Case of Social Security theft rare but possible

The bizarre story of a New Jersey man who collected Social Security benefits from his deceased great aunt is a rare occurrence of theft and fraud.

Lance Nelson, 56, pleaded guilty in federal court this week to collecting approximately $185,000 over 18 years. He faces up to 10 years in prison and a $250,000 fine when he is sentenced in April.

Nelson and his aunt had a joint account at the time of her death in 1998.

"The Social Security Administration (SSA) has a data base to track these  things," says Andrew Biggs, a former SSA deputy commissioner now with the American Enterprise Institute. "They get information from funeral homes, from hospitals, from state governments. Then they know the person is dead and they stop making payments to the person."

But when a person does not report the death of a spouse or relative, he says, someone such as Nelson can take advantage of a direct deposit to defraud the federal government.

"In a certain number of cases like this, what happens - and this is a little bit gruesome - is that somebody passes away and essentially they don't bury the person," he says. "They bury them in the backyard or put them in the freezer or something like that. And so there is nothing to report to the SSA and Social Security to a certain degree will just keep paying the check."

Biggs says the SSA will attempt to recover the stolen money but in many cases the money has been spent by the thief.

"They don't have an enormous amount of resources to go after," he says, "but the agency will make efforts to get that money back."