ZALMA’S INSURANCE FRAUD LETTER

A ClaimSchool? Publication ? 2021, Barry Zalma & ClaimSchool, Inc., Go to my blog & Videos at: Zalma on Insurance And at https://zalma.com/blog  Go to the Insurance Claims Library, Listen to the Podcast: Zalma on Insurance, Videos from Zalma on Insurance,  

Volume 25, Issue 6 – March 15, 2021

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Quote of the Issue

“There’s no such thing as a foreseeable future” - David McCullough

Proving Fraud by A Predetermined Treatment Protocol

RICO Action Against Medical Providers Raises Discovery Difficulties

Insurance companies who claim to be the victims of health care providers operating in a no fault auto insurance state like Florida. In Government Employees Insurance Co., et al. v. Mark A. Cereceda, et al., CASE NO. 19-22206-CIV-ALTONAGA/GOODMAN, United States District Court Southern District of Florida Miami Division (January 15, 2021) where Plaintiffs filed a 406-page Complaint asserting 43 counts and attaching more than 8,500 pages of spreadsheets as exhibits. Specifically, Government Employees Insurance Co. (“Geico”) and related Geico entities (“Geico,” collectively) sued chiropractor (Mark A. Cereceda), other healthcare providers, and myriad LLCs which purportedly provided fraudulent healthcare services. Geico alleges that Cereceda is the managing member and owner of the LLCs.

When an insurer sues a health care provider for fraud based on the provider’s submission of bills for services rendered pursuant to a predetermined protocol, the insurer is alleging that the provider purported to treat an entire patient population in a cookie-cutter manner which, in fact, makes no medical sense, in order to financially enrich the provider by maximizing collection of the patients insurance benefits. Indeed, in predetermined-protocol cases, insurers often explain that the fraudulent nature of each bill or claim is not apparent when reviewed in isolation. Proving each of thousands of false bills would be difficult and not cost effective. That is why courts allow proof by proving predetermined Treatment Protocols where everyone receives the same treatment. The Defendants' demands for discovery chill the opportunity to prove the claimed fraud.

FACTS

Geico alleges that Defendants billed it for fraudulent healthcare services as the assignees of the Geico insureds’ no-fault (personal injury protection, or “PIP”) insurance benefits. Geico’s lawsuit is based on 456,612 invoices, reflecting purported healthcare services provided to approximately 8,000 patients.

During discovery, Defendants propounded interrogatories designed to obtain the specifics of Geico’s allegations. Geico’s response was that everything was improper. Specifically, Geico (which is seeking to recover $20 million) provided supplemental interrogatory answers declaring that all charges were fraudulent.

Geico contends that it need not provide any further detail because courts have permitted insurance carriers to bring these types of lawsuits by alleging an overall scheme to use pre-determined protocols for patients, without regard for the individual circumstances of each patient.

Defendant’s Discovery Motion

Defendants filed a motion to dismiss the lawsuit arguing that the Court “should be skeptical that Geico’s shotgun approach of listing every invoice for every patient without delineating which services it is not contesting as legitimately medically rendered can pass muster under Federal Rule 11.” (emphasis in original)]. United States District Judge Cecilia M. Altonaga denied the dismissal motion. At the hearing on Defendants’ motion to dismiss, Judge Altonaga ruled that the complaint “more than satisfies Rule 12(b)(6) and the pleading standards for the fraud-based claims that are alleged in it.”

Plaintiffs further amended some of their responses with 10 illustrations involving 32 massage treatments, a manual therapy treatment, five hot/cold treatments, five ultrasound treatments, four additional massage treatments, 28 ultrasound treatments, six group therapeutic procedure treatments, five additional ultrasound treatments, four chiropractic manipulation treatments, eight group therapeutic procedure treatments, eight additional chiropractic manipulation treatments, 11 more ultrasound treatments, 17 more ultrasound treatments, 17 more chiropractic manipulation treatments, 12 additional ultrasound treatments, and 12 additional massage treatments.

Geico’s counsel explained to Judge Goodman that its expert report did not discuss specific patient files or give conclusions on a patient-by-patient basis – but that the expert might, at trial, discuss certain specific patient files in order to explain his conclusions and provide concrete, in-context illustrations of his views.

Geico’s expert, Dr. James Dillard, whose report represents that he reviewed more than 450,000 invoices concerning approximately 8,000 patients. But none of his opinions or conclusions mention any specific patient, file, or service.

Dr. Dillard’s report opined that Defendants’ practices used pre-determined treatment protocols for “the substantial majority” of their patients, which “primarily” consisted of medically unnecessary purported services without regard for the individual circumstances of the patients subject to these services. He also concluded that in a “significant” number of cases the purported therapy services “evidently” were performed by unsupervised individuals who lacked credentials to perform the services without direct supervision.

Jean Acevedo, one of Defendants’ experts, opined that there is no evidence to suggest any pattern of fraudulent claims.

Federal courts presiding over no-fault insurance (PIP) fraud cases like this one have held that a plaintiff insurer can establish the absence of medical necessity by demonstrating that a defendant healthcare provider used “a pre-determined treatment protocol that resulted in a large cohort of patients receiving substantially similar treatment regardless of their individualized circumstances.” Moreover, courts have rejected the argument that a determination of liability requires a plaintiff-insurer to produce some additional, individualized proof to demonstrate that each of the healthcare services at issue was medically unnecessary.

Judge Goodman stated that he was comfortable with the notion that a carrier may, if it wishes, draft a complaint using the protocol theory and then use that approach again at trial. Geico has already survived a motion to dismiss and it will presumably be able to get to trial on the same theory of a broad-based fraud based on pre-determined medical protocols.

Geico and its experts have not analyzed the case on a patient-by-patient, claim-by-claim, service-by-service basis. It would require a massive effort for Geico to do that now. Moreover, because Geico may be able to prevail at trial on this theory, it has no need of its own to generate a comprehensive claim-by-claim analysis.

If Geico were to proceed at trial with only evidence of Defendants’ overall business model, then the failure to provide specific discovery responses would be understandable.

The Court has the power to prevent an unfair result by giving Geico a choice on how to proceed and by limiting trial evidence if necessary, depending on which alternative Geico selects. A court may limit the scope of evidence or theories of liability a party may offer in support of its case based on its discovery responses or expert reports.

Adopting that common sense approach, the Court’s solution was to give Geico a choice:

• if it sticks with its chosen strategy of using a non-specific protocol approach, then its experts will not be able to testify about any specific patient, claim or service — even if it is for “illustration” purposes.
• if Geico wants to preserve its ability to have an expert give trial testimony which mentions in any way any specific claim, patient, or service, then it will need to fully and specifically answer the interrogatories at issue.

Given Dr. Dillard’s conclusions that are phrased with terminology which seem to reflect a less-than-all assessment of claims as being fraudulent (i.e., “substantial majority,” “primarily,” “significant number,” “large number,” “and “very small percentage”). On the other hand, if Geico does not change its approach but Defendants question Geico’s experts about specific patients, files, and services at either a deposition or at trial, then Defendants will have “opened the door” and given Geico the opportunity to have its experts discuss specifics, whether for illustrative purposes or otherwise. But asking a general question about what the expert did or did not do will not cause the door to be opened.

If Geico decides to preserve its ability to introduce specific evidence about particular claims or patients or services, then it must provide the comprehensive interrogatory answers within 30 days of giving notice of its strategic solution.

ZIFL OPINION

An insurer alleging fraud based on a predetermined treatment protocol should not have to prove that each claim, in a vacuum, is fraudulent. A middle-ground accepted by courts allows insurers to rely on non-credible patterns in providers’ bills and documentation to explain globally why groups of claims are fraudulent, provided the insurer sufficiently identifies the claims at issue. It can also use specific cases to prove the pattern or fraud but then it must respond in detail to discovery requests. In that regard I have seen in my practice medical billing and reporting that was identical to multiple patients except for the name of the patient. If Geico can show that type of fraud it will have no problem with the RICO action proof and will not need to answer interrogatories about the thousands of fraudulent claims.

 When You Do the Crime, You Must Do the Time

Doctor Unsuccessfully Claimed He Was A “Patsy” Who Was Talked into Helping A Criminal

After convictions and sentences for conspiring to commit healthcare fraud, conspiring to possess with intent to dispense controlled substances, and seven counts of unlawfully dispensing a controlled substance. On appeal, he argued that insufficient evidence supported his convictions, the jury instructions were improper, and his sentences were improperly calculated. In United States of America v. Arman Abovyan, No. 19-10676, United States Court of Appeals for The Eleventh Circuit (February 22, 2021) he asked the Eleventh Circuit to reverse his conviction and let him go free to practice medicine.

FACTUAL BACKGROUND

A healthcare fraud conspiracy was orchestrated by Kenneth Chatman, a convicted felon with no medical training. Chatman owned and operated two substance-abuse treatment centers, Reflections Treatment Center (“Reflections”) and Journey to Recovery (“Journey”), in South Florida. The Facilities offered various levels of outpatient substance-abuse treatment for individuals suffering from drug and alcohol addiction, some of whom resided at separate “sober homes” and “halfway houses.”

The defendant Arman Abovyan was a primary-care physician, board-certified in internal medicine, with a private medical practice. Although Abovyan had no prior experience in substance-abuse medicine, but allowed Chatman to recruit him to be the medical director of the Facilities.

As medical director, Abovyan’s duties included providing substance-abuse treatment, authorizing and ordering drug testing, and prescribing drug-treatment medication. Abovyan’s employment contract specified that he would work around 18.5 hours per week and be paid $11,000 per month. In practice, Abovyan was present at the Facilities only about nine hours per week or less. Abovyan remained as the Facilities’ medical director until federal authorities executed search warrants and shut them down in December 2016.

The Healthcare Fraud Scheme

The healthcare fraud scheme involved over 20 individuals. Chatman paid kickbacks to the owners of sober homes and halfway houses in exchange for them sending their patients to the Facilities for treatment and drug testing.

Abovyan’s Role in Ordering Tests

To help Chatman submit as many specimens as possible to Smart Lab and Ally, Abovyan ordered and authorized excessive lab drug testing that was medically unnecessary.

Co-conspirator Gatt testified that Abovyan pre-signed Ally saliva testing requisition forms so that Gatt and others could make copies of them. Abovyan knew that they were photocopying his pre-signed requisition forms so that he “did not have to continually sign off on each individual form.”

These tests were not specialized to a named patient or a patient’s background. Rather, Abovyan admitted that he established this testing protocol because that was “what Kenneth Chatman . . . wanted.”

When a patient did not show up for testing, various staff provided their own urine for lab analysis, at Chatman’s direction. LaFrance also collected saliva samples and filled out Abovyan’s pre-signed Ally requisition forms, which she gave to Gatt.

