Zalma’s Insurance Fraud Letter
Barry Zalma, Esq., CFE
Insurance claims expert, consultant at Barry Zalma, Inc. and author/Publisher at ClaimSchool, Inc.
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Volume 25, Issue 24 – December 15, 2021
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Quote of the Issue
“Kindness in words creates confidence. Kindness in thinking creates profoundness. Kindness in giving creates love.”
Lao Tzu
A Christmas Fable of Fraud
ZIFL publishes this Story at Christmas Time Every Year. I Hope you like it Again.
The story that follows is fiction based, in part, on a true case worked on by me. Any similarity to real people is unintentional. It is meant only to educate fraud professionals about how some unscrupulous people use the crime of insurance fraud for fun and profit during the Christmas season.
Raymond Alexander had no religion. He cared only for himself and the money he could take from good-hearted people.
Raymond loved the Christmas season.
The marks were in such a kind and giving mood it wasn’t even work to take their money.
The Christmas before last Raymond stumbled on insurance fraud as a lucrative means of making quick, easy money. Raymond made a good living playing bunco schemes about town. He would work the money switch with old folks, the dip, and every possible scam invented to take money from honest people who had a little larceny in their hearts.
Because he was good at what he did Raymond lived well. He leased a three-bedroom apartment in the best part of town, drove a BMW convertible when he wasn’t working and purchased all of his suits from a custom tailor. He ate at gourmet restaurants and collected an eclectic assortment of popular art dishes and Lladro figurines.
Raymond, because he loved his collection, insured his home with the best and most expensive insurer he could find. He had his dishes and figurines appraised and scheduled on his policy so there was no dispute concerning their value if he had to make a claim.
Last Christmas burglars entered Raymond’s home and stole two Lladro figurines and one art dish depicting the English Countryside on Spode china. Raymond was upset that a burglar ripped him off. It was his profession to rip off others. Raymond felt he now understood how women who had been raped must feel.
Raymond called his insurance agent and reported his claim. To his surprise his insurer telephoned him and asked what was lost. No one came to his home. No one asked to come to his home to investigate. They merely called on the telephone and asked for the number of the police report so the insurer could obtain a copy.
Such unthinking trust deserved to be made a victim of Raymond’s wiles. He, the consummate professional, could not resist the temptation. He told the person on the telephone that he was not sure what was taken and that he had only reported that which was obvious on first inspection to the police. As a bunco artist of the first order what came next was simple – the police officer had left him with a sheet of paper to list any items that he later discovered were missing. Raymond sat at his oak and leather antique partner’s desk and prepared his supplemental police report. On the report he listed one out of every four items on the insurance schedule. Then he added three Armani suits, two pairs of Ecco dress boots, a pair of Bruno Magli sport shoes, two pairs of gold cufflinks, and a simple Omega wrist watch. He was not greedy.
He sent the list to the detective and a copy to the adjuster who spoke with him on the telephone. Raymond expected he would need to haggle and would be forced to document each item to the insurance company. Much to his surprise, two weeks later Raymond received a nice letter from his insurer. It advised him that the adjuster had calculated his loss, deducted $500 (his deductible) and could only pay $1,000 for the jewelry that was not scheduled because of a special limitation in the policy. The adjuster expressed her regret in not being able to pay him for everything he lost and hoped the enclosed check for $35,650 would be satisfactory.
Since Raymond had only lost $375.50 worth of goods, he found the check to be quite satisfactory. Raymond spent the Christmas season in a comfortable resort in Bermuda funded by his kind and generous insurance adjuster.
When Raymond returned from Bermuda, he took the things he had reported stolen to high-end swap meets in Long Island, New York. He traded one Lladro for another, one plate for another and bought some new jewelry.
He called his appraiser, who updated the appraisal on his schedule by taking out the items Raymond had claimed were stolen and replacing them with the new items he had acquired. In addition, the appraiser valued all of his jewelry and added it and the new art pieces to the policy. His policy was renewed and the schedule increased and changed to meet the new items with a value of more than $150,000.00.
Raymond Alexander was not a greedy man. He was a successful confidence man because he was not greedy. He did not bleed his marks’ dry. He just took what he believed was an adequate sum of money to properly support his accustomed lifestyle. Raymond never took everything the mark had. He wanted the mark to know he was taken and to be too embarrassed to do anything about it.
Raymond looked on his insurance company as another mark. He did not want to collect $150,000 from them, only enough to take him through the holiday season that he had not celebrated since he was four-years-old.
It was time to have another loss and claim. A fire was out of the question, too messy. Robbery was dangerous and the person hired to fake a robbery might forget he was not supposed to really rob Raymond. A fake burglary might be worse because the police got testy about false police reports. He might make a mistake and they would learn the burglary was not real.
Raymond Alexander was successful at his chosen criminal profession because he paid attention to detail. He read his insurance policy. Part of that policy was a Personal Articles Floater that insured scheduled items for all risks of physical loss. It had very few exclusions. It covered, for instance, the Lladros and the plates against loss (with no explanation) or even breakage from any cause, including an earthquake.
