Category Archives: USAO

Southern California Physician Sentenced to 22 Months in Prison for Medicare Fraud

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A Southern California physician was sentenced to 22 months in federal prison today for his role in a conspiracy to commit Medicare fraud.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Acting U.S. Attorney Stephanie Yonekura of the Central District of California, Special Agent in Charge Glenn R. Ferry of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) Los Angeles Region and Assistant Director in Charge Bill Lewis of the FBI’s Los Angeles Field Office made the announcement.

Dr. Jason C. Ling, 43, of Spring Valley, California, pleaded guilty in June 2014, to conspiracy to commit health care fraud.  According to his plea agreement, between March and November 2010, Dr. Ling conspired with others to defraud the Medicare program by writing medically unnecessary prescriptions for expensive power wheelchairs and other durable medical equipment (DME).  Dr. Ling obtained patients for his Spring Valley medical clinic from a street-level recruiter, or “marketer,” who referred Medicare beneficiaries for medically unnecessary DME prescriptions.  Dr. Ling’s prescriptions were provided to owners of DME companies, including Eucharia Okeke, who used the fraudulent prescriptions to submit approximately $496,794 in false claims to Medicare.

In addition to the prison term, U.S. District Judge George H. Wu of the Central District of California ordered Dr. Ling to pay $311,145 in restitution to the Medicare program.

Eucharia Okeke, pleaded guilty for her role in the conspiracy on Aug. 25, 2014.  Her sentencing hearing is scheduled for Feb. 26, 2015.

The case was investigated by the FBI and the Los Angeles Region of HHS-OIG.  The case was prosecuted by Trial Attorney Alexander F. Porter of the Criminal Division’s Fraud Section.

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

Federal Contractors Eyak Technology LLC and Eyak Services LLC Resolve False Claims Act and Anti-Kickback Act Allegations

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Alaska and Virginia-based technology contractors Eyak Technology LLC (EyakTek) and Eyak Services LLC (ESL) have agreed to pay $2.5 million and relinquish any rights to additional payments from the United States to resolve allegations that they submitted false claims to the U.S. Army Corps of Engineers, the Justice Department announced today.  EyakTek and its sister company, ESL, provide healthcare, information technology, communications and infrastructure services to the U.S. government.  Both are subsidiaries of The Eyak Corporation, headquartered in Anchorage, Alaska.

“Federal government contractors and their employees must adhere to high standards in their dealings with the government,” said Acting Assistant Attorney General Joyce R. Branda for the Justice Department’s Civil Division.  “We will vigorously pursue those who pay kickbacks or otherwise engage in conduct that undermines the integrity of the contracting process.”

From 2005 to 2011, EyakTek held a $1 billion prime contract with the U.S. Army Corps of Engineers known as the Technology for Infrastructure, Geospatial, and Environmental Requirements contract.

The government alleged that, between Sept. 12, 2007, and Oct. 4, 2011, EyakTek’s then-director of contracts, Harold Babb, accepted kickbacks from several subcontractors of EyakTek and ESL in return for using his position to direct subcontracts to them.  EyakTek and ESL allegedly submitted invoices to the Army Corps that included charges for work that was never performed by the subcontractors and lacked internal controls to detect the improper charges.

In March 2012, Babb pleaded guilty to bribery and kickback charges.  The U.S. District Court for the District of Columbia sentenced him to serve 87 months in prison, to be followed by 36 months of supervised release and more than $9 million in restitution for his role in the kickback scheme.

The Army Corps stopped payments to EyakTek and ESL when the alleged scheme came to light.  As part of the settlement, EyakTek and ESL will withdraw any appeals seeking the return of those funds, and relinquish all rights to any payments that have been withheld.

“This settlement demonstrates our willingness to use every tool of civil and criminal law in our arsenal to defend the American taxpayer from corruption in contracting,” said U.S. Attorney Ronald C. Machen Jr. for the District of Columbia.  “The criminal investigation into this wide-ranging bribery and kickback scheme has now resulted in the convictions of 20 individuals, including EyakTek’s former contracts director.  We have aggressively pursued asset forfeitures in the criminal proceedings to make the taxpayer whole and to deprive wrongdoers of their ill-gotten gains.  This civil settlement sends a message to contractors who try to cheat in the competition for government funds.”

“This is yet another prime example of our commitment, along with other fellow law enforcement agencies to hold people and companies accountable for each and every detail of their contracts with the U.S. government and the U.S. Army,” said Director Frank Robey of the U.S. Army Criminal Investigation Command’s Major Procurement Fraud Unit.  “Our agents will continue to aggressively investigate and identify any potential abuses that arise in regard to the contracting process.”