Abovyan’s Role in “Treatment”

The Facilities also made money by billing patients’ insurance for outpatient “treatment.” The Facilities’ treatment services included therapy sessions, medical checkups, and drug-treatment medication. In reality, the patients received no real medical treatment.

In addition to excessive drug testing orders, Abovyan prescribed Suboxone to his patients, even though he was not licensed to do so. Despite being the Facilities’ main doctor, Abovyan largely delegated his treatment duties. He pre-signed prescription pads for his nurses to fill in the patient name, drug, and diagnosis without his being present.

The FBI interviewed Abovyan in June 2017. Abovyan admitted that he: (1) signed the standing lab orders; (2) ordered whatever lab tests that Chatman wanted three times per week per patient; (3) provided the nurse practitioners with pre-signed, blank prescription pads; and (4) received additional payments for detox and treatment services, and was paid $5,000 per month “so that Kenny Chatman could use [Abovyan’s] medical license to bill insurance.”

TRIAL

During his FBI interview, Abovyan explained his attitude about patients’ drug use after they left daily “treatment” at Reflections and returned to the halfway houses: “whatever happens happens.”

The government’s expert witness, Dr. Clark explained that Abovyan pretextually prescribing Suboxone for “pain/withdrawal” without an X Number was only one of many factors underlying her opinion that Abovyan’s prescriptions were not for a legitimate medical purpose. Dr. Clark explained that Suboxone is an excellent medication for use in treatment of an opioid disorder. But Abovyan was only prescribing controlled substances and was not treating his patients.

Defense and Verdict

Abovyan’s defense was that he was an “unwitting patsy,” who was used by Chatman and others for their criminal scheme and argued that “Abovyan had no knowledge” about excessive urine testing.

The jury convicted Abovyan on Counts One through Nine and acquitted him on Count Ten. The district court denied Abovyan’s motion for judgment notwithstanding the verdict or for a new trial.

The district court sentenced Abovyan to 120 months’ imprisonment on his Counts One through Eight convictions, to run concurrently, and a consecutive 15-month sentence on his Count Nine conviction. The district court ordered $1,058,097.88 in restitution to the defrauded insurance companies.

A healthcare fraud conspiracy exists when defendants agree to submit false claims to a healthcare benefit program, such as an insurance plan. Although largely circumstantial, the government introduced ample evidence to support Abovyan’s conviction for conspiring to commit healthcare fraud. Abovyan’s full cooperation with Chatman, along with Abovyan’s own medical conduct, advanced the healthcare fraud scheme. The government proved Abovyan not only agreed to join the conspiracy but also willfully participated in it and knew of its essential nature.

Overwhelming evidence was presented showing Abovyan’s role and conduct that was central to the criminal conspiracy and its success, his consistent and ongoing participation in the scheme throughout his tenure as medical director, and his significant financial gains from the scheme.

Abovyan violated federal law by prescribing a drug, buprenorphine, without the required training, licensing, and X Number.

In this particular case, there was no dispute that there was a healthcare fraud conspiracy and its object—healthcare fraud—did occur.

By the time of Abovyan’s trial, numerous people were already convicted for their involvement in Chatman’s healthcare fraud scheme at the Facilities, and three of them testified in Abovyan’s trial.

Abovyan’s convictions and sentences we affirmed in a 51 page decision.

ZIFL OPINION

Professionals, like Dr. Aboyyan, will usually claim to be innocent dupes of the criminals, like Chatman, who created the insurance fraud scheme. In reality, Dr. Aboyyan was happy to take $11,000 a month for little or no work. He knew it was wrong, he knew his actions were criminal, he knew he was participating in a fraud and admitted that to the FBI and an investigator for one of the insurers that he defrauded. He used his ill-gotten gains to pay lawyers to file an excessive and detailed appeal that required over 51 pages of opinion for the Eleventh Circuit to affirm his conviction. Hopefully they will take his assets to collect the restitution ordered. He has lost his license and will find time to reconsider his criminal conduct as he sits alone in the gray bar hotel. Hopefully the government will collect on the money ordered.

 Wisdom

“Trouble knocked at the door, but, hearing laughter, hurried away.” – Benjamin Franklin

"The strongest argument for free enterprise is that it prevents anybody from having too much power. Whether that person is a government official, a trade union official, or a business executive. If forces them to put up or shut up. They either have to deliver the goods, produce something that people are willing to pay for, are willing to buy, or else they have to go into a different business." —Milton Friedman

“A clown may be first in the kingdom of Heaven, if he has helped lessen the sadness of human life.” — Talmud

"Dependence begets subservience and venality, suffocates the germ of virtue, and prepares fit tools for the designs of ambition." —Thomas Jefferson

“What we do is more important than what we say or what we say we believe.” – Bell Hooks

"Character is like a tree and reputation like a shadow. The shadow is what we think of it; the tree is the real thing." —Abraham Lincoln

"The truth is that, to many people calling themselves Socialists, revolution does not mean a movement of the masses with which they hope to associate themselves; it means a set of reforms which 'we', the clever ones, are going to impose upon 'them', the Lower Orders." — George Orwell

"Without Freedom of Thought there can be no such Thing as Wisdom; and no such Thing as Public Liberty, without Freedom of Speech." —Benjamin Franklin

"When more of the people's sustenance is exacted through the form of taxation than is necessary to meet the just obligations of government, such exaction becomes ruthless extortion and a violation of the fundamental principles of a free government." —Grover Cleveland

“The difference between stupidity and genius is that genius has its limits.” – Albert Einstein

Insurance Fraud Should Not Be A Retirement Plan

Insurance Fraud Gets You Three Squares and a Cot

Every insurer is required by its shareholders, members, state statutes and state regulations to do everything possible to deter and defeat attempts at insurance fraud. Most insurers, therefore, have a staff of fraud investigators working under their Special Investigative Unit (SIU) and the SIU works to train the claims handlers to recognize the indicators or red flags of fraud. 

Much to the surprise of the public, lawyers, and even some judges, defrauding an insurance company is a crime. In most states, insurance fraud is a felony that could subject the perpetrator to as much as five years in state prison plus serious fines. If the fraud is attempted by use of the mail or telephone, internet, e-mail or against a federal insurance program like Medicare, Medicaid and the National Flood Insurance Program (NFPA) it can also be prosecuted as a federal felony.

Insurance fraud is a crime that should be easy for a prosecutor to prove since all that is required is to prove the insurance criminal knowingly presented a claim for the payment of insurance contract benefits to which the perpetrator is not entitled or the submission of a single false document or oral statement in support of the crime. However, state prosecutors are reluctant to prosecute the crime, regardless of the state where it is committed, because they believe it is their duty to prosecute violent crimes. Financial crimes, like insurance fraud, they believe only hurts rich insurance companies and are not worthy of their efforts.

Because of the lack of aggressive prosecution, insurance fraud attempts often succeed. No one knows how much money insurance fraud takes from the insurance industry because not all fraud attempts are discovered. In fact, most attempts at insurance fraud succeed. The best estimates made by insurance fraud professionals about the cost of insurance fraud conclude that fraud takes between $80 billion and $300 billion every year. Even those who are convicted are ordered to make restitution of less than the amount they probably stole, are given probation or a short time in jail. Those who are imprisoned will still have part of their ill-gotten gains left to live well. Many, after arrest or conviction work to run more fraudulent claims to pay the ordered restitution.

A Change in those Who Commit Fraud

In my 53 years in the insurance claims business most insurance fraud perpetrators were young. Some were middle-aged. It seemed that none were of retirement age or elderly. Claims presented by the elderly were paid with little or no investigation because reasonable and prudent claims people assumed that an elderly person would not try to treat the insurer. In fact, when I was a young adjuster 50 years ago, elderly insureds attempted to reduce their claims because they did not think it was fair to receive replacement cost for an old television set even though they paid a premium to get that coverage. Adjusters, like me 50-years-ago, insisted on paying what was owed.

Today, as people in the pre-Baby Boom generation and the Baby Boom generation (those born after the end of World War II in 1945) reach retirement they find that they have spent everything they earned in their youth to support their children and elderly parents and a comfortable life style. When they decide it is time to stop working, they are shocked to find that they have nothing left to support themselves. Since they are quickly becoming physically unable to continue to work their moral compass spins out of control.

A person 65-years-old and older can’t afford to live on Social Security benefits. Because the felony of insurance fraud is seldom prosecuted – prosecutors claim they are compelled to deal with injury causing violent crimes – before a crime against an insurer for nothing more than money. I have been writing Zalma’s Insurance Fraud Letter (ZIFL) twice a month for more than 25 years and have seen that more and more people who are convicted of insurance fraud are above the age where they can collect Social Security. Many are professionals: Doctors, Chiropractors, Nurse Practitioners, and lawyers.

Those who determine the only way they can gather sufficient funds to support a comfortable retirement is to engage in insurance fraud have not read the criminal statutes making insurance fraud a crime or the federal statutes making it a crime to take advantage of government created quasi-insurers like Medicaid and Medicare. As a result, some are caught, prosecuted and convicted of insurance fraud, wire fraud, or health care fraud. Most are not.

The Insurance Claims & SIU Investigators Must Consider the Elderly as a Potential Fraud

Most of the elderly professionals, by definition, are high earners who had income sufficient to invest and save for their retirement. There seems to be no logical reason that such a professional would even think about insurance fraud. However, many of the people in my age cohort – those born after the onset of World War II – had it too good. They earned a lot and spent everything they earned and borrowed money allowing them to spend more than they earned.

Insurers must train their claims and SIU personnel to disabuse them of the prejudice that brings about the belief that an elder will not consider defrauding the insurer. Any one or more of the fraudulent claims events that fit within the definition of insurance fraud must be discovered by every insurer and reported to the state’s Department of Insurance or prosecutors.

Medical Professional Fraud

Most health insurance fraud perpetrators should be easy to catch if the insurance company SIU, the DOJ, the FBI and HHS investigators had the funds to properly and effectively investigate the crimes. The methods used by health care providers to defraud insurers and Medicare, Medicaid or other government programs include any possible means to bill an insurer or government based organization.

Because the government medical assistance programs are bleeding cash the DOJ is becoming more aggressive in its efforts to stop fraud. They are limited, however, by lack of funding, to investigate cases in major metropolitan areas. As a result, a massive majority of health insurance crimes are not prosecuted.

Property Insurance Fraud

Insurance companies, bound by the implied covenant of good faith and fair dealing and state insurance department regulations, are required to believe those who seek insurance, about the value of the property the risk of loss of which the insurer agreed to insure. A Professional would not be questioned if he or she presented a request to insure jewelry, furs, sculptures, paintings, or antiques with high valuations.

