Owner and Manager of New York Medical Equipment Provider Charged for Their Roles in Alleged $3.5 Million Scheme to Defraud Government-Funded Health Plans

Wednesday, November 15, 2017

The owner and the manager of a purported durable medical equipment (DME) company in the Bronx, New York, were charged in an indictment unsealed today for their roles in an allegedly fraudulent scheme that involved submitting over $3.5 million in claims to private insurers, which included government-sponsored managed care organizations.

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, 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.

Ikechukwu Udeokoro, 41, of West New York, New Jersey, and Ayodeji Fasonu, 51, of Stamford, Connecticut, the owner and manager, respectively, of Meik Medical Equipment and Supply LLC of the Bronx, were charged with one count of health care fraud in an indictment filed in the Eastern District of New York on Nov. 13.  The indictment was unsealed upon the arrest of the defendants this morning, and the defendants are expected to be arraigned this afternoon before U.S. Magistrate Judge James Orenstein of the Eastern District of New York at the federal courthouse in Brooklyn.  The case has been assigned to U.S. District Judge Ann M. Donnelly.

According to the indictment, beginning in approximately December 2010 and continuing through at least February 2014, Udeokoro and Fasonu executed a scheme in which they submitted fraudulent claims to private insurers, including those that participated in Medicare Part C, for reimbursement for DME that was purportedly provided to the insurers’ members, many of whom were elderly or disabled and had insurance through Medicare Advantage plans or New York Medicaid Managed Care plans.  As part of the scheme, the defendants allegedly submitted claims to the private insurers for reimbursement for DME such as multi-positional patient support systems and combination sit-to-stand systems, when the defendants in fact provided the insurers’ members either nothing or a far less expensive product, such as a lift chair/recliner.

As alleged in the indictment, Meik Medical Equipment & Supply submitted more than $3.5 million in claims.

The charges in the indictment are merely allegations, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

The FBI and HHS-OIG investigated the case, which was brought as part of the Medicare Fraud Strike Force, under the supervision by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of New York.  Trial Attorney Andrew Estes of the Fraud Section is 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.

Connecticut Substance Abuse Treatment Provider Pays $627K to Settle False Claims Act Allegations

Thursday, September 7, 2017

United States Attorney Deirdre M. Daly and Connecticut Attorney General George Jepsen today announced that a Connecticut substance abuse treatment provider and its former CEO will pay $627,000 to resolve allegations that they violated the federal and state False Claims Acts.

THE HARTFORD DISPENSARY and THE HARTFORD DISPENSARY ENDOWMENT CORPORATION (collectively, “Hartford Dispensary”) is a healthcare organization that provides behavioral health and substance use disorder treatment services. It operates various outpatient treatment programs through its nine clinics located in Connecticut. PAUL McLAUGHLIN is the former President and Chief Executive Officer of Hartford Dispensary.

To be certified as an opioid treatment provider (OTP), the OTP must formally designate a medical director, who assumes responsibility for administering all medical services performed by the OTP. The medical director is also responsible for ensuring that the OTP is in compliance with all applicable federal, state, and local laws and regulations.

The government alleges that Hartford Dispensary and McLaughlin made repeated false representations and false certifications to federal and state authorities that Hartford Dispensary had a medical director, as defined by relevant regulations, who was performing the duties and responsibilities required by federal and state law. The government further alleges that these false representations and certifications were material to false or fraudulent claims submitted to the Medicaid program.

To resolve the government’s allegations under the federal and state False Claims Acts, Hartford Dispensary and McLaughlin have agreed to pay $627,000, which covers conduct occurring from January 1, 2009 through November 20, 2015.

A complaint against Hartford Dispensary was filed in the U.S. District Court in Connecticut under the qui tam, or whistleblower, provisions of the both the federal and state False Claims Acts. The relators (whistleblowers), Russell Buchner and Charles Hatheway, former employees of Hartford Dispensary, will receive a share of the proceeds of the settlement in the amount of $112,860. The whistleblower provisions of both the federal and state False Claims Acts provide that the whistleblower is entitled to receive a percentage of the proceeds of any judgment or settlement recovered by the government.

