Former Charity Executive Pleads Guilty to Bribery and Embezzlement Scheme

June 7, 2018

A former executive of a Springfield, Missouri charity, who was also an Arkansas lobbyist, pleaded guilty in federal court today to bribing Arkansas elected officials in a multi-million-dollar scheme, and then along with other charity executives, embezzling millions of dollars from the Springfield health care organization.

Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division and U.S. Attorney Timothy A. Garrison for the Western District of Missouri made the announcement.

Milton Russell Cranford, aka “Rusty,” 57, of Rogers, Arkansas, pleaded guilty before U.S. Magistrate Judge David P. Rush to one count of federal program bribery.  Cranford was an executive at Preferred Family Healthcare Inc. (formerly known as Alternative Opportunities Inc.), a nonprofit corporation headquartered in Springfield, and oversaw the charity’s operations and lobbying efforts in the state of Arkansas. Cranford also operated three lobbying firms: The Cranford Coalition, The Capital Hill Coalition and Outcomes of Arkansas.

By pleading guilty today, Cranford admitted that he and other Preferred Family Healthcare executives paid bribes to Arkansas State Senator Jonathan Woods, Arkansas State legislator Henry Wilkins IV, a person identified in court documents as “Arkansas Senator A,” and others, to provide favorable legislative action for Cranford, his clients, and Preferred Family Healthcare. In exchange for the bribes paid by Cranford, the officials identified in the Information steered Arkansas General Improvement Fund (GIF) money to Preferred Family Healthcare and other Cranford clients; held up agency budgets; requested legislative audits; and sponsored, filed and voted for legislative bills that favored the charity and Cranford clients.

The additional income gained by Preferred Family Healthcare from Cranford’s bribes enabled Cranford and other executives of the charity to engage in multiple schemes to embezzle, steal, and unjustly enrich themselves at the expense of the charity, including, but not limited to, diverting charity funds to for-profit companies owned by the executives, causing the charity to make rental payments to properties owned by Cranford and the executives; paying for their personal expenses using corporate credit cards; and causing the charity to lend significant funds to Cranford personally, and to for-profit companies owned by other charity executives.  The executives also caused the charity to misapply its funds for unlawful contributions to the campaigns of elected public officials and causing the charity to spend substantial amounts of funds on lobbying and political advocacy.

In addition, Cranford entered into an illegal kickback scheme whereby Cranford paid over $600,000 in illegal kickbacks to a charity executive in exchange for more than $3.5 million in payments made to The Cranford Coalition.  Cranford also acknowledged his role in a second illegal kickback scheme involving the charity’s contract with Philadelphia, Pennsylvania-based political operative Donald Andrew Jones, also known as “D.A.” Jones, and another charity employee, former Arkansas State Representative Eddie Wayne Cooper.  In exchange for Cranford’s role in facilitating the charity’s contract with Jones for lobbying and political advocacy, under which the charity paid Jones almost $1 million, Cranford received kickbacks totaling $219,000 from Jones, $18,000 of which Cranford provided to Cooper, and Cooper received another $45,000 directly from Jones.  In separate but related cases, both Jones and Cooper previously entered guilty pleas acknowledging their roles in that kickback scheme.

A sentencing hearing will be scheduled after the completion of a presentence investigation by the U.S. Probation Office.

The case was investigated by IRS-Criminal Investigation, the FBI and the Offices of the Inspectors General from the Departments of Labor, Health and Human Services, Housing and Urban Development, Veterans Affairs, and the Federal Deposit Insurance Corporation. This is a combined investigation with the Western District of Arkansas, the Eastern District of Arkansas, and the Eastern District of Pennsylvania.  This case is being prosecuted by Assistant U.S. Attorney Steven M. Mohlhenrich of the Western District of Missouri and Trial Attorneys Marco A. Palmieri and Sean F. Mulryne of the Criminal Division’s Public Integrity Section.

Mississippi Physician Sentenced to Over Three Years in Prison for Role in $3 Million Compounding Pharmacy Fraud Scheme

June 7, 2018

A Biloxi, Mississippi physician was sentenced today to 42 months in prison for his involvement in a $3 million compounding pharmacy fraud scheme.

Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division; U.S. Attorney D. Michael Hurst Jr. of the Southern District of Mississippi; Special Agent in Charge Christopher Freeze of the FBI’s Jackson, Mississippi Field Division; Acting Special Agent in Charge Thomas J. Holloman III of IRS Criminal Investigation’s (IRS-CI) New Orleans Field Office and Special Agent in Charge John F. Khin of the Defense Criminal Investigative Service’s (DCIS) Southeast Field Office made the announcement.

Albert Diaz, M.D., was sentenced by U.S. District Judge Keith Starrett of the Southern District of Mississippi.  Restitution to TRICARE and other insurance companies will be determined at a later date. On March 2 after a five-day jury trial, Diaz was convicted of one count of conspiracy to commit health care fraud and wire fraud, four counts of wire fraud, one count of conspiracy to distribute and dispense a controlled substance, four counts of distributing and dispensing a controlled substance, one count of conspiracy to falsify records in a federal investigation and five counts of falsification of records in a federal investigation.

According to evidence presented at trial, between 2014 and 2015, Diaz participated in a scheme to defraud TRICARE and other insurance companies by prescribing medically unnecessary compounded medications, some of which included ketamine, a controlled substance, to individuals he had not examined.  The evidence further demonstrated that, based on the prescriptions signed by Diaz, Advantage Pharmacy in Hattiesburg, Mississippi, dispensed these medically unnecessary compounded medications and sought and received reimbursement from TRICARE and other insurance companies totaling more than $3 million. The trial evidence further demonstrated that in response to a TRICARE audit, Diaz falsified patient records to make it appear as though he had examined patients before prescribing the medications.

The FBI, IRS-CI, the Defense Criminal Investigative Service, the U.S. Department of Health and Human Services Office of Inspector General, the Mississippi Bureau of Narcotics and other government agencies investigated the case.  Trial Attorneys Kate Payerle and Jared Hasten of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Mary Helen Wall of the Southern District of Mississippi are prosecuting the case.

The Fraud Section leads the Medicare Fraud Strike Force, which is part of a joint initiative 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.  The Medicare Fraud Strike Force operates in nine locations nationwide.  Since its inception in March 2007, the Medicare Fraud Strike Force has charged over 3,500 defendants who collectively have falsely billed the Medicare program for over $12.5 billion.

Signature HealthCARE to Pay More Than $30 Million to Resolve False Claims Act Allegations Related to Rehabilitation Therapy

June 8, 2018

Signature HealthCARE, LLC (Signature), a Louisville, Kentucky based company that owns and operates approximately 115 skilled nursing facilities, including 7 in middle Tennessee, has agreed to resolve allegations that it violated the False Claims Act by knowingly submitting false claims to Medicare for rehabilitation therapy services that were not reasonable, necessary and skilled, the Department of Justice announced today.  The settlement also resolves allegations that Signature submitted forged pre-admission certifications of patient need for skilled nursing to the state of Tennessee’s Medicaid program.  Under the settlement agreements, Signature has agreed to pay more than $30 million.  As part of the resolution, the State of Tennessee will receive a portion of the overall settlement.

“Today’s settlement demonstrates our continuing efforts to protect patients and taxpayer by ensuring that the care provided to beneficiaries of government-funded healthcare programs is dictated by clinical needs, not a provider’s fiscal interests,” said Acting Assistant Attorney General Chad A. Readler for the Justice Department’s Civil Division.  “Nursing home facilities provide important services to our elderly, and those facilities must uphold the trust placed in them by billing the government only for reasonable and necessary services.”

The government alleged that Signature engaged in various practices that resulted in the submission of claims for unreasonable, unnecessary, and unskilled services to Medicare patients, including: (1) presumptively placing patients in the highest therapy reimbursement level, rather than relying on individualized evaluations to determine the level of care most suitable for each patient’s clinical needs; (2) providing the minimum number of minutes required to bill at a given reimbursement level while discouraging the provision of additional therapy beyond that minimum threshold; and, (3) pressuring therapists and patients to complete the planned minutes of therapy even when patients were sick or declined to participate in therapy.