The scheduled personal property insurance policy called the Personal Articles Floater (PAF) is an all risk of loss policy with few conditions or exclusions. If an insured has a schedule of $2 million in jewelry based upon a fictitious appraisal, the policy can be turned to cash by advising the insurer that the jewelry was simply lost. There is no reason to even fake a robbery, theft or other insured against peril.

A few years ago, I represented an insurer who was faced with an unusual theft claim presented by an 85-year-old grandmother who claimed her major schedule of antiques, silver, china and fine arts were stolen by a cleaning person she had hired from a notice on her grocery store bulletin board. She claimed the cleaning solution fumes had caused her to faint and when she came back to her senses the cleaning person – “Juanita” whose last name was unknown – was gone and all the grandmother’s property apparently was stolen by Juanita. The claim was for more than $1,750,000 and was supported by an appraisal with detailed descriptions, hand drawn images of each item appraised and signed by the appraiser. It took my investigator three months to locate the appraiser. The appraiser, regardless of the date stated on the appraisal, had died in the attack on Pearl Harbor and was buried in Oahu in December 1941.

 The claim was denied. The grandmother contacted multiple lawyers who would call every three months or so threatening to sue the insurer but gave up when I advised the lawyer of how the fraud was detected and the sweet old grandmother was actually a fraud. Eventually she gave up.

Recommendations

Insurance claims adjusters, special investigation unit investigators, claims management, Fraud Division investigators, FBI Agents, HHS agents must all understand that simply because a person is elderly is not a reason to conclude a claim is honest. The professional claims person should never believe it is impossible that an old man or woman would commit fraud. Rather, the insurance claims professional should understand that there is a higher probability that a major claim presented by an elderly person is an attempt at fraud than a claim presented by Millennial.

Regardless of the age or profession of the person making a claim, if three or more red flags of fraud appear in the claims investigation, a detailed and extensive insurance fraud investigation is required, regardless of the age of the insured/claimant. If the investigation establishes that a fraud is being attempted the claim must be rejected and any lawsuit that follows from the insurance fraud perpetrator should be rejected and tried to a jury or judge until all appeals are rejected.

 Good News From the Coalition Against Insurance Fraud

The owner of a farm labor firm underreported $11M of payroll to illegally lower workers comp premiums. Felipe Suarez Barocio ran Agricultural Services, in Merced County, Calif. He and his daughter provided the state workers comp fund with fake quarterly employee payroll reports. The insurance department discovered $11M in missing payroll after comparing the quarterly reports to the quarterly reports submitted to the state Employment Development Department. The scam lowered the firm’s comp premiums by nearly $2.6M. Barocio received 10 years in state prison. So did his daughter Angelita Barocio-Negrete, who was office manager. The California insurance department led the investigation.

The elderly administrator of a California hospice agency must repay more than $2.1M after handing out illegal kickbacks to patient recruiters for referring patients to the outfit. Antonio Olivera played a key role in the large $28M Medicare con. He ran Mhiramarc Management, which provides hospice services in Downey, Calif. Olivera also overruled his staff’s clinical decisions when they found that Medicare beneficiaries didn’t need hospice care. The patients were forced into expensive hospice even though they weren’t dying. The hospice firm made about $28M in Medicare claims, resulting in $17M of overpayments. Olivera pled guilty and received 30 months in federal prison.

A youth minister’s Affordable Care Act drug-treatment scam grew so large that it skewed premiums across the U.S. and cost nearly $28M in losses. Jeffrey White worked at a rural church in the mountains north of San Bernardino, Calif. He created false addresses and other identifiers that allowed addicted patients to buy insurance outside the annual enrollment window. It also allowed residential in-patient treatment in places far from their homes where the local exchanges offered more-generous coverage. White fraudulently enrolled 300 people in residential treatment programs in 12 states. The 163 fraudulent enrollees White directed to health insurers so skewed the actuarial tables in some exchanges that insurers raised premiums in states such as Arizona. White was also paid kickbacks from the treatment facilities and hospitals where he directed addicts — disguised as consulting fees. White claimed he didn’t know he was breaking the law. He earned three years in federal prison.

A couple burned down their mansion when fire raced out of control after the wife clumsily tried to burn medical records to escape a probe of their $10M medical scam. Osteo doctor Mark Kuper was handed 10 years in federal prison in Fort Worth, Tex. Kuper fraudulently billed insurers for services, physical therapy and psychotherapy that colluding clinics never gave. Kuper sometimes billed more than 100 hours of work in a single day. He also required patients to attend bogus appointments to receive opioids. Kuper gave his wife Melissa access to a secure device and code he used to sign opioid scripts. That let her improperly dispense pain meds without Kuper’s involvement. Mark also claimed his clinics developed personalized physical therapy plans for each patient. The patients actually met in groups with an athletic trainer who was unqualified to perform PT. Melissa set fire to billing and medical records in an outdoor fireplace behind their $1.6M mansion as investigators closed in. The blaze spread to their home, gutting the building. Firefighters found charred records in the fireplace. The Kupers fleeced Medicare, Medicaid and TRICARE.

Fraud of the Month from the Coalition

Kelly Wolfe, a Florida businesswoman was sued and prosecuted for operating a sprawling network of illegitimate durable medical equipment (DME) companies Wolfe, of Indian Rocks Beach, FL admitted to masterminding a $400M DME scam aimed at Medicare and CHAMPVA (Civilian Health Civilian Health and Medical Program of the VA) recipients. She pled guilty to conspiracy to commit health care fraud and filing a false tax return.

Wolfe ran Regency Inc., a medical billing company she used to set up a series of fraudulent medical supply companies. She used Regency to falsify the documents necessary for her and her co-conspirators to use straw owners to procure and operate as many as 50 fly-by-night medical supply companies in the Tampa Bay-area. A local TV station investigated Wolfe’s activities, and found that DME offices tied to her criminal enterprise were routinely staffed with just a few employees and the office spaces were filled with hip, wrist, and knee braces. The recipients would then receive notification that the equipment had been billed to their Medicare or CHAMPVA plan.

According to court documents, Wolfe and her conspirators bribed doctors to approve unneeded equipment. Once the network was established, they billed more than $400M worth of claims to taxpayer funded plans –– justifying the enormous volume of claims as “telehealth visits.” Local seniors, unaware that they had been conscripted into the scheme, reported receiving medical braces in the mail that they never ordered from companies they’d never heard. The equipment was almost always from doctors to whom they’d never spoken. Wolfe’s DME companies were among the businesses raided in a nationwide fraud investigation entitled “Operation Brace Yourself.” Many of them shut down after the FBI raids. Wolfe’s tax charge stems from her admission to using Regency’s funds for personal items that did not qualify as legitimate business expenditures.

A former Regency employee turned whistleblower is entitled to 23% of the $20.3M False Claims Act lawsuit brought against Wolfe and her company. The suit resolves a number of claims that Regency violated the False Claims Act in a number of ways: including falsifying documentation in order to fraudulently establish DME corporations to bill for medically unnecessary DME equipment, and engaging in improper marketing practices that violated the Anti-Kickback Statute.

Wolfe faces a maximum penalty of 13 years in prison for her crimes. She is currently awaiting sentencing.

Taking Insurance Check & Cashing It Twice Is Fraud

Insurance Fraudster & Thief Appeals Conviction Requiring A 35 Page Opinion Affirming the Conviction

Henry Pratt, appealed nunc pro tunc from the November 5, 2015 judgment of sentence imposed by the Philadelphia Court of Common Pleas. His appeal was rejected in Commonwealth of Pennsylvania v. Henry Pratt, J-S46024-20 No. 2961 EDA 2019, Superior Court of Pennsylvania (February 26, 2021) in a 35 page opinion considering all of Pratt’s claims of error that, as you read the facts, you will see was a total waste of the court’s time.

FACTS

Henry Pratt, the Appellant financed a 2004 Bentley through Chase Auto Finance (Chase), a subdivision of JP Morgan Chase Bank. June 11, 2015, N.T. at 112. He then purchased an auto insurance policy from Progressive Casualty (Progressive) for the Bentley. Shortly thereafter Appellant filed an insurance claim with Progressive for damage to the Bentley. Appellant declined a preferred network service and instead stated that he wanted the car to be repaired by Magic Auto Body Shop (Magic). On the same day that the claim was made, Appellant requested a change in his insurance coverage. Specifically, Appellant sought to lower his deducible from $1,000 to $500.

Progressive eventually issued a check in the amount of $10,497.39, made payable to both Appellant and Chase. A cashier at Delmar cashed the check, gave the money to Appellant, whereupon Delmar submitted the check to its bank for payment. The owner of Delmar received a fax from its bank indicating that the check was being returned because the check required a second endorsement. Delmar was told that its bank was not going to honor the check because the check was not properly endorsed. She gave the check to Appellant who promised to have it endorsed but he never returned with the properly endorsed check.

Appellant called Progressive and stated that he lost the original check for $10,497.39 that was previously issued. Progressive stopped the payment on the original check and reissued the check only to have Pratt present it to United Check Cashing (hereinafter “United”) in Philadelphia, Pennsylvania and presented the reissued check that was cashed and Appellant received the money.

Later, Magic called Progressive and requested a supplemental check in the amount of $5,065.17, made payable to Appellant and Magic, for additional work completed on the Bentley. Eventually, a Chase fraud investigation agent reviewed Appellant’s reissued $10,497.39 check. The check had a stamped endorsement of “Chase Auto Finance,” however, the agent determined that the stamped endorsement was not valid.

On October 28, 2009, Appellant filed another insurance claim because of damage which the Bentley incurred near the intersection of 15th and Snyder Streets in Philadelphia, Pennsylvania. A new insurer investigated and believed fraud was being attempted because the damage was identical to that for the earlier claim. He was eventually arrested.

THE TRIAL BY JURY

Appellant proceeded to a jury trial. On June 18, 2015, the jury found Appellant guilty of insurance fraud, conspiracy to commit insurance fraud, and attempted theft by deception, and acquitted him of forgery. On November 5, 2015, the trial court imposed merciful concurrent terms of six to twelve months of incarceration, with immediate parole, followed by four years of probation for each of the insurance-fraud and conspiracy convictions, and eleven and one-half to twenty-three months of incarceration, with immediate parole, followed by four years of probation for the attempted theft-by-deception conviction. Regardless, Pratt appealed.

ANALYSIS

Because a successful sufficiency-of-the-evidence claim warrants discharge on the pertinent crime, Appellant’s penultimate issue, was dealt with first by the appellate court.

Appellant did not develop any of the bald allegations nor explained this issue, and he failed to provide any citation to the record. It is beyond cavil that where an appellate brief fails to provide any discussion of a claim with citation to relevant authority or fails to develop the issue in any other meaningful fashion capable of review, that claim is waived.

In reviewing the judicial and legislative history of this issue, this court believes that evidence of prior civil settlements should not be admissible in subsequent criminal cases.