“Manipulations of the Department of Defense procurement process will not be tolerated,” said Special Agent in Charge Robert Craig for the Defense Criminal Investigative Service (DCIS) Mid-Atlantic Field Office.  “Today’s settlement demonstrates the commitment by DCIS and its partner agencies to hold accountable companies who attempt to bypass federal contracting laws.”

Today’s settlement is the result of a coordinated effort among the department’s Civil Division, the U.S. Attorney’s Office for the District of Columbia, the U.S. Army Corps of Engineers, DCIS, the Defense Contract Audit Agency, the Army’s Major Procurement Fraud Unit and the Small Business Administration.

The claims settled by this agreement are allegations only, and there has been no determination of liability.

Miami-Area Certified Nursing Assistant Sentenced to 150 Months in Prison for Role in $200 Million Medicare Fraud Scheme

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A Miami licensed nursing assistant was sentenced today to serve 150 months in prison for participating in a $200 million Medicare fraud scheme involving fraudulent billings by American Therapeutic Corporation (ATC), a mental health company headquartered in Miami.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida, Special Agent in Charge George L. Piro of the FBI’s Miami Field Office and Special Agent in Charge Derrick Jackson of the Health and Human Services Office of Inspector General’s (HHS-OIG) Florida region made the announcement.

Rodolfo Santaya, 55, of Miami, was convicted on July 18, 2014, after a six-day jury trial, of conspiracy to commit health care fraud and wire fraud, conspiracy to pay and receive bribes and kickbacks, and two counts of receipt of bribes and kickbacks in connection with a federal health care benefit program.  In addition to the prison sentence, U.S. District Judge Jose E. Martinez of the Southern District of Florida ordered Santaya to pay more than $18.2 million in restitution.

Evidence at trial demonstrated that, between 2006 and 2010, Santaya was paid thousands of dollars a month in cash kickbacks in exchange for referring Medicare beneficiaries to ATC, which operated purported partial hospitalization programs (PHPs) in seven locations throughout South Florida and Orlando.  A PHP is a form of intensive treatment for severe mental illness.

Evidence at trial also demonstrated that the Medicare beneficiaries Santaya sent to ATC did not need, qualify for, nor receive PHP treatment.  Nevertheless, ATC submitted false and fraudulent bills to Medicare for services purportedly provided to each of Santaya’s patients.  In order to justify ATC’s fraudulent billings, medical professionals, including doctors, fabricated and signed fraudulent medical documentation and patient files.

ATC, an associated management company, and more than 20 individuals, including ATC’s owners, have all previously pleaded guilty or been convicted at trial.  Santaya has been in federal custody since his conviction.

The case is being investigated by the FBI and HHS-OIG 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.  The case is being prosecuted by Assistant Chief Robert A. Zink and Trial Attorneys Nicholas E. Surmacz and Kelly Graves of the Criminal Division’s Fraud Section.

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.

To learn more about the Health Care Fraud Prevention and Enforcement Team (HEAT), go to: www.stopmedicarefraud.gov.

Defense Contractor Pleads Guilty to Major Fraud in Provision of Supplies to U.S. Troops in Afghanistan

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Supreme Foodservice GmbH, a privately held Swiss company, and Supreme Foodservice FZE, a privately-held United Arab Emirates (UAE) company, pleaded guilty today to major fraud against the United States and agreed to resolve civil violations of the False Claims Act, in connection with a contract to provide food and water to the U.S. troops serving in Afghanistan, the Justice Department announced today.  The companies pleaded guilty in the Eastern District of Pennsylvania (EDPA) and paid $288.36 million in the criminal case, a sum that includes the maximum criminal fine allowed.

In addition, Supreme Group B.V. and several of its subsidiaries have agreed to pay an additional $146 million to resolve a related civil lawsuit, as well as two separate civil matters, alleging false billings to the Department of Defense (DoD) for fuel and transporting cargo to American soldiers in Afghanistan.  The lawsuit was filed in the EDPA, and the fuel and transportation allegations were investigated by the Southern District of Illinois and the Eastern District of Virginia, respectively, along with the Department’s Civil Division.

“The civil resolutions and agreements reflect the Justice Department’s continuing efforts to hold accountable contractors that have engaged in war profiteering,” said Acting Assistant Attorney General Joyce R. Branda for the Justice Department’s Civil Division.  “The department will pursue contractors that knowingly seek taxpayer funds to which they are not entitled.”

“These companies chose to commit their fraud in connection with a contract to supply food and water to our nation’s fighting men and women serving in Afghanistan,” said U.S. Attorney Zane David Memeger for the Eastern District of Pennsylvania.  “That kind of conduct is repugnant, and we will use every available resource to punish such illegal war profiteering.”

