Two Contractors Plead And Are Sentenced to Federal Prison For Paying Kickbacks For Construction Contracts

L.A. Times photo

Kickbacks exist in other industries other than healthcare and can result in federal and state charges. For corporations, it can be charged embezzlement where the person receiving the kickback is obtaining a corporate benefit. If there is a federal or state contract, then it is a violation of federal or state laws. There are also tax implications for the person receiving the kickback (unreported income) and for the person or company paying the kickback if it is written off (improper deduction).  There can also be money structuring or money laundering charges.

A recent case involved defense construction contracts. On June 27, 2014, the presidents of two San Diego contracting firms were sentenced to federal prison terms after pleading guilty to bribing a civilian employee of the Department of Defense to get construction and service contracts worth millions of dollars at Camp Pendleton. Hugo Hernandez Alonso, 50, of Chula Vista was sentenced to a year in prison and fined almost $127,000. Bayani Yabut Abueg Jr., 51, of San Diego was sentenced to six months in prison and fined $366,140. They plead to violating the antikickback statute (41 U.S.C. Sections 8701, 8702, and 8707 and its predecessor) and conspiracy to violate it (18 U.S.C. Section 371). Both plead and appeared to have cooperated which resulted in lower sentences.

In a separate case, that civilian employee, Natividad (Nate) Lara Cervantes, who was the supervisor for construction and service contracts in the inspection branch of the department has plead guilty and will be sentenced later this year. The Los Angeles Times reported on this case in an article.

Mr. Abueg appears to have cooperated in an FBI sting operation since Mr. Cervantes was arrested by the FBI in 2013 after receiving an envelope with $10,000, a down payment of a promised $40,000 bribe from Mr. Abueg. This explains his lower sentence (6 months). This is fairly typical in federal criminal cases where plea agreements are the norm and cooperation allows more flexible and lenient sentencing.

The kickbacks (or bribes as the government would call them) stretch back from 2008 to 2011, with Mr. Cervantes receiving thousands of dollars in cash and remodeling work on his San Diego condominium, according to court documents. Mr. Abueg also demanded kickbacks from subcontractors totaling $539,000 and to cover the cost of the kickbacks, the value of the work done by the subcontractors was inflated. Other subcontractors were required to do discounted work at the homes of Abueg and his relatives as well as Cervantes’ home.

In industries, I have had clients tell me how they will not get business if they do not pay kickbacks. The unfortunate consequence of the payment of kickbacks can be criminal charges. There are cases where clients have paid kickbacks in the past, and then the decision has been made on the advice of counsel to cease payments in order to start the statute of limitations running and to minimize the risk of future charges. In this case, the federal government waited to charge until they were able to catch Mr. Cervantes in the act of receiving the cash payments.

If your company has engaged in kickback arrangements, even creative ones to get around the anti-kickback statutes, it is better to evaluate the law, seek representation and cease the conduct before it comes to the attention of the government. Having a strategy for damage control can be useful and even if there is reduced business it is far better than having a criminal case which completely destroys an entire business and can result in loss of liberty.

Posted by Tracy Green, Esq.

Phone: 213-233-2260

Email: tgreen@greenassoc.com

Attorney Sentenced For Theft of Government Property For Receiving Deceased Grandmother’s Social Security Benefits For Over 10 Years - Case Study On What NOT To Do When OIG Or Investigators Contact A Suspect

The Office of Inspector General (OIG) is increasing their investigations against those who are suspected of improperly taking Social Security benefits.  We have seen OIG request interviews of family members where the parents are out of the country and receiving Supplemental Social Security (SSI) and other government benefits. If someone is charged with theft of Social Security, SSI or Medicare benefits, they will be charged under 18 USC Section 641 (theft of government property).

If the OIG is investigating, it means that there is suspicion of criminal conduct. In a recent federal criminal case, the OIG started investigating and the person receiving the benefits lied to the OIG investigator. This is a case example of what not to do when contacted by the OIG and when an investigation is pending.

