Increased Use of Nonprofits in Fraud Cases: Utah CEO of a "Charity" That Distributed Medical Supplies Sentenced for Tax Evasion

 

In our practice we have seen an increase in the number of charities or nonprofits in the health care or government contracts field. Often the problem is that the parties to not know how to run the charity according the federal and state tax rules. In addition, they often do not realize that both the federal agencies and states are able to use significant powers over non-profits.

In two recent related cases two men were involved in a federal tax fraud case involing a health care business charity.  What happened here? The CEO of a medical supply charity business, Ashley James Robinson, entered into a secret arrangement with a purported donor, Gurcharan “Jazzy” Singh. Mr. Singh provided medical supplies to the charity, making it appear as if these supplies had been donated to the charity thereby getting his company a deduction. 

Mr. Robinson then arranged for the charity to sell the goods to a third-party, passing most of the sale proceeds back to Mr. Singh. As compensation, Mr. Singh then paid Mr. Robinson, not the charity, up to 10% of the total proceeds. Mr. Robinson did not declare the income from Mr. Singh as income. 

As is common in these cases, over years the money adds up. According to court documents, from 2016 through 2019 Mr. Robinson that did not report a total of approximately $1,163,818 in income. As a result, Mr. Robinson caused a tax loss to the IRS of approximately $427,145. That is the loss amount. That will also be the restitution amount to be repaid. The more that can be repaid prior to sentencing, the better it will be obtaining a favorable sentence. 

The government also likes to allege facts showing that the person charged used the money to live lavishly or high on the hog as might be said in the South. Here the government alleged that Mr. Robinson used the funds to pay off the mortgage on his principal residence and to buy multiple luxury vehicles, including a Maserati, a Mercedes Benz and an Audi for a co-worker.

Mr. Robinson and his counsel must have decided that the defense was not strong and he pleaded guilty today to willfully evading the proper assessment of income tax. At sentencing, he was sentenced to federal prison for 1 year and one day (an excellent sentence since it allows him to serve just half the time.) The sentence implies that Mr. Robinson plead early, had mitigating circumstances in his background, and did not have any prior felonies. In addition to his prison sentence, U.S. District Judge Jill N. Parish for the District of Utah ordered Robinson to pay approximately $485,982 in restitution to the United States.

Mr. Singh has already been sentenced in the Central District of California to the same sentence of one year and one day.  These are relatively short sentences and hopefully these men can put this behind them, learn the lessons needed, and get on with their lives and back to their family.  We have seen so many clients get through these issues, and they do make it through the other side. 

Case Study: Federal Embezzlement Charges Against California Controller. Top 5 Things to Learn From This Indictment

As attorneys specializing in white collar crime, we have represented businesses who wanted help in presenting a fraud case to the local police or FBI as well as representing those who have been charged with such offenses. 

Recently, a controller for two Southern California companies was charged in  a federal grand jury Indictment with embezzling $3 million. After providing you with a summary of the allegations, we will delve into what can we learn from this recent Indictment. 

With respect to this particular case, remember that an Indictment does not mean that the accused is guilty, nor is it proof of guilt since our Constitution provides that the accused is presumed innocent until proven guilty beyond a reasonable doubt.

On November 18, 2021, a federal grand jury in Santa Ana, California in the Central District returned a 15-count Indictment accusing the former controller, Rosalba Meza, for two Anaheim-based companies, Trilogy Plumbing, Inc. and Matrix Management, LLC, of embezzling more than $3 million by directing the transfer of company funds to bank accounts that she controlled. She is scheduled to be arraigned on the indictment today (November 29) in United States District Court in Santa Ana.

It is alleged that in February 2019, Ms. Meza told executives in these two companies that they did not have funds to meet payroll obligations but failed to inform the executives that she had been embezzling from the companies. Several months later, while the companies were the subject of an IRS enforcement action because of unpaid payroll taxes, Ms. Meza allegedly told the executives that she did not pay the quarterly payroll taxes because she instead had used those funds to pay employees. 

The Indictment alleges that, once the funds were transferred to her accounts, Ms. Meza used the stolen money to make approximately $292,137 in cash withdrawals at bank branches and more than $1 million in withdrawals at ATMs in the United States and Mexico. Ms. Meza also allegedly wired approximately $870,209 to bank accounts in Mexico owned by a family member and another $250,000 in transfers to other family members and friends. The Indictment also alleges that Ms. Meza filed tax returns for the years 2017 through 2019 that failed to report as income the embezzled funds.

