Tuesday, March 31, 2009

Medicare Fraud -- Florida DME Owner Sentenced To 90 Months For Conspiracy To Commit Medicare Fraud

On March 27, 2009, Alexander Puig of Miami was sentenced to 90 months in prison, followed by three years of supervised release. U.S. District Judge William J. Zloch of the Southern District of Florida also ordered Mr. Puig to pay in restitution in the amount of $1,435,840.

According to the Indictment and the factual proffer, Mr. Puig was one of the "actual" owners of Baez Medical Equipment Corp. a durable medical equipment (DME) company purportedly doing business in Miami-Dade County. From November 9, 2005, through May 24, 2006, Baez Medical submitted approximately $4,322,216 in claims to Medicare, resulting in the payment by Medicare of approximately $1,435,840.

During the investigation, agents interviewed the top four referring physicians of Baez Medical. Each doctor stated that he/she had not treated any of the patients for which Baez Medical billed Medicare. Subsequently, at least 10 Medicare beneficiaries complained to Medicare when they realized that their Medicare numbers were being used to submit claims for services that were not, in fact, rendered to them.

The investigation revealed that Mr. Puig was one of the individuals who controlled Baez Medical, instructing the "nominee owner" to incorporate the business, apply for and obtain a Medicare provider number, and open three separate corporate bank accounts for Baez Medical. Once Medicare began paying the fraudulent claims, Mr. Puig laundered the fraud proceeds through Yerri Consulting Company and Pepin Consulting Inc., two companies which were set up by hm and his co-conspirators solely for the purposes of laundering the fraud proceeds from Baez Medical.

Related court documents and information may be found on the website of the District Court for the Southern District of Florida at http://www.flsd.uscourts.gov/ or on http://pacer.flsd.uscourts.gov/.

Attorney Comments: There are two immediate thoughts. First, the government in this case prosecuted the "actual" owner who was not on the Medicare application or the corporate paperwork. This case appears to be more of a pure fraud case. For practitioners and health care providers, the lesson to learn here is that there are companies who are controlled by others than those listed on the corporate paperwork. The government is seeking to go behind the paperwork and charge de facto owners. It is far too easy for providers to become suspects when they are not dealing with well-respected companies. The "referring physicians" were probably treated as suspects before it was discovered that they did not write the orders. What happens to the physician who writes a prescription for DME to the provider where there is then overbilling or failure to provide services? Know the providers you refer to and work with established companies if possible.
Second, for a plea agreement, the 90 month sentence in this case is long compared to sentences seen years ago. This is a trend in handing out more draconian sentences in white collar cases. With the economy, the Madoff case and the atmosphere in general towards fraud -- we can expect these increased sentences to continue. For health care fraud, the government views fraud or overbilling as damaging the fiscal integrity of the programs and making health care not available to the elderly and truly elderly. Given the lack of prosecutions and light sentences for health care fraud in the past -- it is viewed that these long sentences will act as a deterrence. Especially when they are as long as those sentences handed out for violent crime.
This trend makes it all the more important to handle investigations and legal defense early on in a thorough and professional manner. Consulting experienced legal counsel at the earliest stage possible can help assess the case and determine how best to proceed in a realistic and intelligent way.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings, with a specialty in health care providers.

Health Care Fraud: Miami Doctor And Chemist Plead Guilty In HIV Infusion Fraud Case

On March 26, 2009, Dr. Carmen Del Cueto and chemist Alexis Dagnesses each pleaded guilty to one count of conspiracy to commit health care fraud before U.S. District Judge Paul C. Huck in the Southern District of Florida. Both defendants admitted to working at Midway Medical Center Inc. (Midway), a Miami clinic that purported to specialize in the treatment of patients with HIV.

According to plea documents, Del Cueto was a co-owner of and practicing physician at Midway. Del Cueto and her co-conspirators billed Medicare routinely for services that were medically unnecessary and, in many instances, never provided. Del Cueto admitted to purchasing only a small fraction of the medication that was purportedly being administered to Midway’s patients.

Most of the services allegedly provided to patients at Midway were billed to the Medicare program as treatments for a diagnosis of thrombocytopenia, a disorder involving a low count of platelets in the blood. According to court documents, none of Midway’s patients actually had low blood platelet counts. To make it appear that the patients actually had low platelet levels, Del Cueto admitted that she and her co-conspirators used chemists, including Dagnesses, to manipulate the blood samples drawn from Midway’s patients before the blood was sent to a laboratory for analysis. In her plea, Del Cueto admitted to ordering that patients at Midway receive medications to treat thrombocytopenia despite knowing that the laboratory results had been falsified and the patients did not actually have any such condition.

Midway was not the only clinic where Del Cueto purported to treat HIV patients with injection and infusion therapies. In her plea, Del Cueto admitted that she engaged in substantially similar fraudulent conduct at Diagnostic Medical Center Inc. (Diagnostic), another Miami-area infusion clinic. At Diagnostic, Del Cueto admitted that she and her co-conspirators also billed the Medicare program for HIV injection and infusion services that she knew were medically unnecessary and, in some instances, never actually provided. At the two clinics, Del Cueto admitted to causing the submission of approximately $9.5 million in fraudulent claims to Medicare.

Dagnesses admitted that he would obtain vials of blood drawn from Midway’s patients and place those vials in a blood centrifuge. After rotating the blood in the centrifuge for approximately 15 minutes, the blood would separate into its component parts, enabling Dagnesses to extract the platelets from the sample. Dagnesses would then return the adulterated blood to his co-conspirators at Midway, who would send it to a laboratory for testing. Dagnesses admitted that he was generally usually paid $1,000 for every vial of blood that he tainted for his co-conspirators at Midway. Dagnesses admitted he was aware that the purpose of tainting the blood was to obtain false laboratory reports for Midway’s medical files, which would make it appear that the medications allegedly provided at Midway were medically necessary, when in fact they were not necessary.

Attorney Comments - The Importance Of Compliance Plans For All Health Care Providers: The case was brought as part of the Medicare Fraud Strike Force. The government contends that since the inception of MFSF operations, federal prosecutors have indicted 106 cases with 196 defendants in Miami and Los Angeles. Collectively, these defendants billed the Medicare program for more than $577 million. We can expect significantly more cases to be filed in California and Florida in the next few years.

A case like this HIV-infusion scheme is extreme. It would seem relatively simple to avoid engaging in this type of fraud. The harder cases are where physicians are not compliant with rules and regulations, violate the anti-kickback statute or are affiliated with others who commit fraud. One advantage of having an actual compliance plan is that it provides a safe harbor to avoid having billing errors or other arrangements characterized as criminal.

The collateral consequence of a physician or licensed health care provider is going to be the conviction, risk of going to prison, the loss of license, being excluded from Medicare for 5 years or more (even if the license is saved), being excluded from Medi-Cal (Medicaid) for an indeterminate number of years, and having the conviction reported to the National Practitioner Data Bank. There are many health care providers who did not set out to commit fraud but violated rules and regulations or did not have sufficient oversight of their practices or businesses. Compliance plans should be a prerequisite for anyone who is billing the government for their services.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings, with a specialty in health care providers.

Monday, March 30, 2009

Accountant Pleads Guilty To Tax Fraud Relating To Tax Shelters

On March 17, 2009, Adrian Dicker, the former Vice Chairman and board member at a major international accounting firm, BDO Seidman LLP pleaded guilty today to conspiring with certain tax shelter promoters to defraud the United States in connection with tax shelter transactions involving clients of BDO Seidman and the now defunct law firm of Jenkens & Gilchrist. Dicker also pleaded guilty to tax evasion in connection with a multimillion-dollar tax shelter that Dicker helped sell to a client of BDO Seidman. This case is pending in Manhattan federal court. He is cooperating with the investigation.