“Health care providers must be completely honest when certifying information to the government, and the failure to do so will have serious consequences,” stated U.S. Attorney Daly. “The U.S. Attorney’s office is committed to vigorously pursuing health care providers who make false representations to federal health care programs.”

“Medicaid providers are required to comply with the applicable rules of the program and to certify honestly their compliance,” said Attorney General Jepsen. “I’m grateful to our state and federal partners for their continued cooperation and coordination as we work to protect our taxpayer-funded healthcare programs.”

This matter was investigated by the Office of Inspector General for the U.S. Department of Health and Human Services. The case is being prosecuted by Assistant U.S. Attorney Richard M. Molot and Auditor Kevin Saunders, and by Assistant Attorneys General Michael Cole and Gregory O’Connell of the Connecticut Office of the Attorney General.

People who suspect health care fraud are encouraged to report it by calling 1-800-HHS-TIPS or the Health Care Fraud Task Force at (203) 777-6311.

Wholesale Jewelry Distributor Charged in Multi-Million Dollar Fraud Scheme

Thursday, July 20, 2017

PROVIDENCE – Gerald Kent, 51, of Groton, CT, owner and operator of Kent Jewelry in Johnston, RI., made an initial appearance in U.S. District Court in Providence today and was ordered detained in federal custody, charged by way of a criminal complaint with wire fraud and aggravated identity theft.

It is alleged in court documents that Kent, through his company, which primarily sells jewelry on the internet using websites such as Groupon.com and Zulily.com, orchestrated a long running, multi-million dollar fraud scheme that defrauded a debtor finance company of more than $3.6 million dollars.

The charges are announced by Acting United States Attorney Stephen G. Dambruch; Brian Deck, Resident Agent in Charge of the Providence Office of the U.S. Secret Service; and Harold H. Shaw, Special Agent in Charge of the Federal Bureau of Investigation Boston Division.

According to an affidavit in support of the criminal complaint, it is alleged that Kent submitted fraudulent invoices to a factoring (debtor finance) company based in Chicago, Ill., mostly from Groupon and Zulily, which resulted in payments to Kent of nearly $5 million dollars.

According to the affidavit, it is alleged that to execute the fraud scheme, Kent created hundreds of fraudulent invoices which were submitted to the factoring company for which he received payment; created and used a fraudulent clone of Groupon, Inc.’s website; enlisted coconspirators to pose as Groupon employees; and opened bank accounts in the names of Groupon and Zulily, Inc., in order to deceive the debtor finance company into believing it was receiving payments from these companies.

Factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount.  Factoring companies work with businesses to provide working capital in order to grow their businesses without having to wait for outstanding accounts receivables to be paid.

Kent, who was arrested on Wednesday evening at Foxwoods, appeared today before U.S. District Court Magistrate Judge Patricia A. Sullivan and was ordered detained pending a detention hearing on July 26, 2017.

A criminal complaint is merely an allegation and is not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.

The case is being prosecuted by Assistant U.S. Attorneys Lee H. Vilker and John P. McAdams.

The matter was investigated by agents from the U.S. Secret Service and the FBI.

Former Virtual Currency CEO Pleads Guilty to $9 Million Fraud Scheme

Thursday, July 20, 2017

Deirdre M. Daly, United States Attorney for the District of Connecticut, and Patricia M. Ferrick, Special Agent in Charge of the New Haven Division of the Federal Bureau of Investigation, announced that HOMERO JOSHUA GARZA, 32, of Texas, formerly of Somers, Conn., waived his right to be indicted and pleaded guilty today in Hartford federal court to one count of wire fraud related to his role in his companies’ purported generation and sale of virtual currency.

According to court documents and statements made in court, “virtual currency” is a digital representation of a value that can be traded and functions as a medium of exchange. Virtual currency generally is not issued or guaranteed by any jurisdiction or government, and its value is decided by consensus within the community of users of the virtual currency. A virtual currency generally self-generates units of currency through a process called “mining.” A virtual currency “miner” is computer hardware that runs special computer software to solve complex algorithms that validate groups of transactions in that virtual currency. Once a complex algorithm is solved, a unit of currency, such as a bitcoin, is awarded to the individual operating the miner. This process is known as “mining.”