“Health care providers who engage in deceptive practices place patients at unnecessary risk and contribute to the financial distress of our federal healthcare programs,” said U.S. Attorney Cochran for the Middle District of Tennessee.  “Our dedicated teams of civil enforcement attorneys will work tirelessly with the relators who report fraud such as this and with our law enforcement partners who investigate healthcare fraud.  When we determine that companies are cheating the taxpayers, we will hold them accountable as we have in this case.”

“Our most vulnerable citizens are put at risk when healthcare providers put their financial interests above their patients’ needs and valuable federal funds are diverted from where they are surely needed,” said U. S. Attorney Byung J. “BJay” Pak for the Northern District of Georgia. “This settlement demonstrates our commitment to pursuing healthcare providers who provide unnecessary care to advance their bottom line.”

“Signature was charged with illegally boosting profits by providing excessive amounts of therapy to patients whether they needed it or not,” said Special Agent in Charge Derrick L. Jackson for the U.S. Department of Health and Human Services, Office of Inspector General. “The decision to provide therapy should never be based on corporate financial considerations rather than a patient’s medical needs.”

The settlement resolves allegations filed in a lawsuit by Kristi Emerson and LeeAnn Tuesca, former Signature therapy employees, in federal court in Nashville, Tennessee.  The lawsuit was filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery.  The Act also allows the government to intervene and take over the action, as it did in this case.  Ms. Emerson and Ms. Tuesca will receive a portion of the recovered funds.

The settlements were the result of a coordinated effort by the Civil Division of the Department of Justice, the United States Attorney’s Offices for the Middle District of Tennessee and the Northern District of Georgia, the Office of Inspector General of the Department of Health and Human Services, the Tennessee Bureau of Investigation. Department of Defense, Office of Inspector General, the Defense Criminal Investigative Service, and the Department of Health and Human Services, Office of the Inspector General.  Trial Attorneys Christelle Klovers and Denise Barnes of the Civil Division of the Department of Justice, Assistant United States Attorney Sarah K. Bogni of the Middle District of Tennessee, and Assistant United States Attorney Lena Amanti of the Northern District of Georgia represent the United States.  Assistant Attorney General Philip Bangle represents the State of Tennessee.

  The case is captioned United States ex rel. Emerson and Tuesca v. Signature HealthCARE, LLC, et al., Case No. 1:15-cv-00027 (M.D. Tenn.).  The claims resolved by the settlements are allegations only, and there has been no determination of liability.

Former Janesville Pharmacy Owner Sentenced for Health Care Fraud

Friday, September 1, 2017

Madison, Wis. – Jeffrey M. Anderson, Acting United States Attorney for the Western District of Wisconsin, announced that Mark Johnson, 55, Janesville, Wis., was sentenced today by U.S. District Judge James Peterson to 24 months in federal prison for health care fraud.  Johnson will begin serving his sentence in October.

On August 4, 2016, Johnson’s arrest was announced in conjunction with the unsealing of a 46-count indictment returned by the grand jury, charging him with health care fraud, making false statements in a health care fraud audit, and identity theft.

On May 24, 2017, Johnson entered a guilty plea to Count 1 of the indictment. Pursuant to the Federal Sentencing Guidelines, all the charged conduct was considered by the court at sentencing. Johnson defrauded Medicare and Medicaid from approximately January 2008 to March 2014. During this time-period, he was a licensed pharmacist, and the owner and president of Kealey Pharmacy and Home Care, Inc., a pharmacy located in Janesville, Wisconsin. Kealey Pharmacy was a retail pharmacy providing, among other things, prescription drugs to customers. Kealey was reimbursed for these prescriptions in a number of ways, including reimbursement payments under Medicare and Medicaid.

Johnson submitted false and fraudulent claims to Medicare and Medicaid obtaining reimbursement for medication that was not, in fact, provided to beneficiaries. On occasion, also created false prescription orders using the identities of physicians and then submitted claims for reimbursement for medication pursuant to these false prescription orders. also lied in his responses to an audit being conducted by the State of Wisconsin Department of Health Services of paid Medicaid claims in 2013. obtained approximately $740,000 in fraudulent prescription reimbursements during his fraud scheme.