The court permitted Appellant to cross-examine the Nationwide Investigator and did not preclude any question relating to a settlement decision. Evidence is admissible when offered for a relevant purpose other than to show that a defendant acted in conformity with those acts or to show a defendant’s criminal propensity.

The admission of crimes or other acts is within the discretion of the trial court and will only be reversed upon a showing of an abuse of discretion. Appellant argued that evidence that he cashed a check without the required endorsement at Delmar was improperly admitted because the Delmar incident had nothing to do with insurance fraud or any other basis for the charges against him. The record reveals otherwise as there was a direct and logical connection between the Delmar incident and the check cashing at United in Philadelphia. Appellant successfully cashed the Progressive check for the March 2009 insurance claim at Delmar on April 9, 2009. The check was not properly endorsed because the second payee, Chase Auto Finance, the lien-holder, had not endorsed the check.

On the final day of trial, the Commonwealth indicated that it intended to introduce Appellant’s diary entries through the testimony of Detective Jones.

ZIFL OPINION

Although insurance fraud is probably the crime that is almost never prosecuted, even when there is such obvious fraud as that successfully attempted by Mr. Pratt, the court was merciful when he was convicted the court suspended the sentences and put him on parole only to have him file an extensive and multi-faceted appeal. The wasteful appeal required such analysis by the appellate court that it took over 35 pages to reveal that the entire appeal was useless, dealt with issues waived, and failed to make sense. A sad waste.

Health Insurance Fraud Convictions

State and Federal Government Win More than $10 Million in Criminal Restitution and More Than $55 Million in Civil Claims

A Perfect Fit for You, Inc., a Morehead City, North Carolina, corporation, was sentenced to pay $10,069,361.35 in restitution to the North Carolina Medicaid program and a $2 million fine on a charge of health care fraud. North Carolina and the federal government also won a combined $58,847,668.12 in civil claims and judgments related to this matter.

A Perfect Fit for You, Inc, was a durable medical equipment provider that sold items including powered wheelchairs, orthotic braces, diabetic shoes, powered air flotation beds, osteogenesis stimulators, pneumatic compressors, etc. Between March 2015 and November 2016, one or more employees of A Perfect Fit for You submitted fraudulent billings claims to Medicaid for providing durable medical equipment to Medicaid recipients. These fraudulent claims contained the personal identifying information of Medicaid recipients who had never ordered nor received any durable medical equipment from A Perfect Fit for You. In fact, some of the patients had been deceased years before the false claims were even submitted. This scheme resulted in an estimated loss to Medicaid of approximately $10,069,361.35.

A Perfect Fit for You, Inc. self-reported suspected fraudulent activity to the North Carolina Department of Justice’s Medicaid Investigations Division and cooperated throughout the investigation. One employee, Shelly Bandy, pled guilty in December 2020 to making false statements relating to health care matters and admitted to submitting fraudulent claims to Medicaid on behalf of the company, and she is scheduled to be sentenced later in March.

The federal government and the state of North Carolina also filed civil complaints against the company, its co-owner Margaret Gibson, and Bandy. The company agreed to pay $20,138,722.70 and Gibson has agreed to pay $4 million to resolve these claims. The federal government and N.C. obtained a $34,708,945.42 default judgment against Bandy. These civil claims against the company and Gibson are allegations only and were resolved by settlement. There has been no judicial determination or admission of liability as to them in the civil case.

The investigation and prosecution of this case was conducted by the U.S. Attorney’s Office for the Eastern District of North Carolina, the Medicaid Investigations Division, and the United States Department of Health and Human Services, Office of the Inspector General.

North Carolina Health Care Fraudster Sentenced to 78 Months in Prison

Markuetric Stringfellow of Powder Springs, Georgia, and previously of Charlotte and Greensboro, North Carolina, was sentenced to 78 months in prison and three years of supervised release for defrauding the North Carolina and South Carolina Medicaid programs. Stringfellow has also been ordered to pay $5,278,550 in restitution.

Stringfellow was a partner in Everlasting Vitality, LLC and Do-It-4-The Hood Corporation (D4H), which operated after-school programs in Charlotte, Greensboro, Winston-Salem, and Rocky Mount. Between January 2016 and November 2018, Stringfellow and his co-conspirators solicited illegal kickbacks from drug testing laboratories in exchange for referring North Carolina Medicaid beneficiaries obtained through the after-school programs. Stringfellow and his co-conspirators paid people to recruit at-risk youth, particularly those who were Medicaid eligible for these after-school programs. Children who enrolled were required to submit urine specimens for drug testing, which were then submitted to the labs in exchange for kickbacks from the reimbursements paid by Medicaid.

Stringfellow and other co-conspirators also referred clients to labs they knew would file fraudulent claims and receive reimbursement based on drug testing services that did not meet the drug testing policy requirements. On some occasions, they obtained and then shared clients’ personal identifying information (PII), including names, addresses, dates of birth, and Medicaid beneficiary numbers with the labs. The labs then used D4H clients’ PII to submit drug testing claims to Medicaid that were fraudulent because, among other reasons, the drug tests were not medically necessary, or the urine specimens were not of the Medicaid beneficiaries under whose names they were submitted.

In South Carolina, Stringfellow similarly defrauded the South Carolina Medicaid program by filing fraudulent claims for services that were either not provided, partially provided, or did not qualify for reimbursement.

CEO Sentenced To 15 Years in Prison for a $150 Million Health Care Fraud, Opioid Distribution, And Money Laundering Scheme

Proceeds of the fraud were used to fund private jet flights, courtside tickets to the NBA Finals, and purchase of luxury automobiles, jewelry and real estate

Mashiyat Rashid, 40, of West Bloomfield, Michigan, was the CEO of the Tri-County Wellness Group of medical providers in Michigan and Ohio. Rashid, was sentenced March 3, 2021 to 15 years in prison for developing and approving a corporate policy to administer unnecessary back injections to patients in exchange for prescriptions of over 6.6 million doses of medically unnecessary opioids.

In addition to the prison sentence, Rashid was also ordered to pay over $51 million in restitution to Medicare, as well as forfeiture to the United States of property traceable to proceeds of the health care fraud scheme, including over $11.5 million, commercial real estate, residential real estate, and a Detroit Pistons season ticket membership.

Rashid pleaded guilty in 2018 to one count of conspiracy to commit health care fraud and wire fraud, and one count of money laundering. Twenty-one other defendants, including 12 physicians, have been convicted thus far, including four physicians who were convicted after a one-month trial in 2020. Rashid is the second defendant to be sentenced.

From 2008 to 2016, Rashid was the CEO of the Tri-County Wellness Group, where the clinics had a policy to offer patients, some of whom were suffering from legitimate pain and others of whom were drug dealers or opioid addicts, prescriptions of Oxycodone 30 mg, but forced the patients to submit to unnecessary back injections in exchange for the prescriptions.

Testimony at the trial established that in some instances the patients experienced more pain from the shots than from the pain they had purportedly come to have treated; that audible screams from patients were observed throughout the clinics; and that some patients developed adverse conditions, including open holes in their back. Patients, including patients who were addicted to opioids, who told the doctors that they did not want, need, or benefit from the injections, were denied medication by the defendants and their co-conspirators until they agreed to submit to the expensive and unnecessary injections. The evidence further established that the defendants repeatedly performed these unnecessary injections on patients, as Tri-County was paid more for facet joint injections than any other medical clinic in the United States. 

The evidence at trial showed that the Tri-County clinics valued making money over patient care. The Tri-County clinics intentionally targeted the Medicare program and recruited patients from homeless shelters and soup kitchens. Evidence at trial indicated that Rashid only hired physicians who were willing to disregard patient care in the pursuit of money. Rashid incentivized the physicians to follow the Tri-County protocol of offering opioid prescriptions and administering unnecessary injections by offering to split the Medicare reimbursements for these lucrative procedures. The specific injections used had nothing to do with the medical needs of the patients but were instead selected to be administered because they were the highest-paying injection procedures. A former Tri-County employee testified at the trial of Rashid’s co-defendants that the practices at the clinic were “barbaric.”

Pharmacist Sentenced to Only 14 Years in Federal Prison

Defendant Ordered a “Hit” on the Person He Believed Had Cooperated with Law Enforcement Investigating his Drug Distribution Operation

David Robinson, age 51, of Baltimore, Maryland, to 171 months in federal prison, followed by three years of supervised release, for the federal charges of conspiracy to distribute oxycodone and alprazolam and for murder for hire. Robinson, formerly a licensed pharmacist who owned and operated the Frankford Family Pharmacy, located in the 5400 block of Sinclair Lane in Baltimore pleaded guilty on October 10, 2018, to a federal drug conspiracy involving the distribution of oxycodone and alprazolam outside the scope of professional practice and not for a legitimate medical purpose. On December 17, 2020, Robinson pleaded guilty to a federal charge of murder for hire, admitting that he ordered a “hit” on the person he believed had cooperated with law enforcement that led to his indictment on those charges. Robinson’s pharmacist license was suspended on August 7, 2017.

According to Robinson’s plea agreement for the drug distribution conspiracy, a confidential source (CS-1) advised law enforcement that the pharmacist at Frankford Family Pharmacy knowingly filled fraudulent prescriptions for alprazolam and oxycodone at the pharmacy. During the DEA’s investigation, between January and July 2016, the confidential source made a number of controlled purchases from Robinson at the pharmacy, using blank prescriptions provided to the source by DEA. Robinson knew that the prescriptions were fraudulent because he told the confidential source what name to use on the prescriptions and what quantity of oxycodone tablets to write on the prescriptions. Robinson also told the source to include non-controlled medications on the same prescriptions in order to evade law enforcement. Between April 2015 and June 2017, Robinson fraudulently distributed approximately 12,330 units of alprazolam and 10,000 milligrams of oxycodone.

On June 22, 2017, a federal grand jury in Maryland indicted Robinson for a drug conspiracy involving the distribution of oxycodone and alprazolam. Robinson was arrested on June 27, 2017 and was released from custody on June 29, 2017, under the supervision of U.S. Pretrial Services. On October 10, 2018, Robinson pled guilty to one count of conspiracy to distribute and possess with intent to distribute oxycodone and alprazolam and one count of distribution and possession with intent to distribute oxycodone and alprazolam. Robinson was allowed to continue on conditions of release until his sentencing, scheduled for February 15, 2019.

DEA investigators also learned that during Robinson’s tenure as a pharmacist working the night shift at a pharmacy in Waldorf, Maryland, Robinson also filled fraudulent prescriptions for oxycodone. Robinson admitted that he wrote prescriptions using the names of prominent athletes provided to him as the purported patients. Between September and December 2015, Robinson admitted that he dispensed at least 85,500 milligrams of oxycodone outside the scope of professional practice and not for a legitimate medical purpose.