According to Dicker's guilty plea, between 1995 and 2000, Dicker, a United Kingdom chartered accountant, was a partner in the New York office of BDO Seidman. Beginning in 1998 until 2000, Dicker was one of the leaders of the firm’s "Tax Solutions Group." The activities of the TSG were devoted to designing, marketing, and implementing high-fee tax strategies for wealthy clients, including tax shelter transactions.

Prosecutors alleged Mr. Dicker, who retired from the company in 2000 and served on its board until 2003, worked with others in designing and marketing two fraudulent tax shelters -- one known as the "short sale" transaction and another known as short options strategy, or SOS.

The shelters were designed, marketed and implemented by BDO Seidman and the now-defunct law firm Jenkens & Gilchrist PC, with the assistance of an unnamed foreign bank, the government said. The tax-shelter transactions created more than $1 billion in fraudulent tax losses, prosecutors said.

In June 2000, Mr. Dicker and two other leaders in the Tax Solutions Group obtained a compensation agreement from the firm in which they would be paid 30% of the net profits of the unit, which they shared equally, prosecutors said.

Dicker pleaded guilty to one count of conspiracy to defraud the IRS and one count of tax evasion. He faces a maximum sentence of five years in prison on the conspiracy charge and five years in prison on the tax evasion charge. On each count, the maximum fine is the greatest of $250,000 or twice the gross gain or gross loss from the offense. Restitution to the IRS can be imposed on all the charges. Dicker is scheduled to be sentenced on December 11, 2009, by United States District Judge Gerard E. Lynch.

The press release sets forth the details of the factual basis of the guilty plea:


Attorney Commentary: In this case, the facts showing that Dicker personally profited in a generous arrangement was probably one of the key pieces of evidence of why he chose to plead guilty since it would be used to show intent to defraud. Given the alleged loss amount, the maximum sentence in this case would be one that Dicker would have difficulty turning down. We should expect to see an increase in white collar cases where the government is being defrauded whether in tax or health care. It appears that the government wanted to portray Dicker as being the Madoff of tax shelters and there was a great deal of pressure on him to plea or face a trial with a potential lengthy prison sentence if he lost.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of individuals, licensed professionals and businesses in civil, business, administrative and criminal proceedings.

Tax Fraud: Los Angeles Preparer Sentenced To Probation

On March 26, 2009, Roland G. Uy, a Woodland Hills, California tax preparer who pleaded no contest last November to two counts of aiding others in filing false tax returns and three other felony counts was sentenced to a four-year suspended state prison term and five years of probation, during which time he must pay $20,000 each year in restitution to the State of California Franchise Tax Board (FTB). The case was prosecuted by the Los Angeles County District Attorney’s Office, the Fraud Interdiction Program.

Under the plea agreement Uy was ordered to pay a total of $159,000 in restitution, and had just over $59,000 by the time of sentencing. If Uy fails to pay the full amount of restitution it could result in prison time for him. According to the District Attorney's Office, Uy filed nearly 1,300 false tax returns on behalf of taxpayers. The FTB will seek civil reimbursements and penalties against clients who participated.

Attorney Commentary: This case shows the important of restitution in fraud cases. Payment of restitution can make the difference between prison time and probation. It often can make the difference between a felony and a misdemeanor. In this case, where the loss was over $150,000, imposition of probation is a good result if the evidence demonstrated his involvement in intentionally preparing false tax returns beyond a reasonable doubt. The term "state prison suspended" means that if Uy violates probation (by not paying restitution when he has the means to do so) or by committing another offense or not complying with the other terms of probation -- his sentence will be 4 years in state prison. This is a lot hanging over his head and gives him great incentive to comply with probation.

Any questions or comments should be directed to: tgreen@greenassoc.com Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings.

Saturday, March 28, 2009

Board And Care Owners Plead Guilty To Alien Smuggling And Forcing Some To Work At Their Long Beach Board And Care Homes

On March 23 ,2009, Evelyn Pelayo, the owner of two elder care homes in Long Beach, California, pleaded guilty before U.S. District Judge Gary A. Feess to bringing undocumented aliens into the United States and forcing two of them to work at her businesses. Pelayo owned two residences in Long Beach where she operated elderly care and boarding facilities called Vernon Way Care Home and Walton Care Home. This case is pending in the Central District of California.

The two elder care homes were shut down in April 2008, following the execution of the federal search warrants. At the time, 10 elderly patients were rescued and moved to other facilities.
In a plea agreement filed in federal court, Pelayo admitted that she paid a co-defendant $6,000 to smuggle two undocumented aliens into the United States from the Philippines and then forced them to work at her elder care homes after confiscating their passports and threatening to turn them over to authorities if they attempted to escape.

Pelayo’s husband, Darwin Padolina, pleaded guilty to harboring a third undocumented alien for private financial gain. Padolina admitted that he concealed the undocumented alien for 10 years while the person worked as a domestic servant. Sentencing is set for both on June 22, 2009.

For press release:

Attorney Commentary: Although this is an extreme case of human trafficking, health care providers need to comply with federal immigration laws when hiring employees. In the health care industry -- especially in cities like Los Angeles -- there is a significant risk of hiring persons who are not authorized to work in the United States. Federal immigration law makes it unlawful for an employer to hire or continue to employ a person who the employer knows is not authorized to work in the United States.

In addition to actual knowledge, an employer can be deemed to have constructive knowledge that the person is not authorized to work. The rule states that an employer will have constructive knowledge that an employee is not authorized to work if the employer receives a no-match letter from the Social Security Administration. The rule also sets forth steps the employer should take when it receives a no-match letter, and it provides that if the employer follows these steps, it will not be liable for knowingly employing an unauthorized alien. This should be part of every provider's compliance and risk management plan.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings, with a specialty in health care providers.

Friday, March 27, 2009

Kansas Doctor Not Guilty In Late-Term Abortion Case

In a trial watched closely by those on both sides of the abortion debate, Dr. George Tiller, a Kansas physician accused of performing 19 illegal late-term abortions, was found not guilty today (March 27, 2009). The six-person jury, three men and three women, deliberated for less than an hour. Dr. Tiller’s clinic is one of three in the United States that perform late-term abortions, and he has been reviled by anti-abortion forces for decades.

Dr. George Tiller was charged with violating a Kansas law that requires an independent second opinion on late-term abortions. A six-person jury found Tiller not guilty on all 19 counts. Dr. Tiller was represented by a well-respected Kansas criminal defense attorney who was formerly a board member of the National Association of Criminal Defense Lawyers.

For article, see:


Marriage Family Therapist: Pleads Guilty And Sentenced

On March 25, 2009, a former contract therapist with the Los Angeles County Department of Mental Health accused of defrauding the county and filing false tax returns pleaded guilty today. MFT Carla Gireaux, 62, pleaded guilty to one count each of grand theft of personal property and filing a false tax return. Under the plea agreement, Los Angeles Superior Court Judge David Horwitz sentenced Gireaux to 16 months in state prison.