The facts are as follows. On May 24, 2000, the grandmother of Audrey Owens, an attorney and retired deputy public defender for Riverside County, passed away. Her Social Security benefits had been deposited into a bank account that had her and her father’s name on the account. Ms. Owens took her dad’s name off the account and changed the bank account address to her home. For the next 12 years, the benefits went into this bank account and Ms. Owens spent the funds. Ms. Owens did not think about the fact that her grandmother would have been over 100 years’ old in 2012.

In August 2012, as part of a “centenarian project” OIG began investigating Ms. Owens’ grandmother. The OIG was investigating all persons aged 100 years or more who are receiving Social Security or SSI benefits to make sure they are still alive. OIG could not locate Ms. Owens’ grandmother and therefore suspended benefits. Later this fact was used to show that Ms. Owens would not have ended the fraud on her own.  

On August 30, 2012, OIG agents went to Ms. Owens’ home and spoke to a man and asked him where the grandmother was. This man said the grandmother was in Kansas City. On September 24, 2012, Ms. Owens agreed to speak to OIG agents without an attorney. Ms. Owens told some mistruths to the OIG agents – which is not uncommon for people interviewed without an attorney when they panick. Ms. Owens stated that the man the OIG met was a homeless man she took in from a church when in fact he was her husband. Ms. Owens also stated that she thought the funds that went into the account were from her father’s VA benefits. Another untruth.

It took the U.S. Attorney’s Office a year before filing a criminal complaint against Ms. Owens. The total loss was just over $120,000 for benefits received as well as Medicare premiums paid on the grandmother’s behalf. 

During this year, it would have been very helpful for Ms. Owens if she had started repayment of these funds on her own before she was charged. Unfortunately, it appears that nothing was done until just before sentencing. Once Ms. Owens was charged, she plead open to the Court. By this time, she had retired from the  public defenders’s office.

At sentencing, Pretrial Services recommended 6 months. The government sought a sentence of 12 to 18 months. On June 2, 2014, Judge Phillips sentenced Ms. Owens to 1 year and 1 day (the extra day is a sentencing benefit to Ms. Owens for various reasons).

Ms. Owens sought to have her sentence lower by addressing the fact that she suffered from alcoholism during this time period. It is difficult to determine how persuasive this was given that she was employed full-time during this time period.

One thing that was done correctly here was repayment of restitution before sentencing. Ms. Owens wisely repaid all the funds to SSA except for $1,747 and this may have been a factor in the court not sentencing Ms. Owens to 18 months. If this had been a state court case rather than federal, there probably would not have been a state prison sentence for a first time offense where restitution was almost entirely repaid, however the federal system is much harsher on sentencing results for these type of cases -- especially when a professional is involved.

There is no question that lying to a government agent such as OIG makes matters much worse. It is better to refuse to be interviewed if the person cannot say anything without incriminating themselves. This is when someone should obtain an attorney for advice so they do not make such a terrible mistake that compounds problems. This can often lead to obstruction of justice charges or enhancements.

Posted by Tracy Green, Esq.
Phone: 213-233-2260
Email: tgreen@greenassoc.com

Los Angeles Physician Pleads Guilty to Federal Charge of Distributing Hydrocodone for Prescribing Outside Usual Course of Professional Practice and Without Legitimate Medical Purpose

The criminal cases relating to physicians and controlled substances keep coming.  On June 19, 2014, a 78-year old Los Angeles-area doctor, Dr. Andrew Sun, agreed to plead guilty in Los Angeles to one count of distribution of hydrocodone (painkillers known by the brand names Vicodin and Norco) and one count of money laundering. USDC Case No. 2:14-CR-00157.  The drug distribution count was based on prescribing “outside the usual course of professional practice and without a legitimate medical purpose.”

The money laundering arose from admissions by the doctor that the cash he received for seeing patients for narcotics prescriptions ($554,070) was deposited into his personal bank accounts instead of his business accounts.  The plea agreement also involves Dr. Sun stipulating to forfeit $342,000 seized from his accounts and agreeing to pay the California Medical Board’s investigation fees of $86,975 as restitution. 

The Indictment was filed on March 18, 2014 and the case is pending before Hon. Manuel Real in the Central District. A change of plea hearing is set for June 26, 2014.  As part of his plea agreement, Dr. Sun has agreed that as a condition of his supervised release he will no longer write prescriptions or dispense controlled substances, and will not oppose any administrative action by the DEA or Medical Board to suspend or revoke his licenses or registrations. 