Between approximately May 2014 and January 2016, GARZA, through GAW, GAW Miners, ZenMiner, and ZenCloud, companies he founded and operated, defrauded victims out of money in connection with the procurement of virtual currency on their behalf. The companies sold miners, access to miners, and the right to purchase a virtual currency called “paycoin,” as well as “hashlets.” A hashlet entitled an investor to a share of the profits that GAW Miners or ZenMiner would purportedly earn by mining virtual currencies using the computers that were maintained in their data centers. In other words, hashlet customers, or investors, were buying the rights to profit from a slice of the computing power owned by GAW Miners and ZenMiner.

To generate business and attract customers and investors, GARZA made multiple false statements related to the scheme, including stating that GAW Miners’ parent company purchased a controlling stake in ZenMiner for $8 million and that ZenMiner became a division of GAW Miners. In fact, there was no such transaction. GARZA also stated that the hashlets GARZA’s companies sold engaged in the mining of virtual currency. In fact, GARZA’s companies sold more hashlets than was supported by the computing power maintained in their data centers. Stated differently, GARZA’s companies sold the customers the right to more virtual currency than the companies’ computing power could generate. GARZA also stated that the market value of a single paycoin would not fall below $20 per unit because GARZA’s companies had a reserve of $100 million that the companies would use to purchase paycoins to drive up its price. In fact, no such reserve existed.

During the scheme, GARZA, through his companies, used money his companies had made from new hashlet investors to pay older hashlet investors. The payments were money that the companies owed the older investors based on the purported mining GAW Miners and ZenMiner had done on the investors’ behalf.

The loss attributable to GARZA from the scheme was $9,182,000.

GARZA is scheduled to be sentenced by U.S. District Judge Robert N. Chatigny on October 12, 2017, at which time he faces a maximum term of imprisonment of 20 years.

This matter is being investigated by the Federal Bureau of Investigation and is being prosecuted by Assistant U.S. Attorneys John T. Pierpont, Jr. and Jonathan Francis.

Senior Executives Of Medical Drug Re-Packager Plead Guilty To Defrauding Healthcare Providers

Friday, July 14, 2017

President and Pharmacist-in-Charge Distributed Cancer Drugs Contaminated With Mold

Earlier today, in federal court in Brooklyn, Gerald Tighe, the president and owner of Med Prep Consulting Inc. (Med Prep), and Stephen Kalinoski, its director of pharmacy and registered pharmacist-in-charge, pleaded guilty to wire fraud conspiracy in connection with their operation of the now-defunct Tinton Falls, New Jersey-based medical drug re-packager and compounding pharmacy. The pleas were entered before United States District Judge I. Leo Glasser.

The guilty pleas were announced by Bridget M. Rohde, Acting United States Attorney for the Eastern District of New York, and Mark McCormack, Special Agent-in-Charge of the U.S. Food and Drug Administration’s Office of Criminal Investigations, Metropolitan Washington Field Office (FDA/OCI).

According to court filings and facts presented during the plea proceeding, Med Prep processed numerous drugs, including oncology and dialysis drugs, pain medications, anesthesia drugs, and operating room drugs, in purportedly aseptic conditions. In an effort to gain market share, Med Prep repeatedly misrepresented to its customers, who consisted of hospitals and other healthcare providers, that it adhered to, and in some areas exceeded, industry standards and laws applicable to sterile drug preparation. In fact, Med Prep produced drugs in a facility that fell far short of basic industry standards of cleanliness, creating a risk to the health of already ill patients. Tighe and Kalinoski lied to healthcare providers about Med Prep’s failures to comply with basic sterility practices. Med Prep halted its production of drug products in the summer of 2013, following an incident in which it had distributed intravenous drugs containing visible mold to a Connecticut hospital.