The Criminal Fraud

In 2005, Supreme Foodservice AG, now called Supreme Foodservice GmbH, entered into a contract with the Defense Supply Center of Philadelphia (DSCP, now called Defense Logistics Agency – Troop Support) to provide food and water for the U.S. forces serving in Afghanistan.  According to court documents, between July 2005 and April 2009, Supreme Foodservice AG, together with Supreme Foodservice KG, now called Supreme Foodservice FZE, devised and implemented a scheme to overcharge the United States in order to make profits over and above those provided in the $8.8 billion subsistence prime vendor (SPV) contract.  The companies fraudulently inflated the price charged for local market ready goods (LMR) and bottled water sold to the United States under the SPV contract.  The Supreme companies did this by using a UAE company it controlled, Jamal Ahli Foods Co. LLC (JAFCO), as a middleman to mark up prices for fresh fruits and vegetables and other locally-produced products sold to the U.S. government, and to obscure the inflated price the Supreme companies were charging for bottled water.  The fraud resulted in a loss to the government of $48 million.

Supreme AG, Supreme FZE and Supreme’s owners (referred to in court documents as Supreme Owners #1 and #2) made concentrated efforts to conceal Supreme’s true relationship with JAFCO, and to make JAFCO appear to be an independent company.  They also took steps to make JAFCO’s mark-up on LMR look legitimate, and persisted in the fraudulent mark-ups even in the face of questions from DSCP about the pricing of LMR.

Even though the SPV contract stated that the Supreme food companies should charge the government the supplier’s price for the goods, emails between executives at the companies (referred to as Supreme Executive #1, #2, etc) reveal the companies’ deliberate decision to inflate the prices. Among other things, Supreme Owner #1 increased the mark-up that JAFCO would impose on non-alcoholic beer from 25 percent to 125 percent.  On or about Feb. 16, 2006, during a discussion about supplying a new product to the U.S. government, one Supreme executive wrote to another, “I am very sure the best option is to buy it from Germany and mark up via [JAFCO], like [non-alcoholic] beer.”

In early March 2006, after a DSCP contracting officer told the Supreme food companies that she wanted to see a manufacturer’s invoice for specific frozen products, Supreme Foodservice GmbH lowered its prices for those products to prices that did not include a JAFCO mark-up.  On March 14, 2006, instead of disclosing that the initial pricing had included a mark-up, a Supreme executive misled the DSCP representative by saying, “Based on more realistic quantities, we have been able to negotiate a better price,” to explain the change in pricing.

In June 2006, when a DSCP contracting officer raised questions about pricing focusing on four specific items, Supreme executives again misled the DSCP, claiming that the high prices were for a high quality of product, and offering to sell lower quality products for lower prices.  Supreme Foodservice GmbH did this even after analyzing its JAFCO margin on the four items in question and finding its profit margins were between 41 and 56 percent.

In September 2007, after a fired Supreme executive threatened to tell the DSCP about the fraud, his former employer entered into negotiation of a “separation agreement” with that executive to induce that executive not to disclose the ways in which the Supreme food companies were overcharging the DSCP.  The agreement stated that the executive would receive, among other things, a payment of 400,000 euros in September 2010, provided that the executive did not cause: a deterioration in the economic situation linked to the SPV contract; the termination of the SPV contract; or a decrease in the price levels for products, specifically including LMR and bottled water provided to the U.S. government.

Defendant Supreme GmbH pleaded guilty to major fraud against the United States, conspiracy to commit major fraud and wire fraud.  Supreme FZE, which owns JAFCO, pleaded guilty to major fraud against the United States.  The Supreme companies agreed to jointly pay $48 million in restitution and $10 million in criminal forfeiture.  Each company also agreed to pay $96 million in criminal fines.  In addition, as a result of the criminal investigation, the Supreme companies paid $38.3 million directly to the DSCP as a refund for separate overpayments on bottled water.

The Civil Settlements

In a related civil settlement, Supreme Group agreed to pay another $101 million to settle a whistleblower lawsuit, filed in the U.S. District Court for the EDPA by a former executive, which alleged that Supreme Group, and its food subsidiaries, violated the False Claims Act by knowingly overcharging for supplying food and water under the SPV contract.  The payment also resolves claims that, from June 2005 to December 2010, the Supreme food companies failed to disclose and pass through to the government rebates and discounts it obtained from its suppliers, as required by its SPV contract with the United States.

“Today’s results are part of an ongoing effort by the Defense Criminal Investigative Service (DCIS) and its law enforcement partners to protect the integrity of the Department of Defense’s acquisition process from personal and corporate greed,” said Deputy Inspector General for Investigations James B. Burch for the U.S. Department of Defense’s Office of the Inspector General.  “The Defense Criminal Investigative Service will continue to pursue allegations of fraud and corruption that puts the Warfighter at risk.”

“We are very pleased with this resolution, and are gratified that the public can now see what we’ve been aggressively investigating,” said Director Frank Robey of the U.S. Army Criminal Investigation Command’s Major Procurement Fraud Unit (MPFU).  “Companies that do business with the government must comply with all of their obligations, and if they overcharge for supplying our men and women in uniform who are bravely serving this nation, they must be held accountable for their actions.”