What can we learn from this Indictment? First, like most other people accused of embezzlement, Ms. Meza does not have any criminal history. Past studies have shown that less than 10 percent of people charged with embezzlement have any prior criminal history. This means that background checks alone will not protect you. 

Recent Case Shows Investigation and Prosecution of Federal Fraud by SSI Recipients Who Travel Outside the U.S. in Excess of 30 Days

We receive a fair number of calls by people being audited because their parent has been living in a foreign country for months at a time while receiving Supplemental Security Income (SSI) from the Social Security Administration (SSA). I have seen an increase in audits by the government, including OIG, for these SSI recipients. This is due to the government's enhanced ability to track federal travel by SSI recipients and a task force. A recent criminal case shows that some of these audits are not just seeking repayment but are filing federal criminal charges.

On December 11, 2019, Ahmad Yusuf Nuristani pleaded guilty in federal court to theft of public money, admitting that he received over $100,000 in government benefits by concealing foreign travel and residency between July 2015 and December 2018. As a part of his plea agreement, Mr. Nuristani has agreed to make full restitution to the SSA and the California Department of Health Care Services.  He will be sentenced before the Hon. Cynthia A. Bashant on March 9, 2020. 

During a hearing before U.S. Magistrate Judge Karen S. Crawford, Mr. Nuristani admitted that he applied for SSI from the Social Security Administration in July 2015. Mr. Nuristani acknowledged that he knew an SSI recipient must reside within the United States, and that he was required to report any travel outside of the United States lasting more than thirty days.  Mr. Nuristani admitted to concealing and repeatedly lying to the SSA about his foreign travel and residency, and to receiving $27,492.44 in SSI payments and to causing a loss of $73,090.34 to the State of California for health care payments and services as a result of his fraud. Since SSI recipients automatically qualify for Medi-Cal, this is why there was restitution owed to the State of California.

Prosecutions for Immigration Fraud Are On the Rise: Federal Grand Jury Indicts Lawyer and Accountant in Visa Fraud Conspiracy for South Korean Nationals

While federal prosecutions for white collar crime have been cut in half the past three years, there is an increase in immigration fraud cases in large part due to the current administration's emphasis on preventing illegal immigration. A recent case illustrates this trend. 

On November 4, 2019, in the Central District of California, an indictment was unsealed charging two men with conspiracy to commit visa fraud by having a plan to obtain lawful permanent resident (LPR) status for South Korean nationals by allegedly submitting fraudulent visa applications that falsely claimed American businesses wanted to hire skilled foreign workers.

The named defendants are Weon Keuk Lee, a South Korean national who is also a licensed California attorney who previously operated an immigration law firm in Los Angeles; and Young Shin Kim, a naturalized United States citizen, who previously operated an accounting firm in Diamond Bar, California. An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.

California Psychologist and Doctor Charged with Fraudulent Workers’ Compensation Evaluations Where Psychologist Was Not Certified as a Qualified Medical Examiner and Doctor's Certification Had Lapsed

In billing for evaluations of workers' compensation patients, health care providers should be very careful to ensure that they do not misrepresent themselves as a certified  Qualified Medical Examiner (QME) on a medical legal evaluation or billing statement. 

In addition, it is important to ensure that the bills for medical legal expenses have been reviewed so that the criteria for medical-legal billing has been met. A recent case shows how a report by two provider who were not properly certified QMEs led to criminal insurance fraud charges. 

On May 7, 2019, psychologist Danita Stewart and Dr. Catalino Dureza were charged for allegedly submitting fraudulent insurance claims for Medical Legal Evaluations. They are presumed innocent and charges are not evidence.

Dr. Stewart, a licensed psychologist, allegedly submitted 36 fraudulent insurance claims between April 2015 and June 2015 to five different insurers for Medical Legal Evaluations for a total of $90,714. A Medical Legal Evaluation is conducted to evaluate an employee’s work-related injury and is governed by the California Labor Code. 

Even though Dr. Stewart was a licensed psychologist she was not certified as a Qualified Medical Examiner as required to conduct and bill for Medical Legal Evaluations. Dr. Stewart allegedly conducted these fraudulent evaluations at clinics in Fresno, Tulare, and Kern Counties. Dr. Stewart was charged with 36 felony counts of Penal Code Section 550(a)(1) [one for each report], and 1 felony count of Penal Code Section 550(a)(7).

