Former Director of Accounting and Outside Auditor of American Mortgage Specialists Inc. Plead Guilty to Roles in Fraud Against BNC National Bank

(ed. note: Would not want to be in the cross-hairs of this cross-agency group of fraud enforcers.)
Former Director of Accounting and Outside Auditor of American Mortgage Specialists Inc. Plead Guilty to Roles in Fraud Against BNC National Bank

The former director of accounting and the former outside auditor of Arizona-based residential mortgage loan originator American Mortgage Specialists Inc. (AMS) pleaded guilty in Arizona to conspiracy to defraud BNC National Bank and obstruction of justice, respectively, Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Timothy Q. Purdon of the District of North Dakota; Christy Romero, Special Inspector General for the Troubled Asset Relief Program (SIGTARP); and Steve A. Linick, Inspector General of the Federal Housing Finance Agency Office of Inspector General (FHFA-OIG) announced today.

Lauretta Horton, 45, and David Kaufman, 69, both residents of Arizona, pleaded guilty yesterday before U.S. District Judge Daniel L. Hovland of the District of North Dakota, who took the pleas in Arizona federal court.   Horton and Kaufman were charged in separate criminal informations unsealed on Oct. 2, 2012, for their roles in the fraud scheme against BNC.

“ While the nation was reeling from a financial downturn, Lauetta Horton conspired with AMS executives to deceive BNC Bank about AMS’s true financial stability, and AMS auditor David Kaufman lied to federal investigators to impede their investigation,” said Assistant Attorney General Breuer.  “Horton and Kaufman’s guilty pleas reflect our continued vigilance in investigating and punishing criminal conduct relating to the financial crisis.”

“Banks in North Dakota were not immune from illegal conduct related to the mortgage crisis that impacted banks all across the country,” said U.S. Attorney Purdon. “These guilty pleas are the result of close collaboration with our federal investigative partners and the Justice Department’s Criminal Division and should send the message that the Department of Justice is committed to prosecuting cases such as these wherever they might arise.”

  “As the controller and director of accounting of mortgage originator AMS, Horton sent to TARP-recipient BNC National Bank false financial statements she had prepared so that BNC would continue to fund AMS,” said Special Inspector General Romero.   “In a cover-up and an attempt to impede the federal grand jury investigation, AMS’s external auditor Kaufman lied to SIGTARP agents about his telling an AMS executive that he had changed the financial statements so that BNC would not discover the truth.   Kaufman is the third person convicted of lying to SIGTARP agents, which shows that SIGTARP will aggressively pursue those who fail to tell the truth and impede our investigations.”

“This is a significant case because it holds accountable an individual who participated in a scheme to defraud a member bank of the Federal Home Loan Bank System, and another individual who lied to federal investigators,” said Inspector General Linick.   “This case is a reminder that there are consequences for giving investigators false information and manipulating numbers.”

AMS was in the business of originating residential real estate mortgage loans to borrowers and then selling the loans to institutional investors.   In 2006, AMS entered into a loan participation agreement with BNC whereby BNC provided funding for the loans issued by AMS.  According to court documents, Horton, the director of accounting at AMS, conspired from February 2009 to April 2010 to defraud BNC by making false representations regarding the financial well-being of AMS in order for AMS to continue to obtain funding from BNC.  Specifically, Horton admitted to inflating asset items and altering financial information in the AMS balance sheet provided to BNC to falsely reflect that AMS had substantial liquid assets when, in fact, it did not.

According to court documents, Kaufman, a certified public accountant and the outside auditor of AMS’ annual financial statements, lied to federal agents during the criminal investigation and obstructed the grand jury investigation.   Specifically, Kaufman admitted denying to agents that he had a conversation with an AMS executive in which Kaufman explained to the AMS executive that Kaufman had combined two expenses on AMS’s financial statements in order to conceal the true nature and extent of AMS’s financial condition from BNC.