Separately, Supreme Site Services GmbH, a Supreme Group subsidiary, agreed to pay $20 million to settle allegations that they overbilled for fuel purchased by the Defense Logistics Agency (DLA) for Kandahar Air Field (KAF) in Afghanistan under a NATO Basic Ordering Agreement.  The government alleged that Supreme Site Services’ drivers were stealing fuel destined for KAF generators while en route for which the company falsely billed DLA.

“It is important that government contractors supporting conflicts abroad be held accountable for their billings to the government,” said U.S. Attorney Dana J. Boente for the Eastern District of Virginia.  “The DoD investigating components are instrumental in protecting the interests of the government, and their efforts in this investigation are to be commended.”

Supreme Group’s subsidiary Supreme Logistics FZE also has agreed to pay $25 million to resolve alleged false billings by Supreme Logistics in connection with shipping contracts between the U.S. Transportation Command (USTRANSCOM), located at Scott Air Force Base in Illinois, and various shipping carriers to transport food to U.S. troops in Afghanistan during Operation Enduring Freedom.  The shipping carriers transported cargo destined for U.S. troops from the United States to Latvia or other intermediate ports, and then arranged with logistics vendors, including Supreme Logistics, to carry the cargo the rest of the way to Afghanistan.  The United States alleged that Supreme Logistics falsely billed USTRANSCOM for higher-priced refrigerated trucks when it actually used lower-priced non-refrigerated trucks to transport the cargo.

“The U.S. Attorney’s Office for the Southern District of Illinois is committed to protecting the integrity of all of the vital missions carried out at Scott Air Force Base, including the mission of the U.S. Transportation Command,” said U.S. Attorney Stephen R. Wigginton for the Southern District of Illinois.  “These vital services carried out by the brave men and women of the armed forces of the United States deserve, and will receive, our full support, and this office will do everything possible to protect their missions.”

“These settlements are victories for American taxpayers,” said Special Inspector General John F. Sopko for Afghanistan Reconstruction.  “It sends a clear signal that whether a case involves a mom and pop outfit or a major multinational corporation, we will work tirelessly with our investigative partners to pursue justice any time U.S. dollars supporting the mission in Afghanistan are misused.”

The EDPA lawsuit was initially filed under the qui tam or whistleblower provisions of the False Claims Act, by Michael Epp, Supreme GmbH’s former Director, Commercial Division and Supply Chain.  The False Claims Act prohibits the submission of false claims for government money or property and allows the United States to recover treble damages and penalties for a violation.  Under the Act’s whistleblower provisions, a private party may file suit on behalf of the United States and share in any recovery.  The case remained under seal to permit the United States to investigate the allegations and decide whether to intervene and take over the case.  Epp will receive $16.16 million as his share of the government’s settlement of the lawsuit.

The criminal and civil matters in the EDPA were the result of a coordinated effort by the Department of Justice’s Civil Division, the U.S. Attorney’s Office for the Eastern District of Pennsylvania, DCIS, U.S. Army’s Criminal Investigative Command’s MPFU and the FBI.

The investigation of Supreme Site Services ’ alleged false billings for fuel was conducted by the Civil Division and the U.S. Attorney’s Office for the Eastern District of Virginia, and the investigation of Supreme Logistics’ alleged false invoices for transportation was handled by the Civil Division and the U.S. Attorney’s Office for the Southern District of Illinois.  Both matters were investigated by the Defense Contract Audit Agency Office of Investigative Support, the Army Audit Agency, the International Contract Corruption Task Force, the U.S. Army’s Criminal Investigative Command’s Major Procurement Fraud Unit, the DoD Office of Inspector General’s DCIS, the Special Inspector General for Afghan Reconstruction, the U.S. Air Force Office of Special Investigations and the Naval Criminal Investigative Service.

The claims resolved by the civil settlements are allegations only, except for the conduct for which the Supreme food companies have pleaded guilty.

Owners of Orlando Health Care Clinic Charged with $3 Million Medicare Fraud Scheme

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Charges have been unsealed against husband and wife owners of an Orlando health care clinic for their roles in a fraud scheme that resulted in the submission of more than $3 million in allegedly fraudulent claims to Medicare.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney A. Lee Bentley III of the Middle District of Florida and Special Agent in Charge Derrick Jackson of the U.S. Health and Human Services Office of Inspector General’s (HHS-OIG) Florida region made the announcement after the defendants were taken into custody last night and this morning.

