Mississippi Real Estate Investors Plead Guilty to Conspiracy to Rig Bids at Public Foreclosure Auctions

Thursday, February 15, 2018

First Convictions in Mississippi Real Estate Foreclosure Auctions Investigation

Two real estate investors pleaded guilty today for their roles in a conspiracy to rig bids at public real estate foreclosure auctions in Mississippi, the Department of Justice announced.

“Shannon and Jason Boykin are the first two defendants to plead guilty in the Antitrust Division’s active, ongoing investigation into anticompetitive behavior at real estate foreclosure auctions in Mississippi,” said Assistant Attorney General Makan Delrahim of the Department of Justice’s Antitrust Division.  “In the past few years, the Division has secured convictions of over 100 individuals around the country.  The Division remains committed to rooting out anticompetitive conduct at foreclosure auctions.”

Felony charges against Shannon Boykin and Jason Boykin were filed on February 1, 2018, in the U.S. District Court for the Southern District of Mississippi.  According to court documents, from at least as early May 22, 2012, through at least as late as March 22, 2017, Jason and Shannon Boykin conspired with others to rig bids, designating a winning bidder to obtain selected properties at public real estate foreclosure auctions in the Southern District of Mississippi. Co-conspirators made and received payoffs in exchange for their agreement not to bid.

“Rigging, cheating and swindling foreclosure auctions undermines confidence in the marketplace, defrauds companies, and hurts owners of foreclosed homes.  These criminal actions harm us all, and I commend the Antitrust Division and the FBI for their investigation and prosecution of these crimes throughout the country. This office will continue to work with our law enforcement partners to combat illegal, anticompetitive behavior and protect victims,” said United States Attorney D. Michael Hurst, Jr. for the Southern District of Mississippi.

“The criminal actions of the defendants in this case provide a clear example of why enforcement of the Sherman Act remains necessary in maintaining a competitive field of commerce,” said Special Agent in Charge Christopher Freeze of the FBI in Mississippi. “The FBI will continue to work with the U.S. Department of Justice’s Antitrust Division in identifying such financial schemes that attempt to take advantage of the competitive process, including schemes targeting foreclosure auctions.”

The Department said that the primary purpose of the conspiracy was to suppress and restrain competition in order to obtain selected real estate offered at public foreclosure auctions at non-competitive prices.  When real estate properties are sold at these auctions, the proceeds are used to pay off the mortgage and other debt attached to the property, with remaining proceeds, if any, paid to the homeowner.  According to court documents, these conspirators paid and received money in connection with their agreement to suppress competition, which artificially lowered the price paid at auction for such homes.

A violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine for a Sherman Act charge may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime if either amount is greater than the statutory maximum fine.

The investigation is being conducted by the Antitrust Division’s Washington Criminal II Section and the FBI’s Gulfport Resident Agency, with the assistance of the U.S. Attorney’s Office for the Southern District of Mississippi.  Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact Antitrust Division prosecutors in the Washington Criminal II Section at 202-598-4000, or visit https://www.justice.gov/atr/report-violations.

Miami-Area Man Sentenced to Five Years in Prison for Role in $63 Million Health Care Fraud Scheme

Thursday, February 22, 2018

A Miami-area man was sentenced to 60 months in prison today for his role in a $63 million health care fraud scheme involving a now-defunct community mental health center located in Miami that purported to provide partial hospitalization program (PHP) services to individuals suffering from mental illness.

Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, U.S. Attorney Benjamin G. Greenberg of the Southern District of Florida, Special Agent in Charge Robert Lasky of the FBI’s Miami Field Office and Special Agent in Charge Shimon R. Richmond of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Miami Regional Office made the announcement.