This case arose out of an undercover investigation where 12 undercover officers sought prescriptions for controlled substances from Dr. Sun in 2011 and 2012.  Dr. Sun agreed to plead guilty to distributing hydrocodone, and also admitted in his plea agreement that he also illegally prescribed and distributed other controlled substances (Xanax and Soma). Sun admits that he prescribed these drugs from the beginning on 2011 through June 2012 and that he did so “outside the usual course of professional practice and without a legitimate medical purpose.”

Dr. Sun admitted that, between January 2011 and May 2012, he received approximately $554,070 in cash payments from patients, which he deposited into a personal account “for the purpose of disguising the source and nature of the funds, and which represented the proceeds from defendant’s issuance of prescriptions for controlled substances.”

The drug trafficking count (18 U.S.C. § 841(a) carries a statutory maximum penalty of 10 years in federal prison, and the money laundering count (18 U.S.C. §1956(a)(1)(B)(i) carries a maximum penalty of 20 years in custody.  The plea agreement seems to contemplate a sentence on the low end of the guidelines, and the defense waived any right of appeal if the sentence is 3 years or less.  Similarly, the U.S. Attorney’s Office agrees not to appeal the sentence if the sentence is no less than 3 years. 

Attorney Comments:

This case shows that older or impaired physicians are more likely to be involved in criminal cases such as this one. This physician is 78 and under the terms of the plea agreement, he is likely to get federal prison time.  The plea agreement allowed him a downward departure of two levels due to his age. However, this was offset by an abuse of trust enhancement of two levels.

The current wave of indictments and charges against physicians for prescribing controlled substances will be unlikely to continue as physicians are more aware of the requirement that prescriptions be issued with legitimate medical purpose.  However, there are numerous investigations that are outstanding and the Medical Board, District Attorney’s Office and U.S. Attorneys’ Office will continue to be vigilant.

Undercover cases are difficult given that the evidence is preserved on what the patients said and the physician’s response to the patients. With 12 visits, it establishes a record that impeaches the physician and undermines his credibility. Dr. Sun had a practice and saw the patients but the issue of whether there was legitimate medical purpose would be an issue of expert opinion.  

Any physician prescribing controlled substances must be compliant with pain management protocols, Medical Board rules and seek outside advice to ensure that they will not face criminal or disciplinary charges by the Medical Board or DEA.

Posted by Tracy Green, Esq.

Green and Associates, Attorneys at Law

Phone: 213-233-2260

Email: tgreen@greenassoc.com

California Board of Pharmacy Obtains Interim Suspension Order Against Pharmacy and Pharmacist Due To Counterfeit Drugs and Violations of Pharmacy Law

Over the past seven years, there has been increased investigations on illegal drug diversion at pharmacies and the sale of counterfeit prescription medications at pharmacies. There have been companies and individuals which have been accused of buying back prescription medications from patients and selling them to distributors who create false records of authenticity or selling them to pharmacies at a reduced price.  

In a recent California Pharmacy Board case, the Board sought and obtained an Interim Suspension Order against a pharmacy, Adams Square Pharmacy in Glendale, California, arising from the pharmacy returning counterfeit Cialis to Eli Lilly through a pharmaceutical reverse distributor. This was pursuant to Business and Profession Code Section 494(a)(2) on the grounds that the pharmacy posed a danger to the public health, safety and welfare. the judge also found that the return of the counterfeit Cialis was dishonesty, fraud or deceit. Here is a copy of the decision on the interim order.  The order shut down the pharmacy. The order also precludes the pharmacist owner Margarita Kazarian from working as a pharmacist in charge.  The Los Angeles Times also reported on this matter.  The Pharmacy Board has indicated that it will file an Accusation against Ms. Kazarian by July 1, 2014.

The primary ground for the suspension was that the pharmacy had counterfeit Cialis tablets in its stock. This was discovered when  the Cialis returned by the pharmacy was found to be counterfeit Lilly drug product and were returned in a genuine Lilly packaging and container. The Pharmacy Board conducted an inspection on November 11, 2013 and found more counterfeit Cialis in the pharmacy and numerous other Pharmacy Board violations.

