San Francisco Acupuncturist Pleads Guilty To Health Care Fraud In False Billing for Union Members for Services Not Performed or Inaccurately Billed.

Federal prosecutors have focused investigations on the billing of labor union members’ health benefit plans especially in places like San Francisco where workers have generous union contracts. A recent case illustrates the types of cases that are being prosecuted.

December 6, 2019, acupuncturist Haichao Huang pleaded guilty to health care fraud, in violation of 18 U.S.C. § 1347, and making false statements relating to health care matters, in violation of 18 U.S.C. § 1035(a)(2), in the Northern District of California. The guilty plea was accepted by the Honorable Susan Illston, U.S. District Judge. 

According to the plea agreement, Mr. Huang was a health care provider who offered acupuncture, physical therapy, massage, and other services to patients in and around San Francisco. From February 2013 through June 2018, Mr. Huang admitted that he submitted and caused to be submitted false claims for reimbursement from health care benefit programs that he knew were not properly payable, including from programs provided through federal government and labor union healthcare plans. 

Mr. Huang's plea admits that he included false and inaccurate billing codes that artificially inflated both the type of service the patient received and the time he spent with the patient. The plea agreement gives examples of the ways in which Mr. Huang submitted false and inaccurate billings for reimbursement. For example, Mr. Huang submitted requests for reimbursement for acupuncture treatment when, in fact, the patient had received much shorter periods of treatment, no acupuncture treatment, or no care of any kind at all. 

Non-Physician Operator of Medical Clinic in Burbank Sentenced to 37 Months for Federal Healthcare Fraud in U.S. Central District

Years ago, healthcare fraud would be prosecuted primarily if there were "ghost" billing (billing for non-existent patients or services that were never provided). That has changed significantly and billing for patients who were brought in by marketers for allegedly "medically unnecessary" services has become more common. A recent case shows how these cases are being aggressively handled at the federal level in Los Angeles.

On October 2, 2017, Knarik Vardumyan, a non-physician "owner-operator" of a Burbank medical clinic was sentenced to 37 months in federal prison on federal healthcare fraud charges for participating in a scheme to defraud Medicare by prescribing unnecessary services and equipment, which allegedly often were not even provided. The sentence was imposed by United States District Judge Dale S. Fischer. 

Judge Fischer also ordered Ms. Vardumyan to pay $1,711,789 in restitution to the Centers for Medicare & Medicaid Services. There was no trial in this case since Ms. Vardumyan pleaded guilty in April 2017 to two counts of federal healthcare fraud.

In the plea agreement, Ms. Vardumyan admitted that she knowingly and unlawfully participated in a scheme to defraud Medicare by billing Medicare for “medically unnecessary office visits and diagnostic tests,” and by arranging “for the issuance of . . . prescriptions and orders for medically unnecessary durable medical equipment” and “home health services.” This case involved billing for office visits, diagnostic tests, durable medical equipment and home health. This means that there must have been some coordination between the ancillary services and Ms. Vardumyan's clinic.

There was improper marketing since Ms. Vardumyan further admitted, “many, if not all” of the people who visited her clinic “were brought . . . by co-schemers known as ‘marketers,’ who offered promises of free, medically unnecessary [equipment] or food” to those Medicare beneficiaries who were willing to attend Vardumyan’s clinic.

Although there was a plea, the government suggested a 37 month sentence which Judge Fischer apparently agreed with in addition to the sentence suggested by Pretrial Services. The sentence suggests to me that Ms. Vardumyan was not able to repay much restitution prior to sentencing.

This was was investigated by the Federal Bureau of Investigation which has a strong healthcare fraud unit.

Posted by Tracy Green, Esq.

Orange County Workers' Compensation Fraud Cases Plead Out. Aspen Durable Medical Equipment Owners Get Minimal Jail Time, Pay Over $8 Million in Restitution and Dismiss $139 Million in Liens at WCAB

In criminal fraud cases, restitution is usually key to obtaining favorable plea terms. In workers' compensation fraud cases, releasing the right to collect on liens or receivables at the Workers' Compensation Board is also an important part of plea deals especially in light of Labor Code 139.31. 

This is evidenced in two complex workers' compensation fraud cases, known as the Aspen Medical DME cases, which plead out on May 5, 2017 in Orange County Superior Court. 

The three individual owners -- Jeffrey Edward Campau, Landen Alan Mirallegro and Abraham Khorshad -- agreed to pay jointly $8,621,845.96 in restitution, dismiss liens (charged and uncharged) worth over $139 million and pay other penalties in exchange for county jail terms (with state prison suspended) and where they will be eligible for house arrest with electronic monitoring. 

CALIFORNIA INSURANCE AGENT SENTENCED TO STATE PRISON FOR "ADVANCE COMMISSION FRAUD" IN ORANGE COUNTY SUPERIOR COURT

We are used to insurance fraud cases brought against those who file fraudulent claims. There has been an increased number of cases against those who work for the insurance industry. 