Samuel Konell, 70, of Boca Raton, Florida, was sentenced by U.S. District Judge Jose E. Martinez of the Southern District of Florida.  Judge Martinez also ordered Konell to pay $9,921,726 in restitution and to forfeit certain substitute assets, including several pieces of jewelry, in partial satisfaction of a personal money judgment entered against the defendant in the amount of $432,829.  Konell pleaded guilty on Nov. 21, 2017, to one count of conspiracy to defraud the United States and receive health care kickbacks.

As part of his guilty plea, Konell admitted that from approximately January 2006 through June 2012, he received kickbacks and/or bribes in return for referring Medicare beneficiaries from the Miami-Dade state court system to Greater Miami Behavioral Healthcare Center Inc. (Greater Miami) to serve as patients.  He admitted that he coordinated with criminal defendants in the state court system to obtain court orders for mental health treatment in lieu of incarceration so that he could refer those individuals to Greater Miami to serve as patients in return for kickbacks and/or bribes.  Konell further admitted that he did so knowing that certain of those individuals were not mentally ill or otherwise did not meet the criteria for PHP treatment.

In addition, Konell admitted that he and his co-conspirators at Greater Miami took steps to disguise the true nature of the kickbacks and/or bribes that Greater Miami paid to Konell and other patient brokers. Specifically, Konell was placed on the Greater Miami payroll to make the kickbacks and/or bribes appear as though they were legitimate salary payments, he admitted.  Konell further admitted that he was originally paid a flat monthly rate that was based on the number of patients he referred to Greater Miami from the state court system, and when Konell referred more patients to Greater Miami, his co-conspirators found ways to pay him over and above his regular kickback payments, including by providing him with holiday bonuses.

In furtherance of the kickback conspiracy, Konell made representations to judges and others in the Miami-Dade state court system that the individuals he referred to Greater Miami received medically necessary PHP services from Greater Miami when in reality such services were not always needed, he admitted.

According to plea documents, Konell’s co-conspirators caused the submission of over $63 million in false and fraudulent claims to Medicare.  These claims were based on kickbacks and/or bribes paid to Konell and others and were for services that were medically unnecessary, were not eligible for Medicare reimbursement or were never provided by Greater Miami.  Konell admitted that his participation in the Greater Miami scheme resulted in the submission of claims to Medicare totaling between at least approximately $9.5 and $25 million.

Eleven other individuals have pleaded guilty and have been sentenced for their roles in the scheme, including the owner of Greater Miami, three administrators and seven patient brokers.

This case was investigated by the FBI and HHS-OIG and 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 Southern District of Florida.  Former Senior Trial Attorney Christopher J. Hunter and Trial Attorneys Elizabeth Young and Leslie Wright of the Fraud Section prosecuted the case.  Assistant U.S. Attorney Adrienne Rosen of the Southern District of Florida is handling the forfeiture aspects of the case.

The Medicare Fraud Strike Force operations are 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.

Detroit Doctor Sentenced to Six Years in Prison for Role in $10.4 Million Health Care Fraud Scheme

Tuesday, February 13, 2018

A Detroit, Michigan-area doctor was sentenced to 72 months in prison today for his role in a $10.4 million conspiracy to defraud the Medicare program.

Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, U.S. Attorney Matthew Schneider of the Eastern District of Michigan, Acting Special Agent in Charge Timothy Waters of the FBI’s Detroit Division and Special Agent in Charge Lamont Pugh III of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Chicago Regional Office made the announcement.

Mahmoud Rahim, M.D., 65, of West Bloomfield, Michigan, was sentenced by U.S. District Judge Nancy G. Edmonds of the Eastern District of Micihgan.  Judge Edmonds also ordered the defendant to forfeit $1,679,505.  The restitution amount will be determined at a later hearing.

After a one-week trial in September 2017, Rahim was convicted of one count of conspiracy to commit health care fraud and wire fraud, one count of wire fraud, one count of conspiracy to receive health care kickbacks and two counts of receiving healthcare kickbacks.  According to the evidence presented at trial, Rahim accepted kickbacks from his co-conspirators in exchange for referring Medicare patients for electromyogram tests (EMGs), some of which were unnecessary, and physical therapy performed by unlicensed individuals.  Rahim disguised these payments as “rent” and set up a shell company to hide this illegal scheme.