Although BNC’s holding company had received approximately $20 million under the TARP and had injected approximately $17 million of the TARP funds into BNC, BNC incurred losses exceeding the millions received from TARP.  BNC then did not make its required TARP dividends to the Department of Treasury for nearly two years.

At sentencing, scheduled for May 6, 2013, Kaufman and Horton face a maximum penalty of 10 years and five years in prison, respectively.

The investigation was conducted by agents assigned to the Offices of the Inspector General of SIGTARP and of FHFA.  The case is being prosecuted by Trial Attorney Robert A. Zink and Senior Litigation Counsel Jack B. Patrick of the Criminal Division’s Fraud Section and by Assistant U.S. Attorney Clare Hochhalter of the District of North Dakota, with the assistance of Trial Attorney Jeannette Gunderson of the Criminal Division’s Asset Forfeiture and Money Laundering Section.

This case is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations.  Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants.  For more information on the task force, visit www.stopfraud.gov .

President of Miami Medical Clinic Sentenced on Health Care Fraud Charges

President of Miami Medical Clinic Sentenced on Health Care Fraud Charges

Wifredo A. Ferrer, United States Attorney for the Southern District of Florida; Michael B. Steinbach, Acting Special Agent in Charge, Federal Bureau of Investigation (FBI), Miami Field Office; and Christopher B. Dennis, Special Agent in Charge, U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG), announce yesterday’s sentencing of defendant Arbilio Yanes on Medicare fraud and related offenses. U.S. District Judge Cecilia M. Altonaga sentenced Yanes to 151 months in prison.

Yanes previously pled guilty to conspiracy to commit health care fraud and to pay health care kickbacks, health care fraud, payment of health care kickbacks, and money laundering.

According to the statements made in court at the plea hearing, sentencing, and evidence presented at the plea hearing, Yanes was the president and one of two owners of Research Center (Research Center) of Florida Inc., a purported medical clinic located in Miami-Dade County, Florida. Between October 13, 2003 and November 5, 2004, Research Center submitted claims to Medicare for $21,043,982, almost exclusively for purported treatment of HIV-positive Medicare beneficiaries for the administration of prescription drugs. Based on these claims, Medicare paid Research Center $11,098,388.93. In fact, Research Center personnel generally administered smaller doses of the medications than the clinic billed in its claims or offered no treatment at all.

To execute the scheme, Yanes paid more than $1.6 million to shell companies controlled by outside patient recruiters. Those shell companies did no business with Research Center, but the recruiters located Medicare beneficiaries who were willing to attend Research Center as purported patients and paid the beneficiaries to do so. Yanes also paid himself more than $1.3 million in profits from the scheme. Of that sum, Yanes paid more than $650,000 to two shell companies he controlled, which did no business with Research Center.

After being interviewed by FBI agents in October 31, 2008, in connection with this scheme, Yanes moved to Brazil. He was prosecuted after being extradited back to the United States.

Efren Mendez, the vice-president of Research Center; Damian Beltran, a medical assistant at the clinic; and Barbara Perez and Caridad Perez, patient recruiters for the clinic, all previously pled guilty to conspiracy to commit health care fraud in related cases.

Mr. Ferrer commended the investigative efforts of the FBI and HHS-OIG. This case was prosecuted by Assistant U.S. Attorney Marc Osborne.

A copy of this press release may be found on the website of the United States Attorney’s Office for the Southern District of Florida at www.usdoj.gov/usao/fls.

Professor Sentenced to 41 Months for Grant Fraud

Although we were unable to locate a press release issued by the US Attorney’s Office in M.D. Pa, a professor charged on January 31, 2012 with grant fraud, received a stiff sentence: 3.5 years in prison and $660,000 restitution.  More than 100 letters were received by the court advocating leniency (including from the professor’s thesis adviser and from a current financial backer of his research).  Despite this and powerful testimony from supporters (including his father), the court meted out what must have been seen by the defendant, his family and supporters as very harsh justice.