At sentencing, Judge Peterson noted that Johnson’s criminal conduct caused a considerable financial loss to the Medicare and Medicaid programs, which are designed to protect the sick and the vulnerable.

The charges against Johnson were the result of a lengthy investigation conducted by the U.S. Department of Health and Human Services, Office of Inspector General, and the U.S. Postal Inspection Service. Federal investigators began investigating Johnson after being alerted to the possible fraud by two employees who worked at the pharmacy.

Acting U.S. Attorney Anderson commended the outstanding work of the investigators in the case and praised the two former employees who came forward with concerns about possible fraud. Anderson said, “Johnson’s case is an example of this U.S. Attorney’s Office’s commitment to prosecuting those in the health care profession who abuse the public trust by defrauding the Medicare and Medicaid programs.”

The prosecution of this case is being handled by Assistant U.S. Attorney Meredith P. Duchemin.

Former DHS Employee Sent to Prison for Scheme to Steal USDA Funds Intended to Feed Hungry Children

Monday, July 17, 2017

LITTLE ROCK—Patrick C. Harris, Acting United States Attorney for the Eastern District of Arkansas, announced Monday that United States District Court Judge James M. Moody, Jr., sentenced Gladys Waits, 37, of Little Rock, to prison for her role in a scheme to steal money intended for feeding children in low income areas.

Judge Moody sentenced Waits, who pleaded guilty to conspiring to commit wire fraud on March 30, 2016, to 108 months’ imprisonment, to be followed by three years of supervised release. She was also ordered to pay restitution in the amount of $9,669,269.66.

The United States Department of Agriculture (USDA) feeding programs in Arkansas are administered through the Arkansas Department of Human Services (DHS). Sponsors who want to participate in the feeding programs must submit an application to DHS for approval. After they are approved, they can provide meals as part of the feeding programs, and they are reimbursed for the eligible meals they serve.

Waits is the eighth defendant to be sentenced for her involvement in a scheme to fraudulently obtain USDA program funds intended to feed children in low income areas. Other defendants sentenced include: Kattie Jordan, 63 months’ imprisonment on March 15, 2016; Reuben Nims, 21 months’ imprisonment on November 2, 2016; Tonique Hatton, 108 months’ imprisonment on January 4, 2017; James Franklin, 24 months’ imprisonment on January 10, 2017; Maria Nelson, 30 months’ imprisonment on January 31, 2017; Michael Lee, 30 months’ imprisonment on May 1, 2017; and Christopher Nichols, 3 years’ probation on May 16, 2017.

Waymon Weeams, Dortha Harper, Francine Leon, Alexis Young, and Erica Warren have all pleaded guilty to conspiring to defraud USDA feeding programs and are awaiting sentencing. Jacqueline Mills and Anthony Waits were convicted on April 6, 2017, following a jury trial and are also awaiting sentencing.

Gladys Waits worked for DHS and her responsibilities included processing applications from sponsors who applied to participate in the feeding programs, determining their eligibility, and approving their proposed feeding sites. Waits was responsible for approving the feeding programs for Mills, Jordan, Nims, Franklin, Nichols, Weeams, and Harper at various times between August 2012 and August 2014. The sponsors submitted claims with inflated numbers of children fed. Waits also helped these sponsors avoid DHS’s detection of the fraud.

Gladys Waits received bribe payments from some sponsors, both directly through checks made payable to her and indirectly through checks made payable to relatives, including her husband, Anthony Waits. Anthony Waits recruited sponsors Nims, Franklin, Nichols, Weeams and Harper to participate and they paid a percentage of the proceeds they received from the programs back to Anthony Waits.

The investigation is ongoing and is being conducted by the USDA–Office of Inspector General, Federal Bureau of Investigation, Internal Revenue Service–Criminal Investigations, and United States Marshals Service. The case is being prosecuted by Assistant United States Attorneys Jana Harris, Allison W. Bragg, and Cameron McCree.

If you are aware of any fraudulent activity regarding feeding programs, please email that information to [email protected](link sends e-mail).