’s inquiry has not addressed the possibility that Gruber’s receipt of $80,000 for work he claims was done by research assistants may be “phantom billing.”
Hoffer has asked for only the minimal information from Gruber about his research assistants: their names, employment status, and contact information. Gruber has refused to provide this information.
Though Gruber has failed to respond to Hoffer’s information requests to date, Hoffer has subpoena power and could subpoena all of Gruber’s business documents, bank statements, and financial records related to his contract with the state of Vermont. While enforcement of that subpoena would require the cooperation of the Democratic Attorney General of Massachusetts, Maura Healey, the documents it uncovers could turn up a hornet’s nest of trouble for Gruber.
Healey was elected to her first term as Attorney General of Massachusetts in November, defeating Republican nominee John Miller by a 62% to 38% margin, and was sworn in early this month. On Monday Breitbart News asked a spokesperson if the Attorney General’s office would enforce a subpoena in Massachusetts issued by Vermont State Auditor Hoffer for Gruber’s records.
Breitbart News has yet to receive a response to that request.
As part of his inquiry, Hoffer could subpoena Gruber to provide copies of the 1099s or W-2s he provided his research assistants for work performed by them on the state of Vermont contract in 2014. Under federal law, the Internal Revenue Service requires that all employers provide independent contractors who have worked for them in 2014 with 1099s and employees who have worked for them in 2014 with W-2s by January 31, 2015. (This year, that deadline is extended to February 2, 2015, since January 31 is a Saturday.)
Vermont State Auditor Hoffer’s request for information on the employment status of the research assistants Gruber claimed conducted work under his supervision is relevant to the issue of Gruber’s tax reporting responsibilities.
If those research assistants are independent contractors, Gruber’s only tax reporting obligation is to provide them with 1099s, and include copies of those 1099s in his own personal tax filings for 2014.
If, however, the research assistants were employees, Gruber is responsible for paying Social Security and Medicare withholding taxes as well as providing them with W-2 forms.
While Gruber may be an internationally prominent economist with an extensive academic pedigree, his record as a businessman is filled with questions about his billing practices, sloppy bookkeeping, and failure to incorporate his consulting activities into a separate business.
Based on all evidence currently available to Breitbart News, the $5 million Gruber received over the past four years from federal and state governments contracts was paid to Gruber personally, rather than to a corporate entity. Consultants often establish separate corporate entities to prevent co-mingling of funds and allow for clean record keeping, particularly as it relates to federal and state tax payment and reporting.
While it is a common practice and entirely legal for an individual who operates a small consulting business to operate it as a proprietorship rather than to form a corporate entity from which to operate it, it is unusual to operate a consulting business on the scale of Gruber’s without forming a separate corporate entity.
Operating a consulting business of the size of Gruber’s enterprise as a proprietorship run out of a personal bank account can be a tax and record keeping nightmare.
On Friday, Breitbart News confirmed with the office of Massachusetts Secretary of State William Galvin that Gruber, a resident of that state, has not formed a corporate entity of any sort there.
“Jonathan Gruber has not formed any corporate entity in Massachusetts” Brian McNiff, spokesperson for Massachusetts Secretary of State William Galvin, told Breibart News.
“I just checked the corporate database by name and then by last name. There were several people named Gruber, and there are three with the first name of John, but they are not residents of Massachusetts, they are in New York, Washington, and Indiana,” McNiff said.
Breitbart News asked Gruber if he has formed a corporate entity in Massachusetts, or any other state, but has received no response to our inquiries.
In addition to the state of Vermont, the state of Minnesota, the House Government Oversight and Reform Committee have confirmed and the Inspector General’s Office of the Department of Health and Human Services is considering conducting inquiries into Gruber’s billing practices and consulting contracts.
To date, there are no press reports indicating that any one in the Department of Justice or the Internal Revenue Service is investigating Gruber’s contracts and billing practices.
With regards to qui tam plaintiff claims under the federal False Claims Act, such claims could potentially be brought in connection with Gruber’s 2009 contract with the Department of Health and Human Services for $392,600, where, as Breitbart News has documented, at least one of his research assistants was paid by the National Bureau of Economic Research (which was not party to the contract), rather than by Gruber himself.
In the case of Gruber’s state contracts, a federal False Claims Act suit from a whistleblower would face a higher hurdle, unless the qui tam plaintiff could prove that the state contract was funded substantially by a grant from the federal government.