PennLive.Com article on sentencing

Original US Attorney’s 1-31-12 Press Release below:

Former Penn State Professor Charged In $3 Million Federal Research Grant Fraud

FOR IMMEDIATE RELEASE
January 31, 2012

The United States Attorney’s Office for the Middle District of Pennsylvania announced that a felony Information has been filed in United States District Court in Harrisburg against Craig Grimes, age 55, of Raleigh, North Carolina, charging him with wire fraud, false statements, and money laundering. During the time period alleged in the Information, Grimes resided in Boalsburg, Pennsylvania, and was a Professor of Material Science and Engineering at The Pennsylvania State University.

According to United States Attorney Peter J. Smith, Count I of the Information charges that between June 30, 2006, and February 1, 2011, Grimes defrauded the National Institutes of Health (“NIH”) of federal grant monies. The NIH, a component of the United States Department of Health and Human Services, provides funding for medical research through grants.

Grimes, acting through his solely-owned company, SentechBiomed, State College, PA requested a $1,196,359.00 grant from NIH to perform research related to the measurement of gases in a patient’s blood. The measurement of these gases was purported to be relevant to detecting the presence of a disease in infants known as necrotizing enterocolitis.

In the application, Grimes specifically represented to NIH that he would direct approximately $509,274.00 to the Hershey Medical Center to conduct clinical research on adult and infant subjects. The money was never paid. Instead, the grant funds were misappropriated, in part, by Grimes for his own use. The clinical studies/trials were not performed.

Count II of the Information charges Grimes with allegedly making false statements to the United States Department of Energy in connection with a second federal grant. In August 2009, Grimes, while a PSU professor, completed a grant application seeking a $1,908,732.00 grant from the Advanced Research Projects Agency – Energy(ARPA-E) which was created to foster research and development of energy-related technologies. The ARPA-E grant was funded by the American Recovery and Reinvestment Act.

ARPA-E seeks to avoid funding research already funded by other government and private entities. It requires applicants for grants to disclose other funding sources. In the application Grimes completed and had submitted to ARPA-E, he allegedly stated there was no other funding, when, in fact, he had received a grant from the National Science Foundation.

Count III of the Information charges Grimes with money laundering the proceeds of the fraudulent proceeds he received from the National Institutes of Health.

United States Attorney Smith stated, “Fraud in connection with federally funded university research harms public health and safety and damages our scientific and educational institutions. Such cases will be investigated and prosecuted as vigorously as any other type of serious economic crimes. Anyone with information concerning suspected research fraud should contact the Office of Inspector General for the appropriate federal agency.”

Greg Friedman, Inspector General, U.S. Department of Energy, stated that “The Department of Energy is a major underwriter of energy research in the United States. Cases that impact the integrity of the process are important to us. Abuse of the system is unacceptable. I would like to thank the United States Attorney’s Office and the IG Special Agents who worked tirelessly on this case. This investigation and prosecution demonstrate our commitment to holding those who defraud the Department accountable for their actions.”

“NIH grants billions in taxpayer funds each year to advance vital medical research,” said Nicholas DiGiulio, the Philadelphia Region’s Special Agent in Charge for the Office of Inspector General of the Department of Health and Human Services. “Every dollar is precious, so any misappropriation of these funds – as the government charges Mr. Grimes today – will be investigated aggressively.”

If convicted, Grimes faces up to thirty-five years in prison and a fine of $750,000.

Fraud related to U.S. Department of Energy may be reported to: (800) 541-1625.

Fraud related to U.S. Department of Health and Human Services, including U.S. National Institutes of Health, grants and programs may be reported to: 1-800-HHS-TIPS (1-800-447-8477).

Fraud related to U.S. National Science Foundation grants and programs may be reported to: 703-292-7100.

The investigation is being conducted by special agents of the Department of Energy, Office of Inspector General, the National Science Foundation, the Department of Health and Human Services, and the IRS. Prosecution is assigned to Assistant United States Attorney Joseph J. Terz.

