Former Social Security Administrative Law Judge Sentenced to Four Years in Prison for Role in $550 Million Social Security Fraud Scheme

Friday, August 25, 2017

A former social security administrative law judge (ALJ) was sentenced today to four years in prison for his role in a scheme to fraudulently obtain more than $550 million in federal disability payments from the Social Security Administration (SSA) for thousands of claimants.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Special Agent in Charge Michael McGill of the Social Security Administration-Office of Inspector General’s (SSA-OIG) Philadelphia Field Division, Special Agent in Charge Amy S. Hess of the FBI’s Louisville Field Division, Special Agent in Charge Tracey D. Montaño of the IRS Criminal Investigation (IRS-CI) Nashville Field Office and Special Agent in Charge Derrick L. Jackson of the U.S. Department of Health and Human Services-Office of the Inspector General (HHS-OIG) Atlanta Regional Office made the announcement.

David Black Daugherty, 81, of Myrtle Beach, S.C., was sentenced by U.S. District Judge Danny C. Reeves of the Eastern District of Kentucky, who also ordered Daugherty to pay restitution of over $93 million to the SSA and HHS. Daugherty pleaded guilty in May 2017 to two counts of receiving illegal gratuities.

According to admissions made as part of his guilty plea, beginning in 2004, Daugherty, as an ALJ assigned to the SSA’s Huntington, W. Va., hearing office, sought out pending disability cases in which Kentucky attorney Eric Christopher Conn represented claimants and reassigned those cases to himself. Daugherty then contacted Conn and identified the cases he intended to decide the following month and further solicited Conn to provide medical documentation supporting either physical or mental disability determinations. Without exception, Daugherty awarded disability benefits to individuals represented by Conn – in some instances, without first holding a hearing. As a result of Daugherty’s awarding disability benefits to claimants represented by Conn, Conn paid Daugherty an average of approximately $8,000 per month in cash, until approximately April 2011. All told, Daugherty received more than $609,000 in cash from Conn for deciding approximately 3,149 cases.

As a result of the scheme, Conn, Daugherty, and their co-conspirators obligated the SSA to pay more than $550 million in lifetime benefits to claimants based upon cases Daugherty approved for which he received payment from Conn.

Daugherty was indicted last year, along with Conn and Alfred Bradley Adkins, a clinical psychologist. The defendants were charged with conspiracy, fraud, false statements, money laundering and other related offenses in connection with the scheme.

Conn pleaded guilty on March 24, to a two-count information charging him with theft of government money and paying illegal gratuities, and was sentenced in absentia on July 14 to 12 years in prison. Conn absconded from court ordered-electronic monitoring on June 2, and is considered a fugitive. He remains under indictment. On June 12, Adkins was convicted after a jury trial of one count of conspiracy to commit mail fraud and wire fraud, one count of mail fraud, one count of wire fraud and one count of making false statements. Adkins is scheduled to be sentenced on September 22.

The SSA-OIG, FBI, IRS-CI and HHS-OIG investigated the case. Trial Attorney Dustin M. Davis of the Criminal Division’s Fraud Section and Trial Attorney Elizabeth G. Wright of the Criminal Division’s Money Laundering and Asset Recovery Section are prosecuting the case, with previous co-counsel including Assistant U.S. Attorney Trey Alford of the Western District of Missouri and Investigative Counsel Kristen M. Warden of the Justice Department’s Office of the Inspector General.

Compounding Pharmacy Sales Representative Pleads Guilty to Prescription Fraud Conspiracy

Thursday, August 17, 2017

TUSCALOOSA – A sales representative for a Haleyville, Ala.-based compounding pharmacy pleaded guilty today in federal court to participating in a conspiracy to generate prescriptions and defraud health care insurers and prescription drug administrators out of tens of millions of dollars in 2015.

U.S. Attorney Jay E. Town, FBI Special Agent in Charge Johnnie Sharp, U.S. Postal Inspector in Charge Adrian Gonzalez, U.S. Department of Health and Human Services, Office of Inspector General, Special Agent in Charge Derrick L. Jackson, Defense Criminal Investigative Service Special Agent in Charge John F. Khin, and Internal Revenue Service, Criminal Investigation, Acting Special Agent in Charge James E. Dorsey announced the plea.