Dr. Dureza, a licensed medical doctor, had obtained the proper certification to conduct and bill for Medical Legal Evaluations, but his certification lapsed. Dr. Dureza allegedly continued to conduct and bill for Medical Legal Evaluations, and once he was recertified he conducted and billed for unauthorized Medical Legal Evaluations. Between January 2014 and May 2015, Dr. Dureza allegedly submitted 17 fraudulent insurance claims for Medical Legal Evaluations conducted in Fresno County to five different insurers for a total of $16,292. This is not a large loss amount but shows that they will prosecute for amounts under $25,000. Dr. Dureza was charged with 17 felony counts of Insurance Code 1871.4(a)(1).

Whether or not someone is a QME is a public record so it appears the insurance carriers must claim that they paid these bills understanding that the providers were CMEs. I have seen cases where a biller has placed a QME, IME and AME near the providers' name, not realizing that there could be confusion on what type of report is being billed. The carriers have been aggressive about billings for these reports even though the providers could have billed for treatment without a QME certification.

Posted by Tracy Green, Esq.

Green and Associates, Attorneys at Law

Pennsylvania Operating Officer Charged Along With Her Husband With Mail Fraud, Embezzlement from Healthcare Benefit Program for Alleged False Reimbursement Expenses

Given that hospital employees are paid essentially out of government healthcare and insurance funds, cases involving hospital officers and key employees are often prosecuted in a higher profile and federal manner than other types of businesses. In addition, government employees - especially those in law enforcement - can also be charged more harshly due to their position of authority and special skills. 

A recent Indictment shows how this played out for one couple where the wife worked as an executive at a hospital and the husband worked as a detective with the local district attorney's office. 

On April 19, 2019, Stephanie J. Roskovski and her husband, Scott A. Roskovski, were indicted by a federal grand jury in Pittsburgh on charges of mail fraud, conspiracy to commit mail fraud, embezzlement from a healthcare benefit program, conspiracy to commit money laundering, money laundering and false statement in a loan application. An Indictment is an accusation and is not evidence. A defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt.

The Indictment alleges that the Roskovskis, during the years 2011 through December 2017, perpetrated a fraud totaling more than $1.3 million on Butler Healthcare Providers, d/b/a Butler Memorial Hospital, where Stephanie Roskovski was employed and, for much of that time, served as the hospital’s Chief Operating Officer. 

During the time, Scott Roskovski was employed as a detective with the Butler County District Attorney’s Office where he conducted investigations involving fraud and other financial crimes. Counts One through 23 of the Indictment allege that the defendants conspired to and did defraud Butler Healthcare Providers by submitting requests to Butler Hospital for alleged business-related expenses that were used, or intended to be used, for personal expenditures. 

Former CEO of Non-Profit Medical and Dental Clinic Who Is Also Licensed Nurse Practitioner Pleads Guilty to Health Care Fraud in Fresno

We are seeing an increased focus on nonprofit health care entities that are run by individuals. One recent case shows how nonprofits can face scrutiny that includes conflict of interest issues and concern over whether payments to executives or employees.

On August 13, 2018, Sandra Haar pleaded guilty to health care fraud and conspiracy to receive kickbacks in federal court in Fresno.

Ms. Haar was the founder and chief executive officer of Horisons Unlimited, a nonprofit public benefit corporation that provided health and dental services in Merced and surrounding communities. Ms. Haar was also a nurse practitioner. Horisons is now closed but once had eight clinics.

According to court documents, between January 1, 2014, and March 2017, Ms. Haar allegedly orchestrated the billing to Medicare and Medi-Cal for services she knew were not reimbursable, and she allegedly profited by over $3.7 million from her fraud. For example, Ms. Haar allegedly billed Medi Cal for health and dental services that were not rendered and for unnecessary health care services.

Six Florida Defendants Including Two Doctors Charged in Private Insurance Health Care Fraud Involving Sober Homes, Alcohol and Drug Addiction Treatment Centers and Drug Testing

Private insurance companies are aggressively pursing investigations into drug and alcohol rehabilitation centers, sober living homes, laboratories who process drug testing and physicians who make referrals. 

The referrals from licensed treatment centers to sober living facilities owned by the same or related parties is one red flag. In addition, a common issue is whether reduced rent to impoverished or unemployed clients is a referral payment. 

The cases that have more extreme facts are the ones that then get referred for criminal prosecution. A recent case has extreme facts alleged including billing for services not provided, falsification of records, not discharging clients using drugs, and excessive or unnecessary urine drug testing. 

