Category Archives: Criminal Division

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

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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

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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.

Former Employee of U.S. Government Contractor in Afghanistan Pleads Guilty to Accepting Kickbacks From Subcontractor

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Monday, March 5, 2018

A former employee of a U.S. government contractor in Afghanistan pleaded guilty today to accepting illegal kickbacks from an Afghan subcontractor in return for his assistance in obtaining subcontracts on U.S. government contracts.

Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division; U.S. Attorney Byung J. Pak of the Northern District of Georgia; Special Agent in Charge John Khin of the Defense Criminal Investigative Service’s (DCIS) Southeast Field Office, Atlanta Resident Agency; Special Inspector General for Afghanistan Reconstruction (SIGAR) John F. Sopko; Director Frank Robey of the U.S. Army Criminal Investigation Command’s (CID) Major Procurement Fraud Unit (MPFU); Special Agent in Charge David J. LeValley of the FBI Atlanta Resident Agency and Special Agent in Charge Wendell W. Palmer of Air Force Office of Special Investigations (OSI), made the announcement.

Christopher McCray, 55, of Jonesboro, Georgia and Chattanooga, Tennessee, pleaded guilty to one count of accepting illegal kickbacks before U.S. District Judge Mark H. Cohen of the Northern District of Georgia.  He is scheduled to be sentenced by Judge Cohen on June 14 at 10:00 a.m. EST.  McCray was charged in an indictment filed on April 25, 2017 in the Northern District of Georgia with one count of conspiracy to accept kickbacks and 14 counts of accepting illegal kickbacks.

As part of his plea, McCray admitted that he was employed as the country manager for a subcontractor of an American company that was moving cargo for the Army and Air Force Exchange Service from Bagram Airfield to military bases through Afghanistan.  When the prime contractor needed McCray’s employer to take a much bigger role in the distribution, McCray had the chance to influence the choice of the necessary Afghan trucking company as a subcontractor to his employer.  McCray’s employer entered into a subcontract with an Afghan company but before the choice of the subcontractor was made, the Afghan trucking company secretly agreed to kick back to McCray 15 percent of the revenues it would receive on the contract, he admitted.  McCray thereafter remained as the only representative of his employer in Afghanistan for the duration of the subcontract and was responsible for checking the accuracy of the invoices submitted to McCray’s employer and the quality of the Afghan company’s work, all while secretly receiving the kickbacks, he admitted.

McCray received the secret payments from December 2012 to May 2014.  He and the Afghan trucking company also maintained a separate set of invoices, which showed the amounts charged to McCray’s employer and the amounts kept by the Afghan company and the amounts sent to McCray.  McCray was first paid in cash, then by wires sent to his bank in Atlanta and then by Western Union payments sent to his mother, who would deposit the funds, mostly in cash, into McCray’s bank accounts, he admitted.

DCIS, SIGAR, Army CID-MPFU, the FBI and Air Force OSI investigated this matter.  Trial Attorney James Gelber of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Brian Pearce of the Northern District of Georgia are prosecuting the case.

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

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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

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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

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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

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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.

Nurse Practitioner and Physician Indicted in Compounding Pharmacy Fraud Schemes

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Tuesday, October 24, 2017

A Mississippi-based nurse practitioner was charged in an indictment unsealed today for her role in a multi-million dollar scheme to defraud TRICARE, the health care benefit program serving U.S. military, veterans and their respective family members.  A Mississippi-based physician was charged in a separate indictment filed last week for his role in a similar scheme.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, U.S. Attorney Mike Hurst of the Southern District of Mississippi, Special Agent in Charge Christopher Freeze of the FBI’s Jackson, Mississippi Field Division and Special Agent in Charge Jerome R. McDuffie of the Internal Revenue Service Criminal Investigation (IRS-CI) New Orleans Field Office made the announcement.

Susan Perry N.P., 58, of Grand Bay, Alabama, and Albert Diaz M.D., 78, of Ocean Springs, Mississippi, were charged in separate indictments returned on Oct. 18, in the Southern District of Mississippi, in Hattiesburg.  Perry’s indictment was unsealed upon her arrest and initial appearance today before U.S. Magistrate Judge John Gargiulo of the Southern District of Mississippi.  Perry is scheduled to be arraigned on Oct. 25, at 10:30 a.m., and Diaz is scheduled to be arraigned on Nov. 1, at 10:30 a.m., both before Judge Gargiulo.