****

An Indictment or Information is not evidence of guilt but simply a description of the charge made by the Grand Jury and/or United States Attorney against a defendant. A charged Defendant is presumed innocent until a jury returns a unanimous finding that the United States has proven the defendant’s guilt beyond a reasonable doubt or until the defendant has pled guilty to the charges.

Former Fair Financial Company CEO Sentenced In Indianapolis to 50 Years in Prison for Role in $200 Million Fraud Scheme

Department of Justice
Office of Public Affairs
FOR IMMEDIATE RELEASE
Friday, November 30, 2012
Former Fair Financial Company CEO Sentenced In Indianapolis to 50 Years in Prison for Role in $200 Million Fraud Scheme
Two Other Fair Financial Executives Sentenced Today for Roles in Scheme

WASHINGTON – The former chief executive officer of Fair Financial Company, an Ohio financial services business, was sentenced today to serve 50 years in prison for his role in a scheme to defraud approximately 5,000 investors of more than $200 million, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney for the Southern District of Indiana Joseph H. Hogsett.

 

Timothy S. Durham, 50, of Fortville, Ind., was sentenced today by U.S. District Judge Jane Magnus-Stinson.  In addition to his prison term, Durham was sentenced to serve two years supervised release.

 

James F. Cochran, the former chairman of the board of Fair, was sentenced today by Judge Magnus-Stinson to serve 25 years in prison and three years of supervised release.

 

Rick D. Snow, the former chief financial officer of Fair, was sentenced today by Judge Magnus-Stinson to ten years in prison and two years of supervised release.

 

Judge Snow also ordered Durham, Cochran and Snow to pay restitution in the amount of $208 million.

 

“The lengthy prison sentences handed down today are just punishment for a group of executives who built a business on smoke and mirrors,” said Assistant Attorney General Breuer.  “By deliberately misleading their investors and state regulators, Mr. Durham and his co-conspirators were able defraud thousands of innocent investors.  The Justice Department will continue to devote considerable time and resources to ensure that fraudsters like Mr. Durham, Mr. Cochran and Mr . Snow are brought to justice for their crimes.”

 

“This ordeal is truly a tragedy for all families involved,” said U.S. Attorney Hogsett.  “All we can do is ask that today’s decision send a warning to others in Indiana that if you sacrifice truth in the name of greed, if you steal from another’s American dream to enhance your own, you will be caught and you will pay a significant price.”

 

“The FBI will continue to aggressively pursue financial crimes investigations,” said Special Agent in Charge Robert A. Jones of the FBI Indianapolis Division.  “Today’s sentencing represents a significant step toward justice.  We must remain mindful that the victims of this crime still suffer.”

 

On June 20, 2012, following an eight-day trial, a federal jury in the Southern District of Indiana convicted Durham and two co-conspirators for their roles in this scheme. Durham was convicted of one count of conspiracy to commit wire and securities fraud, 10 counts of wire fraud and one count of securities fraud.  James F. Cochran, 57, of McCordsville, Ind., was convicted of one count of conspiracy to commit wire and securities fraud, one count of securities fraud and six counts of wire fraud.  Rick D. Snow, 49, Fishers, Ind., was convicted of one count of conspiracy to commit wire and securities fraud, one count of securities fraud and three counts of wire fraud.

 

Durham and Cochran purchased Fair, whose headquarters was in Akron, Ohio, in 2002.  According to evidence presented at trial, between approximately February 2005 through November 2009, Durham, Cochran and Snow executed a scheme to defraud Fair’s investors by making and causing others to make false and misleading statements about Fair’s financial condition and about the manner in which they were using Fair investor money. The evidence also established that Durham, Cochran and Snow executed the scheme to enrich themselves, to obtain millions of dollars of investors’ funds through false representations and promises and to conceal from the investing public Fair’s true financial condition and the manner in which Fair was using investor money.