Pharmacies need to be vigilant in their ordering and be careful when ordering from distributors who are selling trade name drugs at prices below the manufacturers. There are currently federal criminal cases filed throughout the country regarding the operation of businesses dealing in counterfeit drugs or drugs that have been recycles through the system through pharmacies or patients. In the Los Angeles area, there were groups who bought prescription drugs from patients and then repackaged them with fake certificates and resold them into the stream of commerce. This is considered illegal drug diversion.

Pharmacies should check their stock, their suppliers and make sure this does not happen to them.  In addition, the pharmacies should be ready for inspections without the issues that this pharmacy faced which included failing to maintain adequate records of sales, disposition, and acquisition of medications; expired medications on the shelf; overfilled containers; etc.  This is also considered unprofessional conduct.

Posted by Tracy Green, Esq.
Green and Associates, Attorneys at Law
Phone: 213-233-2260
Email: tgreen@greenassoc.com

Did Your Office Receive OIG Or Grand Jury Subpoena For Records? Case Example Of Why You Should Not Destroy Records Unless You Want Obstruction Of Justice Charge.

I receive many calls from businesses and individuals where the government - federal, state, or administrative boards - or insurance companies are requesting records.  Some records are requested for an audit.  Other records are requested by a subpoena or grand jury subpoena. 

One of the keys in responding is not to panic. Obtain sage advice and proceed intelligently so you do not make matters worse. Even if there are some issues with the records, it may be a damage control case and you may not be objective or thinking clearly when receiving this request for records. 

One of the first things I tell clients is NOT to destroy records. Why? Destroying records does a number of things. First, it helps show intent to defraud. Second, it also provides a basis for an obstruction of justice charge. So even if the government decides not to charge health care fraud, it can charge obstruction of justice. Third, it also means you will not be able to use those records in your defense at any time and you do not know where the investigation is going at an early stage.  

A recent case shows what can happen when records are destroyed. On June 11, 2014, a New Jersey chiropractor, Mary Jean Negri, DC, RN, admitted destroying patient appointment records sought by federal agents investigating potential billing fraud at her medical office. Dr. Degri DC pleaded guilty in federal court to an information charging her with one count of obstructing an investigation of a health care offense. Dr. Negri DC had been practicing for 24 years and now this will cause her to lose her license and have a federal criminal conviction. 

According to documents filed in this case and her own statements made in court, Dr. Degri DC discovered in May 2012 that the FBI and the U.S. Attorney’s Office were investigating her chiropractic corporation for potentially fraudulent billing practices. Dr. Negri DC  suspected that investigators were interested in obtaining the clinic's patient appointment books as evidence of potential fraud. In an effort to obstruct the government’s investigation, she discarded those patient appointment books.

Dr. Negri DC's sentencing is scheduled for September 29, 2014. The maximum sentence on this charge is 5 years, a $250,000 fine, or twice the gain or loss caused by the offense. It is doubtful that she will receive the maximum but the sentence will depend on the judge and the facts and circumstances.  There will be significant collateral consequences to Dr. Negri DC as well such as being excluded as a Medicare provider by OIG and discipline to her license including revocation.  

Do not let your office respond to subpoenas or request for records in a manner that exposes you to greater problems. Seek advice and handle these requests in a professional manner. Even if you need to assert the 5th Amendment or are concerned about billing exposure, remember that not every case investigated is charged but it makes the government's job easier to prove fraudulent intent if there are records destroyed or "lost" in a flood or disaster.

Posted by Tracy Green, Esq.

Green and Associates, Attorneys at Law

Phone: 213-233-2260

Email: tgreen@greensasoc.com

Los Angeles Doctor Charged With Medicare Fraud For Signing Home Health And Hospice Certifications That Were Not Medically Necessary - OIG Investigations Continue

We can expect to see more health care fraud cases involving home health, hospice, physical therapy and occupational therapy being filed in California. These cases also usually involve marketing of Medicare beneficiaries. The Office of Inspector General (OIG) is investigating old cases and seeking to file them even where the billing was done years ago. A recent case involved billing back from 2006.

