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.

Owner and Patient Recruiter Sentenced to Prison for Their Roles in $258.5 Million Medicare Fraud Scheme

An owner and operator of two community mental health centers in Baton Rouge, Louisiana, and a patient recruiter for a community mental health center in Houston, Texas, were sentenced  to prison today for their involvement in a $258.5 million Medicare fraud scheme involving partial hospitalization psychiatric (PHP) services.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney J. Walter Green of the Middle District of Louisiana, Special Agent in Charge Mike Fields of the U.S. Department of Health and Human Services Office of the Inspector General’s (HHS-OIG) Dallas Office, Special Agent in Charge Michael Anderson of the FBI’s New Orleans Division, and Louisiana State Attorney General James D. “Buddy” Caldwell made the announcement.

Roslyn F. Dogan, 53, of Baton Rouge, Louisiana, and James R. Hunter, 48, of Houston, Texas, were sentenced by U.S. District Court Chief Judge Brian A. Jackson in the Middle District of Louisiana to 90 months in prison and 60 months in prison, respectively.  In addition to the prison sentences, Dogan was ordered to pay $43.5 million and Hunter was ordered to pay $3.2 million in restitution.

After six days of trial, on May 21, 2014, a federal jury found Dogan guilty of conspiracy to commit health care fraud, and two counts of health care fraud, and also found Hunter guilty of conspiracy to commit health care fraud and conspiracy to pay and receive kickbacks.

According to evidence presented at trial, Dogan was a co-owner of Serenity Center of Baton Rouge, and a manager and marketer for both Serenity Center and Shifa Community Mental Health Center of Baton Rouge.  Dogan recruited Medicare beneficiaries who were living in nursing homes and assisted living facilities to attend the PHP programs at Shifa and Serenity, knowing the individuals did not need the psychotherapy programs.  She then devised methods to keep the patients at the facilities for as long as possible without invoking scrutiny from Medicare, including by having patients involuntarily committed to local inpatient psychiatric hospitals and then discharged and re-admitted to one of the Shifa facilities.  Additionally, Dogan directed administrators and therapists at the Shifa Baton Rouge facilities to falsify treatment records indicating that patients had received psychotherapy treatment when, in fact, the patients had not received such treatment.  She further concealed the fraud by directing that patient billing statements be intercepted from the mail to prevent the patients from seeing the services that had been billed in their names, and by stealing incriminating documents seized pursuant to a search warrant from federal custody.

Evidence at trial demonstrated that Hunter agreed to recruit Medicare beneficiaries to attend the PHP program at Shifa Community Mental Health Center of Texas in Houston in exchange for $1,500 per week in cash.  Hunter recruited Medicare recipients from group homes who were not appropriate for the PHP services, but who agreed to attend the program in exchange for $75 cash per week.  To ensure their admittance to the program, Hunter instructed each beneficiary as what to say to physicians regarding their supposed psychiatric symptoms.  As a result of the kickback scheme with Hunter, the Houston facility billed Medicare approximately $16.5 million.

According to court documents, the investigation into the three community mental health centers has resulted in the conviction of seventeen individuals, including therapists, marketers, administrators, owners and a medical director.  The companies collectively submitted more than $258 million in claims to Medicare for PHP services over a period of seven years.  Medicare paid approximately $43.5 million on those claims.

The case is being investigated by HHS-OIG, the FBI, and the Medicaid Fraud Control Unit of the Louisiana Attorney General’s Office, 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 Louisiana.  The case is being prosecuted by Trial Attorneys Abigail Taylor and Dustin M. Davis of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Shubhra Shivpuri of the Middle District of Louisiana.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged nearly 2,000 defendants who have collectively billed the Medicare program for more than $6 billion.  In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

Louisiana Psychiatrist Sentenced to Serve More Than Seven Years in Prison for His Role in $258 Million Medicare Fraud Scheme

A Louisiana psychiatrist was sentenced in federal court in Baton Rouge, Louisiana, today to serve 86 months in prison for his role in a $258.5 million Medicare fraud scheme involving partial hospitalization psychiatric services.    He was further ordered to pay $43.5 million in restitution and to forfeit all proceeds from the fraudulent scheme.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney J. Walter Green of the Middle District of Louisiana, Special Agent in Charge Mike Fields of the Dallas Region of the U.S. Department of Health and Human Services Office of the Inspector General (HHS-OIG), Special Agent in Charge Michael Anderson of the FBI’s New Orleans Division and Louisiana State Attorney General James D. “Buddy” Caldwell made the announcement.    Chief U.S. District Court Judge Brian A. Jackson of the Middle District of Louisiana imposed the sentence.
According to documents filed in the case, Zahid Imran, M.D., 56, of Baton Rouge, served as the medical director of Shifa Community Mental Health Center of Baton Rouge, and co-owned Serenity Center of Baton Rouge and Shifa Community Mental Health Center of Texas.    As part of the scheme, Imran admitted mentally ill patients to the facilities, some of whom were inappropriate for partial hospitalization, and then re-certified the patients’ appropriateness for the program in an effort to continue to bill Medicare for services.   To support the fraudulent Medicare billing, Imran and others falsified patient treatment records to reflect services on dates when no such services were provided.    Imran pleaded guilty on May 13, 2014, to conspiracy to commit health care fraud.
Law enforcement’s 2011 investigation into the three community mental health centers has resulted in 17 convictions of individuals employed by the facilities, including therapists, marketers, administrators, owners and the medical director.    The companies billed Medicare for partial hospitalization program services for the mentally ill that were unnecessary or never provided over a period of approximately seven years.    The companies, collectively, submitted more than $258 million in claims to Medicare during this period.   Medicare paid approximately $43.5 million on those claims.
The case is being investigated by HHS-OIG, the FBI and the Medicaid Fraud Control Unit of the Louisiana Attorney General’s Office, 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 Louisiana.    The case is being prosecuted by Trial Attorneys Abigail Taylor and Dustin M. Davis of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Shubhra Shivpuri of the Middle District of Louisiana.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged nearly 1,900 defendants who have collectively billed the Medicare program for more than $6 billion.    In addition, the HHS Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.