Paper Trail

Evelyn Knoob had been mail-room supervisor at Blue Cross-Blue Shield’s Marion, Ill., processing center for just three months when she opened an ordinary-looking box to find thousands of Medicare claims that had been ignored for months. When she gave the box to her boss, Donald Heinle, he locked his office door and shredded the nearly 10,000 forms while she looked on bewildered. “If you ever tell anyone,” Knoob, 54, recalls him saying, “you’ll go to the federal penitentiary. I’ll tell them you helped me.”

Terrified, she kept the secret for months, but plunged into a suicidal depression before finally speaking up and setting off a federal investigation that led to millions of dollars in penalties against Blue Cross. Now, under the federal whistle-blower statute passed by Congress in 1863, Knoob stands to receive millions. “It’s like winning the lottery, but I didn’t really win,” she says. “I gave up my life for this.”

A mother of five and grandmother of six, Knoob had risen steadily through the ranks since 1983, when she went to work at the 350-em-ployee Blue Cross facility, which evaluates millions of Medicare claims annually and decides on behalf of the government whether to approve or deny payments. “She was doing pretty good on her job and enjoyed what she was doing,” says her husband, George, 63, a retired machinist.

But on Oct. 23, 1992, three employees she had asked to clean out the mail room came across the box of unprocessed claims. “It was just so wrong,” she says of the shredding, done so Heinle could claim the forms were never received. “I was sick over it.” She was so disturbed that she had trouble sleeping and dropped from 265 pounds to 115.

Then, in August 1993, Heinle suspended her without giving a reason. Devastated, she went straight home and downed a handful of pills in a failed attempt to kill herself. “That job was so much a part of my life,” says Knoob, who went into a prolonged depression. She returned to work the following April, only to have the company put her on involuntary leave in October.

That was when she hired Marion lawyer Ronald Osman, 52, who looked into Knoob’s claims and found an operation so driven to run efficiently—in order to retain heft government contracts and bonuses—that performance reports were falsified, phone records altered and evidence of inefficiency erased. “I knew the shredded claims were a problem,” says Osman. “But then she got to telling me about the other things, and I knew we had something.” In March 1995, Osman filed a complaint under the federal False Claims Act—a Civil War-era law aimed at crooked government contractors. It provides for a 15-to-25 percent bounty to whistle-blowers.

The criminal investigation that followed only made life more miserable for Knoob, who was shunned by coworkers worried about their jobs. (Son Gregory, 29, and daughter Elizabeth, 35, also worked there, but stood by her.) For Knoob, who had grown up on public assistance in a wooden shack in nearby Energy, Ill., the office had become a sort of second family. Now she was cut off.

In the end, her stance was vindicated. According to a settlement unsealed July 16, Blue Cross pleaded guilty to eight felony counts, including obstruction of a federal audit, and agreed to pay $4 million in criminal fines and $140 million to the federal government. Donald Heinle, her boss, pleaded guilty to conspiracy and other charges and faces up to 15 years in jail and a $750,000 fine. Other managers are also facing charges.

Knoob, who never earned more than $38,000 a year, will probably get more than $21 million for exposing the scam. (A federal judge will determine the exact figure in the fall.) “What happened involved a small group of people in one office,” says Blue Cross spokesman Robert Kieckhefer. “Once we were aware of it, we acted as quickly as we could.”

Now Knoob and her husband are considering a new house, hiring cleaning help and providing for their family’s financial security. Says Gregory, who now runs his own medical billing company: “I’m proud of what she did. She set a good example.” And Knoob says if she had it to do over again, she would alert someone much earlier. “My advice is to tell somebody,” she says. “It slowly destroys you otherwise.”

Thomas Fields-Meyer

John T. Slania in Marion