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CCC’s: Was Heir Locators Indictment a Hair Too Late?

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Below is a post that I wrote with a friend and former Antitrust Division colleague, Karen Sharp.  The post originally appeared in Law 360 Competition (here). I am reposting for those that don’t have access to the article.

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Was Heir Locators Indictment a Hair Too Late?

by Robert Connolly and Karen Sharp[1]

            On August 17, 2016, a Utah grand jury returned a one count Sherman Act indictment against Kemp & Associates, Inc. and Daniel J. Mannix,[2] a Kemp corporate officer.  According to the indictment, the conspiracy was an agreement to “allocate customers of Heir Location Services sold in the United States” that began as early as September 1999 and continued as late as January 29, 2014.

Heir location service companies identify heirs to estates of intestate decedents and, in exchange for a contingency fee, develop evidence and prove heirs’ claims to an inheritance in probate court.  The indictment charged that there was an allocation scheme whereby the defendants agreed with a competing heir location service company that the first company to contact an heir would be allocated certain remaining heirs to the estate and, in return, would pay the other company a portion of the collusive contingency fees collected from the heirs.

In pretrial orders issued last August, U.S. District Court Judge David Sam, 1) dismissed the indictment as time barred by the five-year statute of limitations; and 2) held that if there were a trial, the agreement would not be considered per se, but instead judged by the jury under the Rule of Reason.  The Antitrust Division is challenging both rulings on appeal in the Tenth Circuit.  In this article we discuss the court’s ruling that the indictment was time barred by the statute of limitations.

A full exposition of the facts can be found in the indictment,[3] Judge Sam’s Memorandum Decision and Order[4], the government’s opening brief in the Tenth Circuit,[5] and the defendants’ response.[6]  But in short, the relevant facts are these:

  • There was a written allocation agreement between competing heir location service companies to divide certain customers.
  • On July 30, 2008, defendant Mannix wrote to Kemp & Associates colleagues in an email: “The ‘formal’ agreement that we have had with [Blake & Blake] for the last decade is over.”
  • There were in fact no other heirs allocated after July 30, 2008.
  • Payments made by previously allocated customers, however, occurred within the Sherman Act five-year statute of limitations period preceding the indictment.

The government argues on appeal that the conspiracy did not end on July 30, 2008 when the agreement was abandoned but continued based on the “payments theory.” The payments theory is straightforward: conspirators rig bids, fix prices and/or allocate customers to reap the higher prices that come from eliminating/restraining competition.  As long as a conspirator is being paid as a result of the illegal agreement, the conspiracy continues.

The government has the weight of authority and specifically, Tenth Circuit precedent, on its side.  The government argues on appeal that Judge Sam “mistakenly concluded that the alleged conspiracy ended after the last customers were allocated, rather than continuing as long as the conspirators collected and distributed payments from the contracts with the allocated customers.”  The indictment specifically alleged that as part of the customer allocation conspiracy, the defendants “accepted payment for Heir Location Services sold to heirs in the United States at collusive and noncompetitive contingency fee rates.”  The indictment alleges that the conspiracy continued at least as late as January 29, 2014, which is the date when, according to the defendants’ motion to dismiss the indictment, “a large team of law enforcement agents and prosecutors served subpoenas on, and sought to interview, many of the Company’s employees.”

The payments theory is well accepted, including in the Tenth Circuit.  United States v. Evans & Associates Construction Co.[7] was a bid-rigging case where the contract was rigged outside the statute of limitations, but the defendant received payments for the work done on the contract within the statute period.  The Tenth Circuit in Evans concluded that “the statute did not begin to run until after the successful contractor accepted the last payment on the contract.”[8] According to the court, “the Sherman Act violation was ‘accomplished both by the submission of noncompetitive bids and by the request for and receipt of payments at anti-competitive levels.’”[9] Similarly, in the more recent case of United States v. Morgan, the Tenth Circuit held that “the distribution of the proceeds of a conspiracy is an act occurring during the pendency of the conspiracy.”[10]