On October 27, 2018, Baltimore City’s Citi-Watch camera system captured a drug transaction, which led to the arrest of an individual, CS-2. A search of CS-2’s vehicle resulted in the recovery of two shoeboxes containing a total of 35 stock pharmacy bottles of the prescription medications promethazine and clonidine.

CS-2 had obtained the prescription medications from David Robinson. CS-2 had known Robinson for approximately three years, and had previously purchased oxycodone, Xanax, clonidine, and promethazine from Robinson at the Frankford Family Pharmacy. After the search warrant was executed at Robinson’s pharmacy on June 27, 2017, Robinson began providing CS-2 with boxes of medications in exchange for cash without requiring a prescription. Robinson continued to sell promethazine and clonidine and six months after the raid, Robinson was still ordering pills from his vendors.

As detailed in his plea agreement for the murder for hire, following his arrest in 2017, Robinson told CS-2 about an individual that Robinson believed had cooperated with law enforcement and led to his arrest (i.e., CS-1). CS-2 and Robinson had a discussion about CS-1 being killed. After some time, the two agreed to have CS-1 killed. Robinson provided CS-2 with some information about CS-1. CS-2 told Robinson that he/she knew someone that could do a “hit” on CS-1. CS-2 told Robinson that the fee would be $5,000 up front and $5,000 when CS-l was killed.

Robinson admitted that from December 13, 2018 through February 7, 2019, CS-2 made three controlled purchases of drugs from Robinson, at the direction of law enforcement, using cash provided by DEA agents. CS-2 purchased a total of 118 stock pharmacy bottles of clonidine, each containing 100 tablets; and 24 stock pharmacy bottles of 50 mg promethazine tablets, with each bottle containing 100 tablets. Robinson did not request, nor did CS-2 provide, a prescription for any of the drugs.

During a controlled purchase on January 24, 2019, CS-2 and Robinson discussed the murder of CS-1 (which was audio-recorded). During this conversation, they discussed a $5,000 fee that had already been paid to the hitman, and that an associate of the hitman had information about the location of CS-1. The associate wanted an additional $3,000 to be paid to him/her in order to provide CS-1’s location to the hitman. Robinson was upset over this additional fee required to identify the location and accomplish the murder of CS-1 and did not agree to pay the additional fee. On February 4, 2019, CS-2 sent a text message to Robinson’s cell phone advising that he had provided the additional $3,000 in order to obtain CS-1’s address.

On February 14, 2019, CS-2 called Robinson and told Robinson that the murder was done and that the hitman would want his money. CS-2 then met with Robinson, who provided CS-2 with $2,000. CS-2 put the cash in his pocket and Robinson asked CS-2 for proof that the murder had been completed. CS-2 showed Robinson several fake photos in which it appeared that CS-l had been bound with zip ties, shot several times, and killed. After the meeting, law enforcement arrested Robinson.

Robinson will also forfeit items seized on June 27, 2017 during the execution of search warrants at his residence, the Frankford Family Pharmacy, his vehicle, and a safe deposit box rented by Robinson. These include: $159,862 in cash from Robinson’s home; $46,927 in a briefcase, blank prescriptions, a prescription pad, and a loaded 9mm pistol from Robinson’s car; $60,486 in cash, an AR-15 rifle with a magazine, several boxes of ammunition for the rifle from the pharmacy; and $25,041 in cash, $4,500 in gold coins, and $1,010 in silver coins from the safe deposit box.

Doctor Admits Role in Genetic Testing Kickback and Bribery Schemes

Lee Besen, 65, of Waverly, Pennsylvania, pleaded guilty by videoconference before U.S. District Judge Anne E. Thompson to an information charging him with two counts of conspiring to violate the Anti-Kickback Statute.

Besen is the fourth defendant to plead guilty in bribery and kickback schemes involving doctors and medical employees in the Scranton, Pennsylvania, area. According to documents filed in this case and statements made in court Besen was a primary care physician with an office in the Scranton area. In 2018, he began accepting monthly cash kickbacks and bribes in exchange for collecting DNA samples from Medicare patients and sending them for genetic tests to clinical laboratories in New Jersey and Pennsylvania. The cash kickbacks ranged from $500 to over $8,000. Besen typically accepted the cash inside his office, at times behind locked doors.

When Besen did not receive his kickback and bribe payments, the volume of genetic tests he ordered dipped. When he accepted those payments, that volume typically increased because, as Besen said in a recorded conversation, “Greenbacks speak.” Besen was also recorded discussing the kickback and bribe payments as “vigs” – slang for fees collected by bookies.

Besen frequently sought ways to make more money. At one point, he proposed adding to the scheme by collecting “CGx” cancer screening tests from Medicare patients, sending the tests to a new lab, and then splitting lucrative sales commissions that the lab paid out – ranging up to $2,500 per test. Although Besen had not previously ordered CGx tests for any of his patients, once he realized there was money to be made, he said in a recording that his office was “totally open now for CGx.” He was also recorded saying that he hoped the money he made from CGx tests would help him “retire early.”

Even as the ongoing COVID-19 pandemic substantially reduced in-patient visits, Besen worked with his staff to generate more genetic tests from Medicare patients. Before one illicit payoff that Besen accepted in the parking lot of a fast-food restaurant, he was recorded making veiled threats and expressing concern about being caught on camera accepting kickbacks and bribes. Despite such concerns, he followed through with the meeting because, as he was recorded saying, he wanted to collect “greenbacks” for his “pool house.”

Besen enlisted his employee, Kimberly Schmidt, who, in exchange for cash kickbacks and bribes, helped prepare paperwork for the genetic tests. Schmidt has previously pleaded guilty for her role in the scheme and is awaiting sentencing. As a result of the scheme, Medicare paid $350,374 for genetic tests generated from Besen’s medical practice.

Separately, Besen and Terri Haines, of Kennett Square, Pennsylvania, entered into a different kickback and bribery scheme involving “health fairs.” Haines was not a health care provider, but made a living soliciting and collecting CGx genetic screening tests from Medicare patients at health fairs, and then sending those tests to a lab in exchange for commissions. She was not authorized to order those CGx tests without a doctor’s sign-off. Haines paid Besen a kickback and bribe to use his name and medical credentials to order CGx tests for the Medicare patients she met at fairs, even though Besen never actually attended any of the health fairs and never met the patients for whom the genetic tests were ordered. Medicare paid $713,882 for CGx genetic tests that resulted from this scheme.

Each conspiracy charge is punishable by a maximum of five years in prison and a fine of $250,000, or twice the gross gain or loss derived from the offense, whichever is greater. Sentencing is scheduled for July 6, 2021.

Ohio Treatment Facilities Agree to Pay $10.25 Million To Resolve False Claims Act Allegations

Oglethorpe Inc. and its three Ohio facilities, Cambridge Behavioral Hospital, Ridgeview Behavioral Hospital, and The Woods at Parkside, will pay $10.25 million to resolve alleged violations of the False Claims Act for improperly providing free long-distance transportation to patients and admitting patients at Cambridge and Ridgeview who did not require inpatient psychiatric treatment, resulting in the submission of false claims to the Medicare program. 

Oglethorpe Inc. is a Florida company that operates two Ohio inpatient psychiatric hospitals, Cambridge and Ridgeview, and one Ohio substance abuse treatment facility, Parkside. The settlement was based on analysis of the companies’ ability to pay after review of their financial condition. 

This settlement resolves allegations that, between August 2013 and June 2019, defendants provided free long-distance van transportation to patients to induce them to seek treatment at the defendants’ facilities, in violation of the Anti-Kickback Statute, and then submitted claims for services provided to these patients, in violation of the False Claims Act. The Anti-Kickback Statute prohibits offering, paying, soliciting, or receiving remuneration to induce referrals of items or services covered by a federal health care program, such as Medicare, Medicaid or TRICARE. Claims submitted to these programs in violation of the Anti-Kickback Statute give rise to liability under the False Claims Act. The government also alleged that Oglethorpe, Cambridge, and Ridgeview submitted, or caused to be submitted, false claims to Medicare for medically unnecessary inpatient psychiatric admissions and associated services at the two hospitals.

Contemporaneous with the settlement, Oglethorpe entered into a corporate integrity agreement (CIA) with HHS-OIG. Among other things, the CIA requires that for the next five years Oglethorpe must retain an Independent Review Organization to review its claims to Medicare and Medicaid.

The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by Darlene Baker, a former client advocate at Cambridge. Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery if the government takes over the case and reaches a monetary agreement with the defendant. The qui tam case is captioned United States ex rel. Baker v. Oglethorpe, Inc., et al., No. 2:16-cv-1040 (S.D. Ohio). 

Manhattan U.S. Attorney Announces Resolution of Civil and Criminal Healthcare Fraud Charges Against Vascular Surgeon

Dr. Feng Qin Agreed to Pay $800,000, Admits Misconduct, and Receives Four-Year Ban from Participating in Federal Healthcare Programs.

FENG QIN, M.D. (“QIN”), a vascular surgeon, and his medical practice QIN MEDICAL P.C. (“QIN MEDICAL”) have resolved civil and criminal allegations. QIN, who practiced in Lower Manhattan and Far Rockaway, Queens, was criminally charged in December 2018 with fraudulently billing Medicare for vascular surgery procedures performed on end-stage renal disease (“ESRD”) patients that were not medically reasonable and necessary or covered under Medicare rules; the United States also filed a civil healthcare fraud complaint against QIN and QIN MEDICAL in December 2018. 

Under the civil settlement approved today by U.S. District Judge Laura Taylor Swain, QIN and QIN MEDICAL agreed to a pay $783,200 to the United States. The State of New York is expected soon to enter into an additional settlement with defendants in the amount of $16,800, for a total recovery of $800,000. The amount is based on the Office’s assessment of the defendants’ ability to pay based on the financial information they provided. As part of the settlement, QIN and QIN MEDICAL admitted and accepted responsibility for conduct alleged by the Government in its civil complaint as further described below. QIN previously paid $150,000 to settle a prior civil fraud lawsuit filed against him and his previous employer for engaging in fraudulent billing practices during the time period 2010 through 2012.

QIN also entered into a Voluntary Exclusion Agreement with HHS-OIG, which prohibits him from participating in Medicare and other federal healthcare programs for four years. This is in addition to the more than two years he has been so excluded since his arrest, as a condition of his bail. The Government has agreed to defer QIN’s criminal prosecution for a period of one year, after which time it will seek to dismiss the charges if QIN abides by the terms of the deferred prosecution agreement.