On December 21, 2016, six Florida defendants, including owners, doctors, and an employee of sober homes and alcohol and drug addiction treatment centers were charged in a health care fraud scheme for filing fraudulent insurance claim forms and license applications and defrauding health care benefit programs.

Neurosurgeon Sentenced for Health Care Fraud Involving Spinal Implant Devices. Admitted Hiding Financial Interest in Implant Company From California Hospitals

Spinal implant billing by hospitals has been an area of intense investigation and scrutiny for the past five years. Physicians who performed spinal surgeries at hospitals have been investigated to see whether they have ownership or other financial arrangement with companies selling implants to the hospitals. 

A recent case involving a neurosurgeon who used to practice in California where his plea agreement included admissions that he had an interest in an implant company that sold implants to California hospitals where he performed surgeries and that he his his financial interest from the hospitals. 

On January 8, 2017,  Detroit-area neurosurgeon Aria O. Sabit M.D., who previously practiced in Ventura, California, was sentenced to 235 months in prison after he pleaded guilty to four counts of health care fraud, one count of conspiracy to commit health care fraud and one count of unlawful distribution of a controlled substance. 

Before moving to moving to Michigan, Dr.  Sabit practiced in Ventura, California. Dr. Sabit admitted in his plea that in approximately February 2010, while he was on the staff of a California hospital, he became involved with Apex Medical Technologies LLC (Apex), which was owned by another neurosurgeon and three non-physicians. Dr. Sabit is also is a defendant in two civil False Claims Act cases brought by the Justice Department in the Central District of California and these cases are pending.  

In exchange for the opportunity to invest in Apex and share in its profits, Dr. Sabit admitted he agreed to convince his hospital to buy spinal implant devices from Apex and to use a substantial number Apex spinal implant devices in his surgical procedures. Dr. Sabit further admitted that he and Apex’s co-owners concealed Dr. Sabit’s involvement in Apex from the hospitals and surgical centers.

In connection with his guilty plea, Dr. Sabit admitted that the financial incentives provided to him by Apex and his co-conspirators caused him to use more spinal implant devices than were medically necessary to treat his patients in order to generate more sales revenue for Apex, which resulted in serious bodily injury to his patients. Dr. Sabit also admitted that, on a few occasions, the money he made from using Apex spinal implant devices motivated him either to refer patients for unnecessary spine surgeries or for more complex procedures that they did not need.

Owner Of Pennsylvania Medical Staffing Company Sentenced For Billing Medicaid for Services Not Provided, Provided by Others or Not Qualified to Provide Services

Medical staffing companies need to be careful when billing for services and for providers. One issue that arises is when a licensed provider is not available and the services are provided by a different person or someone who is not licensed yet. 

We have seen this with home health agencies as well. Companies must be very careful about controls on who performs services in staffing agencies. A recent staffing company case shows what can happen when there are shortcuts and false documentation. The case can go criminal.

On December 21, 2016, Rose Umana, owner and operator of Vision Healthcare Services, Inc. (Vision) of Pennsylvania, was sentenced by United States District Court Judge Sylvia H. Rambo to 36 months in prison. Vision is a medical staffing company and home care services provider servicing several Pennsylvania counties and has been enrolled under Medicaid since 2006. This sentence was for making false statements relating to health care matters, engaging in monetary transactions involving criminally-derived property, and identity theft.  

According to the United States Attorney's Office, between January 2012 and January 2014, Ms. Umana, in her position as owner of Vision, created false identification documents and fictitious occupational licenses for workers. It is also alleged that Ms. Umana and Vision: 
(1) submitted bills to Medicaid for medical services not provided by the workers, 
(2) billed Medicaid for services provided by someone other than the person claimed to be the provider, and 
(3) billed Medicaid for services not provided or provided by someone not qualified to provide the service.

California Man Who Refinanced Hotel Property Convicted Of Wire Fraud and Misstatements to a Bank in Federal Jury Trial

In the legal community, many of us expected white collar prosecutions for bank financing and mortgage fraud, including cases against lenders to be on the rise. There have not been as many cases as expected. The cases still seem to be against individuals who gave false information to get a loan. While some call these "liar's loans" - most frequently they are not prosecuted unless the borrower was not able to make the loan payments. A recent case involving hotel refinancing and construction loans show what kind of bank misstatement and loan fraud cases go criminal. In the cases we have worked on, the banks put together a large package of material to make it easy for the prosecutors to work up the case.