BRIDGET McCUNE, 41, of Destin, Fla., pleaded guilty before U.S. District Court Judge L. Scott Coogler to conspiracy to commit health care fraud, wire fraud and mail fraud and to conspiring to solicit and receive kickbacks in return for referring prescriptions under Medicare and TRICARE, a U.S. Department of Defense health care program. McCune also pleaded guilty to four counts of health care fraud, and to two counts of money laundering for spending proceeds of the crimes. She remains out on bond pending sentencing, which is not yet scheduled.

McCune worked for Northside Pharmacy, an Alabama company doing business as Global Compounding Pharmacy. Global’s compounding and shipping facility was in Haleyville. The pharmacy did its prescription processing, billing and customer service at its “call center” in Clearwater, Fla.

Global hired sales representatives, including McCune, who were located in various states and were responsible for generating prescriptions from physicians and other prescribers. To bill insurance providers, including Blue Cross Blue Shield of Alabama, Medicare and TRICARE, for these prescriptions, Global contracted to enter the pharmacy networks of their third-party administrators, known as “pharmacy benefit managers” or “PBMs. These PBMs included Prime Therapeutics, Express Scripts Incorporated and CVS/Caremark.

McCune’s plea agreement with the government describes a conspiracy at Global that centered on generating and billing PBMs for fraudulent, often high-reimbursement prescriptions. To generate prescriptions, Global hired sales representatives who were married or related to doctors and other prescribers. Global also encouraged sales representatives to volunteer at doctors’ offices where they would review patient files and push Global’s products to patients. Global executives also frequently instructed employees to obtain high-reimbursing prescriptions that Global would fill and bill for reimbursement. The plea agreement describes a Global executive instructing sales representatives to obtain certain prescriptions and, shortly after, McCune obtained those prescriptions for herself and her dependents.

When billing, Global engaged in various fraudulent practices, including splitting drug quantities to evade PBM billing safeguards and automatically refilling and billing for prescriptions regardless of patient need, according to court documents. Global routinely waived co-pays to encourage patients to accept unnecessary medications and refills.

As part McCune’s plea, she agrees to forfeit $401,628 to the government as proceeds of illegal activity.

Global paid McCune a base salary plus a monthly commission for prescriptions that she obtained, according to court documents.

McCune began as a sales representative for Global’s Florida region in September 2014, working from Destin. Global promoted her to national field trainer in January 2015, but she also continued to function as a sales representative until she left the company in July 2016. McCune had a “close familial relationship” with a Florida physician, according to her plea agreement, and the “overwhelming majority of prescriptions she obtained” were issued under her family member’s signature.

At the same time that the U.S. Attorney’s Office for the Northern District of Alabama charged McCune, it separately charged another Global sales representative, KELLEY NORRIS, also known as KELLEY NORRIS-HARTLEY, 41, of Tuscaloosa. Norris faces the charge of conspiracy to commit health care fraud, wire fraud and mail fraud, as well as charges of health care fraud for submitting fraudulent prescription reimbursement claims to Blue Cross Blue Shield of Alabama. Norris also entered a plea agreement with the government.

The charges against McCune and Norris followed charges brought by the U.S. Attorney’s Office in May against Global sales representative Robin Gary Lowry, 49, of Columbus, Miss. Lowry was charged with conspiracy to defraud BCBS of Alabama and Prime Therapeutics. She also faced three counts of health care fraud for submitting fraudulent claims for payment to BCBS of Alabama.

Lowry pleaded guilty to the charges in June. She is scheduled for sentencing Nov. 7.

FBI, U.S. Postal Inspection Service, U.S. Department of Health and Human Services Office of Inspector General, U.S. Defense Criminal Investigative Service and Internal Revenue Service, Criminal Investigation investigated the cases, which Assistant U.S. Attorneys Chinelo Dike-Minor and Nicole Grosnoff are prosecuting.

Former Government Contractor Sentenced to 60 Months for His Participation in Bribery Conspiracy

Friday, July 28, 2017

A former owner of a government contracting company that serviced the Military Sealift Command (MSC) was sentenced to 60 months in prison, and to pay a $15,000 fine, for his participation in a bribery conspiracy from approximately 1999 to 2014, in which he provided a contracting official at MSC with almost $3 million in bribes.  Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division and U.S. Attorney Dana J. Boente of the Eastern District of Virginia made the announcement.

U.S. District Judge Arenda L. Wright Allen today sentenced Joseph P. Allen, 56, of Panama City, Florida, following his guilty plea on April 19, to one count of conspiracy to commit bribery.