Gireaux, a licensed marriage and family therapist, was charged last month in a felony complaint . She allegedly billed the county for mental health services never rendered. Of 196 clients, 25 were interviewed by investigators establishing a loss of $76,469. Based on the total client population of 196 people, a statistician calculated the total loss at an estimated $593,399.44. At sentencing, the defendant was ordered to pay restitution in that amount to the County of Los Angeles. The complaint alleged that Gireaux filed false tax returns and failed to file a tax return. Thus, she was additionally ordered to pay the FTB $112,272.
Commentary: In fraud cases in state court, the amount of restitution paid prior to sentencing is often key to the disposition. This was a fairly significant sentence given the first time offense and age of the MFT. There was no indication that she had made restitution prior to sentencing and that could be the reason for the 16 month sentence. The case was resolved relatively quickly in Division 50 (Judge Horowitz) in what is known as EDP (Early Disposition).
Perhaps the reason for the seemingly high sentence for the first offense is that the government is the victim. It is difficult to know.
One of the significant disadvantages of a 16 month state prison term is that the MFT will not be eligible to have her case expunged. In addition, there was no apparent agreement to have the offense reduced to a misdemeanor.

Any questions or comments should be directed to: tgreen@greenassoc.com.  Tracy Green is a principal at Green and Associates in Los Angeles, CA. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings.

Thursday, March 26, 2009

Surrogacy Firm Accused Of Civil Fraud And Customer Complaints

The March 26, 2009 edition of the Los Angeles Times has an article about a Beverly Hills-based surrogacy and egg-donor agency, B Coming, that has been sued civilly by Health Net and a Spanish couple and has received complaints by customers and surrogates. See article:


Due to laws in foreign countries, many potential parents are coming to California due to the more relaxed laws allowing surrogacy. The potential for disputes abound in this area especially where parents are paying high fees, surrogates are involved and the parties are vulnerable.

Woman Pleads Guilty To Mail Fraud And Causing Fertility Drugs To Be Dispensed Without Prescription

On March 9, 2009, Heidi Benham, a former patient of a fertility clinic plead guilty in Massachussets federal court before U.S. District Judge Douglas P. Woodlock to an Indictment charging eight counts of mail fraud and seven counts of causing prescription drugs to be dispensed without a prescription.

At the plea hearing, the prosecutor told the Court that had the case proceeded to trial, the Government’s evidence would have proven that, beginning in approximately February 2001 and continuing through October 2005, Benham created a scheme to obtain prescription fertility drugs through fraud. As part of this scheme, Benham caused her health insurance plan to pay for the drugs she obtained via fraud, and then sold these drugs for profit via classified advertisements that Benham placed on the Internet.

Benham had originally been a patient seeking fertility treatments when she began this conduct. Benham called certain specialty pharmacies that carried prescription drugs used in fertility treatments and falsely claimed that she was a representative of a physician’s office. In the call, Benham told the pharmacies that the physician had either prescribed or authorized a refill of a prescription of certain fertility drugs for herself. Relying upon these false statements, the pharmacies sent various prescription fertility drugs to Benham’s residence and billed her health insurance plan for the drugs. The Government estimated that Benham’s health insurance plan paid more than $500,000 in insurance claims in connection with fraudulent prescriptions for fertility drugs that were provided.

Upon receipt of the prescription fertility drugs, Benham sold the drugs for profit to customers throughout the country using Internet classified advertisements that she posted on various Internet bulletin boards. The government estimated that Benham received approximately $160,000 from her sales of these drugs. Judge Woodlock scheduled sentencing for June 16, 2009. The maximum sentence Benham faces is up to 20 years imprisonment, to be followed by 3 years of supervised release and a fine of over $1,000,000. Benham also may be ordered to forfeit $160,000.

Post-Script - Sentencing:  Sentencing was held July 10, 20110, and Ms. Benham was sentenced to three years' imprisonment followed by three years' supervised release.

Attorney Comments: The pharmacies who were targeted by this woman also face financial repercussions in that the health insurers who paid them may seek recovery of the funds on the ground that the drugs were dispensed without a valid prescription. The repayment demand would depend in part on the records maintained by the pharmacy and whether there was independent verification with the medical office. Our office worked on a number of cases where prescription medications used to treat HIV positive patients were obtained by patients fraudulently and resold and the physicians and pharmacies involved were at risk civilly and criminally. Compliance is key in this area -- especially where the medications are expensive.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings, with a specialty in health care providers.

Posted by Tracy Green, Esq.
Phone 213-233-2260

Wednesday, March 25, 2009

Woman Pretending To Be Immigration Lawyer Re-Arrested In San Diego

On March 11, 2009, San Diego County District Attorney Bonnie M. Dumanis, along with U.S. Immigration and Customs Enforcement (ICE), announced today a woman who was awaiting sentencing on a grand theft charges involving targeting Hispanic immigrants has been re-arrested for once again committing the same crimes. Gladys Escobar was taken into custody this morning and booked into the Century Regional Detention Center in Lynwood, California.

In the first case, Escobar was charged in October 2008 and plead guilty to three counts of grand theft. According to the court pleadings, Escobar, who operated in North San Diego County, claimed to be a lawyer and filed a false application for asylum on behalf of undocumented immigrants. Victims believing Escobar had the legal authority to help them stay in the U.S. paid her thousands of dollars. Instead, Escobar initiated a process with U.S. Citizenship and Immigration Services which led the victims to inevitable deportation. Escobar admitted taking approximately $17,000 from her victims and as part of the earlier guilty plea and agreed to pay restitution.

The new charges stem from additional victims who allegedly were subject to the same scheme perpetrated by Escobar while her case moved through the criminal justice system. An arraignment date in San Diego Superior Court has yet to be set.

For the press release:

Commentary: Apart from representing licensed professionals, we have represented those who are accused of engaging in the practice of a licensed profession (such as law or medicine) without a license. We have also represented the professional who is charged with aiding and abetting the unlicensed practice. There are often paraprofessionals or managers who work in regulated fields who are charged. For example, the medical assistant who is giving injections.

There are also people who can legally not be licensed but have failed to make proper disclosures to clients or patients. In the immigration case above for example, there are immigration consultants who do not need to be licensed attorneys but once there is any deception or fraud these cases take on greater complications. As a first step, the licensing board will often issue a cease and desist letter or ask the person to respond to the letter. In such a case, the proper response can ensure that the investigation goes no further.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals, and have represented those charged with the unlicensed practice of law and medicine (or the aiding and abetting of unlicensed practice) in internal investigations, disciplinary proceedings, search warrants and criminal matters.

Tuesday, March 24, 2009

Home Health Care: NYT Op-Ed On High Cost

The March 23, 2009 edition of the New York Times has an editorial about managing costs in the home health industry. The editorial reports that the home health industry is one of the most profitable in Medicare. It also cites a recent GAO report about fraud and abuse in Medicare home health. The editorial piece noted that President Obama’s budget plan calls for saving $37 billion over the next decade by reducing Medicare’s projected home health care expenditures in order to help finance his broader health care reforms.

Home health care companies are facing significant federal cuts in addition to the state cuts that have already been imposed. Further, there is public support for further cuts. For private businesses who are Medicare providers there will be significant pressure. For the article, see:


Contractors State License Board: Settlement With Home Repair Companies

On March 12, 2009, the California State Attorney General's Office and the Contractors State License Board (CSLB) reached a final agreement with SRVS Charge Inc. and its affiliated companies which were providing home repair work in California to approximately 6,000 customers a year. The State alleged that the home repair work was substandard and the fees were exhorbitant. The settlement follows a lawsuit that was filed.

The CSLB and Attorney General's settlement was with :

- SRVS Charge Inc. and its affiliates,
- Principal owner, Sarkis Terabelian, 43, of Burbank;
- General manager, Zohrab "Rob" Mkhitarian, 40, of Burbank; and
- Associates Marine Metspakyan, 33, Avetik Avo Gyandzhyan, 38, Lilit Lusparyan, 28, Alisa Oganyan, 35, Estine Akopyan, 28, and Vardui Terabelian, 45.