Judge Sam did not agree that the indictment before him alleged a conspiracy that would properly invoke the payments theory.  He concluded that the primary purpose of the anticompetitive agreement was the allocation of customers.  According to Judge Sam, “[i]t then follows that any conspiratorial agreement ceased to exist once the allocation of customers through the [agreed-upon] Guidelines ceased.”  Judge Sam distinguished the heir locators’ agreement from the bid-rigging agreement in Evans, stating, “[T]he evidence in Evans and Morgan shows that the central purpose of the conspiracy was to obtain wrongful proceeds or money.  While the Indictment here mentions the payment of proceeds, Ind. ¶¶ 11 (h), (i), the central purpose of the conspiracy charged was not ‘economic enrichment.’” Judge Sam found, without even a hearing or trial, that the “central purpose” of the heir locators’ allocation agreement was not “economic enrichment.”  The statute of limitations, therefore, expired on July 30, 2013, five years after defendant Mannix sent an internal Kemp & Associates email abandoning the allocation agreement.

In our opinion the judge was grasping at straws to distinguish (and extinguish) this case from Evans to avoid application of the payments theory.  Payments by allocated heir locator customers seem like payments made on rigged contracts.  Since the judge also found this to be a Rule of Reason case, he apparently felt that the agreement on balance was procompetitive–and not designed to generate supra competitive profits.  The court’s logic seems to be a real-life application of the “bad facts make bad law” principle.  But, there was simply no record on which to base a finding that the payments made and accepted by defendants and their co-conspirators within the statute were merely administrative tasks that “bore no relation to customer allocation.”

A Better Way to Judge The Validity of Using a Payments Theory To Extend the Statute

  1. The Judicial Concern with Prosecutorial Delay

            Judge Sam was clearly troubled by the fact that the defendants were indicted in August 2016, several years after the five-year statute of limitations would have appeared to have run on an agreement that was abandoned in July 2008.  Moreover, since there was no fixed time when an estate distribution would be finalized, there was no telling when the statute of limitations would begin to run in this type of case. The court noted:

“Additionally, the government has identified 269 allegedly affected estates, the administration of which consisted of a series of ordinary, non-criminal events that could last many years. In contrast, Evans involved the bid for one contract which was bid, granted, completed and fully paid within the two years. [citation omitted] . . .. This arbitrariness is not consistent with the very reasons limitations periods exist in criminal cases.”

In bid-rigging cases, the outer limits of the statute of limitations is at least defined by the length of the contract.  But here, as the court noted, the payments theory could extend the statute of limitations for an unknown, and possibly very long time.

2.    The “Payments Theory” as a Due Process Violation

A more direct and fair method to address the concern that Judge Sam and other courts may have with an indefinite extension of a statute of limitations is to consider the application of the payments theory as a possible violation of due process.  Does extending the statute of limitations for an indefinite and arbitrary period deprive the defendants of due process?

The Supreme Court has recognized that prosecutorial delay may constitute a due process violation but has set an extremely high bar for a would-be successful defendant.  In United States v. Marion,[11] the Court held that in order for the Due Process Clause of the Fifth Amendment to require dismissal of an indictment the defendant must show that the pre-indictment delay:

1)         caused substantial prejudice to the defendant’s rights to a fair trial; and

2)         that the delay was an intentional device to gain tactical advantage over the accused.[12]

There is a critical difference, however, between the facts in Marion and the heir location services case.  In Marion there was a three-year delay between the commission of the crime and the charged case.  The defendants alleged this delay was a prejudicial due process violation.  But, the case was still brought within the statute of limitations.  However, where, as here, the application of a payments theory leads to an arbitrary and indefinite extension of the statutorily set limitations period, Marion can be distinguished.  We suggest it would be appropriate to apply a different/lesser test in this case.  The near-impossible-to-meet prong of showing that the prosecution intentionally engaged in delay tactics to gain an advantage should be dropped.  Instead, the defendants should be required to make the Marion showing of substantial prejudice suffered by the application of the payments theory. A showing of substantial prejudice would require for example a witness’ death or illness, loss of physical evidence, or a witness who was once available is now not available; i.e., something more than a general allegation that memories fade with time.