According to the statement of facts included in Allen’s guilty plea, Allen conspired with a government contracting official, Scott B. Miserendino, Sr., 58, formerly of Stafford, Virginia, to use Miserendino’s position at MSC to enrich themselves through bribery.  Specifically, beginning in about 1999, Miserendino used his position and influence at MSC to facilitate and expand Allen’s company’s commission agreement with a third-party telecommunications company that sold maritime satellite services to MSC.  Unknown to MSC or the telecommunications company, throughout the scheme, Allen paid half of the commissions he received from that telecommunications company to Miserendino as bribes.

For his role in the scheme, Miserendino was charged in a five-count indictment on May 4, with one count of conspiracy to commit bribery and honest services mail fraud, one count of bribery, and three counts of honest services mail fraud.  His trial is currently scheduled for October 31, before U.S. District Court Judge Rebecca Beach Smith.  The charges and allegations against Miserendino contained in the indictment are merely accusations. The defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

The Norfolk offices of the FBI, the Defense Criminal Investigative Service and the Naval Criminal Investigative Service investigated the case.  Trial Attorneys Sean F. Mulryne and Molly Gaston of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Stephen W. Haynie of the Eastern District of Virginia are prosecuting the case.

Richmond Man Sentenced to 33 Months for Embezzlement

July 31, 2017

LEXINGTON, Ky. – A Richmond, Ky., man, who previously admitted to embezzling money from several related commercial real estate companies in Lexington, has been sentenced to 33 months in federal prison.

Today, U.S. District Court Judge Joseph M. Hood sentenced 65-year-old Robert K. Chaffins for four counts of mail fraud. Chaffins was Vice President of the Asset Management Division of a conglomerate of related entities, namely Lex/108, LLC, Leestown Distribution, LLC, Melbourne Distribution Center, LLC, and 801 Realty, LLC. In this role, Chaffins was responsible for collecting various payments from tenants renting business space from these entities. Knowing some of the fees provided for in the leases were not being collected, he set up bank accounts in the name of these entities, billed the tenants for particular fees through the U.S. Mail, and deposited payments into the bank accounts for his personal use.

In total, from February of 2007 until January 28, 2016, Chaffins deposited $1,064,522.36 in checks intended for Lex/108, LLC, Leestown Distribution, LLC, Melbourne Distribution Center, LLC, and 801 Realty, LLC, into bank accounts he controlled. He used this money to make payments on a second home, a Mercedes Benz, investment and retirement accounts, and dozens of other personal expenses.

Chaffins pleaded guilty to the mail fraud charges in March 2017. Under federal law, he must serve 85% of his prison sentence and will be under the supervision of the United States Probation Office for three years following his term of incarceration.

Carlton S. Shier, IV, Acting United States Attorney for the Eastern District of Kentucky; Jon Oldham, Resident Agent in Charge, United States Secret Service, Lexington Resident Office; and Chief Mark Barnard, Lexington Police Department, jointly announced the sentence.

The United States Secret Service and the Lexington Police Department conducted the investigation and Assistant United States Attorney Kathryn Anderson represented the United States.

Marshall County physician indicted on health care fraud charges

Wednesday, July 26, 2017

WHEELING, WEST VIRGINIA – A physician with a pain management clinic in McMechen, West Virginia, was indicted by a federal grand jury sitting in Wheeling on June 6, 2017 on health care fraud, mail fraud, and wire fraud charges, Acting United States Attorney Betsy Steinfeld Jividen announced.

Dr. Roland F. Chalifoux, Jr., age 57, of St. Clairsville, Ohio, was indicted on eleven counts of “Health Care Fraud for Travel Dates,” seven counts of “Mail Fraud,” four counts of “Wire Fraud,” and four counts of “Health Care Fraud.” The crimes are alleged to have occurred from 2008 to June 2017 in Marshall County and elsewhere in the Northern District of West Virginia.

Assistant U.S. Attorney Robert H. McWilliams is prosecuting the case on behalf of the government. The U.S. Department of Health and Human Services, The Drug Enforcement Administration, the Federal Bureau of Investigation, the United States Postal Inspection Service, and the West Virginia Insurance Fraud Investigation Unit are investigating.

An indictment is merely an accusation. A defendant is presumed innocent unless and until proven guilty.