According to the indictment and the Government’s civil complaint, patients with ESRD who are receiving dialysis may require vascular access surgical procedures, such as fistulagrams, where dye is injected into the patient’s vein or artery to visualize blood flow, and percutaneous transluminal angioplasties, in which wires and balloons are inserted into blood vessels that have narrowed in order to restore blood flow. However, as Medicare billing guidelines made clear, it is not reasonable and necessary for physicians to bill the program for fistulagrams and angioplasties unless the patient has specific and documented clinical problems, such as significant difficulty receiving dialysis properly.

The patients at QIN’s medical practice primarily consisted of ESRD patients undergoing dialysis treatment. During the relevant period, from 2015 to 2016, QIN routinely scheduled patients for fistulagrams and angioplasties three months in advance, and performed fistulagrams and angioplasties on these patients as a matter of routine, regardless of whether there was a justifiable clinical reason to do so. Furthermore, on multiple occasions he misrepresented the medical conditions of patients in their medical records to make it seem as if they suffered from symptoms that would warrant the procedures when they did not. QIN MEDICAL then unlawfully billed and received payment from Medicare for these procedures, which were excluded from Medicare coverage, as QIN knew.

As part of the civil settlement, QIN and QIN MEDICAL admit, acknowledge, and accept responsibility for the following conduct:

• QIN often routinely scheduled, and actually saw, ESRD patients approximately every three months, regardless of their medical need.
• QIN treated many of his ESRD patients with fistulagrams and angioplasties. The symptoms documented in the medical records, including the records of the dialysis center and the treating nephrologist, were insufficient to justify these treatments for numerous ESRD patients.
• QIN knew that in the absence of a documented clinical justification, Medicare would not pay for fistulagrams or angioplasties. Nevertheless, on numerous occasions, QIN MEDICAL sought and received reimbursement from Medicare for these treatments without the required documented clinical justification.

The allegations of fraud stated in the civil complaint were first brought to the attention of federal law enforcement by a whistleblower who filed a lawsuit under the False Claims Act.

Former Fusion Sales Executive Pleads Guilty to Obstructing Government Investigations into Purdue Pharma and Practice Fusion

Steven Mack, 46, of Bridgeville, Pennsylvania, pleaded guilty before Judge William K. Sessions III of the United States District Court for the District of Vermont to one count of attempting to obstruct a federal investigation into the relationship between Mr. Mack’s former employer, Practice Fusion, Inc., and Purdue Pharma LP, the seller of extended release opioid products, including OxyContin.

As explained during the plea hearing, in 2015 and 2016 Mr. Mack was the Director of National Accounts for Practice Fusion, an electronic medical record (EMR) company. In that position, Mr. Mack was a principal point of contact between Practice Fusion and Purdue Pharma with regard to the subject of the investigations. Mr. Mack admitted deleting from his company-issued laptop hundreds of computer files relevant to the investigation, with the intent to obstruct the investigation by impairing the integrity and availability of those records.

Pursuant to the plea agreement, Mr. Mack has agreed to cooperate with respect to ongoing investigations and to provide information about all criminal activities known to Mr. Mack. Pursuant to the plea agreement, which still must be accepted by Judge Sessions, Mr. Mack faces up to 18 months in prison and up to a $75,000 fine.

On January 27, 2020, the United States Attorney for the District of Vermont announced that it entered into a deferred prosecution agreement with Practice Fusion by which the EMR vendor admitted to a criminal conspiracy, in violation of 18 U.S.C. § 371, and a criminal kickback, in violation of 42 U.S.C. § 1320a-7b(b)(1). Practice Fusion solicited and received kickbacks from Purdue Pharma to arrange for an increase in prescriptions of extended release opioids by healthcare providers who used Practice Fusion’s EMR software. Purdue Pharma paid Practice Fusion nearly $1 million to create a clinical decision support (CDS) alert that would prompt physicians to prescribe more extended release opioids. Purdue Pharma’s marketing department financed the kickbacks and participated in designing the CDS alerts, which were presented to physicians as objective medical guidance. Practice Fusion and Purdue Pharma entered the conspiracy because they believed that the CDS would influence doctors’ prescriptions of extended release opioids.

On October 21, 2020, various components of the Department of Justice, including the United States Attorney’s Office for the District of Vermont, announced that Purdue Pharma had entered into a plea agreement by which Purdue Pharma would plead guilty to conspiring to violate the Anti-Kickback Statute relating to its arrangement with Practice Fusion, among other things. On November 24, 2020, Purdue Pharma pleaded guilty to its illegal conspiracy with Practice Fusion.

The March 8, 2021 hearing marks the first individual to be prosecuted in connection with the Department of Justice’s recent investigations into Purdue Pharma and Practice Fusion. Mr. Mack is the first individual to be criminally charged from a leading EMR vendor, and, to date, the fourth individual held accountable by the District of Vermont in connection with its EMR investigations. On May 31, 2017, the United States Attorney’s Office for the District of Vermont announced a resolution with eClinicalWorks LLC (ECW), and in that case required three of ECW’s founders (CEO Girish Navani, CMO Dr. Rajesh Dharampuriya, and COO Mahesh Navani) to be jointly and severally liable for the payment of $154,920,000, and resolved civilly with three non-executive employees, Developer Jagan Vaithilingam, Project Manager Bryan Sequeira, and Project Manager Robert Lynes.

New Jersey Physician Agrees to Pay $106,255 To Resolve False Claims Act Allegations

Vedat Obuz and his medical practice, Lotus Clinics P.C./Lotus Family Medicine, falsely billed certain medical procedures to Medicaid and Medicare by representing that the procedures had been performed by Obuz when, in fact, those procedures were performed by nurse practitioners.

Obuz, a New Jersey physician and his medical practice will pay $106,255 to resolve allegations that they violated the False Claims Act by making false representations in connection with submissions to the Centers for Medicare & Medicaid Services, Acting U.S. Attorney Rachael A. Honig announced today.

The allegations were originally made in a lawsuit filed under the whistleblower provisions of the False Claims Act by Kathleen Menold. The Act permits private parties to sue for false claims on behalf of the United States and to share in any recovery. Ms. Menold will receive 20 percent from the federal share of the settlement.

Owner of Mental Health Services Agency Pleads Guilty to Health Care Fraud Charge

WALI MUHAMMAD, 45, of Branford, Connecticut waived his right to be indicted and pleaded guilty March 11, 2021 to one count of health care fraud.

Pursuant to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the court proceeding before U.S. Magistrate Judge Thomas O. Farrish occurred via videoconference.

According to court documents and statements made in court, from 2010 to 2019 Muhammad owned and operated Happy Family Clinical Services LLC (“Happy Family”), a mental health and social services agency. At various times, Happy Family’s office was located in East Haven and Branford, before moving to New Haven in 2014. 

From 2013 through 2019, Muhammad engaged in a scheme to defraud the Connecticut Medicaid Program by submitting fraudulent claims for psychotherapy services that were purportedly provided to Medicaid clients. The claims were for occasions and dates of service when no psychotherapy services of any kind had been provided to the Medicaid clients identified in the claims. The claims also were submitted using the names and identities of licensed clinical social workers and other licensed health care providers who purportedly worked for Happy Family, and represented that the psychotherapy services were personally rendered by the licensed providers, when, in fact, the licensed providers had not personally rendered the services, had not supervised the services that were billed, and were unaware that Muhammad was billing or causing the services to be billed as if the providers had personally rendered the services. When services were provided, they were usually rendered by unlicensed individuals and billed as licensed psychotherapy.

Muhammad is scheduled to be sentenced by U.S. District Judge Vanessa L. Bryant on June 23, 2021; at which time he faces a maximum term of imprisonment of 10 years. As part of his plea, Muhammad agreed to pay $574,034 in restitution to Medicaid.

North Carolina Durable Medical Equipment Corporation Sentenced For $10 Million Healthcare Fraud Scheme, And the Company and Its Owner Agree to Pay Millions to Resolve Related Civil Claims

A Perfect Fit for You, Inc., a North Carolina corporation was sentenced March 2, 2021 to 5 years’ probation and ordered to pay a $2,000,000 fine in addition to paying $10,069,361.35 in restitution to the North Carolina Medicaid Program on a charge of Healthcare Fraud, in violation of Title 18, United States Code, Section 1347. The company and its owner have also agreed to pay millions to the United States and State of North Carolina to resolve related civil claims under the federal and state False Claims Acts. In that same civil action, the Governments have obtained a multi-million-dollar judgment against one of the company’s employees.

According to court documents, A Perfect Fit for You, Inc., was a durable medical equipment provider located in Morehead City, North Carolina, and owned by Margaret A. Gibson. Durable medical equipment includes items such as powered wheelchairs, orthotic braces, diabetic shoes, powered air flotation beds, osteogenesis stimulators, pneumatic compressors, etc. Between March 2015 and November 2016, one or more employees of A Perfect Fit for You submitted fraudulent billings claims to Medicaid for providing durable medical equipment to Medicaid recipients. These fraudulent claims contained the personal identifying information of Medicaid recipients who had never ordered nor received any durable medical equipment from A Perfect Fit for You. In fact, some of the patients had been deceased years before the false claims were even submitted. This scheme resulted in an estimated loss to Medicaid of approximately $10,069,361.35.

After appointment of a receiver, A Perfect Fit for You, Inc. self-reported suspected fraudulent activity to the North Carolina Medicaid Investigations Division. Thereafter, the company cooperated throughout the investigation.

On December 13, 2017, and based on the conduct described above, the United States and State of North Carolina filed a civil complaint under the federal and state False Claims Acts against A Perfect Fit for You, Inc. and Gibson, as well as one of the company’s employees, Shelley P. Bandy. The federal and North Carolina False Claims Acts mandate that the Governments recover triple the money falsely obtained, plus substantial civil penalties for each false claim submitted. To resolve those claims, the company has agreed to pay $20,138,722.70, while Gibson has agreed to pay $4,000,000. As for Bandy, the United States and State of North Carolina have obtained a $34,708,945.42 default judgment against her in the civil action. It should be noted that the civil claims against A Perfect Fit for You, Inc. and Gibson are allegations only and were resolved by settlement. There has been no judicial determination or admission of liability as to them in the civil case.

On December 29, 2020, Bandy pled guilty to making false statements relating to health care matters in violation of Title 18, United States Code, Section 1035. Bandy admitted to submitting fraudulent claims to Medicaid on behalf of A Perfect Fit for You, Inc. Bandy is scheduled to be sentenced later in March, 2021.

North Philadelphia “Pill Mill” Doctor Sentenced to Five Years in Prison

Myron Rodos, 80, of Ambler, PA, was sentenced to five years in prison, three years of supervised release on March 2, 2021, and ordered to pay a fine of $300,000 by United States District Court Judge Chad F. Kenney for distributing controlled substances, namely opioids, outside the course of professional conduct and not for a legitimate medical purpose.