Another aspect of due process that can arise in payments theory cases, and may be what really troubles courts, is that an individual who is the subject or target of a criminal antitrust investigation is often without a job and can find it difficult to get one while possible legal charges hang over his or her head.  A company may also suffer negative financial consequences while a “cloud of suspicion” from a grand jury investigation lingers.  Being a subject/target of an antitrust criminal investigation is an incredibly stressful and expensive ordeal.  If this status is going to continue, perhaps indefinitely, past the traditional statute of limitations, there should be a very good reason.  Depending on the circumstance, a judge, like Judge Sam, may find that the delay in bringing a case was a due process violation of the defendants’ property rights—the right to earn a living.

We also suggest, however, that if the defendant can make a showing of substantial prejudice, the government should have the opportunity to explain why there was a need to resort to a payments theory. Was the crime or industry investigated very complex?  Did the subjects themselves stonewall the investigation and cause delays?  Did the defendants successfully conceal the conspiracy until very near the typical running of the statute?  If the government has a satisfactory explanation of why it has resorted to the payments theory, and especially if the defendant’s conduct during the investigation contributed to the delay, then the court should find no due process violation.

The due process analysis we are suggesting is, of course, a deviation from the two-step test the Supreme Court established in Marion, but it is based on a valid distinction from Marion—but for the payments theory, the heir locators’ indictment is barred.  A balancing of the prejudice to the defendant versus the government’s need to use the payments theory, is a more appropriate way for a court to decide whether a case is time-barred than by finding that the ultimate goal of a customer allocation scheme was not economic enrichment.

Some Thoughts on the Case as Former Prosecutors

            Another benefit of a due process analysis is that it would help explain why the government brought a case that is facially so far out of the statute of limitations.  One might conclude, and perhaps Judge Sam did, that the government was simply negligent, and the defendants should not bear the cost of that negligence. After all, the allocation agreement itself was in the form of written “Guidelines,” and the directive ending the “formal” agreement was in a July 2008 email.  The defendants further allege that two disgruntled former Kemp & Associates employees (and potential witnesses) first approached the Antitrust Division in 2008 or 2009.  By all appearances, this seems like a relatively easy conspiracy to “uncover” and prove, so why did the Antitrust Division wait until it had to rely on a payments theory to bring an indictment?

As former prosecutors we can speculate—and it is just speculation– as to why the case was brought using a payments theory to extend the statute.  One possibility that comes to mind is that the government believes that the conspiracy was not abandoned in July 2008.  Perhaps the government has evidence that additional customers were allocated after July 2008 and that the conspiracy in fact continued until the date the defendants received the subpoenas.  Was the Mannix email withdrawing from the conspiracy just a cover and the allocation actually continued “underground?” The government may simply have found it expedient to go with the payments theory rather than disprove the withdrawal email beyond a reasonable doubt.  This, of course, is just speculation–there may be other valid reasons why a payments theory was necessary.  But, often the public facts do not tell the entire story. The Antitrust Division brought a case that appeared to be a straightforward per se customer allocation agreement and used the well accepted payments theory to bring the case within the statute of limitations.  Without a trial or a record of any sort, there is no way to tell whether this was a sound exercise of prosecutorial discretion or not.[13]

The Tenth Circuit may reverse Judge Sam on the statute of limitations issue, in which case the rule of reason versus per se issue will take center stage. Or the appeals court may agree with Judge Sam and limit the payments theory to situations, like Evans, where there is a fixed contract performance time that limits the payments theory extension of the statute of limitations.  But, even in this situation, contracts typically have delays, so the idea of a “fixed contract time” may be somewhat illusory.  While it is not the law currently, our suggestion is that rather than have courts chip away at the legally sound payments theory based on dubious distinctions, defendants should challenge, and courts should assess the fairness of, the government’s use of the payments theory on the basis of due process; i.e., balancing the harm to the defendants against the justification offered by the government for relying on this theory to extend the statute.

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[1] Bob Connolly is a partner with GeyerGorey LLP.  He is the former chief of the Antitrust Division’s Philadelphia Field Office and served for 34 years in the Antitrust Division. He publishes a blog, Cartel Capers.

Karen Sharp is a former trial attorney with the DOJ Antitrust Division, where she investigated and prosecuted national and international antitrust matters for 25 years. She also served as a special assistant United States attorney in the Eastern District of California. Most recently she was counsel for Wilson Sonsini Goodrich & Rosati in San Francisco.  Ms. Sharp can be reached at [email protected].