On November 9, 2016, after a 12 day trial, a federal jury convicted Sanjiv Kakkar of wire fraud and making misstatements to a bank. The government presented evidence at trial that Mr. Kakkar presented false information to a bank in connection with refinancing a hotel property he owned in Boulder Creek, Calif. There were three basic categories of misstatements or fraud: (1) falsifying income information and tax returns where income was overstated; (2) failure to provide updated financial and tax records; and (3) submitting false information to an escrow company to get reimbursement for construction costs.  

Former Napa Winemaker Charged in California Federal Court With Mail and Wire Fraud in Mislabeling Wine

Mislabeling of food items has not been a high priority in past years. However, the issues that have happened in China with olive oil and in the U.S. with “organic” food and the money that the mislabelers make while they deceive consumers is no longer going unnoticed. If your company makes a product or food item that is not properly labeled, understanding the risks is important. 

Federal regulations govern, and some companies do not realize that there is civil and criminal exposure if they are violated. A recently filed case may help companies realize the high risks and why compliance is important. It also shows how hiding facts, creating false records or deceptive acts may turn a civil lawsuit into a criminal case.

On November 2, 2016, former winemaker Jeffry Hill was indicted in San Francisco for mail fraud and wire fraud in connection with his operation of a Napa Valley-based wine company Hill Wine Company (“HWC”). These are allegations and not evidence but for companies and individuals just being charged is something to be avoided.

San Diego MedTech Consultant Pleads Guilty to Defrauding Investors by Selling Fake Stock in Medical Research Company

Health care investment fraud is on the rise. On February 16, 2016, Oceanside businessman Greg Ruehle admitted to securities fraud (15 U.S.C. §§ 78j, 78ff) involving more than 160 people out of investments totaling nearly $2 million. As part of his plea to securities fraud charges, Mr. Ruehle admitted being hired by local medical research firm ICB International, Inc. (ICBI) to identify investors who could fund their research. 

Instead, Mr. Ruehle collected millions of dollars from investors and used the money for his own gambling and other personal expenses.  Mr. Ruehle disguised and concealed his fraud by issuing the investors fake stock certificates and failing to report the purported “investment” to the company. In a parallel action, the Securities and Exchange Commission today announced civil charges against Ruehle.  

In 2015, some of the investors asked for proof that their money was being used at ICBI.  In response, Ruehle sent them a letter on what appeared to be company letterhead, and purportedly signed by the company’s CEO.  In fact, the letter was a forgery, which was borne out by the fact that Mr. Ruehle misspelled the CEO’s name.  

ICBI remained unaware of these “investors,” and never received a penny of their $1.9 million investments. San Diego-based ICBI’s mission is to develop technologies to transport therapeutic treatments through the blood-brain barrier to treat neuro-degenerative diseases like Parkinson’s and Alzheimer’s disease.  Mr. Ruehle’s plea agreement requires that he forfeit the $1.9 million in proceeds and pay restitution to the victim investors.

Health care businesses and investors need to be vigilent about due diligence when investing in health care businesses. We have seen many investment disputes which were not properly documented and investors were not properly issued shares.

Pennsylvania Physician And One Other Plead Guilty To Health Care Fraud Charges Arising From Writing A Fraudulent Prescription in Another Person's Name

Writing a prescription in another person's name is a fraudulent prescription. When that visit or prescription in the other person's name is billed to Medicare or insurance, then there is also health care fraud. When a Schedule II drug is involved, there is also a potential drug count.

On January 15, 2016,  Dr. John Terry and Stephen Heffner, Jr. pleaded guilty before Chief United States District Court Judge Christopher C. Conner in Williamsport, Pennsylvania.

According to the plea agreement, in April 2013, Dr. Terry caused Medicare to be billed for fraudulent prescriptions intended for Mr. Heffner knowing that Mr. Heffner was not his patient and that the Oxycodone was not actually intended for Mr. Heffner but for Dr. Terry’s patient, David Hatch of New York.  Medicare paid for the prescription received by Mr. Heffner but actually delivered to Mr. Hatch.

Sacramento Dentist Pleads Guilty to Billing for Unnecessary or Unperformed Dental Work Billed to Delta Dental From 2008 to 2010

We have seen an increasing number of audits by Delta Dental where billing for services not provided is suspected. In some cases, the issue is that non-covered services (such as implants) are being performed and there is false documentation and billing for "covered" services. Or we have seen that one patient has dental coverage and work is performed on another family member who does not have coverge.