The defendant pleaded guilty in November 2019 to four counts of distribution of Schedule II controlled substances, and stipulated that he illegally distributed an additional 6,130 oxycodone (30 mg) pills and 3,670 methadone (10 mg) pills to patients in exchange for sex and money. Rodos, a physician, operated a medical practice in North Philadelphia as a prescription “pill mill” where he prescribed dangerous and addictive controlled substances to addicts for cash, and often in exchange for sex. The charges resulted from a lengthy FBI investigation that produced audio and videotape recordings made by a civilian source and an undercover agent that showed Rodos prescribe medically unnecessary hydrocodone in exchange for cash. Moreover, female patients, who became drug addicts while under the defendant’s ‘care’ reported to FBI agents that they routinely obtained prescriptions from Rodos for oxycodone and other controlled substances in exchange for sexual favors. 

“It’s hard to understand how a longtime physician, trained to help and to heal people, could be this depraved,” said Michael J. Driscoll, Special Agent in Charge of the FBI’s Philadelphia Division. “Dr. Rodos used his patients’ addictions against them, readily doling out powerful opioids in exchange for money or sex acts. The FBI and our partners are doggedly working to put drug-dealing doctors like him out of business, as we battle our country’s opioid epidemic.”

Licensed Pharmacist Pleads Guilty to Making False Statements to the DEA

Richard Schirripa pled guilty to making materially false statements to officers of the Drug Enforcement Administration (“DEA”). On two occasions in 2020, Schirripa falsely represented that, as part of the recent closure of his pharmacy in Manhattan, he had sold, transferred, or destroyed all controlled substances. In fact, he remained in possession of thousands of controlled substance pills/patches in his home, including fentanyl and oxycodone, which had been prescribed to others. Schirripa pled guilty March 2, 2021 before U.S. District Judge George B. Daniels, to whom his case is assigned.

According to the allegations in the Information, court filings, and statements made in court:

In or around January 2020, Madison Avenue Pharmacy (“MAP”) – which Schirripa had owned for many years – closed. Under federal regulations, before a pharmacy discontinues business activities, it must notify the DEA at least 14 days in advance. Schirripa did not comply with this requirement. The DEA learned that MAP had closed when DEA officers attempted to conduct a routine audit of MAP and saw a piece of paper on the storefront that announced MAP’s closure and noted that MAP’s controlled substances had been transferred to a specified local pharmacy. The DEA officers then went, in person, to that specified local pharmacy. Shortly thereafter, Schirripa wrote the DEA (in January 2020) and met with the DEA (in February 2020). 

On both occasions, Schirripa made materially false statements to the DEA. On both occasions, Schirripa falsely represented that as part of the recent closure of MAP, he had transferred to others, sold, or destroyed all controlled substances. In fact, Schirripa remained in possession of thousands of controlled substance pills/patches, including fentanyl, oxycodone, and oxymorphone. These substances were all recovered from a safe in Schirripa’s home on Long Island. When agents executed a search warrant at Schirripa’s home in April 2020, Schirripa acknowledged that these controlled substances were from his pharmacy and that he needed to destroy them. There were nearly 4,000 pills/patches in total, many of which contained labels indicating that they had been prescribed to others.

Under the terms of his plea agreement, Schirripa also admitted to various regulatory violations, including regarding controlled substances. Schirripa also agreed to: Surrender of his pharmacy and pharmacist licenses; a three-year ban before he can reapply for such licenses; and a three-year ban on any employment that involves his possessing, controlling, or distributing controlled substances.

Schirripa, 67, of Fort Salonga, New York, pled guilty to one count of making false statements, which carries a maximum sentence of five years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. Schirripa is scheduled to be sentenced by Judge Daniels on July 13, 2021, at 10:30 a.m.

Ms. Strauss praised the outstanding investigative work of the New York Office of Homeland Security Investigations (“HSI”), the U.S. Postal Inspection Service, the DEA, the New York City Police Department, U.S. Customs and Border Protection, the Internal Revenue Service, and the Port Authority Police Department. She also expressed gratitude to the U.S. Department of Health and Human Services, the New York State Department of Corrections and Community Supervision, and the Northvale, New Jersey, Police Department.

Allergy and Asthma Associates in Roanoke Pleads Guilty

Allergy and Asthma Associates Inc. [AAA], a Roanoke, Virginia-based family-owned medical practice agreed to a $2.1 million civil resolution with Allergy and Asthma Associates Inc. [AAA], a Roanoke-based, family-owned medical practice that billed Medicare and Virginia Medicaid more than $600,000 for expensive asthma treatments in did not purchase or improperly administered to patients. In June 2020, AAA pleaded guilty in U.S. District Court in Roanoke to one count of criminal health care fraud.

According to court documents, between January 2010 and September 2017, AAA submitted improper billings to Medicare and Medicaid for Xolair, an expensive asthma treatment sold in single-use vials. Due to the nature of the drug, many patients receive doses of the drug that require health care providers to administer a partial vial of the drug. This results in leftover amounts of Xolair that are not administered to the patient. At relevant times, Medicare and Medicaid allowed providers to bill Medicare Part B and Medicaid one time for an entire single vial of Xolair, which includes both the administered quantity, as well as the discarded quantity of the drug from a single-use vial, up to the amount listed on the vial’s label.

In situations where a patient’s dose resulted in a leftover partial vial of Xolair, AAA administered the leftover amount to another patient and then billed Medicare and Medicaid for administering this amount as if it were the entire single-use vial.

From January 2010 to September 2017, AAA billed Medicare $627,540 for Xolair that AAA did not purchase. In addition, AAA received 129 vials of Xolair from Medicaid which is not documented as being used for a Medicaid patient. These 129 vials represent an approximate loss to Medicaid of $88,878.

Under the terms of the civil resolution finalized last week, AAA will pay a total of $2,149,607 to settle claims they violated the false claims act. Broken down, $1,994,607 will be paid to United States government and $154,648 will be paid to the Commonwealth of Virginia.

Owner of Tennessee Drug Screening Lab Sentenced To 36 Months

Michael Dube, who formerly owned and operated American Toxicology Labs, was sentenced March 2, 2021 in U.S. District Court in Abingdon, Virginia to 36 months in federal prison. Dube, 59, of Johnson City Tenn., previously pleaded guilty in U.S. District Court in Abingdon to two felony counts of health care fraud (one filed in the Western District of Virginia and one filed in the Eastern District of Kentucky).

According to court documents, in March 2011, Michael Dube pleaded guilty in the Eastern District of Tennessee to one count of intentionally omitting information from reports as required under the Controlled Substances Act. As a result of his conviction, the Department of Health and Human Services [HHS] informed Dube in a letter dated June 29, 2012, that he was excluded from participating in any federal health care program.

Nonetheless, in May 2013, Michael and his wife, Regan Dube, established American Toxicology Labs [ATL] in Johnson City, Tennessee, with Regan Dube serving as the company’s registered agent, and using the couple’s home address as the principal office and mailing address. ATL then applied to participate in Medicare and Medicaid. On the applications, Regan Dube was listed as the owner of ATL, and Michael Dube’s name and participation in ATL was omitted.

ATL conducted urine screens for various entities who represented themselves to be opioid treatment facilities. Between May 1, 2014, and January 31, 2020, Medicare, Virginia Medicaid, Kentucky Medicaid and TennCare made payments to ATL that totaled approximately $8.5 million. During this time, Michael Dube made employment decisions, negotiated business arrangements with providers, and otherwise participated in the management of ATL.

In addition, Michael Dube also received kickback payments from third parties for referring individuals to those third parties for services for which payment was made (in whole or in part) by federal health care programs. These payments were deposited in Michael and Regan Dube’s personal checking account in a total amount of $441,646. Regan Dube was previously convicted and sentenced in connection with the scheme. 

As a result of their convictions, Regan and Michael Dube will pay a total of $9,015,046, plus interest, divided between special assessments, fines, restitution, and forfeiture. They will have to repay all of the money they received from Medicare and Medicaid programs. ZIFL hopes that the government will collect the $9 million or keep the Dubes in jail until it is paid.

Ohio Doctor Sentenced to Prison for Role in Unlawful Distribution of Controlled Substances

George Griffin, M.D., 71, of Cincinnati, pleaded guilty to one count of unlawful distribution of controlled substances on Oct. 5, 2020 and was sentenced to 40 months in prison March 1, 2021 for his role in illegally distributing controlled substances.

According to court documents, Griffin prescribed controlled substances to patients in amounts and for lengths of time that were outside the scope of legitimate medical practice. Griffin routinely prescribed controlled substances to patients even though various “red flags” suggested that he should stop writing those prescriptions, change the prescriptions, and/or counsel patients accordingly. Further, according to court documents, Griffin prescribed dangerous combinations of drugs known to heighten the risk of overdose and death.

Howard University Employee Pleads Guilty to Healthcare Fraud

Folashade Adufe Horne, 51, of Laurel, Maryland, pled guilty on February 17, 2021 in federal court to defrauding the D.C. Medicaid program out of more than $370,000.

Horne pled guilty to health care fraud in the United States District Court for the District of Columbia. The charge carries a statutory maximum of 10 years in prison and financial penalties. Under federal sentencing guidelines, Horne faces a likely recommended sentence of between 18 and 24 months in prison.

At various times between January 2014 and June 2020, Horne was employed by four different home health agencies to serve as a personal care aide for D.C. Medicaid beneficiaries. Horne also was employed full-time by Howard University during this same period. The home health agencies employed Horne to assist Medicaid beneficiaries in performing activities of daily living, such as getting in and out of bed, bathing, dressing, and eating. Horne was supposed to document the care she provided to the Medicaid beneficiaries on timesheets and then submit the timesheets to the home health agencies, which would in turn bill Medicaid for the services that she rendered.

Horne acknowledged that between January 2014 and June 2020, she caused the D.C. Medicaid Program to issue payments totaling $373,564 for services that she did not render. As part of her fraud scheme, she submitted false timesheets to different home health agencies purporting that she provided personal care aide services that she did not provide. She claimed she provided such services during times when she actually was working her shift as a full-time employee at Howard University Hospital. She claimed to work more than twenty hours in a given day on more than 200 occasions, including 28 days when she asserted that she provided 32 hours of PCA services. She also claimed to provide personal care aide services in the District of Columbia on days when she was not even in the United States.

Videos on YouTube And Zalma On Insurance from Barry Zalma

--- Over 110 Videos describing important insurance issues described by Barry Zalma and available to anyone who views or subscribes to the YouTube account. Issues include insurance fraud, definition of insurance, insurance as a contract of personal indemnity, millions for defense and not a dime for tribute and the tort of bad faith. Please subscribe. There are 62 Videos are at https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw/videos but I have had some difficulty posting new videos to my YouTube channel and have decided to post all future videos on insurance, insurance claims, insurance law, and insurance fraud to this YouTube Channel my Rumble channel https://rumble.com/c/c-262921 and my blog, https://zalma.com/blog.

