This is an important book that deserves a wide readership. While a widespread myth persists of poor folks who rip off the government by taking advantage of various welfare programs, the author reveals that those ripping off welfare in a wholesale fashion are those within government themselves, along with an entire industry of private consulting firms with whom agencies contract to siphon funds from the federal welfare systems.

There aren't too many books that set the blood to boiling from the very opening pages of the Introduction. Yet here's the vignette that sets the narrative going:

"Alex was taken into foster care at age twelve after his mother’s death. Over a six-year period, he was moved at least twenty times between temporary placements and group homes. Soon after losing his mother, Alex learned his older brother might be able to care for him, but then his brother died. There were also hopes that Alex could go to live with his father, but then his father died as well.

"Unknown to Alex, he was eligible to receive Social Security survivor benefits after his father died. These funds could have provided an invaluable benefit to Alex, supplying an emotional connection to his deceased father and financial resources to help with his difficult transition out of foster care.

"But without telling Alex, the Maryland foster care agency applied for the survivor benefits on his behalf and t0 become his representative payee. Then, although obligated to only use the benefits for the child’s best interests, the agency took every payment from Alex. The agency didn’t tell Alex it was applying for the funds, and didn’t tell him when the agency took the money for itself. Alex struggled during his years in foster care, left foster care penniless, and continued to struggle on his own. And after taking Alex’s funds, the agency hired a private revenue contractor t0 learn how to obtain more resources from foster children."

So here's the rub:

Sociologists have long identified an institutional dynamic known as the "complexing phenomenon." The essence of this "phenomenon" is that many organizations over time tend to direct less of their energy and fewer of their resources outward toward the mission for which they were originally founded, and more of them inward toward efforts at their own self-preservation. What Mr. Hatcher, who teaches law at the University of Baltimore and has worked for the Children's Defense Fund, demonstrates is that current institutions directed to serve the public welfare have taken the "complexing phenomenon" one step further: much beyond simply channeling more of their own resources toward their institutional self-preservation, as Alex's case illustrates, they are actively exploiting the very people entrusted to their care in order to bolster their own coffers. Not only are foster care agencies accessing the individual funds of their clients, but courts are financing themselves by piling fine upon fine upon their indigent prisoners (even charging for access to court-appointed lawyers, in violation of the 6th Amendment), and nursing homes are pumping their residents with stupor-inducing psychotropics so they can cut back on staff while bringing in more residents toward the end of obtaining greater federal funds.

There is enough here to outrage any reader, no matter where the reader stands on the political spectrum. Conservatives who believe government does not work will be fortified in that belief, because there is certainly plenty of evidence here that the government agencies commissioned to serve the public welfare are NOT working toward their intended purposes. On the other hand, left-wing critics will find much ammunition here as well, as much of the dysfunction can be attributed to private companies that have invaded the welfare establishment to make billions (hence the title of the book, "The Poverty Industry"), who have come here because they see there is profit to be made.

There are two weaknesses to the book. Lawyers who are authors don't necessarily have to write like lawyers, but unfortunately this one does. The case that is presented contains a lot of repetition, as if Mr. Hatcher doesn't want his jury (i.e. the reading audience) to forget his main points. He tells you what he is going to tell you, then he tells you, than he tells you what he just told you--often more than once. Unfortunately, that means that after that blood-boil-inducing Introduction, everything dies to a simmer in the following chapters as he presents exhibit after exhibit of evidence.

Secondly, Mr. Hatcher alerts the reader in the beginning that after presenting his case he will propose solutions at closing. I had been looking forward to what he had to say because in receiving all the testimony, I couldn't see much hope in correcting a system that had seemed to become so corrupt it should just be torn down and rebuilt from scratch. Alas, when it came to "solutions," much of what Mr. Hatcher had to say only served to disappoint. Mostly, his suggestions seemed to consist of nothing more than saying all the wayward institutions should remember their original mandates to serve rather than take and do the right thing. Furthermore, all necessary laws should be enforced. Well, yes, but . . . These things SHOULD happen, they should have ALWAYS happened, but they are NOT happening, so what can possible change-of-heart is going to occur to make them happen NOW?

Also disappointing was that, in having made a case that it's the involvement of private for-profit consulting companies that has corrupted much of the system, Mr. Hatcher doesn't do much to take them on in his recommendations. How's this for a recommendation: prohibit the hiring of any such corporations by government agencies?