What triggers audits? It can be discrepancies in records, significant increases in billing, or complaints by former employees or patients. Or it can be a routine audit. In a recent case, a former employee went to the Dental Board to set forth allegations against her former dental office. That disclosure triggered action by the Dental Board (interim suspension), an Accusation and then a federal criminal case. It took five years for this to play out. In the meantime, the dentist surrendered his license in August 2013.

This recent case demonstrates what can happen in these cases. Dentist David M. Lewis of Sacramento pleaded guilty on January 11, 2016 to health care fraud for his role in defrauding the health care benefit program used by United Parcel Service (UPS) employees. Undoubtedly, this has been a long hard road for the now former dentist.

A former employee at Lewis’s dental practice for 9 years, Nichol Ramirez aka Nichol Lomack, who worked as an insurance claims manager, cooperated with the Dental Board and government. She ultimately pleaded guilty to one count of health care fraud for her part. She was interviewed by the Dental Board in December 2010 and the case went from there.

In October 2011 the Dental Board executed a search warrant at the dentist's office. The search warrant was used so that the dentist would not have advance notice and have any ability to alter or destroy the charts. After the charts and xrays were submitted for expert review, the Dental Board filed an Interim Suspension Order in February 2012 and filed an Accusation. In August 2013, Dr. Lewis surrendered his license. In February 2014, Lewis was indicted on health care fraud and conspiracy to commit health care fraud and mail fraud.

According to court documents, beginning in late 2008 or early 2009 (after the economic recession), Dr. Lewis, a dentist practicing in Sacramento, began targeting UPS employees for dental treatment because their health care plan under the Northern California General Teamsters Security Fund provided 100 percent coverage without any annual limits. Dr. Lewis' office allegedly offered cash and other incentives (Sonicare toothbrushes for example) to UPS patients for receiving dental treatment or for recruiting other UPS employees to receive such treatment.

In some instances, Dr. Lewis' office submitted claims to Delta Health Systems, which administered the UPS health care plan, that billed the plan for work that was never performed. In other instances, it was alleged that Dr. Lewis performed unnecessary dental work on UPS employees, including root canals, and claims were submitted to Delta for payment for these unnecessary services.

Former UCSD Professor's Tech Company That Applied for Government Grants and Contracts Admits and Pleads Guilty to Wire Fraud, Agrees to Forfeit $180,000. False Statements in Government Applications Carry Exposure. Owner Gets "Deferred Prosecution Agreement."

False statements in any documents submitted to the government for payment can result in fraud charges. During the 1990s, government qui tam and criminal contracting fraud cases were common. We are seeing an increased number of companies being investigated for government contract fraud. These are usually handled by the Office of Inspector General (OIG) 

In an unusual case involving government grants and contracts, Dr. Homayoun Karimabadi, a former research professor at the University of California, San Diego (“UCSD”) and the Chief Executive Officer for SciberQuest, Inc., was charged in federal court last week with fraudulently obtaining government grants and contracts.

Dr. Karimabadi and SciberQuest, Inc., the corporation run by Dr. Karimabadi, both waived indictment and were arraigned on an information charging them with felony wire fraud and criminal forfeiture.  SciberQuest entered a guilty plea before U.S. Magistrate Judge Karen S. Crawford. Additionally, Dr. Karimabadi and SciberQuest jointly agreed to forfeit $180,000 as money that was improperly received as a result of the alleged fraud, in addition to a fine that will be imposed on the corporation at sentencing. 

In a favorable resolution for Dr. Karimabadi, he is scheduled to enter into a "deferred prosecution agreement" on January 15, 2016 at 8:30 a.m. before Judge Gonzalo P. Curiel. A deferred prosecution agreement is an agreement between a criminal defendant and the United States Attorney’s Office where the defendant admits to the facts constituting a criminal offense, but the United States agrees to suspend the entry of judgment for a period of time and agrees to dismiss the charges if, during that period, the defendant complies with certain conditions set forth in the agreement.These are not easy to obtain and show that either there were weaknesses in the government's case against Dr. Karimabadi or that fairness supported this result.  