Rahim was charged along with office manager Janet Nahkle, 58, of Dearborn, Michigan, in an indictment returned in June 2016.  Nakhle pleaded guilty to conspiracy to receive health care kickbacks in December 2016 and was sentenced to serve 18 months in prison.

The FBI and HHS-OIG investigated the case, which was brought as part of the Medicare Fraud Strike Force under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Michigan.  Fraud Section Trial Attorneys Jessica Collins and Amy Markopoulos prosecuted 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.

United States Files False Claims Act Complaint Against Compounding Pharmacy, Private Equity Firm, and Two Pharmacy Executives Alleging Payment of Kickbacks

Friday, February 23, 2018

The United States has filed a complaint in intervention against Diabetic Care Rx LLC d/b/a Patient Care America (PCA), a compounding pharmacy located in Pompano Beach, Florida, alleging that the pharmacy paid illegal kickbacks to induce prescriptions for compounded drugs reimbursed by TRICARE, the Department of Justice announced today.  The government has also brought claims against Patrick Smith and Matthew Smith, two pharmacy executives, and Riordan, Lewis & Haden Inc. (RLH), a private equity firm based in Los Angeles, California, which manages both the pharmacy and the private equity fund that owns the pharmacy, for their involvement in the alleged kickback scheme.

TRICARE is a federally-funded health care program for military personnel and their families.  The government alleges that the Defendants paid kickbacks to marketing companies to target TRICARE beneficiaries for prescriptions for compounded pain creams, scar creams, and vitamins, without regard to the patients’ medical needs.  According to the complaint, the compound formulas were manipulated by the Defendants and the marketers to ensure the highest possible reimbursement from TRICARE.  The Defendants and marketers allegedly paid telemedicine doctors to prescribe the creams and vitamins without seeing the patients, and sometimes paid the patients themselves to accept the prescriptions.  The scheme generated tens of millions of dollars in reimbursements from TRICARE in a matter of months, according to the complaint, which alleges that the Defendants and marketers split the profits from the scheme.

“The Department of Justice is determined to hold accountable health care providers that improperly use taxpayer funded health care programs to enrich themselves,” said Acting Assistant Attorney General for the Justice Department’s Civil Division Chad A. Readler.  “Kickback schemes corrupt the health care system and damage the public trust.”

“Providers and marketers that engage in kickback schemes drive up the cost of health care because they focus on their own bottom line instead of what is in the best interest of patients,” said Executive Assistant Randy Hummel of the United States Attorney’s Office for the Southern District of Florida.  “We will hold pharmacies, and those companies that manage them, responsible for using kickbacks to line their pockets at the expense of taxpayers and federal health care beneficiaries.”

“The Defense Criminal Investigative Service (DCIS) is committed to protecting the integrity of TRICARE, the military health care program that provides critical medical care and services to Department of Defense beneficiaries,” said Special Agent in Charge John F. Khin, of the Southeast Field Office.  “In partnership with DOJ and other law enforcement agencies, DCIS continues to aggressively investigate fraud and corruption to preserve and recover precious taxpayer dollars to best serve the needs of our warfighters, their family members, and military retirees.”

The lawsuit, United States ex rel. Medrano and Lopez v. Diabetic Care Rx, LLC dba Patient Care America, et al., No. 15-CV-62617 (S.D. Fla.), was originally filed in the U.S. District Court for the Southern District of Florida by Marisela Medrano and Ada Lopez, two former employees of PCA.  The lawsuit was filed under the qui tam or whistleblower provisions of the False Claims Act, which permit private parties to sue for false claims against of the United States and to receive a share of any recovery.  The Act permits the United States to intervene in such lawsuits, as the United States has done in this case.