[2] United States v. Kemp & Associates, Inc., et al., No. 2:16-cr-00403 (D. Utah Aug. 17, 2016) (David Sam J.)16-

[3]   The indictment can be found on the Antitrust Division’s website at https://www.justice.gov/atr/file/887761/download.

[4]  Judge Sam’s memorandum opinion is linked at Law 360, Aug. 29, 2017, Antitrust Charges Against Heir-Tracker Co. Dismissed, available at https://www.law360.com/articles/958574/doj-antitrust-charges-against-heir-tracker-co-dismissed. It can also be found here JudgeSamSOLOrderandMemorandum.

[5]   Opening Brief for the United States, (corrected) (filed January 3, 2018), available at https://www.justice.gov/atr/case-document/file/1020466/download.

[6]  The defendants’ brief is linked at Law 360, February 5, 2018, Heir-Tracking Firm Urges 10th Circ. to Refuse Antitrust Case, available at https://www.law360.com/competition/articles/1009042/heir-tracking-co-urges-10th-circ-to-refuse-antitrust-case.  It can also be found here defendants’ kemp-brief.

[7]   United States v. Evans & Associates Construction Co., 839 F.2d 656 (10th Cir. 1988).

[8]   Id. at 661.

[9]   Id. (quoting United States v. Northern Improvement Co., 814 F.2d 540 (8th Cir. 1987)).

[10]  United States v. Morgan, 748 F.3d 1024, 1036-37 (10th Cir. 2014).

[11]  United States v. Marion, 404 U.S. 307 (1971).

[12]  Id. at 324.

[13] The Antitrust Division already had a significant setback on the “payments theory” in United States v. Grimm, 738 F.3d 498 (2d Cir. 2013), a case where the jury returned guilty verdicts for fixing of municipal bonds.  The last bond fixed was outside the five-year statute of limitations, but payments on the fixed bonds could extend over the life of the bonds—up to thirty years.  The Second Circuit could not accept this extreme extension of the statute of limitations and reversed the convictions ruling that a “[criminal] conspiracy ends notwithstanding the [later] receipt of anticipated profits where the payoff merely consists of a lengthy, indefinite series of ordinary, typically noncriminal, unilateral actions.” Id. at 502 (quotation marks, ellipses, and brackets omitted).

National Health Care Fraud Takedown Results in Charges Against Over 412 Individuals Responsible for $1.3 Billion in Fraud Losses

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Thursday, July 13, 2017

Largest Health Care Fraud Enforcement Action in Department of Justice History

Attorney General Jeff Sessions and Department of Health and Human Services (HHS) Secretary Tom Price, M.D., announced today the largest ever health care fraud enforcement action by the Medicare Fraud Strike Force, involving 412 charged defendants across 41 federal districts, including 115 doctors, nurses and other licensed medical professionals, for their alleged participation in health care fraud schemes involving approximately $1.3 billion in false billings. Of those charged, over 120 defendants, including doctors, were charged for their roles in prescribing and distributing opioids and other dangerous narcotics. Thirty state Medicaid Fraud Control Units also participated in today’s arrests. In addition, HHS has initiated suspension actions against 295 providers, including doctors, nurses and pharmacists.

Attorney General Sessions and Secretary Price were joined in the announcement by Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting Director Andrew McCabe of the FBI, Acting Administrator Chuck Rosenberg of the Drug Enforcement Administration (DEA), Inspector General Daniel Levinson of the HHS Office of Inspector General (OIG), Chief Don Fort of IRS Criminal Investigation, Administrator Seema Verma of the Centers for Medicare and Medicaid Services (CMS), and Deputy Director Kelly P. Mayo of the Defense Criminal Investigative Service (DCIS).

Today’s enforcement actions were led and coordinated by the Criminal Division, Fraud Section’s Health Care Fraud Unit in conjunction with its Medicare Fraud Strike Force (MFSF) partners, a partnership between the Criminal Division, U.S. Attorney’s Offices, the FBI and HHS-OIG.  In addition, the operation includes the participation of the DEA, DCIS, and State Medicaid Fraud Control Units.