Perry was charged in a 13-count indictment with 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, one count of distributing and dispensing of a controlled substance, one count of conspiracy to solicit and receive healthcare kickbacks, four counts of soliciting and receiving healthcare kickbacks and one count of making false statements.  Diaz was charged in a 16-count indictment with 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.

The indictments allege that both Perry and Diaz participated in schemes to defraud TRICARE by prescribing medically unnecessary compounded medications, some of which included Ketamine, a controlled substance, to individuals they had not examined, for the purpose of having a Hattiesburg-based compounding pharmacy dispense these medically unnecessary compounded medications and to seek reimbursement from TRICARE.  According to the indictments, between February 2013 and October 2016, TRICARE reimbursed the compounding pharmacy more than $3.3 million for compounded medications prescribed by Perry, and between October 2014 and December 2015, TRICARE reimbursed the compounding pharmacy more than $2.3 million for compounded medications prescribed by Diaz.  Additionally, Perry is alleged to have received more than $50,000 in kickback payments from a marketer for the compounding pharmacy in return for prescribing the compounded medications, as well as having made false statements to the FBI.   Diaz is alleged to have submitted falsified patient records in response to an audit conducted by TRICARE to make it appear as though he had examined patients before prescribing the compounding medications.

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

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 Dustin M. Davis, Katherine 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.

Former Global Head of HSBC’s Foreign Exchange Cash-Trading Found Guilty of Orchestrating Multimillion-Dollar Front-Running Scheme

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Monday, October 23, 2017

The former head of global foreign exchange cash trading at HSBC Bank plc, a subsidiary of HSBC Holdings plc (collectively HSBC), was found guilty today for his role in a scheme to defraud an HSBC client through a multimillion-dollar scheme commonly referred to as “front running.”

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Bridget M. Rohde of the Eastern District of New York, Inspector General Jay N. Lerner of the Federal Deposit Insurance Corporation (FDIC) and Assistant Director in Charge Andrew Vale of the FBI’s Washington Field Office made the announcement.

Mark Johnson, 51, a United Kingdom citizen with residences both in the U.K. and the United States, was found guilty after a four-week jury trial of one count of conspiracy to commit wire fraud and eight counts of wire fraud.  Sentencing date has not been scheduled.  U.S. District Judge Nicholas G. Garaufis of the Eastern District of New York presided over the trial.  Johnson was arrested on a criminal complaint in July 2016 and indicted in August 2016.

“This verdict makes clear that the defendant corruptly manipulated the foreign exchange market for the benefit of his bank and his bonus pool, to the detriment of the bank’s client,” said Acting Assistant Attorney General Blanco.  “This case demonstrates the Criminal Division’s commitment to protecting the financial system from harm, and holding corporate executives, including at the world’s largest and most sophisticated financial institutions, responsible for their crimes.”

“The jury found that former HSBC banker Mark Johnson exploited confidential information provided by a client of the bank to execute trades that were intended to generate millions of dollars in profits for him and the bank at the expense of their client,” said Acting U.S. Attorney Rohde.  “This Office, together with its law enforcement partners, will continue to vigorously investigate and prosecute those who would so abuse their client relationships and, more generally, undermine public confidence in the operation of the financial markets by engaging in fraudulent schemes.”

“This case involved a complex fraud scheme to ‘front run’ a foreign exchange transaction in order to generate millions of dollars in illicit profits for HSBC, which also indirectly benefited individual traders,” said Inspector General Lerner. “Such cases are challenging, but important, to bring against bank insiders who misuse their positions and undermine the integrity of a major international financial institution.”

“Mark Johnson misused confidential information to manipulate currency prices and defrauded a client out of more than $7 million,” said Assistant Director in Charge Vale.  “The American people need to be assured that we are working vigorously to ensure integrity is upheld in financial services industries.  We will continue to work with our law enforcement partners to investigate and prosecute those who engage in illegal business practices.”

According to the evidence presented at trial, in November and December 2011, Johnson cheated an HSBC client out of millions of dollars by misusing information provided to him by a client that hired HSBC to execute a foreign exchange transaction related to a planned sale of one of the client’s foreign subsidiaries.  HSBC was selected to execute the foreign exchange transaction – which was going to require converting approximately $3.5 billion in sales proceeds into British Pound Sterling – in October 2011.  HSBC’s agreement with the client required the bank to keep the details of the client’s planned transaction confidential.  Instead, Johnson misused confidential information he received about the client’s transaction to cheat the client out of millions of dollars, the evidence showed.