The defendants operated various service and repair companies that employed electricians, plumbers, and heating and air-conditioning technicians in Southern California, the San Francisco Bay Area, and the Sacramento region. The State in its lawsuit contended that SRVS Charge Inc.'s improper business activities were as follows:

- The company placed millions of dollars in telephone directory advertising, including many full-page ads. The ads, which listed different company names, claimed a 100% satisfaction guarantee and senior discounts. When customers called the numbers listed in any of the ads, they would be directed to a central call center.

- Many times repairmen would be dispatched from a different company than the customer called.

- Often, these workers had not undergone the criminal background check required of all contractors and Home Improvement Salespeople licensed by the Contractors State License Board since January 1, 2005.

- Customers were charged high prices for emergency home service and repair, often unrelated to the actual home repair work. Much of the work was poorly done or never completed.

- If a customer refused to pay, the company would file a lien against the home to force payment.

Because the company used multiple business names, it was difficult, if not impossible, for customers to seek recourse for incompetent workmanship, incomplete work, or any other issue that arose on their project. Customers were often denied refunds, despite the existence of the "100% satisfaction guarantee" promised in the ads.

Over several years, the Attorney General and the CSLB shut down affiliates of SRVS Charge, Inc. But instead of closing the business, the defendants continued to run their company under a labyrinth of business names and fraudulent contractor license numbers that were interchangeable. When CSLB either revoked a license or received an excessive number of complaints, the company would establish a new corporate identity and business would continue without interruption.

As part of its investigation, CSLB conducted undercover stings against service technicians suspected of using these fraudulent licenses and referred instances of the illegal activity to the San Diego, Los Angeles, Santa Clara, and Sacramento County district attorney's offices. In one instance, the San Diego District Attorney's Office found that a service technician had also committed burglary and theft and is now being prosecuted for his crimes.

The settlement provides for the following.

- A permanent injunction against the defendants' prior illegal activities. This includes:
o CSLB monitoring of the defendants' operations for one year;
o Mandatory registration of all company service technicians with CSLB. This requires technicians to undergo a criminal background check;
o Capping the number of business licenses that the defendants can use to a maximum of five;
o Preventing the defendants from charging exorbitant fees or fees that have nothing to do with the actual work that is performed;
o Fully disclosing to CSLB the names of the directors, officers, and employees of their company; and
o Mandatory customer complaint tracking with proper complaint investigation and reasonable efforts to resolve them.
o Prohibiting the defendants from engaging in false advertising.

The companies will pay $3 million in penalties and restitution to be distributed as follows:
o $1.3 million to be used for consumer restitution;
o $450,000 to be assessed in penalties for state Business and Professions Code violations; and
o The remainder to be used to reimburse CSLB for investigative costs, legal costs, and costs of monitoring future compliance with the judgment.

If the terms of the settlement are violated, the defendants could face jail time.

The following companies are affiliated with the defendants and are included in the settlement:

- American Electric (CSLB #834398)
- American Home Repairs, Inc. (CSLB #834206)
- 59 Minute Service (CSLB #837697)
- Cal Repair Services, Inc., dba Pick Red Plumbing (CSLB #797241)
- Answering Resources, Inc., dba Thrifty Electric (CSLB #723375)
- Orbell Enterprises, Inc., dba Plumbing One (CSLB #713006)
- USA Services, Inc. (CSLB #775863)
- Love My Home, Inc. (CSLB #811361)
- Electric Avenue, formerly A Plus Electric Company (CSLB #569322)
- American Electric 911 Fast Inc. (CSLB #826916)
- Pro Electric Co. (CSLB #670171)
- RG Electric (CSLB #516892)
- Pacific West Heating & Air Conditioning (CSLB #604150)

See the complaint: http://ag.ca.gov/cms_attachments/press/pdfs/n1706_complaint_for_civil_penalties_and_injunctive_relief.pdf
See the settlement agreements:

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates and focuses their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings.

Health Care Provider's Duty To Produce Patient's Medical Records

One of the common questions we receive is what rights patients have to see and receive copies of their records or to have the records transferred to another health care provider and what costs can be charged.
The law on this issue is governed by California Health & Safety Code Section 123100 through 123149.5 establishes a patient's right to see and receive copies of his or her medical records, under specific conditions and/or requirements as discussed below.

Who Does This Law Apply To? These regulations govern: health facilities, clinics, home health agencies, physician and surgeons, dentists, podiatrists, psychologists, optometrists, chiropractors, clinical social workers, marriage and family therapists, and physical therapists. For other health care professionals not specifically governed by these regulations, it is a guide on what to do. By following them, one can be confidant that there should be no issue with any Board or Bureau.

Section 123110 of the Health & Safety Code specifically provides the following about patients inspecting or copying their records (including telemedicine records):

Inspection of Records - Right To "Inspect" Within 5 Working Days
(1) Any adult patient, or any minor patient who by law can consent to medical treatment (or certain patient representatives), is entitled to inspect patient records upon written request to a physician and upon payment of reasonable clerical costs to make such records available.
(2) The physician must then permit the patient to view his or her records during business hours within five working days after receipt of the written request.
(3) The patient or patient's representative may be accompanied by one other person of his or her choosing.
(4) Prior to inspection or copying of records, physicians may require reasonable verification of identity, so long as this is not used oppressively or discriminatorily to frustrate or delay compliance with this law.

Inspection is different than copying the records which is discussed below. Thus, the timeframe for inspection is shorter for inspection than copying (which is 15 days).

Transfer of Records To Other Providers - Not Covered By Law
The request to transfer medical records is not covered by law and is considered a matter of "professional courtesy." No statutes cover record transfers and there is no set protocol for transferring records between providers. Generally, physicians will transfer records without charging a fee; however, some doctors do charge a fee associated with copying and mailing the paperwork. Physicians will require a patient to sign a records release form to transfer records.

Copying Records - Costs Can Be Charged And Production Must Be Within 15 DaysThe patient or patient's representative is entitled to copies of all or any portion of his or her records that he or she has a right to inspect, upon written request to the physician. The physician may charge a fee to defray the cost of copying, not to exceed 25 cents per page or 50 cents per page for records that are copied from microfilm, along with reasonable clerical costs.

By law, a patient's records are defined as records relating to the health history, diagnosis, or condition of a patient, or relating to treatment provided or proposed to be provided to the patient. Physicians must provide patients with copies within 15 days of receipt of the request. If there is an emergency or urgent reason why the records need to be copied immediately, it would be a good practice to produce the records immediately.

Copies of x-rays or tracings from electrocardiography, electroencephalography, or electromyography do not have to be provided to the patient or patient's representative if the originals are transmitted to another healthcare provider upon written request of the patient and within 15 days of receipt of the request. A patient may request to purchase copies of his or her x-rays or tracings. All reasonable costs, not exceeding actual costs, may be charged to the patient or patient's representative.

Note: Make sure the entire patient chart has been copied. It is a good practice to have the health care provider review the file before it is released. We have seen cases where one of the issues at the disciplinary board is that records were created after production of records to the patient. In some cases, it was simply that the entire file was not copied and produced to the patient.