Raymond knew he could not cause an earthquake but he had no problem reporting that he lost his art. He removed from his home, two or three items at a time, for several weeks. Figurines and plates valued by his appraiser at $51,632.00 were stored at a Public Storage unit. The number was nice, odd and with no zeros except the cents.
On November 15 Raymond telephoned his insurance agent to report that he returned home from a weekend trip to Massachusetts to his apartment in Boston and found selected parts of his collection missing. There was no evidence of a break-in to his house and all he could explain to the agent was that the items had disappeared, mysteriously from his home. The alarm had been set and was operating perfectly. It detected no intruders but the items were gone.
Again, Raymond was contacted by an adjuster by telephone. He learned that she was in Phoenix, Arizona and never left her desk to deal with claims. She asked for, and Raymond gladly gave, a recorded statement concerning the events and the items claimed lost. She kept him on the telephone for almost an hour taking from Raymond as much detail as he could possibly remember about each item.
Raymond was distraught. His holiday had been ruined. The adjuster empathized with him and told him she would work hard to complete his claim before Christmas. She did. A check for $49,162.00 arrived in Raymond’s mail box on November 30. They broke a record getting money to him. They did no investigation other than speak to him, and they paid him promptly. Since the loss was his second loss in two years the adjuster sent a note to the underwriters about the loss history and they decided not to renew Raymond for a second term.
He went to his insurance broker, after he “replaced” all the missing goods and obtained an identical policy from another insurer for a smaller premium. They were willing to take a chance that lightning would not strike the same place three times in a row.
Raymond enjoyed his insurance company money and did less of his normal scams. It seemed wrong to take an old woman’s savings through a convoluted scheme when he could wrest money from an insurer with such ease. The payments also allowed him to add to his collection with no new spending.
Raymond was a happy man. His BMW had become boring to him. The state made him insure it so he had the best insurance money could buy from the New York Auto Insurance Specialists.
He drove the vehicle to Boston Harbor where it was shipped to an acquaintance with whom he had done a sting in Hartford who now lived in Belize. For a 15% commission the BMW was sold to a General in the Belize army for its high Blue Book value. Raymond then reported to the Boston PD and his insurance company that his BMW had been stolen from the street in front of his apartment while he slept.
Everything went well, the BMW was valued and the insurer was ready and willing to pay Raymond low blue book value on the car. They did, however, automatically report the theft to the National Insurance Crime Bureau (The “NICB”) an entity that records the vehicle identification number of every vehicle ever shipped out of the United States. The insurer was about to send a check to Raymond when it received a report from NICB that the BMW had been shipped from Boston to Belize three months before.
The insurer assigned the investigation to its Special Investigation Unit. Investigator Steve Nazarian went to Raymond’s home to interview him in detail. Raymond lied with alacrity until he was confronted with the shipping documents. The ease with which he had been caught frightened Raymond. He thought he might have to go to jail. He knew there was no way to take back the reported theft. It was a week before Christmas. He pleaded with Nazarian.
“Well, Mr. Alexander” Nazarian, responded, “the state of Massachusetts takes insurance fraud very seriously. We are required to report you to the Insurance Fraud Bureau. They make all decisions about crime. Your insurer, on the other hand, is quite upset that you tried to cheat it. What do you think we should do?”
“Just forget I made the claim. I will sign any paper you ask to withdraw my claim. Getting me arrested won’t help you.” Raymond suggested.
“I just happen to have a release in my briefcase, here. Please sign it. I will report you to the IFB but I will also report that we settled with you for no payment as I am required to do by law. They may have more important criminals to arrest than you.”
“Give me the release.” Raymond exclaimed as he grabbed the release out of Steve Nazarian’s hand and signed it. “Now please leave my house.”
“Of course, Mr. Alexander” Nazarian said, and with a snide accent said: “Have a Merry Christmas.”
Raymond stayed at home through the Christmas season. He saw no one, did nothing. He ate a frozen turkey dinner alone on Christmas Eve. He decided he would never attempt an insurance fraud again.
The Insurance Fraud Bureau had received, along with Nazarian’s report of Raymond’s attempted fraud, eighteen hundred reports of suspected fraud for the month of November. His name was put in their data base for future reference but no file was opened. Bigger and more exciting fraud perpetrators took up their attention. No one was hurt. The insurance company paid no money and immediately cancelled all policies it had for Raymond.
Raymond went back to his regular work taking money from widows, orphans, the sick and the partially criminal. He continued to live well and never again committed insurance fraud. His Christmas present to the insurance industry was to set his criminal mind to other victims.
This is, of course, a Christmas fable.
All insurers do not run auto thefts through the NICB or ISO database. Most insurers believe whatever the insured tells them. Most have under-trained, understaffed and overworked claims departments who just send out money. Very few have claims personnel who can, like Nazarian, conduct a thorough insurance claims investigation that provides to the insureds and insurer excellence in claims handling.