Shortly before the transaction, which occurred in December 2011, Johnson and other traders acting under his direction purchased Pound Sterling for their own benefit in their HSBC “proprietary” accounts.  Johnson then caused the $3.5 billion foreign exchange transaction to be executed in a manner that was designed to “ramp,” or drive up, the price of the Pound Sterling, benefiting their proprietary positions and HSBC at the expense of their client.

As part of their scheme, Johnson and his co-conspirators made misrepresentations to the client about the transaction that concealed the self-serving nature of their actions.  In total, Johnson and the traders he supervised generated HSBC profits of roughly $7.5 million from the execution of the FX  transaction for the victim company.

The investigation was conducted by the FDIC’s Office of Inspector General and the FBI’s Washington Field Office.  The Criminal Division’s Office of International Affairs provided significant support.  Assistant Chiefs Carol Sipperly and Brian Young and Trial Attorney Blake Goebel of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Lauren Elbert of the Eastern District of New York’s Business and Securities Fraud Section are prosecuting the case.

The Fraud Section plays a pivotal role in the Department of Justice’s fight against white collar crime around the country, focusing on cases of national significance and international scope.  Fraud Section prosecutors have vast experience in investigating and prosecuting securities and financial fraud, health care fraud and foreign corruption.  The Section is routinely the national leader in large, sophisticated white collar investigations and prosecutions, frequently in partnership with U.S. Attorneys’ Offices and in coordination with foreign law enforcement agencies.  Learn more about the Criminal Division’s Fraud Section at: https://www.justice.gov/criminal-fraud.

New York Businessman Charged in Telemarketing-Related Fraud and Identity Theft Scheme

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Thursday, October 5, 2017

A New York businessman was arrested today for overseeing a scheme to forge hundreds of thousands of counterfeit documents containing improperly obtained personal information, which he allegedly sold to his clients, who then allegedly provided this information to telemarketers.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Bridget M. Rohde of the Eastern District of New York, Special Agent in Charge Richard T. Thornton of the FBI’s Minneapolis Field Office, Special Agent in Charge Christopher Combs of the FBI’s San Antonio Field Office and FBI Assistant Director in Charge William F. Sweeney, Jr. of the New York Field Office made the announcement.

William Patrick Nanry, 55, of Pearl River, New York, was charged on Tuesday, October 3, in an indictment filed in the Eastern District of New York with one count of conspiracy to commit wire and mail fraud, one count of mail fraud, one count of identity theft and one count of aggravated identity theft.

According to the indictment, Nanry operated a business selling “sweepstakes leads,” which are documents listing the phone numbers and personal information of individuals who have responded to mass mailings notifying recipients that they may have won, or were likely to win, expensive prizes and enormous cash payouts.  Such information is highly valued by fraudulent telemarketers, who seek to identify individuals who may be susceptible to questionable pitches.

The indictment alleges that beginning in approximately 2009, Nanry acquired lists of names and contact information for hundreds of thousands of people—primarily senior citizens— and used this information to create fake sweepstakes leads, which he then sold to his clients as authentic.  The indictment further alleges that Nanry directed a team of employees and associates to write the personal information of the victims onto the counterfeit sweepstakes forms, even though the victims had not agreed to this use, and even though many of the victims had never responded to a sweepstakes mailing.  Nanry allegedly directed these employees and associates to vary their handwriting, to use a large number of pens in varying colors, and to take other actions to make the fake leads appear authentic.  According to the indictment, the counterfeit sweepstakes leads were then sold to Nanry’s clients, who provided them to telemarketers, who then contacted the people named in the leads.  Many of these fake sweepstakes leads allegedly ended up in the hands of telemarketers who attempted to defraud the victims.  Some of the individuals who had their information misused by Nanry were ultimately defrauded by scam telemarketers.

Over the duration of the scheme, Nanry earned over $1.7 million by selling fake sweepstakes leads to his clients, the indictment alleges.

An indictment is merely an allegation and the defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

The FBI is investigating this matter.  Timothy A. Duree and Tracee Plowell of the Criminal Division’s Fraud Section are prosecuting the case