This matter was investigated by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Southern District of Florida, the Defense Criminal Investigative Service, the U.S. Food and Drug Administration’s Office of Criminal Investigations, and the U.S. Army Criminal Investigation Command’s Major Procurement Fraud Unit.

The claims asserted against the defendants are allegations only; there has been no determination of liability.

Owner of Numerous Miami-Area Home Health Agencies Sentenced to 20 Years in Prison for Role in $66 Million Medicare Fraud Conspiracy

Wednesday, February 28, 2018

The owner and operator of numerous Miami, Florida-area home health agencies was sentenced to 240 months in prison today for his role in a $66 million conspiracy to defraud the Medicare program.

Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, U.S. Attorney Benjamin G. Greenberg of the Southern District of Florida, Special Agent in Charge Robert F. Lasky of the FBI’s Miami Field Office and Special Agent in Charge Shimon R. Richmond of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Miami Field Office made the announcement.

Rafael Arias, 52, of Miami, was sentenced by U.S. District Judge Cecilia M. Altonaga of the Southern District of Florida, who ordered Arias to pay $66.4 million in restitution and to forfeit the gross proceeds traced to the offense.  Arias pleaded guilty on Nov. 30, 2017, to one count of conspiracy to commit health care fraud and wire fraud.

“Today’s sentencing sends a clear message to anyone who is considering defrauding the Medicare system:  You will not only be caught, prosecuted, and sent to prison, but you will also have to pay back all of your ill-gotten gains,” said Acting Assistant Attorney General Cronan.

“Arias assumed that in Medicare fraud lay a path to riches,” said Special Agent in Charge Richmond. “Instead he discovered that we are working tirelessly with our law enforcement partners to protect patients and taxpayers while holding criminals accountable for their unlawful actions.”

As part of his guilty plea, Arias admitted that, between December 2007 and September 2015, he was the owner and operator of more than 20 home health agencies.  In many cases, however, Arias recruited nominee owners to falsely and fraudulently represent themselves as the agencies’ owners to hide his identity and ownership interest.  Arias and his co-conspirators paid illegal bribes and kickbacks to patient recruiters to refer patients to these agencies, and submitted false and fraudulent home health care claims to Medicare for beneficiaries who, in many cases, did not qualify or for whom the services were never provided.  In addition, Arias provided checks to other individuals and entities to cash so that Arias and his co-conspirators could obtain fraud proceeds to benefit themselves and further the fraudulent scheme.

Arias was charged along with Aylen Gonzalez, 39, of Hialeah, Florida; Ana Gabriela Mursuli Caballero, 51, of Miami; and Rafael Cabrera, 51, of Miami, in a July 2017 indictment.  Gonzalez, a patient recruiter who owned a medical clinic and co-owned two home health agencies, pleaded guilty in November 2017 to one count of conspiracy to commit health care fraud and wire fraud and was sentenced to 180 months in prison.  Mursuli Caballero, a patient recruiter and owner of two home health agencies, pleaded guilty in October 2017 to one count of conspiracy to commit health care fraud and wire fraud and was sentenced to 115 months in prison.  Cabrera, who participated in laundering and concealing the proceeds from the fraud, pleaded guilty in November 2017 to one count of conspiracy to commit money laundering and was sentenced to 71 months in prison.

This case was investigated by the FBI and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Florida.  Trial Attorneys Angela Adams and Jessica Collins of the Criminal Division’s Fraud Section prosecuted the case.

The Fraud Section leads the Medicare Fraud Strike Force.  Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged nearly 3,500 defendants who have collectively billed the Medicare program for more than $12.5 billion.  In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

Two New Orleans-Area Psychiatrists and a Health Care Marketer Charged for Roles in Kickback Scheme; Psychiatrists Also Charged With Health Care Fraud

Thursday, February 8, 2018

Two New Orleans, Louisiana-area psychiatrists and a third individual were charged in an indictment filed today for their alleged participation in a health care kickback scheme.  The two psychiatrists were also charged for their roles in a home health care fraud scheme.

Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, U.S. Attorney Duane A. Evans of the Eastern District of Louisiana, Special Agent in Charge Eric J. Rommal of the FBI’s New Orleans Field Office and Special Agent in Charge C.J. Porter of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Dallas Field Office made the announcement.

Muhammad Kaleem Arshad, M.D., 62, of New Orleans, Louisiana, Padmini Nagaraj, M.D., 60, of Kenner, Louisiana, and Joseph A. Haynes, 61, of New Orleans, were each charged with one count of conspiracy to receive illegal health care kickbacks and three counts of receiving illegal health care kickbacks.  Arshad and Nagaraj were also charged with one count of conspiracy to commit health care fraud and five counts of health care fraud.

The indictment alleges that the defendants, who were affiliated with a company that provides outpatient psychiatric services, conspired with the owner of a New Orleans home health agency to take bribes in exchange for referring psychiatric patients for medically unnecessary home health services. Haynes, who worked at the company as a marketer, allegedly helped to negotiate and enforce the bribes and kickbacks for the doctors.  The indictment further alleges that the New Orleans home health agency then submitted the fraudulent claims to Medicare to receive payment.

An indictment is merely an allegation and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

The case was investigated by the FBI and HHS-OIG.  Trial Attorney Kate Payerle of the Criminal Division’s Fraud Section is 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.

New York Doctor Sentenced to 13 Years in Prison for Multi-Million Dollar Health Care Fraud

Wednesday, February 7, 2018

A New York surgeon who practiced at hospitals in Brooklyn and Long Island was sentenced today to 156  months in prison for his role in a scheme that involved the submission of millions of dollars in false and fraudulent claims to Medicare.

Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, U.S. Attorney Richard P. Donoghue of the Eastern District of New York, Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office and Special Agent in Charge Scott Lampert of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Office of Investigations made the announcement.

Syed Imran Ahmed M.D., 51, of Glen Head, New York, was sentenced by U.S. District Judge Dora L. Irizarry of the Eastern District of New York, who also ordered Ahmed to pay $7,266,008.95 in restitution, to forfeit $7,266,008.95, and to pay a $20,000 fine.  Ahmed was convicted in July 2016 after an 11-day trial of one count of health care fraud, three counts of making false statements related to health care matters and two counts of money laundering.

“Medicare is a crucial program for many of the most vulnerable people in our society – American seniors and those with disabilities,” said Acting Assistant Attorney General Cronan.  “In this case, Syed Ahmed put his own greed ahead of the trust we put in our medical professionals, draining over $7 million in precious funding from our Medicare program.  His conviction and the sentence imposed in this case demonstrate the Department of Justice’s unwavering commitment to protecting public funds and the integrity of our health care system.”

“Dr. Syed Ahmed treated Medicare like a personal piggy bank, stealing over $7.2 million by making fraudulent claims for medical procedures he never performed,” stated U.S. Attorney Donoghue.  “Dr. Ahmed will now pay the price for violating the trust that Medicare places in doctors.  His 13-year prison sentence and the heavy payments imposed should send a powerful message of deterrence to other medical professionals who would seek to defraud vital taxpayer-funded programs like Medicare for personal enrichment.  This Office, together with our law enforcement partners, will remain vigilant in rooting out health care fraud.”

“Health care fraud is often billed as a victimless crime, but that couldn’t be further from the truth,” said Assistant Director in Charge Sweeney.  “Someone is always left to foot the bill. Insurers, the insured, and others are the ones who pay the price. Those who employ these schemes will most certainly be brought to justice, as we’ve proven here today.”