Still, I have been recommending this book to others because it shines a light on a real scandal of government misconduct of which few are aware. When an individual con man is uncovered taking advantage of the most vulnerable among us--an elderly or mentally disabled person--we're ready to have that person's head. We wonder, "How could anybody be so low?" We should be just as outraged when we see it being down on a wholesale basis, especially by those who are hired to be serving us.
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Written with more passion than style, this somewhat repetitive and awfully depressing book explores how private contractors and state governments wring money out of the federal government by gaming the systems the feds use to distribute money designed to improve health care and child welfare, diverting it to other purposes and leaving children often worse off. States pay themselves for taking care of children in the state foster system, rather than passing on the money or saving it on the child’s behalf, and that’s just the tip of the iceberg. States impose child support requirements on incarcerated parents, don’t tell them about their obligations, then terminate custody for failure to pay child support even without an order to pay. States evade their obligations to contribute to Medicare by taxing health care providers, then returning some of that money to them as their contribution and claiming federal matching funds—done right, you can use federal funds to get federal matching funds. “Do better” is the basic prescription, but I don’t know how hopeful it’s possible to be given the even worse condition of state governments at this point. ( )

State-sponsored racketeering of the poor

Foster children aren’t people. To state governments they are a “revenue generating mechanism”. States actively seek out disabled, removed and orphaned children to apply for and seize their federal benefits without their knowledge, and without giving them any of the money. Daniel Hatcher has discovered a whole industry sector, combining private companies and government that do nothing but generate profits out of the misery of unfortunate children, nursing home patients, and the poor caught in minor crimes. This nightmare of a book is staggeringly well documented with the states’ and the firms’ own proud documents. Everyone in power knows it goes on. And it gets worse by the day with their enthusiastic encouragement.

States are arrogant about keeping their poverty activities private. They claim once a child is in custody, the sovereign right of the state supersedes any court proceedings seeking accountability. That includes due process, denied to victims. They claim seizing a child’s assets helps support children. It is both illegal and unconstitutional, but whatever.

The company MAXIMUS seems to be the biggest private player, with 13,000 employees dedicated to maximizing revenues for Human Services agencies in the US, Canada, Australia, …. And they commit fraud. Soon after admitting to fraudulently filing Medicaid claims, they won a contract to help prevent Medicaid fraud. (This is also typical in Washington, which charges military vendors with billions in fraud, then awards them additional billions in new contracts. And some of those military contractors are now players in the poverty industry.) Private companies have penetrated essentially every corner of the poverty industry. Former governors and congressmen sit on company boards, and these private companies even review the bids to run various facets of government agencies.

-State agencies do not permit foster children to have any assets. Anything of value is seized by the State. This drops them into instant poverty, maximizing the state’s claim on federal funds.
-Federal law says the states have the clear obligation to pay for foster care. Children do not. Yet, after taking children’s assets, Iowa charges children $250 a month for its services.
-State agencies are the “least preferred” payees of Social Security, but the states just apply as the sole possible payee, taking the money without the knowledge of the victim.
-States use money laundering techniques much like check-kiting to steal Medicaid billions every year. So there is no money to treat the poor, while the states reap fortunes.
-The governor of New Hampshire scammed Medicaid payments to be 40% of the state budget, and put the money in the general fund, taking it away from patients, robbing them twice.
-Indiana built a 37 acre, $200 million hospital by actively collecting nursing home patients and keeping federal money meant to care for them.
-Total takings by state agencies from foster children alone is a quarter of a billion dollars a year, with a large cut going to private firms maximizing the take for their client states.
-Private firms batch process social security applications directly to Washington without vetting by their state “overseers”. An expected percentage will always be accepted.
-Putting children on psychotropic drugs without prescriptions allows more children per foster home, reduces costs, and gets the state higher rates for (now) higher needs victims. The same goes for nursing home patients.
-Auditing the private sector auditors, the federal government found that that they cost five times as much as the fraud they uncover.

After the billions in foster care and Medicaid scams, section three of The Poverty Industry details how private companies tear apart families and keep children in poverty by pursuing fathers for repayment of welfare. They lose their jobs, their reputations and their children. Looking at the vendor contracts, courts have to agree the primary focus of the State was revenue, not child wellbeing or family unity, so the contractors win. Having read the horrors of state racketeering and fraud in previous sections, this was practically comic relief.

The book ends with the resurgence of debtor prisons for the poor, fueled by the astonishing list of fees private contractors can legally add to fines. Once in the vortex, the poor are never able to recover. They lose jobs, income, drivers’ licenses, homes, even the right to vote. They are even fined for being fined. Interest is added like on credit cards. The collection agency tacks on its own fee of 25-40% to each new penalty it piles on. A hundred dollar fine that can’t be paid instantly can grow to thousands almost overnight, even with the victim in jail.

You cannot read The Poverty Industry without disgust. It is revolting, abhorrent and criminally insane. Page after page of untrammeled relentless evil greed becomes hard to stomach. That this is allowed to go on is itself a scandal. As you read, you think: this can’t continue for 220 pages. It starts out terrible; how much more can there be? But it does go on and it does get more sickening with every page. The Poverty Industry should be the foundation of congressional hearings, documentary films and investigative reports. It is a damning, overdue condemnation of the states and their private sector contractors. It is cruel and unusual punishment for the most needy, least equipped and least knowledgeable. And the poverty industry just laughs all the way to the bank.

David Wineberg ( )