 

When Durham and Cochran purchased Fair in 2002, Fair reported debts to investors from the sale of investment certificates of approximately $37 million and income producing assets in the form of finance receivables of approximately $48 million. By November 2009, after Durham and Cochran had owned the company for seven years, Fair’s debts to investors from the sale of investment certificates had grown to more than $200 million, while Fair’s income producing assets consisted only of the loans to Durham and Cochran, their associates and the businesses they owned or controlled.

 

Durham, Cochran and Snow terminated Fair’s independent accountants who, at various points during 2005 and 2006, told the defendants that many of Fair’s loans were impaired or did not have sufficient collateral.  After firing the accountants, the defendants never released audited financial statements for 2005, and never obtained or released audited financial statements for 2006 through September 2009.  With independent accountants no longer auditing Fair’s financial statements, the defendants were able to conceal from investors Fair’s true financial condition.

Evidence introduced at trial showed that the defendants engaged in a variety of other fraudulent activities to conceal from the State of Ohio Division of Securities and from investors Fair’s true financial health and cash flow problems.  Evidence showed that the defendants made false and misleading statements to concerned investors who either had not received principal or interest payments on their certificates from Fair or who were worried about Fair’s financial health.  The defendants also directed employees of Fair not to pay investors who were owed interest or principal payments on their certificates.

 

Even though Fair’s financial condition had deteriorated and Fair was experiencing severe cash flow problems, Durham and Cochran continued to funnel Fair investor money to themselves for their personal expenses, to their family, friends and acquaintances, and to the struggling businesses that they owned or controlled.

 

This case is being prosecuted by Trial Attorney Henry P. Van Dyck and Senior Deputy Chief for Litigation Kathleen McGovern of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Winfield D. Ong and Nicholas E. Surmacz of the Southern District of Indiana. The investigation was led by the FBI in Indianapolis.

This case is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations.  Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants.  For more information on the task force, visit www.stopfraud.gov .

Death Charge Added To Indictment Against Pill Mill Doc/ USAO-EDPA

Death Charge Added To Indictment Against Pill Mill Doc

FOR IMMEDIATE RELEASE
November 29, 2012

PHILADELPHIA – A third superseding indictment was unsealed today against Dr. Norman Werther, 73, of Horsham, adding nine new defendants and dozens more charges, most notably distribution of a controlled substance resulting in death, announced First Assistant United States Attorney Louis D. Lappen. It is the first such case in the Eastern District of Pennsylvania. Werther was originally indicted on August 10, 2011 with 51 co-defendants. The charges allege a multi-million dollar drug conspiracy involving illegal prescriptions, phony patients, and a drug trafficking organization. At the time, Werther was a Montgomery County physician, running a physical therapy and rehabilitation practice in Willow Grove. According to the third superseding indictment, Werther conspired with six separate groups of drug dealers. In addition to the count of causing a death, he is charged in multiple counts of conspiracy to distribute controlled substances, distribution of controlled substances, maintaining a drug-involved premises, and money laundering. He faces a mandatory 20 years and maximum sentence of life in prison if convicted of all charges.

New defendants charged in the third superseding indictment are: Troy Brinkley, 44; Edward Jackson, 49; Edward Dominick, Sr., 53; Frederick Kelsey, 51; Kyle Jones, 30; Ali Armstead, 31; Terrell Jackson, 27; Bernard Jackson, 33; and Ronald Campbell, 35, all of Philadelphia. Dominick, Sr., is still at-large; all others are in custody.