"Honest Services" Mail Fraud and Kickback Case: How The Feds Are Asserting Jurisction in Charging a Shockwave Therapy Company and its Purported Owners, a Referring Chiropractor, Unindicted Referring Doctors and Unindicted Marketers Over Workers' Compensation Patient Referrals and Alleged Kickbacks Disguised as Agreements for Billing, Rent, Receivables and/or Management Services

For the past five years, after the conviction of former Enron CEO Jeffrey Skilling was upheld at the U.S. Supreme Court, federal authorities have been getting ready to use "honest services" mail fraud in health care fraud and kickback cases involving private insurance, workers' compensation insurance as well as Medicare and Medicaid (Medi-Cal) billing. 

In Skilling, the U.S. Supreme Court found clear congressional inent to limit honest services prosecutions to "offenders who, in violation of fiduciary duty, participated in bribery or kickback schemes." In state health care, physicians and chiropractors owe a general fiduciary and statutory duty as part of their professional duties to patients to disclose financial relationships they have with referring businesses (Bus. and Prof. Code Section 654.2) and this will be the core of the conspiracy count but the prosecutors have alleged specific violations of state law which prohibit unlawful referral arrangements for workers' compensation patients as well. 

In three California cases filed this past week, the U.S. Attorney's Office for the Southern District of California (San Diego) is using honest services mail fraud (18 U.S.C. Section 1341 and 1346) and the travel act (18 U.S.C. Section 1952) to prosecute kickbacks and unlawful referral arrangements in treatment of California workers' compensation patients. 

Apart from the fiduciary duty to patients, these honest services fraud cases are also using violation of the underlying California state laws that prohibit referring patients to providers or individuals where the referring person has a financial interest or relationship with them (Labor Code Sections 139.3 and 3125), and state laws that prohibit kickbacks or any compensation or inducement for referring patients (Bus. and Prof. Code Section 650 and Insurance Code 750). 

In one of them filed in the Southern District of California on November 6, 2015, United States v. Reese, Mathis, et al., Case No. 15CR2822, charges were filed against:


(1) Chiropractor George Reese and his professional corporation, 
(2) Foremost Shockwave Solutions, a shock wave therapy services company,
(3) Lee Mathis, a purported partial owner of Foremost who is also an attorney who allegedly owned management and/or billing companies that are referenced in the Indictment, and
(4)  Fernando Valdes who is also a purported owner of Foremost.  
Anyone charged is presumed innocent, and charges in an Indictment are not evidence.

Millennium Health Laboratories Agrees to Pay $256 Million to Resolve Qui Tam Allegations of Unnecessary Urine Drug and Genetic Testing and Illegal Kickbacks to Physicians

Millennium Health, formerly Millennium Laboratories, has agreed to pay $256 million to resolve alleged violations of the False Claims Act for billing Medicare, Medicaid and other federal health care programs for medically unnecessary urine drug and genetic testing and for providing free items to physicians who agreed to refer expensive laboratory testing business to Millennium. 

The United States alleged that Millennium caused physicians to order excessive numbers of urine drug tests, in part through the promotion of “custom profiles,” which, instead of being tailored to individual patients, were in effect standing orders that caused physicians to order large number of tests without an individualized assessment of each patient’s needs. 

The United States also alleged that Millennium’s provision of free point of care urine drug test cups to physicians—expressly conditioned on the physicians’ agreement to return the urine specimens to Millennium for hundreds of dollars’ worth of additional testing — violated the Stark Law and the Anti-Kickback Statute.  The Stark Law and the Anti-Kickback Statute generally prohibit laboratories from giving physicians anything of value in exchange for referrals of tests.

Millennium, headquartered in San Diego, is one of the largest urine drug testing laboratories in the United States and conducts business nationwide.

78 Year Old Physician Assistant Sentenced to Three Years In Prison For Medicare Fraud - Older Physicians and PAs Are Often Solicited by Suspect Health Care Businesses That Engage in Billing Fraud and Abuse

A 78 year old Los Angeles physician’s assistant was sentenced on November 24, 2018 to three years in federal prison for defrauding Medicare by signing fraudulent prescriptions and other medical documents for durable medical equipment (DME) while working at two separate medical clinics in the Los Angeles area. This was after a guilty plea and not a trial.