When they are charged, our experience is that an example is sought to be made of them. A recent case involving “advance commission fraud” illustrates how long sentences and large fines can be imposed against those who work in the insurance industry.  

On December 1, 2015, an insurance agent Eric Lee was sentenced under a plea agreement to 10 years in state prison for defrauding over $1.4 million through an advance commission scheme. In state court, this means that with good time, Mr. Lee should only serve five years. 

Mr. Lee pleaded guilty to 10 felony counts of grand theft and 10 felony counts of insurance fraud with sentencing enhancements for damage exceeding $100,000, aggravated white collar crime over $500,000 and property damage over $1.3 million. Mr. Lee was also ordered to pay $1.4 million in restitution and a $2.8 million fine.

These sentencing enhancements show how the amount of loss in a fraud case in California state court, like federal court, has a significant impact on the total sentence that can be imposed. 

Mandatory Victim Restitution Act - Is Your Spouse Liable For Restitution Judgments?

The case of United States v. Berger, No. 08-50415 (9th Cir., Jul. 31, 2009), reminds us of the misfortune an innocent spouse might incur due to the criminal conduct of his or her spouse.  In that case, the Ninth Circuit Court of Appeals determined that the community property, including that portion which otherwise would be awarded upon dissolution of marriage to an innocent spouse, may utilized under the Mandatory Victim Restitution Act (MVRA) (18 U.S.C. § 3663(a)) to satisfy a restitution judgment obtained against a criminally liable spouse. This was even the case where the proceeds of the fraud were not used to purchase the property that was owned by an innocent spouse.

FACTUAL AND PROCEDURAL BACKGROUND

In 1986, while Richard Berger (Richard) and Cornella Berger (Cornella) were married, Richard joined a partnership (Partnership) which he and others formed for the purpose of purchasing a 290-unit apartment complex (Property). 

During the relevant period, Richard served as President and CEO of Craig Electronics (Craig), an electronics wholesaler. A federal grand jury returned an indictment, charging Richard with 36 counts of conspiracy, loan fraud, falsifying corporate books, and other securities fraud violations committed at Craig. After a jury trial, Richard was found guilty on 12 of those counts. Cornella was not involved in any wrongdoing associated with the illegal scheme.  No proceeds from the fraud scheme were invested in the Property.

As part of his sentence, Richard was ordered, pursuant to the MVRA, to pay restitution of just over $3.14 million to the victims of his fraud.  Thereafter, Richard consented to the Partnership’s entering into a contract to sell the Property. The district court ordered that Richard’s approximately $1.5 million share of the proceeds from the sale of the Property (the Proceeds) be deposited with the court.

The government filed an application to disburse the Proceeds to the victims of Richard’s fraud who were entitled to receive restitution. Cornella opposed the application, arguing that she was entitled to one-half of the Proceeds as her community property share.

Over Cornella’s objection, the district court granted the government’s application to disburse the entire sum of the Proceeds to the victims. Cornella appealed.  Cornella claims that the district court erred by failing to award her a one-half interest in the Proceeds.

LEGAL ANALYSIS

Cornella argued that the asset distribution should have been analyzed under case law governing criminal forfeiture, citing United States v. Lester, 85 F.3d 1409 (9th Cir. 1996) (holding that wife’s one-half interest in portion of community property was not liable to criminal forfeiture imposed on her husband).  The appellate court noted that restitution and forfeiture are distinct asset collection regimes, governed by different rules. Whereas criminal forfeiture is a judgment against a person convicted of a crime (id., at 1413), a restitution order under the MVRA is “a lien in favor of the United States on all property and rights to property of the person fined.” 18 U.S.C. § 3613(c) (emphasis added).  Thus, the Ninth Circuit analyzed the allocation of restitution funds using the law governing MVRA restitution.

Under the MVRA, the government may enforce a judgment imposing a fine in accordance with the practices and procedures for the enforcement of a civil judgment under Federal law or State law.  18 U.S.C. § 3613(a).  Thus, the appellate court looked to California law to determine Richard's property rights in the Proceeds.

Cornella and the government agreed that the Proceeds were community property. In the ordinary case, “the community estate is liable for a debt incurred by either spouse before or during marriage, regardless of which spouse has the management and control of the property and regardless of whether one or both spouses are parties to the debt or to a judgment for the debt.” Cal. Fam. Code § 910(a).  Thus, even though Richard was the only spouse who was a party to the restitution judgment, under the MVRA and California law the Proceeds’ community property status made Cornella liable for that debt, even though she was entirely innocent with respect to Richard's misdeeds.