“The fraud scheme that Dr. Ahmed engaged in was motivated by pure greed,” said Special Agent in Charge Lampert.  “HHS OIG and our law enforcement partners will continue to aggressively pursue all those who seek to unlawfully enrich themselves by victimizing participants of the Medicare program.”

According to evidence presented at trial, Ahmed, a surgeon who practiced at Kingsbrook Jewish Medical Center and Wyckoff Heights Medical Center in Brooklyn, Franklin Hospital in Valley Stream, and Mercy Medical Center in Rockville Centre, New York, billed the Medicare program for incision-and-drainage and wound debridement procedures that he did not perform.  Ahmed wrote out lists of phony surgeries and sent the lists to his billing company in Michigan with instructions that they be billed to Medicare.  Ahmed also directed that the surgeries be billed as though they had taken place in an operating room so as to increase the payout for the fraudulent scheme, the evidence showed.

The evidence introduced at trial showed that Medicare paid over $7 million to Ahmed for fraudulent claims.

The FBI and HHS-OIG investigated the case, which was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of New York.  Trial Attorney Debra Jaroslawicz of the Fraud Section, Assistant U.S. Attorney F. Turner Buford, formerly a Fraud Section trial attorney, and Senior Litigation Counsel Patricia Notopoulos of the Eastern District of New York are prosecuting the case.

The Fraud Section leads the Medicare Fraud Strike Force.  Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged nearly 3,500 defendants who have collectively billed the Medicare program for more than $12.5 billion.  In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

Michigan Doctor and Owner of Medical Billing Company Sentenced to 15 Years in Prison for $26 Million Health Care Fraud Scheme

Tuesday, November 7, 2017

A Detroit-area doctor was sentenced to 180 months in prison today for his role in a $26 million health care fraud scheme that involved billing Medicare for nerve block injections that were never provided and efforts to circumvent Medicare’s investigation of the fraudulent scheme.  A co-conspirator who owned a medical billing company was previously sentenced to 10 years in prison.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Daniel L. Lemisch of the Eastern District of Michigan, Special Agent in Charge David P. Gelios of the FBI’s Detroit Division, Special Agent in Charge Lamont Pugh III of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Chicago Regional Office and Special Agent in Charge Manny Muriel of Internal Revenue Service Criminal Investigation (IRS-CI) made the announcement.

Johnny Trotter M.D., 42, of Bloomfield Hills, Michigan, was sentenced today by U.S. District Judge George C. Steeh of the Eastern District of Michigan.  The owner of the medical billing company, Elaine Lovett, 61, of Detroit, was sentenced by Judge Steeh on Sept. 26.  Judge Steeh also ordered each defendant to pay $9,199,946 in restitution and scheduled a hearing tomorrow on forfeiture.  Trotter and Lovett were convicted in April 2017 after a four-week jury trial of one count of conspiracy to commit health care fraud and wire fraud, and three counts of health care fraud.  Trotter was remanded to custody pending a detention hearing tomorrow.

According to the evidence presented at trial, from May 2008 until May 2014, Trotter and Lovett knowingly submitted fraudulent bills for services that they knew had not been provided, mainly nerve block injections.  Additionally, after Medicare imposed a requirement in 2009 that required Trotter’s claims to undergo a medical review prior to payment, Trotter and Lovett conspired to circumvent Medicare’s fraud investigation of Trotter by creating sham medical practices, the evidence showed.  To continue to receive payment for services that were not provided, Trotter and Lovett concealed their involvement with these practices from Medicare, and instead recruited their family members and employees to serve as straw owners of the companies, the evidence further showed.

The FBI, HHS-OIG and IRS-CI investigated the case, which was brought as part of the Medicare Fraud Strike Force under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Michigan.  Fraud Section Assistant Chiefs Malisa Dubal and Allan Medina, as well as Trial Attorneys Tom Tynan and Jacob Foster, prosecuted 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.