Erasmus Kotey, 78, of Montebello, was sentenced by United States District Judge Margaret M. Morrow. In addition to the 36-month prison term, Judge Morrow ordered Kotey to pay approximately $3.5 million in restitution to the Medicare program. Kotey pleaded guilty in March to one count of health care fraud and one count of conspiracy to commit health care fraud in two separate cases. In a plea agreement filed earlier this year in United States District Court, Kotey admitted that he engaged in a scheme to commit health care fraud while working as a physician’s assistant at a clinic  located at 866 North Vermont Avenue in Los Angeles. (A co-conspirator in this scheme was Susanna Artsruni, a North Hollywood woman who owned a medical supply company and admitted that she got unnecessary prescriptions from physician assistants at three clinics was sentenced to over 6 years in prison for causing Medicare to pay $9.6 million for the $25 million in fraudulent claims submitted.) 

In addition to his role in the scheme at the clinic on North Vermont, Kotey admitted that he engaged in a conspiracy to commit health care fraud through his work as a physician’s assistant at another clinic at 943 South Atlantic Boulevard in Monterey Park.

At both clinics, Kotey admitted that he signed prescriptions and other medical documents for medically unnecessary power wheelchairs and other DME. Using these fraudulent prescriptions, DME supply companies submitted fraudulent claims to Medicare.

Kotey also admitted that he ordered medically unnecessary diagnostic testing at the North Vermont clinic. In the two cases combined, the government alleged that Kotey’s fraudulent prescriptions resulted in approximately $7 million in false and fraudulent claims to Medicare. Medicare paid approximately $3.5 million on those claims.

Attorney Commentary: Esasmus Kotey is 78 years old and our office often sees physicians and physician assistants who are older get caught up in Medicare or other fraud cases. There are a couple of reasons for this. One is that often the older physicians or providers are vulnerable in that they are having financial problems and are looking for a position and the only places that will hire senior citizens are health care businesses that are engaged in suspect activities or want to be able to take advantage of an older person's trusting nature. Sometimes these physicians retired and due to the economy or bad business investments need to work. 

In the past. these physicians were viewed as "victims" by the government but now they are being prosecuted alongside the individuals who created and profited from the fraud scheme. The older physicians and providers usually do not make much money from these schemes. If you or someone you know is an older provider be sure to perform due diligence on any clinic or health care business before working there especially when there is billing to government or insurance programs. 


Posted by Tracy Green, Esq. 

California Man Pleads Guilty In Investment Schemes That Defrauded Physicians And Dentists Out Of More Than $2 Million

On July 21, 2014, David W. Rose, 57, of Orange County, pleaded guilty in United States District Court to one count of wire fraud and one count of mail fraud arising from defrauding dozens of doctors and others of more than $2 million in separate schemes that promised large returns on investments in the medical and dental fields.

According to court documents, over a six-year period that ran through May 2011, Mr. Rose solicited physicians to invest in an Irvine company he called M.D. Venture Partners (MDVP) and falsely promised lucrative returns on investments in emerging medical technologies. In a subsequent scheme, Mr. Rose used Technology Innovation Partners (TIP) to solicit dentists and orthodontists to invest, claiming funds would be pooled and invested in a company developing ablation technology that would be used to remove wisdom teeth in children without surgery.

Throughout both schemes, investor funds were misused, with Mr. Rose using victims’ money for personal expenses. According to a plea agreement filed in court, Mr. Rose used investor funds to pay $7,500-a-month rent for a house in Coto de Caza, college tuition, luxury vehicles, an $80,000 Sea Ray boat and shares in the Green Bay Packers.

The investigation revealed that no money was invested by either MDVP or TIP.

In the MDVP scheme, Mr. Rose caused approximately 32 victims to lose more than $900,000, according to court documents. In the TIP scheme, 45 victims lost more than $1.4 million. Mr. Rose was arrested in May 2013 and has remained in custody since that time.

Mr. Rose pleaded guilty before United States District Judge James V. Selna, who is scheduled to sentence the defendant on November 24. At sentencing, Mr. Rose has agreed there will be an enhancement since there were more than  50 victims. Under the plea agreement, Mr. Rose waives his right to appeal if the sentence is no more than the low end of level 23 on the federal sentencing guidelines (level 23 is 46 to 57 months).  

Thus, his likely sentence is around 4 to 5 years even thought Judge Selna is free to depart from the plea agreement as it is not binding upon him. The statutory maximum sentence of 40 years in federal prison and this shows that the sentencing maximum is not reflective of the actual sentence to be imposed. The government agreed to a one level departure due to Mr. Rose's efforts in helping secure restitution which is estimated over $2.3 million.

Posted by Tracy Green, Esq.

Greenand Associates, Attorneys at Law

Email: tgreen@greenassoc.com

Phone: 213-233-2260