A federal grand jury in the Middle District of Florida returned an indictment on Nov. 19, 2014, against Juan Carlos Delgado, 58, and Nereyda Infante, 48, both of Orlando, Florida, charging them with one count of conspiracy to commit health care fraud, five counts of health care fraud, and one count of conspiracy to commit money laundering.  According to the indictment, Delgado and Infante owned and operated Prestige Medical Services and Rehab Center, a health care clinic that purportedly provided medical services to Medicare Part B and Medicare Part C beneficiaries, and three other similarly named clinics that also purportedly provided medical services to Medicare Part C beneficiaries.

Between February 2012 and September 2014, the defendants allegedly submitted claims to Medicare that falsely represented that medical services were provided, medically necessary, and prescribed by a physician, when they were not.  The health care fraud counts specifically allege fraudulent claims involving Pentostatin prescriptions, an expensive chemotherapeutic medication, that were not medically necessary, not prescribed by a physician, and not provided.  The indictment also alleges that the defendants transferred proceeds obtained as the result of fraudulent claims and diverted them for their personal use.  According to the indictment, the defendants obtained more than $1.8 million in proceeds from the alleged fraud.

The charges contained in an indictment are merely accusations, and a defendant is presumed innocent unless and until proven guilty.

The case is being investigated by the HHS-OIG 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 Trial Attorney Andrew H. Warren of the Criminal Division’s Fraud Section.

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.

To learn more about the Health Care Fraud Prevention and Enforcement Team (HEAT), go to: www.stopmedicarefraud.gov.

Former New Jersey Chiropractor Sentenced to Prison for Fraud

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A man formerly of Neptune, New Jersey, was sentenced today in the U.S. District Court for the District of New Jersey to serve 54 months in prison to be followed by five years of supervised release, the Justice Department and the Internal Revenue Service (IRS) announced.

In February 2014, a jury convicted David Moleski, a pilot and former chiropractor, of 14 counts of mail fraud, one count of wire fraud, one count of corruptly endeavoring to obstruct and impede Internal Revenue laws and three counts of submitting false claims for tax refunds.  Moleski was sentenced by U.S. District Judge Freda L. Wolfson, who also ordered that Moleski pay a $10,000 fine and, as a condition of release, $48,199 in restitution.

According to the evidence presented in court, Moleski submitted three false tax returns in 2009 for tax years 2006 through 2008 that collectively requested more than $1.3 million in income tax refunds to which he was not entitled.  Prior to filing these returns, Moleski failed to file tax returns from 1999 through 2005, even though he was legally required to file.  When the IRS assessed taxes for those years and began collecting, Moleski obstructed the collection efforts and demanded that a third-party financial institution not comply with an IRS levy.  In addition, Moleski attempted to pay credit card bills and other debts with fake financial instruments that claimed to draw on an account at the U.S. Treasury that did not actually exist.  For instance, Moleski sent a fake financial instrument for $500,000 in alleged payment of a mortgage debt.

The case was investigated by special agents of IRS-Criminal Investigation.  Trial Attorneys Tino M. Lisella and Yael T. Epstein of the Tax Division prosecuted the case, with the assistance of the U.S. Attorney’s Office for the District of New Jersey.

Rite Aid Corporation Pays $2.99 Million for Alleged Use of Gift Cards to Induce Medicare and Medicaid Business

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Rite Aid Corporation, a Delaware corporation and national retail drugstore chain with its principal place of business in Camp Hill, Pennsylvania, has paid the United States $2.99 million to resolve allegations that it violated the False Claims Act by inappropriately using gift cards as inducements, the Department of Justice announced today.

The settlement resolves allegations that Rite Aid offered illegal inducements to Medicare and Medicaid beneficiaries to transfer their prescriptions to Rite Aid pharmacies.  The government alleged that from 2008 to 2010, Rite Aid had knowingly and improperly influenced the decisions of Medicare and Medicaid beneficiaries to transfer their prescriptions to Rite Aid pharmacies by offering them gift cards in exchange for their business.

“This case demonstrates the government’s ongoing commitment to enforcing accountability, transparency and fairness in the retail pharmacy industry,” said Acting Assistant Attorney General Joyce R. Branda for the Civil Division.  “The government will continue to advocate for the best interests of Medicare and Medicaid patients, and prevent pharmacies from improperly manipulating their healthcare choices.”

“This settlement holds Rite Aid accountable for exerting undue influence on individuals when they make important healthcare decisions about where and when to fill prescriptions,” said Acting U.S. Attorney Stephanie Yonekura for the Central District of California.  “Corporate profit should never steer an individual away from making the right healthcare decision.”

“Pharmacies are not allowed to improperly influence the decision-making of Medicare and Medicaid patients about where to fill prescriptions,” said Special Agent in Charge Glenn R. Ferry for the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG).  “Pharmacy chains that manipulate patient choices in this way will be held accountable.”