Summary Of Record.
A physician may choose to prepare a detailed summary of the record pursuant to Health & Safety Code section 123130 rather than allowing access to the entire record. This summary must be made available to the patient within 10 working days from the date of the patient's request. If more time is needed, the physician must notify the patient of this fact and the date that the summary will be completed, not to exceed 30 days between the request and the delivery of the summary.
If the patient specifies to the physician that he or she is interested only in certain portions of the record, the physician may include in the summary only that specific information requested. The summary must contain information for each injury, illness, or episode and any information included in the record relative to: chief complaint(s), findings from consultations and referrals, diagnosis (where determined), treatment plan and regimen including medications prescribed, progress of the treatment, prognosis including significant continuing problems or conditions, pertinent reports of diagnostic procedures and tests and all discharge summaries, and objective findings from the most recent physician examination, such as blood pressure, weight, and actual values from routine laboratory tests. The summary must contain a list of all current medications prescribed, including dosage, and any sensitivities or allergies to medications recorded by the physician.

Failure to Comply With Regulation Can Constitute Unprofessional Conduct And An Infraction: Any health care provider who willfully violates the regulations set forth above is guilty of unprofessional conduct. Further, any health care provider who willfully violates these regulations is guilty of an infraction punishable by a fine of not more than one hundred dollars ($100). The state agency, board, or commission that issued the health care provider's professional or institutional license shall consider a violation as grounds for disciplinary action with respect to the licensure, including suspension or revocation of the license or certificate.
If the patient has followed the requirements outlined in the Health & Safety Code and the physician has not complied with the request, the Medical Board allows patients to file a complaint. The physician will be contacted to determine the reason for failing to provide the patient with access to his or her medical records.

Exceptions: There are some exceptions to the absolute requirements shown above:

Minor's Records Exception. A physician may refuse the request of a minor's representative to inspect or obtain copies of the minor's records if a physician determines that access to the patient records requested by the representative would have a detrimental effect on the physician's professional relationship with the minor patient or the minor's physical safety or psychological well-being.

Mental Health Records Exception: A physician may refuse a patient's request to see or copy his or her mental health records if the physician determines there is a substantial risk of significant adverse or detrimental consequences to the patient if such access were permitted, subject to the following conditions:
The physician must make a written record and include it in the patient's file, noting the date of the request and explaining the physician's reason for refusing to permit inspection or provide copies of the records, including a description of the specific adverse or detrimental consequences to the patient that the physician anticipates would occur if inspection or copying were permitted.
The physician must permit inspection or copying of the mental health records by a licensed physician, psychologist, marriage and family therapist, or clinical social worker designated by the patient. These healthcare providers must not then permit inspection or copying by the patient. The physician must inform the patient of the physician's refusal to permit the patient to inspect or obtain copies of the requested records, and inform the patient of the right to require the physician to permit inspection by, or provide copies to, the healthcare professionals listed in the paragraph above. The physician must indicate in the mental health records of the patient whether the request was made to provide a copy of the records to another healthcare professional.

Compliance: Your office should have policies, procedures and forms governing this area. Office staff should have to follow these policies so there can be little confusion as to how to respond to patients' requests for records. There should be patient consent forms and the production of records should be document to the patient or his or her representative or subsequent health care provider. It would be a good idea to have the package of forms and rules reviewed by a health care attorney for accuracy. We have seen failure to produce records or delays result in professional complaints especially when they are mishandled.
Sometimes issues arise when the patients get demanding about immediate production at or about the time the statute of limitations is about to run for any professional negligence claim. If your office staff suspects that the reason why the file is needed is for a professional negligence claim, remain professional and ensure that the file is completely copied. If there are any records missing, indicate that during the production in writing. Seek independent counsel to ensure that your office is handling it all in a professional manner that is good risk management and will not come back to haunt you later.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings, with a specialty in health care providers.

Phone: 213-233-2260
Email: tgreen@greenassoc.com

Monday, March 23, 2009

Kickback Charges Results In Guilty Plea By Former Hospital Executive

On March 18, 2009, Dante Nicholson, former senior vice president of City of Angels Medical Center appeared before United States District Judge George H. King in Los Angeles. Nicholson pleaded guilty to two counts of paying illegal kickbacks. Nicholson has agreed to pay over $4.1 million in restitution to Medicare and Medi-Cal.

In a plea agreement, Nicholson admitted to participating in an arrangement to pay recruiters to refer homeless people from "Skid Row" with Medicare and Medi-Cal benefits to City of Angels for in-patient hospital stays. As part of this arrangement, City of Angels entered into sham “consulting” contracts intended to conceal the illegal kickbacks. City of Angels then billed Medicare and Medi-Cal for in-patient services to the recruited homeless beneficiaries, including those for whom in-patient hospitalization was not medically necessary.

Nicholson and a second City of Angels executive – Robert Bourseau, a former chairman of the board and co-owner of the hospital – were indicted and remains in custody without bond.

Nicholson was named in the second indictment brought in the investigation into health care fraud related to Skid Row residents. In December 2008, Rudra Sabaratnam, the former chief executive officer of City of Angels pleaded guilty to paying illegal kickbacks for patient referrals. Estill Mitts, who operated a center that recruited homeless people to receive unnecessary health services, pleaded guilty in September 2008 to conspiracy to commit several federal crimes. Sabaratnam and Mitts are scheduled to be sentenced by Judge King on August 17.

The charges to which Nicholson pleaded guilty carry a statutory maximum penalty of 10years in federal prison. Judge King ordered Nicholson to appear for sentencing on August 17.

Commentary: This is still an ongoing investigation and with this guilty plea by Mr. Nicholson and others, there is a likelihood that one can expect further indictments.

Any questions or comments should be directed to: tgreen@greenassoc.com.  Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings, with a specialty in health care providers.

Sunday, March 22, 2009

Fraudulent Trust Package Results In Conviction For Aiding In Preparation Of False Income Tax Return And Tax Evasion in San Francisco

On March 18, 2009, David Marion Simcho was sentenced by United States Judge Marilyn Patel to 27 months in prison, followed by three years of supervised release and ordered to pay $111,769 in restitution for his role in marketing and promoting a fraudulent trust package to eliminate or reduce tax liability and then preparing a false income tax return. He will begin serving his sentence on July 17, 2009. (Case No. CR-06-0542 MHP)

This sentence follows Mr. Simcho's guilty plea on June 2, 2008, to one count of aiding or assisting in the preparation of a false income tax return and one count of income tax evasion. The plea came almost two years after his indictment on August. 3, 2006, when Mr. Simcho of Southlake, Texas, was indicted by a federal grand jury. He was initially charged with 17 counts of aiding or assisting in the preparation of a false income tax return and four counts of income tax evasion.

This case was quite old (the conduct went back almost 10 years) and shows how cases can take years to investigate, prosecute and be resolved. According to the plea agreement, Mr. Simcho admitted that in 1999 he marketed and sold a trust package to a client and represented it as a legitimate means to eliminate or reduce tax liability when he knew otherwise. The trust package transferred the title of the client’s personal assets into the name of the trust. The client then became the “manager” of that trust. The client remained in control over all assets that were in the name of the trust.

Mr. Simcho then prepared an amended 1999 federal income tax return for the client which contained false items including a false Schedule C claiming $166,249 in personal expenses as deductible business expenses, a false Schedule A which claimed a charitable gift in the amount of $120,000 when there was no such charitable gift, and a false Form 4797, which represented that a $205,120 loss resulted from an exchange of like-kind property when no property had been exchanged.

Mr. Simcho also admitted that during the 2001 tax year he received taxable income from the sales of trusts and a salary from his employment with Property Protection Services, LLC. He admitted that he knowingly and willfully omitted this income from his 2001 federal income tax return.

The investigation was the result of information provided to the IRS by a Certified Public Account who said that Mr. Simcho prepared an inaccurate amended tax return for one of his clients. At the same time, an IRS Revenue Agent was performing an audit on those same clients. The Revenue Agent confirmed the allegations and referred the case on Simcho to Criminal Investigation Division (IRS-CID).