The charges announced today aggressively target schemes billing Medicare, Medicaid, and TRICARE (a health insurance program for members and veterans of the armed forces and their families) for medically unnecessary prescription drugs and compounded medications that often were never even purchased and/or distributed to beneficiaries. The charges also involve individuals contributing to the opioid epidemic, with a particular focus on medical professionals involved in the unlawful distribution of opioids and other prescription narcotics, a particular focus for the Department. According to the CDC, approximately 91 Americans die every day of an opioid related overdose.

“Too many trusted medical professionals like doctors, nurses, and pharmacists have chosen to violate their oaths and put greed ahead of their patients,” said Attorney General Sessions. “Amazingly, some have made their practices into multimillion dollar criminal enterprises. They seem oblivious to the disastrous consequences of their greed. Their actions not only enrich themselves often at the expense of taxpayers but also feed addictions and cause addictions to start. The consequences are real: emergency rooms, jail cells, futures lost, and graveyards.  While today is a historic day, the Department’s work is not finished. In fact, it is just beginning. We will continue to find, arrest, prosecute, convict, and incarcerate fraudsters and drug dealers wherever they are.”

“Healthcare fraud is not only a criminal act that costs billions of taxpayer dollars – it is an affront to all Americans who rely on our national healthcare programs for access to critical healthcare services and a violation of trust,” said Secretary Price. “The United States is home to the world’s best medical professionals, but their ability to provide affordable, high-quality care to their patients is jeopardized every time a criminal commits healthcare fraud. That is why this Administration is committed to bringing these criminals to justice, as President Trump demonstrated in his 2017 budget request calling for a new $70 million investment in the Health Care Fraud and Abuse Control Program. The historic results of this year’s national takedown represent significant progress toward protecting the integrity and sustainability of Medicare and Medicaid, which we will continue to build upon in the years to come.”

According to court documents, the defendants allegedly participated in schemes to submit claims to Medicare, Medicaid and TRICARE for treatments that were medically unnecessary and often never provided. In many cases, patient recruiters, beneficiaries and other co-conspirators were allegedly paid cash kickbacks in return for supplying beneficiary information to providers, so that the providers could then submit fraudulent bills to Medicare for services that were medically unnecessary or never performed. The number of medical professionals charged is particularly significant, because virtually every health care fraud scheme requires a corrupt medical professional to be involved in order for Medicare or Medicaid to pay the fraudulent claims.  Aggressively pursuing corrupt medical professionals not only has a deterrent effect on other medical professionals, but also ensures that their licenses can no longer be used to bilk the system.

“This week, thanks to the work of dedicated investigators and analysts, we arrested once-trusted doctors, pharmacists and other medical professionals who were corrupted by greed,” said Acting Director McCabe. “The FBI is committed to working with our partners on the front lines of the fight against heath care fraud to stop those who steal from the government and deceive the American public.”

“Health care fraud is a reprehensible crime.  It not only represents a theft from taxpayers who fund these vital programs, but impacts the millions of Americans who rely on Medicare and Medicaid,” said Inspector General Levinson. “In the worst fraud cases, greed overpowers care, putting patients’ health at risk. OIG will continue to play a vital leadership role in the Medicare Fraud Strike Force to track down those who abuse important federal health care programs.”

“Our enforcement actions underscore the commitment of the Defense Criminal Investigative Service and our partners to vigorously investigate fraud perpetrated against the DoD’s TRICARE Program. We will continue to relentlessly investigate health care fraud, ensure the taxpayers’ health care dollars are properly spent, and endeavor to guarantee our service members, military retirees, and their dependents receive the high standard of care they deserve,” advised Deputy Director Mayo.

“Last year, an estimated 59,000 Americans died from a drug overdose, many linked to the misuse of prescription drugs. This is, quite simply, an epidemic,” said Acting Administrator Rosenberg. “There is a great responsibility that goes along with handling controlled prescription drugs, and DEA and its partners remain absolutely committed to fighting the opioid epidemic using all the tools at our disposal.”

“Every defendant in today’s announcement shares one common trait – greed,” said Chief Fort. “The desire for money and material items drove these individuals to perpetrate crimes against our healthcare system and prey upon many of the vulnerable in our society.  Thanks to the financial expertise and diligence of IRS-CI special agents, who worked side-by-side with other federal, state and local law enforcement officers to uncover these schemes, these criminals are off the street and will now face the consequences of their actions.”

