Would this be called conspiracy to commit fraud? While investigating the person who demanded and received the so-called reimbursements, would the authorities also seek evidence of "kick-backs" to the officer who made the payouts? If the total of these fraudulent claims exceeded $100,000 would the white-collar criminal(s) face jail time?
Not fraud here, but could be considered an excess benefit transaction depending upon the facts and circumstances surrounding the reimbursements. When an excess benefit transaction occurs, they are very severe monetary penalties which can be imposed on certain disqualified persons.