Electronic court filings and further procedural and docket information are available at https://ecf.cand.uscourts.gov/cgi-bin/login.pl.

Any questions or comments should be directed to: tgreen@greenassoc.com or call 213-233-2260. Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals, individuals and businesses in civil, business, administrative and criminal proceedings. She has significant experience in defending individuals, licensed professionals and businesses in search warrants and administrative and criminal investigations. The firm website is: http://www.greenassoc.com/

State of California Intervenes In Qui Tam Lawsuit Against 7 Laboratories

In a civil qui tam lawsuit pending in San Mateo County against seven laboratories, the State of California Attorney General's Office has intervened. A qui tam complaint contains allegations, have not been proven and are currently being defended by the laboratories including one of our clients:

The laboratories are:
(1) Quest Diagnostics, Inc., based in Madison, NJ; its affiliate Specialty Laboratories, Inc., based in Valencia, CA; and 4 other Quest affiliates;
(2) Health Line Clinical Laboratories, Inc., now known as Taurus West, Inc., based in Burbank, CA;
(3) Westcliff Medical Laboratories, Inc., based in Santa Ana, CA;
(4) Physicians Immunodiagnostic Laboratory, Inc., based in Burbank, CA;
(5) Whitefield Medical Laboratory, Inc., based in Pomona, CA;
(6) Seacliff Diagnostics Medical Group, based in Monterey Park, CA; and
(7) Laboratory Corporation of America, based in Burlington, NC.
The State Attorney General's Office also issued a press release that seemed somewhat sensational and reflects the issues facing Medi-Cal providers in these difficult budgetary and political times. The press release can be found at:

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates. They represent health care providers in the defense of qui tam lawsuits. 

Saturday, March 21, 2009

Records And Computer Alterations During Government Investigation: Obstruction of Justice

A recent case demonstrates what can happen if someone alters records or computers during a government investigation. On March 16, 2009, a former Pfizer District Sales Manager, Thomas Farina, was convicted after a 5-day jury trial in a federal court in Boston for obstruction of justice.

Evidence presented during the five day trial was that in the summer of 2004, Farina -- while working for Pfizer Inc. -- caused a sales representative under his direction to alter documents and backdate the alterations on his computer to delete the evidence of the promotion of a drug for uses and dosages for which it was not indicated or approved for promotion by the United States Food and Drug Administration. The evidence demonstrated that Farina instructed his sales representative on how to change the clock and date setting on the computer, and then alter and re-save the documents in order to make the sanitized documents appear to have been last modified at an earlier time. Pfizer disclosed this conduct to the United States and fully cooperated in the investigation and prosecution of the case.

At that time, Pfizer and its sales staff (including Farina) were aware of the fact that the company was under investigation for the promotion of that drug for uses and at dosages for which the FDA had specifically declined to approve this drug. In March 2004, the company issued a “document hold” with respect to its sales force concerning that drug, including to Farina and the sales representatives under his direction. In the summer of 2004, Farina was in the process of collecting relevant documents from its employees computers relating to the promotion of that drug, in response to the government's investigation when Farina engaged in the conduct that was the subject of the trial. Sentencing is set for June 11.

For the press release:

Attorney Commentary: This appears to be a misguided "loyal" employee where the effort to cover up the alleged misconduct resulted in a greater problem than the alleged wrongful promotion of the drug. In almost every case we've seen, altering documents or fabricating them will create more problems than addressing the issues raised in the original investigation. This applies to computer records as well. In many cases, the fabrication will often be used to show proof of intent to defraud.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings, with a specialty in health care providers..

Friday, March 20, 2009

Securities And Wire Fraud: Attorney Charged In Stock Registration Evasion Scheme

Two recent cases have charged attorney with providing legal opinions in a "pump-and-dump" stock case where the attorney apparently did not profit from selling the unregistered shares. This shows a new aggressiveness in criminal prosecutions. The men who used those letters to sell worthless stock via email, Stephen Luscko and Gregory Alphonse Neu of Florida, have already each been sentenced to five years in prison.

On March 12, 2009, Dallas attorney, Phillip Windom Offill, Jr., of Dallas, was indicted in U.S. District Court in the Eastern District of Virginia. Mr. Offill is charged with one count of conspiracy to commit registration violations, securities fraud and nine counts of wire fraud. The indictment also seeks approximately $15 million in forfeiture from Mr. Offill.
The indictment charges that Offill and a Phoenix attorney David Stocker (who has already plead guilty and issued a legal opinion that that pump and dump stock op) employed a method to evade federal securities registration requirements in order to provide co-conspirators with millions of unregistered and "free-trading" shares of nine companies’ common stock that the co-conspirators could not have otherwise legally obtained. The indictment alleges many of the shares were subsequently sold by co-conspirators to the general investing public. By evading the registration requirements, the co-conspirators were able to hide from the investing public the actual financial condition and business operations of the companies. The companies included Emerging Holdings Inc.; MassClick Inc.; China Score Inc.; Auction Mills Inc.; Custom-Designed Compressor Systems Inc.; Ecogate Inc.; Media International Concepts Inc.; Vanquish Productions Inc.; and AVL Global Inc.
Attorney Commentary: In some pump-and-dump frauds, a legal opinion is crucial to getting the scam going. In the past, it appears that the only cases in which the SEC brought civil or criminal cases against lawyers who provided the opinions came when those lawyers also directly profited from selling the unregistered shares. No cases used to be brought against lawyers who simply issued such opinions. That has obviously changed and attorneys who offer legal opinions need to be extremely careful in how those legal opinions are going to be used. Good faith is a difficult defense when people have lost millions of dollars in a pump-and-dump scheme.
The opinion letters were deemed important because stock transfer agents rely on them in allowing unregistered shares to be traded. Normally, such shares are subject to rules that keep them from being traded for at least a year. But there are exceptions, and these letters said the shares fell into one exemption. These cases may be brought to deter other attorneys from issuing legal opinions for stocks traded on the Pink Sheets (a market largely used to trade stocks of companies that are not registered with the SEC).
For more, see: http://www.usdoj.gov/opa/pr/2009/March/09-crm-230.html

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals, and have represented attorneys in internal investigations, State Bar proceedings, search warrants and criminal matters.

Thursday, March 19, 2009

Medicare Fraud: Miami Jury Convicted Physicians And Medical Assistants Who Worked At Clinic

On March 17, 2009, a federal jury in Miami today convicted two physicians and two medical assistants in connection with a $5.3 million Medicare fraud scheme.

After a two-week trial in federal court in Miami, a jury found two physicians (David Rothman, M.D., 66, and Keith Russell, M.D., 65) and two medical assistants (Eda Marietta Milanes, 43, and Jorge Luis Pacheco, 50) guilty on all charged counts, including conspiracy to commit health care fraud and multiple counts of health care fraud for submitting claims to Medicare for unnecessary medications. U.S. District Judge Ursula Ungaro of the Southern District of Florida remanded the defendants into custody following the verdict.

According to evidence presented at trial, the defendants worked as doctors and medical assistants at two Miami clinics, Medcore Group LLC (Medcore) and M&P Group of South Florida Inc. (M&P Group), that purported to specialize in the treatment of human immunodeficiency virus (HIV). Evidence at trial established that Rothman was the medical director for both Medcore and M&P Group between May 2004 and January 2006. Russell took over as medical director at M&P Group after January 2006. Pacheco and Milanes worked as medical assistants for Russell at M&P Group.