The Medicare Fraud Strike Force operations are 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 3500 defendants who collectively have falsely billed the Medicare program for over $12.5 billion.

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For the Strike Force locations, in the Southern District of Florida, a total of 77 defendants were charged with offenses relating to their participation in various fraud schemes involving over $141 million in false billings for services including home health care, mental health services and pharmacy fraud.  In one case, the owner and operator of a purported addiction treatment center and home for recovering addicts and one other individual were charged in a scheme involving the submission of over $58 million in fraudulent medical insurance claims for purported drug treatment services. The allegations include actively recruiting addicted patients to move to South Florida so that the co-conspirators could bill insurance companies for fraudulent treatment and testing, in return for which, the co-conspirators offered kickbacks to patients in the form of gift cards, free airline travel, trips to casinos and strip clubs, and drugs.

In the Eastern District of Michigan, 32 defendants face charges for their alleged roles in fraud, kickback, money laundering and drug diversion schemes involving approximately $218 million in false claims for services that were medically unnecessary or never rendered. In one case, nine defendants, including six physicians, were charged with prescribing medically unnecessary controlled substances, some of which were sold on the street, and billing Medicare for $164 million in facet joint injections, drug testing, and other procedures that were medically unnecessary and/or not provided.

In the Southern District of Texas, 26 individuals were charged in cases involving over $66 million in alleged fraud. Among these defendants are a physician and a clinic owner who were indicted on one count of conspiracy to distribute and dispense controlled substances and three substantive counts of distribution of controlled substances in connection with a purported pain management clinic that is alleged to have been the highest prescribing hydrocodone clinic in Houston, where approximately 60-70 people were seen daily, and were issued medically unnecessary prescriptions for hydrocodone in exchange for approximately $300 cash per visit.

In the Central District of California, 17 defendants were charged for their roles in schemes to defraud Medicare out of approximately $147 million. Two of these defendants were indicted for their alleged involvement in a $41.5 million scheme to defraud Medicare and a private insurer. This was purportedly done by submitting fraudulent claims, and receiving payments for, prescription drugs that were not filled by the pharmacy nor given to patients.

In the Northern District of Illinois, 15 individuals were charged in cases related to six different schemes concerning home health care services and physical therapy fraud, kickbacks, and mail and wire fraud.  These schemes involved allegedly over $12.7 million in fraudulent billing. One case allegedly involved $7 million in fraudulent billing to Medicare for home health services that were not necessary nor rendered.

In the Middle District of Florida, 10 individuals were charged with participating in a variety of schemes involving almost $14 million in fraudulent billing.  In one case, three defendants were charged in a $4 million scheme to defraud the TRICARE program.  In that case, it is alleged that a defendant falsely represented himself to be a retired Lieutenant Commander of the United States Navy Submarine Service. It is alleged that he did so in order to gain the trust and personal identifying information from TRICARE beneficiaries, many of whom were members and veterans of the armed forces, for use in the scheme.

In the Eastern District of New York, ten individuals were charged with participating in a variety of schemes including kickbacks, services not rendered, and money laundering involving over $151 million in fraudulent billings to Medicare and Medicaid. Approximately $100 million of those fraudulent billings were allegedly part of a scheme in which five health care professionals paid illegal kickbacks in exchange for patient referrals to their own clinics.

In the Southern Louisiana Strike Force, operating in the Middle and Eastern Districts of Louisiana as well as the Southern District of Mississippi, seven defendants were charged in connection with health care fraud, wire fraud, and kickback schemes involving more than $207 million in fraudulent billing. One case involved a pharmacist who was charged with submitting and causing the submission of $192 million in false and fraudulent claims to TRICARE and other health care benefit programs for dispensing compounded medications that were not medically necessary and often based on prescriptions induced by illegal kickback payments.

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In addition to the Strike Force locations, today’s enforcement actions include cases and investigations brought by an additional 31 U.S. Attorney’s Offices, including the execution of search warrants in investigations conducted by the Eastern District of California and the Northern District of Ohio.

In the Northern and Southern Districts of Alabama, three defendants were charged for their roles in two health care fraud schemes involving pharmacy fraud and drug diversion.

In the Eastern District of Arkansas, 24 defendants were charged for their roles in three drug diversion schemes that were all investigated by the DEA.