The charges allege that Werther worked with six alleged drug traffickers who recruited large numbers of pseudo-patients. Werther set aside a specific block of time each business day to see the pseudo-patients recruited by Troy Brinkley, Ronald Campbell, Anthony DiPasquale, Angel DuPrey, Kyle Jones, and William Stukes (charged earlier). With the help of Werther’s office staff, those “patients” were transported to Werther’s medical office, at 301 Davisville Road in Willow Grove, PA, for cursory examinations. The “patients” paid an office visit fee, usually $150, by cash, check, or money order, and Werther would write prescriptions for them to obtain oxycodone-based drugs without there being a legitimate medical purpose for the prescription and outside the usual course of professional practice. The “patients” were then driven to various pharmacies, including Northeast Pharmacy, to have their prescriptions filled. The drugs were then turned over to the alleged drug dealers so their organizations could sell the narcotics to numerous drug dealers, also charged, who would also then resell the drugs on the street.

According to the third superseding indictment, in September 2010, Werther knowingly dispensed approximately 150 pills containing 30 milligrams each of oxycodone, and 30 pills containing 15 milligrams each of oxycodone, to N. B., a person known to the grand jury, for no legitimate medical purpose and N. B.’s death resulted from the use of that substance.

According to the third superseding indictment, Werther’s wife sent a memo to the office staff in July 2011: “When Angel (referring to defendant Angel Duprey) calls… Dr. has told us to tell him that a Consultant was in and reviewed our charts. He and Fernando (referring to defendant Ferdinand Nieves) were arrested… this created a big problem for us. It is a big “red flag” …we don’t want the government reviewing us. The DEA checks on physicians dispensing narcotics. Dr. could lose his license. He has sent away more than 100 people in the last few weeks. He cannot see their people under any circumstances. Be firm… no arguing.”

The alleged drug conspiracy involving Dr. Werther operated between February 2009 and August 2011 and resulted in the alleged illegal distribution of more than 700,000 pills containing oxycodone. At least one of the drug trafficking organizations allegedly working with Werther trafficked pills valued at more than $5 million that Werther is alleged to have illegally prescribed.

A total of 67 defendants have been charged in the case. Additional charges contained in the third superseding indictment include Conspiracy (6 counts), Distribution of Controlled Substances Causing Death, Maintaining a Drug-Involved Premises, Distribution of Controlled Substances (196 counts), Possession with the Intent to Distribute (3 counts), Money Laundering (117 counts), and Health Care Fraud (44 counts).

Other defendants previously charged and awaiting trial are: Kim Carter, 44, Angel Duprey, 33, Ferdinand Nieves, 45, and Anthony DiPasquale, 46, all of Philadelphia.

All others have pleaded guilty.

The crimes of conspiracy, distribution of controlled substance, possession with intent to distribute, and money laundering each carry a maximum possible sentence of 20 years in prison; health care fraud and aggravated structuring each carry a maximum sentence of 10 years in prison; structuring financial transactions carries a maximum possible sentence of five years in prison. Each defendant also faces possible fines, periods of supervised release, and special assessments.

This case was investigated by the Drug Enforcement Administration, the U.S. Department of Health and Human Services Office of Inspector General, the Federal Bureau of Investigation, and the Bureau of Alcohol, Tobacco, Firearms and Explosives, with assistance from the Philadelphia Police Department, the North Coventry Police Department, the Upper Moreland Police Department, and the Montgomery Township Police. It is being prosecuted by Assistant United States Attorneys Michelle Rotella and Nancy Beam Winter.

UNITED STATES ATTORNEY’S OFFICE, EASTERN DISTRICTof PENNSYLVANIA
Suite 1250, 615 Chestnut Street, Philadelphia, PA 19106
PATTY HARTMAN, Media Contact, 215-861-8525

Two Brooklyn Clinic Employees Plead Guilty in Connection with $71 Million Medicare Fraud Scheme

Two Brooklyn Clinic Employees Plead Guilty in Connection with $71 Million Medicare Fraud Scheme
Co-Defendant Pleaded Guilty Yesterday for Role in Scheme

11/28/2012

WASHINGTON—Two Brooklyn, New York residents pleaded guilty today for their roles in a $71 million Medicare fraud scheme, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney for the Eastern District of New York Loretta E. Lynch; Acting Assistant Director in Charge Mary E. Galligan of the FBI’s New York Field Office; and Special Agent in Charge Thomas O’Donnell of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG).