On June 3, 2014, an Indictment was filed against Dr. Robert Glazer alleging conspiracy to commit health care fraud in violation of 18 U.S.C. §1349, health care fraud in violation of 18 U.S.C. §1347, and aiding and abetting health care fraud from January 2006 to May 2014.  Dr. Glazer is presumed innocent and these are simply allegations in the Indictment. It is alleged that all these certifications for home health, PT and OT and the DME prescriptions resulted in billings to Medicare totaling $33 million which resulted in payments of $22 million. Does this mean that Dr. Glazer received $22 million? Of course not, but in a conspiracy he is liable for the certifications he wrote them and there was not medical necessity.

The Indictment though will show what I see in many health care fraud cases in the Los Angeles area.  First, the doctor allegedly used his clinic to provide medically unnecessary certifications for (1) home health services for nursing, physical therapy and occupational therapy, (2) hospice services, and (3) durable medical equipment for power wheelchairs. 

Medicare coverage for hospice is limited to situations where it has been medically certified that beneficiaries are terminally ill, have 6 months or less to live, and the beneficiary chose hospice understanding that Medicare will not cover treatment intended to cure the beneficiaries' terminal illnesses.

Second, this case involves the marketing of Medicare beneficiaries. A marketer is alleged to be a co-conspirator who recruited Medicare patients for the home health agency and the medical clinic. Patients allegedly received free diabetic shoes and promises of free power wheelchairs. There is a lot of marketing in hospices and the fees paid to marketers are significant. With marketing, any claim will be a false claim but this case goes beyond pure marketing and kickback issues.

Third, this case involved a manager or hidden owner of the Medicare clinic. The Indictment alleges an owner of home health services (Fifth Avenue Home Health) was a manager alleges that the medical clinic provided unnecessary services. In many of these cases, managers and hidden owners are involved.

These fraud cases take years to find their way to court. For physicians who wrote certifications, they are now being held responsible for the billings of third party home health agencies, hospices and DME companies. In some of these cases, the DME companies have been prosecuted and now the government is coming back to charge the physicians, especially now that the individuals who have plead guilty or been convicted are cooperating.

OIG Investigations. If the Office of Inspector General (OIG) has come to your office and requested files by subpoena or request, there is a pending criminal investigation. I have seen many providers not take these subpoenas or investigations seriously and let themselves and their staff interviewed. After a year or two, medical providers may think that these cases have gone away but then find that the investigations are still ongoing. 

It is important to seek expert advice early on in these cases in order to evaluate the legal issues. In some cases, where there is a good defense it may be critical to hire an expert early and present this evidence to OIG or the U.S. Attorney's Office in order to prevent cases from being filed. In other cases, there may be reasons to not disclose this information or evidence and wait to see whether or not charges will be filed. There are many other ways to proceed since each case is different. It is important to have knowledge and understand the allegations, the billing issues and why there is an investigation. This also allows medical providers to plan ahead. 

Posted by Tracy Green, Esq.
Green and Associates, Attorneys at Law
800 West 6th Street, Suite 450
Los Angeles, California 90017
Tel: 213-233-2260
Email: tgreen@greenassoc.com

Ex-Controller Of California Court Services Firm With Gambling Addiction Admits Embezzling $3.3 Million And Pleads Guilty In Federal Court

I receive many calls from businesses and individuals where the government - federal, state, or administrative boards - or insurance companies are requesting records.  Some records are requested for an audit.  Other records are requested by a subpoena or grand jury subpoena. 

One of the keys in responding is not to panic. Obtain sage advice and proceed intelligently so you do not make matters worse. Even if there are some issues with the records, it may be a damage control case and you may not be objective or thinking clearly when receiving this request for records. 

One of the first things I tell clients is NOT to destroy records. Why? Destroying records does a number of things. First, it helps show intent to defraud. Second, it also provides a basis for an obstruction of justice charge. So even if the government decides not to charge health care fraud, it can charge obstruction of justice. Third, it also means you will not be able to use those records in your defense at any time and you do not know where the investigation is going at an early stage.  