One of the owners of the clinics, Tony Marrero, testified at trial that the clinics were established for the sole purpose of defrauding Medicare. Marrero testified that the scheme was to submit claims for medically unnecessary HIV infusion and injection treatments. Evidence at trial showed that Medcore and M&P Group billed Medicare for $5,300,186 and were paid $2,511,387 during two years of operations. Marrero testified that the unnecessary medicines were not administered to patients, and that the clinics were only operated to create the appearance of legitimacy.

Marrero stated that he had an arrangement with a pharmaceutical wholesale company, Lifecare Medical, to buy invoices showing the purchase of large amounts of medications, when only minor amounts were actually bought. Marrero; his wife, Belkis Marrero; his brother-in-law, Orlando Pascual; the owner of Lifecare Medical, Harold Sio; a patient recruiter and clinic employee, Alberto R. Gonzalez; and a medical assistant at Medcore, Luz Borrego; each previously pleaded guilty in connection with this scheme.

Borrego testified that she manipulated the patients’ blood samples at Medcore to ensure that lab results would appear to support the Medicare claims. Borrego stated that she would not give the medications ordered by Rothman because she knew the medications could harm the patients.

Trial testimony established that every patient who went to Medcore and M&P Group was paid a cash kickback of up to $200 per visit. The scheme relied upon 20 patients during the two-year period at both clinics. Four patients testified that they took kickbacks and never received any medication at the clinics. One patient testified that he used his payments from the clinics to support his cocaine addiction. Another patient testified that he did not have HIV, even though the clinics’ documents showed he was being infused with medication to treat HIV.

Evidence introduced at trial documented that Rothman worked at other Miami-area infusion clinics, which billed Medicare for more than $60 million between 2004 and the end of 2005. Trial evidence also established that Russell worked at Tendercare Medical Center (Tendercare), another fraudulent infusion clinic, with Pacheco and Milanes at the same time as M & P Group. Further, two of the patients who testified at trial received kickbacks from both Tendercare and M&P Group.

According to evidence presented at trial, Milanes was paid extra by Marrero at M&P Group to manipulate blood samples to justify the false claims. Pacheco worked directly for Marrero to determine what drugs would be falsely billed to Medicare through M&P Group. Trial testimony established that Pacheco was a physician in Cuba prior to coming to the United States.

“The Medicare program relies on physicians to be the first line of defense against fraud,” said Bernardo Rodriguez, Acting Special Agent-in-Charge of the Miami Office of Inspector General, Department of Health and Human Services. “As in this case, when doctors shirk that responsibility and steal from Medicare, we have to prosecute them to the fullest extent of the law.”

Pacheco and Milanes were remanded into custody following the verdicts. Rothman and Russell were required to post bond and are under house arrest until sentencing. Rothman faces a maximum of 50 years in prison. Russell, Milanes and Pacheco each face a maximum of 30 years in prison. Sentencing for all defendants has been scheduled for June 26, 2009.

Attorney Commentary: First, note that the business people who probably were the most culpable plead out and cooperated against the physicians and medical assistants. Second, if this is the type of case we come across, the physicians either were blissfully ignorant, listened to the promises of the business people on how "clean" the practice was or just somehow stuck their head in the sand since they were having a tough time, needed the money, etc. I note that the physicians are somewhat older. That is a consistent pattern. It is very hard to imagine that a business person would tell the physician that the clinic was designed for Medicare fraud.

Fourth, I doubt the physicians ever knew about the patient kickbacks. It appears that the physicians were probably not at the clinic a great deal (especially since one was also working at another clinic) and there is no indication here that the physicians owned the clinic. Fifth, the fact that one of the non-physicians stated that she would not give the patients the medications ordered by the doctor -- shows that the physician well may not have not have realized the fraudulent scheme in place.

Sixth, however, when one is at trial and the patients who were paid kickbacks are paraded in to testify and the other cooperating defendants appear and describe their fraud -- it is difficult for the physician to overcome this overwhelming evidence of fraud. Viewing it in the real time of a trial -- rather than how it occurred -- can make it difficult for the jury to imagine how anyone could not have realized there was a fraud scheme. This is one of the reasons why fraud trials can be challenging.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates. The firm focuses its practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings, with a specialty in health care providers..

Wednesday, March 18, 2009

Physicians Billing For Technical Component Of Diagnostic Imaging - Limited By 2009 Law

Effective January 1, 2009, under California law, physicians may no longer bill patients or insurers for the technical component of diagnostic imaging services (CT, PET, or MRI) that were not rendered by the physician or someone under his or her supervision. This means that radiologic facilities or imaging centers must now directly bill the patient or the responsible third-party payor.

California Business & Profession Code Section 655.8. The new law is Section 655.8 of the California Business and Professions Code. Section 655.8 prohibits a physician, chiropractor, podiatrist or dentist (“licensee”) from billing or otherwise charging the patient or other responsible payer for the technical component of CT, PET and MRI diagnostic tests that were not actually performed or supervised by such licensee. Section 655.8 further requires that a diagnostic imaging facility that performs the technical component of these tests to bill the patient or other responsible payer directly, and prohibits these facilities from billing the licensee who ordered the test. A violation of Section 655.8 constitutes a misdemeanor and is punishable by imprisonment, fines, or both.

Section 655.8’s apparent intention is to preclude several types of common global billing arrangements. and especially the ones driven more by marketing. First, it seeks to preclude lease arrangements between diagnostic facilities and licensees, where the diagnostic facility bills a licensee at a low cost for diagnostic space, equipment and staff, and the licensee orders tests which are performed at the facility, adds a mark-up to the technical component of the test and bills the patient and/or the responsible third party payer for the test. Any part-time and block time-sharing leases, space sharing arrangements, and similar arrangements need to be reviewed to see if they comply with Section 655.8.

Second, Section 655.8 seeks to preclude brokering arrangements where a broker arranges for diagnostic services at negotiated rates with multiple diagnostic facilities, then bills third party payers for services rendered by those facilities at marked-up rates. Under Section 655.8 these arrangements are prohibited because the diagnostic facilities is billing the broker for services rather than third party payers and patients.

Scope of Section 655.8 and Meaning Of "Performed" and "General Supervision." Section 655.8 is not perfectly clear and there are numerous issues regarding its scope. First, the term "performed"is not defined so it is not clear what relationship the licensee must have with the diagnostic facilities, the technicians and other employees and the equipment in order to be deemed to have "performed" the test.

Second, the “supervision” requirement is met if the licensee provides the applicable level of supervision set forth in Medicare regulations, 42 C.F.R. Section 410.32. This is only vague to the extent that it is unknown how the State will interpret "general supervision." We have seen general supervision arrangements that are unpaid and there is little interaction with the technicians or involvement with the facility. Such arrangements will likely not meet the critieria.

42 C.F.R. Section 410.32 includes 3 different levels of supervision depending upon the test performed. "General supervision" is required for the most commonly performed diagnostic tests and it requires that the test be furnished under the licensee’s overall direction and control, but the licensee’s physical presence is not required during the performance of the test. General supervision also requires that the licensee be responsible for the training the technicians who perform the test, the maintenance of the equipment and other supplies needed for the test.

The best practice is to treat "general supervision" as a serious responsibility. Ideally, the general supervising physician should visit the facility regularly, be involved in ongoing oversight of the technicians and at have input into their performance evaluations, review equipment calibration reports, and routinely engage with employees on quality control.

Each arrangement will need to be analyzed under Section 655.8 to determine whether a licensee can bill patients or payers for the technical component of a test requiring general supervision which is rendered pursuant to a lease arrangement with a diagnostic center. The structure and day-to-day operations will need to be reviewed to determine whether (1) the test was performed under the “overall direction and control” of the licensee (even when he or she is not present at the leased premises when the test is performed) and (2) the general supervision requirements are met.