Other Insurance Fraud Convictions

Brothers Admit Arson in Philadelphia

Imad Dawara, 32-years old, of Swarthmore, and 40-year-old Bahaa Dawara, of Woodlyn, two brothers admitted in court to setting fire to their hookah lounge as they struggled with business losses, causing more than $20 million in damages to a retail block in Philadelphia’s historic area.

Federal prosecutors reported that the brothers had taken out $750,000 in insurance weeks before the blaze. The February 2018 fire burned for nine hours and left the block of restaurants, retail stores and apartments in Old City shuttered for months. Approximately 160 people were displaced, and a few of the businesses never reopened.

The Dawaras, who used gasoline to start the blaze, should serve nine years in prison and pay $22 million in restitution under the terms of the plea agreements entered in February. Their sentencing is set for June.

U.S. District Judge Juan Sanchez expressed concern about their ability to pay such a “staggering” sum, but the brothers insisted they could, the first $500,000 payment was due Thursday.

 New Book: “It’s Time to Abolish The Tort of Bad Faith"

The concept of unintended consequences is one of the building blocks of economics. Adam Smith’s “invisible hand,” the most famous metaphor in social science, is an example of a positive unintended consequence.

INSURANCE AS A NECESSITY

Neither the courts nor the governmental agencies seem to be aware that in a modern, capitalistic society, insurance is a necessity. No prudent person would take the risk of starting a business, buying a home, or driving a car without insurance. The risk of losing everything would be too great. By using insurance to spread the risk, taking the risk to start a business, buy a home, or drive a car becomes possible.

Insurance has existed since a group of Sumerian farmers, more than 5,000 years ago, scratched an agreement on a clay tablet that if one of their number lost his crop to storms, the others would pay part of their earnings to the one damaged. Over the eons, insurance has become more sophisticated, but the deal is essentially the same. An insurer, whether an individual or a corporate entity, takes contributions (premiums) from many and holds the money to pay those few who lose their property from some calamity, like fire. The agreement, a written contract to pay indemnity to another in case a certain problem, calamity, or damage that is fortuitous, that is that occurs by accident, is called insurance.

In a modern industrial society, almost everyone is involved in or with the business of insurance. They insure against the risk of becoming ill, losing a car in an accident, losing business due to fire, becoming disabled, losing their life, losing a home due to flood or earthquake, or being sued for accidentally causing injury to another. The insurers, insureds, or people damaged by those insured are dependent on one another. In a country where human interactions are governed solely by the terms of written contracts, insurance would be a simple means of spreading risk and providing indemnity based on the promises made by the contract of insurance. But, in this the real world, insurance contracts are controlled by statutes enacted to ostensibly protect the consumer of insurance, regulations imposing obligations on the conduct of insurers and the decisions of trial and appellate courts interpreting insurance contracts.

A simple insurance contract between two parties might say: “I insure you against the risk of loss of your engagement ring valued at $15,000 by all risks of direct physical loss except wear and tear for a premium paid by you of $15.00.” Anyone who could read would understand that contract. If something happens to damage, destroy or lose the ring the insurer will pay you $15,000.00. However, insurers cannot write such a simple contract because the state requires many terms and conditions that complicate the policy wording and confuse the common person. The states and courts that did so had nothing but good intentions to protect the consumer against the insurer and control the actions of the insurer.

The tort of bad faith was created because courts felt that insurers treated their insureds badly and defeated the purpose for which insurance is acquired. It has served its purpose. Fair Claims Settlement Practices laws and regulations are now available to control insurers who do not act in good faith. Insurance fraud statutes and Regulations provide assistance to insurers who have been deceived by those they insure or who are victims of attempted insurance fraud.

It is time that all contracts, including insurance contracts, are treated like any other contract, and insureds who believe the insurer breached the contract of insurance can sue to recover the benefits promised by the policy.

Available as a paperback here.  Available as a Kindle book here.

Legal Disclaimer

ZIFL is made available by the publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using ZIFL you understand that there is no attorney client relationship between you and the publisher. ZIFL should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

Consider Books to Show Your Appreciation to Your Insurer Clients or Claims Employees

Many insurers refuse to allow their employees to receive gifts from vendors.

If you wish to thank your insurance company clients for allowing you to represent their interest or if you wish to honor your claims personnel it is time to give them something that will be useful to them throughout the coming year and that will not offend insurer’s rules to avoid attempts to extort clients for business from insurer employees.

The Insurance Claims Library

Over the last 51 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it for insurers and their claims staff to become insurance claims professionals.

Consider the Insurance Claims Library where, for a small investment you can provide each claims office – rather than individual adjusters – a group of insurance books that will help them throughout the year.

By providing clients, claims departments, or claims personnel with any one or more of the books offered by the Insurance Claims Library. By so doing you can add to the insurance claims professionalism of your clients, employees and claims personnel. With delivery handled by Amazon.com any one or more of the following books, all available from amazon.com and https://zalma.com/blog/insurance-claims-library/, will gain the respect and gratitude from each recipient and their employers.

New and Now Available from the Zalma Insurance Claims Library

The Insurance Examination Under Oath Second Edition

A Tool Available to Insurers to Thoroughly Investigate Claims and Work to Defeat Fraud

The insurance Examination Under Oath (“EUO”) is a formal type of interview authorized by an insurance contract. It is taken under the authority provided by the agreement of the insurer, when he, she or it acquires a policy of insurance, to submit to a condition of the insurance contract that compels the insured to appear and give sworn testimony at the demand of the insurer. Failure to appear and testify is considered a breach of a material condition.

The EUO is conducted before a notary and a certified shorthand reporter who is present to give the oath to the person interviewed. The reporter will record the entire conversation and prepare a transcript to be read, reviewed, corrected and signed by the witness under penalty of perjury or by an oath taken before a notary or judge.

The EUO is a tool only sparingly used by insurers in the United States. A professional insurer will only require an insured to submit to an EUO when a thorough claims investigation raises questions: About the application of the coverage to the facts of the loss, the potentiality that a fraud is being attempted, or to assist the insured in the obligation to prove to the insurer the cause and amount of loss.

Although seldom used the EUO is an important tool needed by insurers when there is a question of coverage, destruction of evidence needed to prove a compensable loss or the amount of loss or evidence indicating the potential that a fraud is being attempted. The EUO and Legal Action provisions in an insurance policy are conditions precedent to an insured’s ability to file suit, and that since the insured failed to substantially comply with the terms of those provisions, the appropriate remedy is dismissal without prejudice. The insured’s failure to comply with these conditions does not bar his ability to bring suit to recover, but merely suspends his ability to bring suit until he has fully complied with those conditions.

Available as a paperback here or Available as a Kindle book here

“Insurance Fraud Costs Everyone ”

This book started as a collection of columns I wrote and published in the magazines “Insurance Journal,” “Insurance Week,” and “The John Cooke Insurance Fraud Report” insurance trade publications serving the insurance community in the United States.

Since the last edition I have added more stories that were published in my twice monthly newsletter, Zalma’s Insurance Fraud Letter which is available free to anyone who clicks the links.

The original title was “Heads I Win, Tails You Lose” and was meant to describe insurance fraud as it works in the Unites States. It means that whenever a person succeeds in perpetrating an insurance fraud everyone who buys insurance is the loser.

If the fraud succeeds the insurer must charge more premium to cover the expense of defending the fraud and payment of funds to the fraud perpetrator. If the fraud fails the insurer must charge more premium to cover the expense of defending the fraud. Everyone, except the lawyers, lose.

As you read the stories, I hope they help you understand the effect that insurance fraud has on the perpetrators, the insurers, the people who need insurance, the people who buy insurance, and the people who keep the promises made by insurance policies.

Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

The subtitle, “Heads I Win, Tails You Lose” is meant to describe insurance fraud as it works in the Unites States. It means that whenever a person succeeds in perpetrating an insurance fraud everyone who buys insurance is the loser.

Available as a Kindle Book and Available as a Paperback from Amazon.com.

Zalma on Insurance Videos

Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created a library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals available at https://zalma.com/blog/insurance-claims-library/. My original channel does not allow me to add posts so I have created a new channel, Barry Zalma available at Zalma on Insurance Videos and at https://rumble.com/search/video?q=zalma where I post a new video almost every day

Podcasts are available at https://anchor.fm/barry-zalma; https://www.breaker.audio/zalma-on-insurance; https://www.google.com/podcasts?feed=aHR0cHM6Ly9hbmNob3IuZm0vcy8xY2FlYjg1NC9wb2RjYXN0L3Jzcw==; https://overcast.fm/itunes1509583809/zalma-on-insurance; https://pca.st/ujampbxm; https://radiopublic.com/zalma-on-insurance-Wel2lZ; and https://open.spotify.com/show/2VTJCeGmBUkf0IlFV8SWJk. 

Zalma on Insurance Blog Posting

• A Video Explaining an Insurance Claims Interview March 12, 2021
• When Other Insurance Clauses are not Repugnant They Are Applied as Written March 12, 2021
• A Video Explaining the Work Product Protection and Insurance Investigations March 11, 2021
• Taking Insurance Check & Cashing it Twice is Fraud March 11, 2021
• A Video Explaining How to Retain Counsel to Defend an Insured March 10, 2021
• Proof that Plaintiff Was Struck by an Insured Vehicle Defeats UM Claim March 10, 2021
• A Video Explaining How to Deal With Diminution in Value of an Auto Claims March 9, 2021
• The Insureds Must Prove “Bad Faith” in Pennsylvania by Clear and Convincing Evidence March 9, 2021
• A Video Explaining the Equitable or Contractual Remedy of Subrogation March 8, 2021
• When You do the Crime You Must do the Time March 8, 2021
• A Video Explaining the Use and Application of “Appraisal” in First Party Property Claims March 5, 2021
• Private Limitation of Action Provision in Insurance Policy Defeats Late Filed Suit March 5, 2021
• A Video Explaining that the Devil’s in the Details When Faced with a Major Insurance Fraud March 4, 2021
• Settlement for Less Than Available Insurance Defeats UIM Claim March 4, 2021
• 150 Insurance Law and Insurance Claims Videos Now Available at Rumble.com/Zalma March 3, 2021
• A Video Explaining Some Hazards of Using an Independent Medical Examiner March 3, 2021
• Proving Fraud by a Predetermined Treatment Protocol March 3, 2021
• A Video Explaining How to Deal With Wrongful Death Claims March 2, 2021
• Failure to Read Certificate Defeats Coverage for Additional Insured March 2, 2021

Barry Zalma, Esq., CFE

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at https://www.zalma.com and [email protected].

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.