PLANNING AHEAD

In handling a white collar criminal case, it is critical to look at restitution early on. This can affect strategy in the case and planning for future assets and family law issues. The restitution amounts in some criminal cases can influence family decisions, financial planning, and so on.  Moreover, payment of restitution early in the case can make a huge difference in the sentence. This legal issue is just one factor

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles, California. The firm focuses its practice on the representation of professionals and businesses in civil, business, administrative and criminal proceedings. Their website is: http://www.greenassoc.com/

800 West 6th Street, Suite 450
Los Angeles, California 90017
213-233-2260

Restitution In Fraud Cases: Fake Nurse Must Repay Wages Earned & Importance Of Repayment of Restitution

An unlicensed woman who stole the identities of registered nurses to obtain work as a nurse must pay back wages and benefits she received, even though she actually did the work for which she was paid, the Ninth U.S. Circuit Court of Appeals ruled on August 20, 2010.  The case is United States v. Hunter, No. 09-30246. This case is a lesson on how the courts interpret "making the victim whole" even when services are performed by a defendant that have some value and did not require a license. This tracks the 6th Circuit in a similar case.

Upholding a restitution order by a federal judge in Fairbanks, Alaska, the three-judge panel said Becky Nadine Hunter had to repay former employers more than $18,000 because they did not receive the services they paid for: those of a “licensed” nurse.

Ms. Hunter was convicted of five counts of mail fraud and other crimes after federal prosecutors accused her of devising as many as 21 aliases to defraud employers and lenders, as well as the state and federal governments. The mail fraud charges arose from a series of false documents Ms. Hunter mailed to obtain employment as a nurse when she moved to Alaska in 1998. Prosecutors said she acquired nursing licenses in the state using the names, Social Security numbers, birth dates and credentials of two nurses who lived in New York and Canada.

Ms. Hunter used the first license she obtained, along with a false employment history and other information, to get a job in 1998 as a school nurse with the Fairbanks North Star Borough School District. The district paid her $12,558 in wages and benefits, but fired her after discovering her false identity. Ms. Hunter later used a similar set of false documents to obtain a nursing position with the U.S. Department of Labor, where she was paid $5,457. She was arrested in 2004 following an investigation by the FBI, the Internal Revenue Service and the U.S. Postal Service. 

U.S. District Court Judge Ralph R. Beistline of the District of Alaska sentenced Ms. Hunter to 96 months incarceration after she successfully appealed her initial sentence, and he ordered her to make restitution in full to the North Star Borough and the Department of Labor under the federal Mandatory Victims Restitution Act (MVRA).

Ms. Hunter appealed, arguing that her former employers would receive windfalls if she was required to repay wages for work she actually performed, but the Ninth Circuit rejected the argument in an opinion by U.S. District Judge G. Murray Snow of the District of Arizona, sitting by designation.

Noting that the purpose of restitution under the MVRA is not to punish a defendant but to make victims whole by reimbursing actual losses, Snow said the district court did not err in concluding that Ms. Hunter’s former employers were victims of her conduct.

“Both [North Star] Borough and the Department of Labor were directly and proximately harmed by Hunter’s mail fraud because they paid for the services of a licensed nurse that were never received…,” he wrote. “If Hunter had not mailed false documents reflecting fictitious nursing credentials, she could not legally have been employed in positions that required a valid nursing license, and a qualified licensed nurse could have been employed instead.”

Snow similarly rejected Hunter’s assertion that the restitution order should have deducted the value of services she provided that did not require her to hold a nursing license.

“This conclusion accords with traditional principles of contract law,” he explained, pointing to treatises by Corbin and Farnsworth. “When an individual fails to comply with licensing requirements aimed at protecting health and safety rather than merely raising revenue, that individual can maintain ‘no action for the promised compensation or for quantum meruit.’ ”  Judges Raymond C. Fisher and Marsha S. Berzon joined Snow in his opinion.

Attorney Commentary:  Restitution is key in fraud cases. There are some cases where there has been no fraud. But in those cases where there has been fraud or a mistake of judgment so severe that it amounts to fraud, restitution is important.  Assessment of restitution and payment before charges or sentencing is key to obtaining a great result in a criminal fraud case. 

If there is 1 thing I could teach my clients it is to pay restitution at some amount -- no matter how small -- every month. If the restitution is $100,000 and the client has no money, the payment of $100 a month or taking a second job to pay $2,000 a month will earn the respect of the court, the prosecution and the victim. There may be some dispute over the amount but payment is critical.

All too often even though I preach this regularly, my clients or potential clients fail to appreciate how important this fact is in the system. I make my clients earn the right to say they are sorry and to show true acceptance of responsibility where my client has made a mistake or done something wrong. If this means borrowing money, selling items through a yard sale or otherwise or second or third jobs -- this may be the difference between probation and jail time.

Posted by Tracy Green, Esq. Please email Ms. Green at tgreen@greenassoc.com or call her at 213-233-2260 to schedule a complimentary 30-minute consultation.  Ms. Green's office at Green and Associates is located at 800 West Sixth Street, Suite 450, Los Angeles, CA 90017.

The firm focuses its practice on the representation of licensed professionals, individuals and businesses in civil, business, administrative and criminal proceedings. They have a specialty in representing licensed providers and in audits, administrative board and discipline matters in California and throughout the country. Our website is: http://www.greenassoc.com/