Katherina Kostiochenko, 34, pleaded guilty today before U.S. District Judge Nina Gershon in the Eastern District of New York to one count of conspiracy to commit health care fraud, one count of health care fraud, and one count of conspiracy to pay kickbacks. Sergey V. Shelikhov, 51, pleaded guilty today before Judge Gershon to one count of conspiracy to commit health care fraud.

Co-conspirator Leonid Zheleznyakov, 28, pleaded guilty yesterday before Judge Gershon to one count of conspiracy to commit health care fraud for his role in the scheme.

Kostiochenko, Shelikhov, and Zheleznyakov were employees of a clinic in Brooklyn that operated under three corporate names: Bay Medical Care PC, SVS Wellcare Medical PLLC, and SZS Medical Care PLLC (Bay Medical clinic). According to court documents, owners, operators, and employees of the Bay Medical clinic paid cash kickbacks to Medicare beneficiaries and used the beneficiaries’ names to bill Medicare for more than $71 million in services that were medically unnecessary or never provided. The defendants billed Medicare for a wide variety of fraudulent medical services and procedures, including physician office visits, physical therapy, and diagnostic tests.

According to the criminal complaint, the co-conspirators allegedly paid kickbacks to corrupt Medicare beneficiaries in a room at the clinic known as the “kickback room,” in which the conspirators paid approximately 1,000 kickbacks totaling more than $500,000 during a period of approximately six weeks from April to June 2010.

Kostiochenko, Shelikhov, and Zheleznyakov pleaded guilty to conspiring to commit health care fraud for their roles in the Bay Medical scheme. Kostiochenko also pleaded guilty to paying cash kickbacks to Medicare beneficiaries as part of the scheme.

At sentencing, Kostiochenko faces a maximum penalty of 25 years in prison, and Shelikhov and Zheleznyakov both face a maximum penalty of 10 years in prison. Kostiochenko and Zheleznyakov are scheduled for sentencing on March 12, 2013, and Shelikhov is scheduled for sentencing March 13, 2013.

In total, 16 individuals have been charged in the Bay Medical scheme, including two doctors, nine clinic owners/operators/employees, and five external money launderers. To date, 10 defendants have pleaded guilty for their roles in the conspiracy. Six individuals await trial before Judge Gershon on January 22, 2013.

The case is being prosecuted by Trial Attorney Sarah M. Hall of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Shannon Jones of the Eastern District of New York. The case was investigated by the FBI and HHS.

The case was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of New York. The Medicare Fraud Strike Force operations are part of the Health Care Fraud Prevention and Enforcement Action Team (HEAT), a joint initiative announced in May 2009 between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,480 defendants who have collectively billed the Medicare program for more than $4.8 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to www.stopmedicarefraud.gov.

Palmview Siblings Sentenced for Health Care Fraud Conspiracy

Palmview Siblings Sentenced for Health Care Fraud Conspiracy

Nov. 28, 2012

McALLEN, Texas – Velma Alaniz, 31, and her brother Valente Alaniz, 27, both of Palmview, have been sentenced to federal prison for their roles in a scheme to defraud Medicare and Medicaid through fraudulent billings for power wheelchairs, incontinent supplies and other medical items, United States Attorney Kenneth Magidson announced today along with and Texas Attorney General Greg Abbott.

Velma Alaniz, an owner of Ace Medical Equipment and Supplies, a McAllen-area durable medical equipment (DME) business, and her brother Valente, manager of Ace Medical, were both convicted of conspiracy to commit health care fraud on Dec. 7, 2011, after pleading guilty before U.S. District Judge Randy Crane.

Following the sentencing hearing that began on Nov. 19-20 and concluded today, Judge Crane ordered Velma and Valente Alaniz to serve 24 and 37 months in prison, respectively. Both will be placed on supervision for a period of three years following their release from prison. Judge Crane also ordered them to repay Medicare and the Texas Medicaid program the sum of $159,557.43.