Owner of Florida Pharmacy Pleads Guilty in $100 Million Compounding Pharmacy Fraud Scheme; Real Properties, Cars and a 50-Foot Boat Will Be Forfeited

Monday, November 6, 2017

Seven Others Previously Pleaded Guilty

The president and owner of a Florida pharmacy that was at the center of a massive compounding pharmacy fraud scheme, which impacted private insurance companies, Medicare and TRICARE, pleaded guilty today for his role in the scheme.  Seven other individuals have previously pleaded guilty in connection to the scheme.  Various real properties, cars and a 50-foot boat will be forfeited as part of the guilty pleas.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney W. Stephen Muldrow of the Middle District of Florida, Special Agent in Charge Eric W. Sporre of the FBI’s Tampa Field Office, Special Agent in Charge Robert F. Lasky of the FBI’s Miami Field Office, Special Agent in Charge Shimon Richmond of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Miami Regional Office and Resident Agent in Charge Brooke Harris of the U.S. Defense Criminal Investigative Service’s (DCIS) Tampa Regional Office made the announcement.

Nicholas A. Borgesano Jr., 45, of New Port Richey, Florida, the president and owner of A to Z Pharmacy of New Port Richey, pleaded guilty in the Middle District of Florida to one count of conspiracy to commit health care fraud and one count of conspiracy to engage in monetary transactions involving criminally derived property.  His sentencing will be scheduled before U.S. District Judge James S. Moody Jr of the Middle District of Florida.

According to admissions made as part of his plea agreement, Borgesano owned and operated numerous pharmacies and shell companies that he and his co-conspirators used to execute a fraud scheme involving prescription compounded medications.  The scheme generated over $100 million in fraud proceeds, he admitted.  Borgesano acquired and controlled A to Z Pharmacy in New Port Richey, Havana Pharmacy, Medplus/New Life Pharmacy and Metropolitan Pharmacy, all of Miami; and Jaimy Pharmacy and Prestige Pharmacy, both of Hialeah, Florida.  He admitted using these pharmacies to cause the submission of false and fraudulent reimbursement claims for prescription compounded medications, chiefly pain creams and scar creams, to private insurance companies, Medicare and TRICARE.  Borgesano admitted that he and his co-conspirators manipulated billing codes in the reimbursement claims and submitted reimbursement claims for pharmaceutical ingredients they did not have.  Borgesano and his co-conspirators also paid kickbacks and bribes in exchange for prescriptions and patient identifying information used to further the scheme, including to a physician in exchange for the physician signing prescriptions for patients he never saw.  Borgesano admitted using A to Z Pharmacy as the hub of his operation on behalf of all his pharmacies.  He disbursed proceeds of the fraud scheme through a variety of methods, including by check and wire transfer to co-conspirators’ shell companies and through the purchase of assets, he admitted.

In addition to Borgesano, the following defendants have previously pleaded guilty to conspiracy to commit health care fraud for their roles in the scheme:

  • Bradley Sirkin, 55, of Boca Raton, Florida;
  • Scott P. Piccininni, 49, of Fort Lauderdale, Florida;
  • Edwin Patrick Young, 49, of New Port Richey, Florida;
  • Wayne M. Kreisberg, 40, of Parkland, Florida;
  • Matthew N. Sterner, 48, of New Port Richey, Florida;
  • Peter B. Williams, 57, of New Port Richey, Florida; and
  • Joseph Degregorio, 71, of New Port Richey, Florida

The cars that will be forfeited include a 1936 Ford Deluxe, a 1964 Chevrolet Corvette convertible, a 1967 Chevrolet Camaro, a 1970 Chevrolet Monte Carlo and a 2008 Lamborghini convertible.  The boat that will be forfeited is a 2009 50’7” Cigarette racing boat.   The cars and boat had previously been seized.  The combined equity in the real properties, cars and boat that will be forfeited is over $7.6 million.  The real properties, cars and boat had been purchased with proceeds from the fraud scheme.