A recent case shows what can happen when records are destroyed. On June 11, 2014, a New Jersey chiropractor, Mary Jean Negri, DC, RN, admitted destroying patient appointment records sought by federal agents investigating potential billing fraud at her medical office. Dr. Degri DC pleaded guilty in federal court to an information charging her with one count of obstructing an investigation of a health care offense. Dr. Negri DC had been practicing for 24 years and now this will cause her to lose her license and have a federal criminal conviction. 

According to documents filed in this case and her own statements made in court, Dr. Degri DC discovered in May 2012 that the FBI and the U.S. Attorney’s Office were investigating her chiropractic corporation for potentially fraudulent billing practices. Dr. Negri DC  suspected that investigators were interested in obtaining the clinic's patient appointment books as evidence of potential fraud. In an effort to obstruct the government’s investigation, she discarded those patient appointment books.

Dr. Negri DC's sentencing is scheduled for September 29, 2014. The maximum sentence on this charge is 5 years, a $250,000 fine, or twice the gain or loss caused by the offense. It is doubtful that she will receive the maximum but the sentence will depend on the judge and the facts and circumstances.  There will be significant collateral consequences to Dr. Negri DC as well such as being excluded as a Medicare provider by OIG and discipline to her license including revocation.  

Do not let your office respond to subpoenas or request for records in a manner that exposes you to greater problems. Seek advice and handle these requests in a professional manner. Even if you need to assert the 5th Amendment or are concerned about billing exposure, remember that not every case investigated is charged but it makes the government's job easier to prove fraudulent intent if there are records destroyed or "lost" in a flood or disaster.

Posted by Tracy Green, Esq.

Green and Associates, Attorneys at Law

Phone: 213-233-2260

Email: tgreen@greensasoc.com

California Medical Board Will Be Revising Pain Management Guidelines - Prescribing Task Force Meeting on June 19, 2014

On June 19, 2014, the California Medical Board's Prescribing Task Force will be meeting in Sacramento. On the agenda will be revision of the Medical Board's Pain Management Guidelines.

For those physicians and groups who specialize in pain management, this will be an important meeting in order to have input into revisions to these guidelines.  These guidelines will ultimately be part of the standard of care.

For more information, including speaking at the meeting, contact the Medical Board at 916-263-2389.

Posted by Tracy Green, Esq.
Green and Associates, Attorneys at Law
Phone: 213-233-2260

76 Year Old Los Angeles Chiropractor Accused of Sexually Assaulting A Patient - What Can You Learn From This?

On June 3, 2014, the Los Angeles Times reported that a 76 year old chiropractor -- practicing for 40 years -- was arrested of sexually assaulting a patient.  Manuel Domingo Chacon was arrested and was held on $100,000 bail but it should be remembered that these are accusations and he is presumed innocent.

While we do not know the facts of this case, it is a reminder that a "sexual assault" or "sexual touching" allegation is very difficult to defend.  My recommendation is for there to be a chaperon in the room where patient are seen. The doors should remain open unless there is a chaperon there.

I often have clients claim they cannot afford it but I recommend having a low skilled medical assistant who can assist with charts and who can enter in each chart their presence during the examination.  I have had clients careers harmed by allegations much less serious than a rape or sexual assault.  I have seen medical providers of brushing up against the outside of someone's clothing for a second. I have seen a physician accused of brushing up his clothed groin area against a patient while performing a laser procedure.

It is not only criminal allegations that are the concern.  If a patient makes that complaint to a Medical, Chiropractic, Pharmacy, Behavioral Science or other Board, those Boards will almost always let them go to hearing and let a judge decide the validity of the allegation.

As part of your best practices, consider making this change in your practice. In today's world, it is easy for someone to make a false claim in the hopes of getting a settlement or if they have psychiatric or other psychological problems that could add to the issue.  Make sure any inappropriate comments by patients are charted and if there are patients who have boundary issues, consider discharging those patients from your practice (while following all the rules and precautions in discharging them).  Be safe out there and be healthily paranoid.

Posted by Tracy Green, Esq.
Green and Associates, Attorneys at Law
Phone: 213-233-2260
Email: tgreen@greenassoc.com