At their plea hearing in December 2011, Velma and Valente Alaniz admitted to conspiring to submit false and fraudulent claims to the Medicare and Medicaid programs related to Ace Medical’s purported sale of power wheelchairs to Medicare and Medicaid patients. In numerous claims for a power wheelchairs, the defendants represented to Medicare and Medicaid that the items were prescribed by the patients’ physicians and had been delivered to the patients when, in fact, the defendants knew that both of these representations were false. In other instances, the defendants submitted false claims to Medicare and Medicaid that represented that power wheelchairs had been delivered to patients when, instead, less expensive scooters were delivered to the patients. The defendants also billed for incontinent and other medical supplies which had not been prescribed by the patients doctors.

The defendants also admitted that, in an attempt to conceal and cover up their fraud, they falsified and forged physicians’ medical orders and examination reports, as well as a variety of other Medicare and Medicaid-related documents that were kept in Ace Medical’s patients’ files. In addition, in 2010 when investigators requested patient files from Ace Medical pertaining to a number of Medicare and Medicaid patients, Velma Alaniz instructed Valente Alaniz to “fix” the patients’ files to make the fraudulent power wheelchair claims appear to be mere billing errors.

Judge Crane allowed the pair to remain on bond and to voluntarily surrender to the United States Marshals Service on Jan. 4, 2013.

The investigation leading to the charges was conducted by the U.S. Department of Health and Human Services—Office of Inspector General, the U.S. Secret Service and the Texas Attorney General’s Medicaid Fraud Control Unit. Special Assistant United States Attorney Rex Beasley and former Assistant United States Attorney Greg Saikin prosecuted the case.

Baylor University Medical Center to Pay More Than $900,000 for False Medicare Claims for Radiation Oncology Services

Department of Justice
Office of Public Affairs
FOR IMMEDIATE RELEASE
Tuesday, November 27, 2012
Baylor University Medical Center to Pay More Than $900,000 for False Medicare Claims for Radiation Oncology Services

 

Baylor University Medical Center, Baylor Health Care System and HealthTexas Provider Network (collectively, Baylor) have agreed to pay the United States $907,355 to settle allegations that Baylor submitted false claims to Medicare, the Civilian Health and Medical Program of the Uniformed Services (TRICARE) and the Federal Employees Health Benefit Program (FEHBP) for various radiation oncology services, including intensity modulated radiation therapy, the Justice Department announced today. Intensity modulated radiation therapy is a sophisticated radiation treatment indicated for specific types of cancer where extreme precision is required to spare patients’ surrounding organs or healthy tissue.

The government alleges that Baylor submitted improper claims to Medicare from 2006 through May 2010 in which Baylor double billed Medicare for several procedures affiliated with radiation treatment plans, billed for certain high reimbursement radiation oncology services when a different, less expensive service should have been billed, billed for procedures without supporting documentation in the medical record, and improperly billed for radiation treatment delivery without corroboration of physician supervision.

“Physicians who participate in Medicare must bill for their services accurately and honestly,” said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Justice Department’s Civil Division. “The Department of Justice is committed to ensuring that federal health care funds are spent appropriately.”

Principal Deputy Assistant Attorney General Delery also noted that the settlement with Baylor was the result of a coordinated effort among the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Northern District of Texas, the Department of Health and Human Services’ Office of Inspector General, FBI and Defense Criminal Investigative Services.

 

U.S. Attorney for the Northern District of Texas Sarah R. Saldaña praised these investigative efforts and said, “this civil recovery is a testament to the efforts of the Department of Justice to hold all parties, regardless of position, accountable for the submission of improper claims to federal health care programs.”

This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover $10.1 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 are over $13.8 billion.

The claims settled by this a gre ement are alle gations onl y, and the re has b een no det ermination of liability.