The settlement resolves allegations filed by Jack Chin under the qui tam, or whistleblower provisions of the False Claims Act, which authorizes private parties to sue for fraud on behalf of the United States and share in the recovery.  Chin will receive approximately $508,300 of the settlement.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $23.2 billion through False Claims Act cases, with more than $14.9 billion of that amount recovered in cases involving fraud against federal health care programs.

This case was investigated jointly by the Commercial Litigation Branch of the Civil Division, the U.S. Attorney’s Office for the Central District of California, the National Association of Medicaid Fraud Control Units and HHS-OIG.

The claims settled by today’s agreement are allegations only and there has been no determination of liability.

Principal in $28.3 Million Medicare Fraud Scheme Sentenced to 11 Years in Prison

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A Florida owner and operator of multiple physical therapy rehabilitation facilities was sentenced in federal court in Tampa today to serve 11 years in prison for his role in organizing a $28.3 million Medicare fraud scheme involving physical and occupational therapy services.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney A. Lee Bentley III of the Middle District of Florida, Special Agent in Charge Derrick Jackson of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Miami Regional Office and Special Agent in Charge Paul Wysopal of the FBI’s Tampa Field Office made the announcement.

Luis Duluc, 54, of Tampa, pleaded guilty on Feb. 3, 2014, to conspiracy to commit health care fraud as well as making a false statement relating to health care matters.  In addition to the prison term, U.S. District Judge Susan C. Bucklew of the Middle District of Florida ordered Duluc to pay $14,424,856 in restitution.

According to Duluc’s admissions in connection with his guilty plea, he and his co-conspirators used various physical therapy clinics and other businesses throughout Florida to submit approximately $28,347,065 in fraudulent reimbursement claims to Medicare between 2005 and 2009.  Medicare paid approximately $14,424,865 on those claims.

Duluc was chairman and president of a Delaware holding company known as Ulysses Acquisitions Inc., which was used to purchase comprehensive outpatient rehabilitation facilities and outpatient physical therapy providers, including West Coast Rehab Inc. in Fort Myers, Florida; Rehab Dynamics Inc. in Venice, Florida; Polk Rehabilitation Inc. in Lake Wales, Florida; and Renew Therapy Center of Port St. Lucie LLC in Port St. Lucie, Florida.  This gave Duluc and his co-conspirators control of those clinics’ Medicare provider numbers, which allowed them to bill Medicare for services.

Duluc admitted that he and his co-conspirators paid kickbacks to obtain, and stole, the personal identifying information of Medicare beneficiaries, and that he and his co-conspirators also obtained unique identifying information of physicians.  They then used this information to create and submit false claims to Medicare through the clinics owned by Ulysses Acquisitions.  These claims sought reimbursement for therapy services that were not legitimately prescribed and not actually provided.  Duluc admitted that he and his co-conspirators created and used false and forged patient records in an effort to conceal the fact that services had not actually been provided.

Duluc also admitted that he developed and marketed the “80/20 deal.”  In these deals, Duluc and his co-conspirators submitted false reimbursement claims to Medicare on behalf of Miami-based therapy clinics, such as Hallandale Rehabilitation Inc., Tropical Physical Therapy Corporation, American Wellness Centers Inc. and West Regional Center Inc.  Duluc and co-conspirators retained approximately 20 percent of the money Medicare paid on these claims and paid the other 80 percent to the co-conspirator clinic owners.

When Duluc and his co-conspirators were done using the clinics they acquired through Ulysses Acquisitions, they engaged in sham sales to nominee or straw owners, all of whom were recent immigrants to the United States with no background or experience in the health care industry.  Duluc admitted that he did this in an effort to disassociate from the fraudulent operations of the rehabilitation facilities.

This case is being investigated by HHS-OIG and the FBI and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and U.S. Attorney’s Office for the Middle District of Florida.  This case is being prosecuted by Senior Trial Attorney Christopher J. Hunter and Trial Attorney Andrew H. Warren of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Simon A. Gaugush of the Middle District of Florida.

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.

To learn more about the Health Care Fraud Prevention and Enforcement Team (HEAT), go to: www.stopmedicarefraud.gov.

Washington Gas Energy Systems Agrees to Pay $2.5 Million in Fines and Penalties for Conspiring to Obtain Federal Contracts

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Washington Gas Energy Systems (WGESystems) has agreed to pay more than $2.5 million in fines and monetary penalties for conspiring to commit fraud on the United States by illegally obtaining contracts that were meant for small, disadvantaged businesses.

The court agreement was announced today by William J. Baer, Assistant Attorney General of the Antitrust Division; Principal Assistant U.S. Attorney Vincent H. Cohen Jr. of the U.S. Attorney’s Office for the District of Columbia; Robert C. Erickson, Acting Inspector General of the U.S. General Services Administration (GSA); Peggy E. Gustafson, Inspector General for the Small Business Administration (SBA), and Andrew G. McCabe, Assistant Director in Charge of the FBI’s Washington Field Office.

