FBI Begins to Tap a Valued Resource: Retired Agents

It was 1973, and the kidnapper had a shotgun to his throat. FBI Agent Joe Chefalo wanted a straight answer: Where was the kidnap victim?

Chefalo was as tough as they came back then, a member of the bureau’s first SWAT team. He got the answer he wanted, and the victim was found unharmed.

Almost 30 years later, Chefalo was in a doctor’s chair in a phony medical office in Encino, pretending to have trouble with his arteries.

He had retired early from the FBI in 1988, and now he was 64. But he had come back with 250 other retired agents to help out in a massive undercover Medicare fraud investigation called Durascam.

As part of the biggest crackdown on health-care fraud in California history, the FBI had set up its own “wellness clinic,” calling it Western Comprehensive Care.

In the process, it had created a new chapter in bureau history, using ex-agents in a way they had never been used before and possibly creating a model for future operations.

Within the FBI, the expanded use of retirees represents a fairly revolutionary change in thinking. Ex-agents have always been used on a paid contract basis for routine background checks and other tasks, but major undercover investigations come as new territory.

In the Medicare fraud investigation, all of the ex-agents, and sometimes even their wives, were posing as patients in need of diagnostic tests. Diagnostic labs and medical supply firms that regularly visited the clinic would later frequently urge the purchase of unnecessary equipment for the patients, such as wheelchairs or braces. They often promised kickbacks to FBI agents posing as clinic workers.

The undercover operation lasted two years, part of a larger statewide fraud crackdown that resulted in almost 400 arrests. Durascam alone produced two dozen arrests, and more than 100 other suspects remain under investigation. FBI agents posing as clinic doctors were given $180,000 in kickbacks by diagnostic firms to prescribe such unneeded durable medical equipment as wheelchairs, oxygen concentrators and body braces.

Chefalo’s role was small. He was called in for tests at the clinic a few times from his home in Newhall. It was a way to help the bureau, and it was fun to be back in action. Ironically, a real doctor working for the FBI thought he spotted a real circulation problem and suggested that Chefalo take some extra tests, but it turned out to be a false alarm.

He didn’t think much about it, but there was already talk that Durascam might turn into a model for future investigations.

Agent Daniel M. Martino had come up with the idea. He was in charge of health-fraud operations in the Los Angeles area. And he had always seen the Society of Former Agents of the FBI as an untapped resource. So he went to them and asked for volunteers.

“They were unbelievably eager to do this,” Martino said. “We needed a cadre of people we could trust. And who better than ex-agents? We had hundreds volunteer, and they all did it for free.

“There’s no question in my mind that we will be calling on them again in future investigations.”

Ex-agents were not always welcomed back so readily. After Sept. 11, hundreds of them called to volunteer their services for anything that might be needed--answering phones or helping out with menial chores to free active agents up. There were some hurt feelings when most of the offers were turned down. But many ex-agents understood.

“Certainly there was some volunteerism and a lot of patriotism,” said Jack Keller, a past head of the ex-agents association in Los Angeles. “They did pick up a few people with real expertise in terrorism. But I can tell you the bureau didn’t really need most of us. We just get in the way unless some real expertise is called for.”

Since Sept. 11, however, the FBI has changed its thinking on ex-agents. The Justice Department recently gave the FBI authority to hire agents back in support positions, waiving dual compensation rules on retirement pay that had blocked the practice in the past.

“We are looking for opportunities to do some of this hiring right now, to free up more active agents for terrorism assignments,” said FBI Assistant Director Ronald Iden, head of the bureau’s Los Angeles division.

“At this point, we are looking at hiring back some retired agents or support personnel. They could be analytical positions, maybe firearms instructors or training instructors, other support positions to free up more agents.”

The current authorization extends only until Sept. 30, but Iden said he hopes it will continue after that. And he is also open to the use of large groups of ex-agents in white-collar investigations similar to Durascam.

“Dan Martino is a very creative guy, and this idea was a tremendous one,” Iden said. “We already have described this technique to other offices, and hopefully they will follow suit on cases where that sort of tactic is useful.”

Nick Rossi, a spokesman for the FBI’s Sacramento office, is one of those who already sees the massive use of ex-agents in Durascam as a potential model for other major fraud investigations.

“The retired agents are an incredible resource for us,” he said. “It’s not just on something like this. But on an everyday basis, we get help from ex-agents who work as private security agents or for other large organizations and who refer cases to us.

“We have a new agent in charge up here, Michael Mason, and one of the first things he did was meet recently with the ex-agents here in Sacramento. As we all adjust to 9/11, we need to look to see if they may play a larger role. If nothing else, they bring wisdom and experience that can be useful.”

Meanwhile, for those who came out of retirement for their undercover bit parts in Operation Durascam, it was sometimes just as simple as getting a nice break from routine.

“They used me as somebody with chest and abdomen pains, and they used my wife, Nancy, too. She was a good one to use because she had a stroke three years ago,” said Richard P. Phinney, 71, who retired from the FBI in 1982.

“We have five children and eight grandchildren and we spent a lot of time with them. My wife and I are also avid duplicate bridge players. This was a fun break for us. Absolutely. Absolutely.

“I think the challenge of trying to get in there and do the job right was part of it. Part of my problem was that I was supposed to be a smoker. We had a real doctor in the clinic, and he and I got into a big argument about me smoking.

“As far as I was concerned, this was the perfect role for ex-agents. We have all kinds of decrepit-looking people, and they should see that as a resource they can in all kinds of situations.”