Exceptions to Section 655.8. Section 655.8 does have exceptions for: (a) diagnostic tests performed within a physician and surgeon’s office or the office of a group practice; (b) licensees and diagnostic facilities that contract directly with a licensed health care service plan; (c) for health care programs operated by public entities (including colleges and universities); and (d) health care programs that are operated by private educational institutions that serve their students' health care needs

There is also an exception that allows radiologists to bill for the technical and professional components, even though the radiologist did not perform or supervise the test. For this exception to be applicable the radiologist and any member of his group practice (1) could not have ordered the diagnostic test and (2) has to provide the interpretation. In other words, radiologists who provide the interpretation may purchase the technical component of diagnostic imaging services assuming that neither the radiologist nor a person in their medical group ordered the diagnostic study.

Importantly, Section 655.8 does not apply to X-Ray, ultrasound, mammography, or other imaging services. It only applies to CT, PET and MRI. Physicians are also reminded that it is a violation of law to allow physician assistants or other staff to perform x-rays without proper certification. After Section 655.8 was enacted, the California Department of Public Health publicly announced that it intends to strictly enforce this x-ray provision and physicians found to be in violation will be cited and may be subject to additional enforcement action.

Conclusion. Section 655.8 must be taken into consideration in planning or structuring billing arrangements related to diagnostic imaging services. In addition, for providers who submit claims to Medicare, they will also need to comply with the anti-markup regulations applicable to the technical component and professional component of diagnostic imaging services that were issued by CMS in the 2009 Medicare Physician Fee Schedule ("MPFS").

It is expected that the State will rely on Section 655.8 in its audits for Medi-Cal to preclude physicians from global billing where they use mobile services and are not radiologists. We also expect that Medicare will use it along with its anti-markup regulations to limit billing by IDTFs. Private insurers will also become more aggressive as they seek to control costs for CT, MRI and PET diagnostic studies.

Any questions or comments should be directed to: tgreen@greenassoc.com.  Tracy Green is a principal at Green and Associates.  The firm focuses its practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings, with a specialty in health care providers.
You can reach Tracy Green at 213-233-2260.

Tuesday, March 17, 2009

Pharmacist Arrested For Theft Of Prescription Medication In Sacramento

The number of arrests of licensed health care professionals for charges related to the abuse of prescription medications or improper conduct involving them continue to increase. This particular case involves a pharmacist taking prescription medications from his pharmacy employer. The diversion was discovered during a state audit.

On March 6, 2009, pharmacist Marvin G. Gibson was arrested for theft of prescription medication while he was employed as a pharmacist at a Sacramento County operated pharmacy.

The DEA began this investigation in June 2008 while they conducted an audit at the County of Sacramento Primary Care Center Pharmacy (Sacramento County PCCP) in Sacramento, CA where Gibson was employed as a registered pharmacist. According to the charges, between August 2007 and January 2008, Gibson stole Hydrocodone on 3 separate occasions from the Sacramento County PCCP.

According to court documents, Gibson admitted to stealing a total of approximately 60 Hydrocodone pills for his own personal use while working at the pharmacy. Hydrocodone is marketed, in its varying forms, under a number of trademarks, including Vicodin, Lorcet, Lortab and Norco.

The arrest warrant charged Gibson with the following violations: (1) one felony count for unlawfully obtaining Hydrocodone by fraud, deceit, misrepresentation and subterfuge (Health and Safety Code 11173(a)); (2) one felony count of unlawful possession of Hydrocodone (Health and Safety Code 11350(a)); and (3) one misdemeanor count of knowingly and unlawfully possessing Hydrocodone without a prescription (Business and Professions Code, Section 4060).

This case is being prosecuted by the Sacramento County District Attorney’s Office. An arrest warrant affidavit contains only allegations against an individual and all defendants must be presumed innocent unless and until proven guilty.

For more information regarding this case, see: http://www.usdoj.gov/dea/pubs/states/newsrel/2009/sanfran030609.html

Comment: This case serves as a reminder of several important points. First, the pharmacist Gibson confessed to the offense. There are no details how that occurred but as one can see, he was still charged criminally. If you have any potential for criminal exposure, hire an experienced attorney before you are interviewed by any government official (whether an auditor or law enforcement).

Second, substance abuse addiction can have devastating consequences. If you have a substance abuse problem, seek treatment now and work on getting your life back in order. If there is criminal exposure for past conduct such as diverting prescription medications or writing false prescriptions, seek legal advice and make a plan on how to handle any investigation and engage in damage control.

Third, employers such as pharmacies and health care providers need to implement control measures so that employees who may have addiction problems will not divert medications or steal prescription pads. Those employers can face sanctions from the DEA and other regulatory agencies.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates  in Los Angeles, CA. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings, with a specialty in health care providers.

Monday, March 16, 2009

Real Estate Broker Charged In Fraud Case

On February 20, 2009, the California Attorney General’s Office filed 73 criminal counts against real estate broker Thomas Hastert in the Nevada County Superior Court for embezzlement, securities fraud, conspiracy, and filing false documents. A criminal complaint contains merely charges and a defendant is presumed innocent until proven guilty.

Hastert brokered over 270 hard-money loans in Nevada, Sacramento, Sutter, Butte, Placer, and Yolo Counties between September 2004 and September 2007 for real estate development projects. Hard-money loans typically provide high returns for private investors and are secured through collateral such as real estate. In this case, Hastert secured $20 million from several investors, using the funds to broker hard-money loans to borrowers seeking to develop homes on real estate.

In the criminal complaint, Hastert is alleged to have:

■ Misled investors. Hastert told investors that borrowers had excellent credit scores and were capable of repaying the loans. This proved to be untrue. Many borrowers had poor credit scores, did not make regular payments on the loans, and held properties that were in foreclosure.
■ The loans that Hastert brokered were required by law to be placed into a special trust account overseen by a third-party escrow firm. The firm had to verify whether funds being withdrawn by borrowers were being used for construction projects. Despite telling investors he had established such a trust account, Hastert never did, and the money was regularly withdrawn and misused by borrowers with no oversight.

■ Hastert told investors he would personally oversee the development of the land. In one instance, he was asked by investors to drive them to a particular property that was supposedly under development. Hastert could not locate the property.

■ Set up fake investors, known as “straw men,” to keep concerned investors at bay. Hastert filed documents with a county recorder’s office saying that his secretary owned a majority interest in the investment, despite the fact that she had never invested a single dollar. If a legitimate investor tried to initiate foreclosure proceedings, Hastert would contend that the supposed majority owner opposed the action.

■ Embezzled fees. Hastert was entitled to collect a 3% fee on loans he brokered. However, he took all his fees up-front as if the loan were fully funded. The complaint alleges some loans never fully funded, and others took more than a year to fully fund.

If convicted, he could face up to 11 years and 4 months in prison apart from the collateral consequence of losing his real estate broker license. Bail was set at $540,000. To review the complaint and arrest warrant declaration:http://ag.ca.gov/cms_attachments/press/pdfs/n1683_aw_dec;aration_filed.pdf

Attorney Comments: There will be a large increase in the number of criminal cases filed against real estate professionals in the next few years both by the U.S. Attorneys' Offices, State Attorney General's Office and District Attorneys' Offices. These cases take years to investigate and prosecute and any individuals who are targets of investigation should seek counsel early in order to do their best to seek to avoid criminal filings. In cases where there are viable defenses and the losses were due to economic reasons or bad business decisions and not fraud, strategic decisions need to be made on whether to approach the investigating authorities.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings, with a specialty in health care providers.


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