WGESystems, based in Virginia, is a wholly owned subsidiary of WGL Holdings Inc. (WGL).  WGL is the parent company for all of the corporations within the Washington Gas family.  WGESystems plays no direct role in the delivery of natural gas, and it is not a utility.  It is a design-build firm that specializes in providing energy efficiency and sustainability solutions to clients.

A criminal information was filed today in the U.S. District Court for the District of Columbia charging WGESystems with one count of knowingly and willfully conspiring to commit major fraud on the United States.  WGESystems waived the requirement of being charged by way of federal indictment, agreed to the filing of the information, and has accepted responsibility for its criminal conduct and that of its employees.

In addition, as part of a deferred prosecution agreement reached with the U.S. Attorney’s Office for the District of Columbia and the Antitrust Division, WGESystems agreed to pay a fine of $1,560,000 and a monetary penalty of $1,027,261 within five days of the approval of the agreement by the court.

According to court documents filed today, WGESystems conspired with a company that was eligible to receive federal government contracts set aside for small, disadvantaged businesses with the understanding that the business would illegally subcontract all of the work on the projects to WGESystems.  In this way, WGESystems was able to capture a total of eight contracts worth $17,711,405 that should have gone to an eligible company. These contracts, awarded in 2010, were focused on making federal buildings in the Washington, D.C., area more energy efficient.

Under the illegal agreement, the company that was awarded these government contracts was allowed to keep 5.8 percent of the value of the contracts for allowing WGESystems to use the company’s small business status to win these contracts.

“Conspiracies to violate federal procurement laws will not be tolerated,” said Assistant Attorney General Bill Baer for the Antitrust Division.  “Taxpayers deserve to have contracting processes that are fair and competitive, and fully comply with applicable laws and regulations.”

“Time and time again, we have seen government contractors abuse and exploit programs designed to help minority and socially disadvantaged small businesses,” said Principal Assistant U.S. Attorney Cohen.  “This Washington Gas subsidiary obtained millions of dollars in federal contracts by using a small business that had no ability to actually complete the contract as a front company.  Even though the subsidiary lost money on these contracts, it is required to pay $2.5 million in fines and penalties under this agreement.  This resolution should cause other contractors to think twice about playing fast and loose with federal contracting rules.”

“Cases like this are important for us to maintain the integrity of the federal contracting process,” said GSA Acting Inspector General Erickson.  “Companies cannot cheat to win federal contracts and expect to get away with their ill-gotten gains.”

“SBA’s 8(a) Business Development Program assists eligible socially and economically disadvantaged individuals in developing and growing their businesses,” said SBA Inspector General Gustafson.  “Large businesses that fraudulently seek to gain access to contracts set aside for small businesses erode the public’s trust in this important program.  I want to thank the U.S. Attorney’s Office and our law enforcement partners for their professionalism and commitment to justice in this investigation.”

“Federal government contracting laws are in place to create a level playing field for small disadvantaged businesses whose work supports our country’s diverse financial infrastructure,” said Assistant Director in Charge McCabe.  “The FBI with our law enforcement partners will investigate those companies who fraudulently abuse federal contracting laws with the purpose of increasing their company’s bottom line.”

According to the court documents, until 2010, GSA had an area-wide contract with WGESystems.  This contract enabled GSA, without competition, to enter into contracts with WGESystems so that WGESystems could provide energy management services for federal buildings.

However, starting in 2010, the federal government changed its practices.  The American Reinvestment and Recovery Act appropriated funds to make buildings in the District of Columbia and the surrounding area more energy efficient.  These funds were to be awarded through the 8(a) program, which is administered by the SBA and which was created to help small, disadvantaged businesses access the federal procurement market.

To qualify for the 8(a) program, a business must be at least 51 percent-owned and controlled by a U.S. citizen (or citizens) of good character who meet the SBA’s definition of socially and economically disadvantaged.  The firm also must be a small business (as defined by the SBA) and show a reasonable potential for success.  Participants in the 8(a) program are subject to regulatory and contractual limits on subcontracting work from 8(a) set-aside contracts.  The SBA regulations require, among other things, the 8(a) concern to agree that on construction contracts it “will perform at least 15 percent of the cost of the contract with its own employees (not including the costs of materials).”

As a result of this change, WGESystems – which was not certified to participate in the 8(a) program – faced the prospect of losing millions of dollars in revenue.