This case was investigated by the FBI with support from HHS-OIG and DCIS and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Middle District of Florida.  The case is being prosecuted by Senior Trial Attorney Christopher J. Hunter and Trial Attorney Timothy P. Loper of the Fraud Section.

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.

Former CEO of Arthrocare Corporation Sentenced to 20 Years in Prison for Role in $750 Million Securities Fraud Scheme

Friday, November 3, 2017

The former chief executive officer of ArthroCare Corporation, a publicly traded medical device company based in Austin, Texas, was sentenced today to 240 months in prison for his role in orchestrating a fraud scheme that resulted in shareholder losses of over $750 million.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, U.S. Attorney Richard L. Durbin Jr. of the Western District of Texas and Special Agent in Charge Christopher Combs of the FBI’s San Antonio Field office made the announcement.

Michael Baker, 58, of Austin, Texas, was sentenced by U.S. District Judge Sam Sparks of the Western District of Texas, who also ordered Baker five years of supervised release following his prison sentence and to pay a fine in the amount of $1 million and to forfeit $13.7 million.  At the sentencing hearing, the Court found that investors lost more than $750 million as a result of the fraud scheme.  On Aug. 18, after a two-week re-trial, Baker was convicted of one count of conspiracy to commit wire fraud and securities fraud, seven counts of wire fraud, two counts of securities fraud and two counts of making false statements.

Evidence at trial showed that, beginning in 2005 and continuing until 2009, Baker, along with his co-conspirators, masterminded and executed a scheme to artificially inflate sales and revenue through a series of end-of-quarter transactions involving several of ArthroCare’s distributors.  Baker, along with his co-conspirators, determined the type and amount of product to be shipped to distributors based on ArthroCare’s need to meet Wall Street analyst forecasts, rather than distributors’ actual orders.  Baker and others then caused ArthroCare to “park” millions of dollars’ worth of ArthroCare’s medical devices at its distributors at the end of each relevant quarter.  ArthroCare reported these shipments as sales in its quarterly and annual filings at the time of the shipment, enabling the company to meet or exceed internal and external earnings forecasts.

The trial evidence further showed that ArthroCare’s distributors agreed to accept shipment of millions of dollars of products in exchange for special conditions, including substantial, upfront cash commissions, extended payment terms and the ability to return products, allowing ArthroCare to falsely inflate revenue by tens of millions of dollars.  In the case of ArthroCare’s largest distributor, DiscoCare, Baker caused ArthroCare to acquire DiscoCare specifically to conceal from the investing public the nature and financial significance of ArthroCare’s relationship with DiscoCare.  In addition to falsely inflating ArthroCare’s revenue, Baker lied when he was deposed by the U.S. Securities and Exchange Commission in November 2009 about ArthroCare’s relationship with DiscoCare, the evidence showed.

Baker’s earlier conviction was overturned by the U.S. Court of Appeals for the Fifth Circuit, resulting in the retrial.  The sentence imposed on Baker today of 20 years imprisonment is identical to the sentence he received after his first trial.

Co-conspirators David Applegate and John Raffle, both former senior vice presidents of ArthroCare, pleaded guilty to multiple felonies in 2013 in connection with their participation in the scheme.  Co-conspirator Michael Gluk, former chief financial officer of ArthroCare, pleaded guilty to conspiracy to commit wire and securities fraud on June 14, in connection with his participation in the scheme.

On Aug. 29, 2014, Raffle was sentenced to 80 months in prison.  On Aug. 29, 2014, Applegate was sentenced to 60 months in prison.  Gluk’s sentencing is scheduled for Jan. 5, 2018.

This case was investigated by the FBI’s San Antonio Field Office.  The case is being prosecuted by Securities and Financial Fraud Unit Chief Benjamin D. Singer, Assistant Chief Henry P. Van Dyck and Trial Attorney Caitlin Cottingham of the Criminal Division’s Fraud Section.