In the Northern and Southern Districts of California, four defendants, including a physician, were charged for their roles in a drug diversion scheme and a health care fraud scheme involving kickbacks.

In the District of Connecticut, three defendants were charged in two health care fraud schemes, including a scheme involving two physicians who fraudulently billed Medicaid for services that were not rendered and for the provision of oxycodone with knowledge that the prescriptions were not medically necessary.

In the Northern and Southern Districts of Georgia, three defendants were charged in two health care fraud schemes involving nearly $1.5 million in fraudulent billing.

In the Southern District of Illinois, five defendants were charged in five separate schemes to defraud the Medicaid program.

In the Northern and Southern Districts of Indiana, at least five defendants were charged in various health care fraud schemes related to the unlawful distribution and dispensing of controlled substances, kickbacks, and services not rendered.

In the Southern District of Iowa, five defendants were charged in two schemes involving the distribution of opioids.

In the Western District of Kentucky, 11 defendants were charged with defrauding the Medicaid program.  In one case, four defendants, including three medical professionals, were charged with distributing controlled substances and fraudulently billing the Medicaid program.

In the District of Maine, an office manager was charged with embezzling funds from a medical office.

In the Eastern and Western Districts of Missouri, 16 defendants were charged in schemes involving over $16 million in claims, including 10 defendants charged as part of a scheme involving fraudulent lab testing.

In the District of Nebraska, a dentist was charged with defrauding the Medicaid program.

In the District of Nevada, two defendants, including a physician, were charged in a scheme involving false hospice claims.

In the Northern, Southern, and Western Districts of New York, five defendants, including two physicians and two pharmacists, were charged in schemes involving drug diversion and pharmacy fraud.

In the Southern District of Ohio, five defendants, including four physicians, were charged in connection with schemes involving $12 million in claims to the Medicaid program.

In the District of Puerto Rico, 13 defendants, including three physicians and two pharmacists, were charged in four schemes involving drug diversion, Medicaid fraud, and the theft of funds from a health care program.

In the Eastern District of Tennessee, three defendants were charged in a scheme involving fraudulent billings and the distribution of opioids.

In the Eastern, Northern, and Western Districts of Texas, nine defendants were charged in schemes involving over $42 million in fraudulent billing, including a scheme involving false claims for compounded medications.

In the District of Utah, a nurse practitioner was charged in connection with fraudulently obtaining a controlled substance, tampering with a consumer product, and infecting over seven individuals with Hepatitis C.

In the Eastern District of Virginia, a defendant was charged in connection with a scheme involving identify theft and fraudulent billings to the Medicaid program.

In addition, in the states of Arizona, Arkansas, California, Delaware, Illinois, Iowa, Louisiana, Massachusetts, Michigan, Minnesota, Mississippi, New York, Oklahoma, Pennsylvania, Rhode Island, South Dakota, Texas, Utah, Vermont and Washington, 96 defendants have been charged in criminal and civil actions with defrauding the Medicaid program out of over $31 million. These cases were investigated by each state’s respective Medicaid Fraud Control Units. In addition, the Medicaid Fraud Control Units of the states of Alabama, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Missouri, Nebraska, New York, North Carolina, Ohio, Texas, and Utah participated in the investigation of many of the federal cases discussed above.

The cases announced today are being prosecuted and investigated by U.S. Attorney’s Offices nationwide, along with Medicare Fraud Strike Force teams from the Criminal Division’s Fraud Section and from the U.S. Attorney’s Offices of the Southern District of Florida, Eastern District of Michigan, Eastern District of New York, Southern District of Texas, Central District of California, Eastern District of Louisiana, Northern District of Texas, Northern District of Illinois and the Middle District of Florida; and agents from the FBI, HHS-OIG, Drug Enforcement Administration, DCIS and state Medicaid Fraud Control Units.

A complaint, information, or indictment is merely an allegation, and all defendants are presumed innocent unless and until proven guilty.

Additional documents related to this announcement will shortly be available here: https://www.justice.gov/opa/documents-and-resources-july-13-2017.

This operation also highlights the great work being done by the Department of Justice’s Civil Division.  In the past fiscal year, the Department of Justice, including the Civil Division, has collectively won or negotiated over $2.5 billion in judgements and settlements related to matters alleging health care fraud.