WGESystems, along with an 8(a) company it used to obtain these contracts, and others, engaged in and executed a scheme to defraud the SBA and GSA by, among other things: concealing that WGESystems, which was not eligible for the aforementioned SBA contracting preferences, exercised impermissible control over the 8(a) company’s bidding for and performance on GSA contracts; and misrepresenting that the 8(a) company was in compliance with SBA regulations pertaining to work on these contracts, including that the company’s employees had performed the required percentage of work on these contracts.  Through these unlawful efforts, WGESystems and the 8(a) company with which it conspired obtained, at least, approximately $17,711,405 in U.S. government contracts related to work at eight different federal buildings.  When these contracts were awarded, the 8(a) company’s registered place of business was the president of the company’s home, and the company had no employees who could provide design-build or contracting services.

WGESystems assisted the 8(a) company with identifying a project manager for the work at the eight buildings who was nominally an employee of the 8(a) company, but who, in actuality, took direction from WGESystems employees.  For much of the relevant period, this project manager was the only employee of the 8(a) company performing work for any of the eight projects.

Under the agreement with WGESystems, the 8(a) company was entitled to 5.8 percent of the $17,711,405 total value of the contracts, which equals $1,027,261.  To date, with all but one of the eight contracts completed or suspended, WGESystems has lost approximately $1,122,581 on the projects.  WGESystems initially anticipated a profit margin that would have equaled about $1,560,000.

Since being informed of this investigation by the Justice Department, WGESystems has taken steps to enhance and optimize its internal controls, policies and procedures.

In light of the company’s remedial actions to date and its willingness to acknowledge responsibility for its actions, the U.S. Attorney’s Office for the District of Columbia and the Antitrust Division will recommend the dismissal of the Information in two years, provided WGESystems fully cooperates with, and abides by, the terms of the deferred prosecution agreement.

This investigation was conducted by the Inspector General’s Offices of the U.S. General Services Administration and the Small Business Administration and the FBI’s Washington Field Office.  The prosecution is being handled by Assistant U.S. Attorney Matt Graves of the Fraud and Public Corruption Section of the U.S. Attorney’s Office for the District of Columbia, and Assistant Chief Craig Y. Lee and Trial Attorney Diana Kane, both of the Antitrust Division’s Washington Criminal I Section.

Miami-Area Hospital Chief Operating Officer Pleads Guilty in $67 Million Mental Health Care Fraud Scheme

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The former chief operating officer of a Miami-area hospital pleaded guilty today for his role in a mental health care fraud scheme that resulted in the submission of more than $67 million in fraudulent claims to Medicare by a state-licensed psychiatric hospital located in Hollywood, Florida, that purported to offer both inpatient and outpatient mental health services.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida, Special Agent in Charge George L. Piro of the FBI’s Miami Field Office and Special Agent in Charge Derrick Jackson of the U.S. Health and Human Services Office of Inspector General’s (HHS-OIG) Florida region made the announcement.

Christopher Gabel, 61, of Davie, Florida, the former Chief Operating Officer (COO) of Hollywood Pavilion LLC (HP), pleaded guilty before U.S. District Judge Cecilia M. Altonaga in the Southern District of Florida to one count of conspiracy to commit health care fraud and one count of conspiracy to defraud the United States and pay and receive health care kickbacks.  Gabel was charged in an indictment returned on May 8, 2014.

According to Gabel’s admissions in connection with his guilty plea, between April 2003 and September 2012, HP submitted false and fraudulent claims to Medicare for treatment that was not medically necessary or not provided to patients.  As COO during that time, Gabel supervised HP’s staff at both its inpatient and outpatient facilities, where Medicare beneficiaries were admitted to HP regardless of whether they qualified for mental health treatment, and were often admitted before seeing a doctor.

Gabel admitted that HP obtained Medicare beneficiaries from across the country by paying bribes and kickbacks to various patient brokers.  Gabel instructed the patient brokers to falsify invoices and marketing reports in an effort to hide, and cover up the true nature of the bribes and kickbacks they were receiving from HP.  From 2003 through August 2012, HP billed Medicare approximately $67 million for services that were not properly rendered, for patients that did not qualify for the services being billed, and for claims for patients who were procured through bribes and kickbacks.  Medicare reimbursed HP nearly $40 million for those claims.

Karen Kallen-Zury, Daisy Miller, Michele Petrie and Christian Coloma were convicted at trial in June 2013 for their roles in this scheme.  Kallen-Zury, HP’s former chief executive officer, was sentenced to 25 years in prison.  Miller, the clinical director of HP’s inpatient facility, was sentenced to 15 years in prison; and Petrie, the head of HP’s intensive outpatient program, was sentenced to six years in prison.  Coloma, the director of physical therapy for an entity associated with HP, was sentenced to 12 years in prison.  Kallen-Zury, Miller and Petrie were ordered to pay nearly $40 million in restitution, and Coloma was ordered to pay more than $20 million in restitution.

The case is being investigated by the FBI and HHS-OIG 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.  The case is being prosecuted by Trial Attorneys Nicholas E. Surmacz, Andrew H. Warren and L. Rush Atkinson of the Criminal Division’s Fraud Section.

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.