“Today’s guilty pleas mark an important step in our continuing effort to hold accountable those who pursue corporate profits over the health and safety of vulnerable patients suffering from disease,” said Acting United States Attorney Rohde. In announcing the guilty plea, Ms. Rohde gratefully acknowledged the assistance and cooperation of the United States Department of Health and Human Services, Office of the Inspector General, Office of Investigations; the United States Office of Personnel Management, Office of the Inspector General; the Department of Justice, Civil Division, Consumer Protection Branch and Commercial Litigation Branch; the FDA’s Office of the Chief Counsel; the Office of the Attorney General of New Jersey; and the New Jersey Board of Pharmacy.

“Producing unsafe and contaminated drugs poses a serious threat to the U.S. public health and cannot be tolerated,” stated FDA/OCI Special Agent-in-Charge McCormack. “The FDA remains fully committed to aggressively pursuing those who place unsuspecting American consumers at risk by distributing adulterated drugs.”

The sentencing, Tighe and Kalinoski each face up to five years in prison, a fine and the forfeiture of criminal proceeds. They will also be required to make full restitution to their victims.

The case is being prosecuted by Assistant United States Attorneys Alixandra E. Smith, Ameet B. Kabrawala and Erin E. Argo.

The Defendants:


Age: 59

West Long Branch, New Jersey


Age: 53

Middletown, New Jersey

E.D.N.Y. Docket No. 15-CR-62 (ILG)

Drug Company Sales Rep Admits Role in Kickback Scheme Related to Fentanyl Spray Prescriptions

Tuesday, July 11, 2017

Deirdre M. Daly, United States Attorney for the District of Connecticut, announced that NATALIE LEVINE, 33, of Scottsdale, Arizona, waived her right to be indicted and pleaded guilty today before U.S. District Judge Michael P. Shea in Hartford to one count of engaging in a kickback scheme that defrauded federal healthcare programs.

According to court documents and statements made in court, from approximately March 2013 to October 2014, LEVINE was employed by Insys Therapeutics, an Arizona-based pharmaceutical company that manufactured and sold Subsys, a fentanyl-based sublingual spray that was approved by the Food and Drug Administration solely for the management of breakthrough pain in cancer patients. LEVINE was a sales representative for the company and was responsible for covering the territories that included Connecticut, New Hampshire and Rhode Island.

In pleading guilty, LEVINE admitted that she induced certain medical practitioners, including an advanced practice registered nurse (APRN) in Connecticut, a physician’s assistant (PA) in New Hampshire, and a physician in Rhode Island, to prescribe Subsys by paying them to participate in hundreds of sham “Speaker Programs.” The Speaker Programs, which were typically held at high-end restaurants, were ostensibly designed to gather licensed healthcare professionals who had the capacity to prescribe Subsys and educate them about the drug. In truth, the events were usually just a gathering of friends and co-workers, most of whom did not have the ability to prescribe Subsys, and no educational component took place. “Speakers” were paid a fee that ranged from $1,000 to several thousand dollars for attending these dinners. At times, the sign-in sheets for the Speaker Programs were forged so as to make it appear that the programs had an appropriate audience of healthcare professionals.

The medical practitioners were paid thousands of dollars in illegal kickbacks in order to prescribe Subsys, and induce others to prescribe Subsys, over similar medications. Medicare Part D plans authorized payment for hundreds of Subsys prescriptions written by the three medical practitioners, resulting in a loss of approximately $4.5 million.

LEVINE pleaded guilty to one count of conspiracy to violate the anti-kickback law, an offense that carries a maximum term of imprisonment of five years and a fine of up to $250,000. Judge Shea scheduled sentencing for October 5, 2017.

This investigation is being conducted by the U.S. Department of Health and Human Services Office of the Inspector General and the Federal Bureau of Investigation, with the assistance of the Drug Enforcement Administration’s Tactical Diversion Squad. The case is being prosecuted by Assistant U.S. Attorneys Douglas P. Morabito and Richard M. Molot.

Several other individuals affiliated with Insys Therapeutics, and medical practitioners involved in this kickback scheme, have been charged in the District of Connecticut and in other Districts across the United States.

U.S. Attorney Daly encouraged individuals who suspect health care fraud to report it by calling the Health Care Fraud Task Force (203) 785-9270 or 1-800-HHS-TIPS.