Most insurance criminals, unlike Raymond, know about the lack of staff, how overworked and underpaid adjusters are, and would never sign a release. The insurance criminal would either try to bribe the SIU investigator or sue the insurer for bad faith for having the gall to claim they caught them at their crime. Insurance fraud perpetrators do not give up a chance of easy money just because their scheme did not hold together. They change the scheme and bluster. Insurers, faced with an expensive defense, will pay something. Insurance criminals are not as naive as Raymond and insurers are not as bright and forceful as his auto insurer. Steve Nazarian would never just give Raymond a release, he would need to consult with management (up at least four layers) and a lawyer before he took such a chance to defeat an insurance fraud.
Insurance fraud perpetrators, even if they feel they have been caught and will never recover, merely redouble their efforts and perpetrate more frauds so they can make up for the few where they are caught. Raymond Alexander gave a Christmas present to the insurance industry but is still loose to take advantage of the old, the poor, and the weak who are prime candidates for a bunco artist. Insurers, unlike an octogenarian widow, should be better able to protect themselves from a bunco scheme. In most cases, as Raymond found, are not able, willing or even care to protect themselves.
The Christmas Present We All Need
The Christmas present I would like is a state government willing to prosecute every insurance fraud to the limit of the law. I dream of an insurance industry willing to spend the money necessary to fight insurance fraud.?Santa, this is what I want as a gift to me and the entire world: Governments and insurers willing to fight insurance fraud and give no quarter to the fraud perpetrator.
Editorial – Anti-Fraud Resolutions
In 2009 ZIFL posted an editorial with New Year’s Resolutions for every person involved in the business of insurance. I repeat it again in this issue and add some thoughts for 2022.
Insurance fraud of all types continues to grow to epidemic levels. It is perpetrated by people of every race, religion, national origin, financial situation, sexual orientation, age, or physical condition. As the US economy tanks and the value of the dollar drops people turn to insurance fraud as a “safe” crime where their financial problems can be cured. Arson for profit, fake thefts, fake injuries all grow logarithmically as it becomes more difficult to earn an honest living. Even when convicted the fraud perpetrators receive as little as probation or one day in jail and rarely are sentenced to multiple years in jail regardless of the extent of the fraud. It often seems that everyone is involved in fraud. Governmental agencies designed to protect consumers, prosecutors, and judges all add to the problem because they have no empathy for insurers, investors, or Wall Street brokers, as victims.
Resolutions for 2022
As you read this issue of ZIFL it is time to consider the New Year’s Resolutions to make for the upcoming new year that must be better than this difficult, strange and Pandemic influenced 2021.
I, and every person involved in the investigation, handling, examination of potential fraud and those who represent insurers who are victims of insurance fraud must commit to show no mercy or tolerance for those who perpetrate fraud against insurers or government supported insurers like Flood Insurance, Crop Insurance, Medicare and Medicaid.
My Resolutions for this year, that I hope you will emulate, include:
1.??????I will refuse to advise any of my clients to pay an insured or claimant when evidence is gathered that establishes, beyond a preponderance of available evidence, that a fraud is attempted.
2.??????If the insured or claimant sues, I will be ready to take convince my clients that it takes the matter to trial by jury and I will never advise the insurer to offer money to settle the litigation.
3.??????I will advise my clients to report all suspected fraud to the appropriate state or federal agency.
4.??????I will demand that the state or federal agency investigate and prosecute all frauds.
5.??????I will demand that all convicted fraud perpetrators serve time in jail and make full restitution to the insurer.
6.??????I will make sure that my clients staff a fully trained and effective SIU.
7.??????I will advise my clients that they direct all members of the SIU to ascertain that every suspected fraudulent claim is investigated thoroughly.
8.??????I will advise my clients to only retain defense counsel who are competent and ready to take every fraud case to trial.
9.??????I will advise my clients to inform all defense counsel that they will have no authority to settle any suit based on a fraudulent claim.
10.???I will lobby the state Legislature and Congress for definite, mandatory sentencing so that the wild variations shown in the “Good News” Section below will not continue.
11.???I will advise my clients to never pay a nuisance settlement to a fraud perpetrator.
12.???I will advise my clients to train all personnel, whether involved in claims or not, on how to recognize insurance fraud.
13.???I will advise my clients to train all insurance sales staff on how to recognize potential fraud before a policy is issued.
14.???I will continue to create insurance law videos and training programs.
15.???I will continue to write insurance books discussing the practicalities of insurance coverage, insurance claims, and insurance claims handling.
16.???I will continue to serve as an insurance claims, coverage and insurance fraud expert witness
17.???I will continue to write training programs for insurance professionals and insurance claims personnel.
18.???I will write an issue of ZIFL twice a month.
19.???I will be available to testify as an expert witness on behalf of insurers who have collected evidence that an insured has attempted fraud.
20.???I will continue to act as a consultant or expert witness on behalf of any insurer or policyholder whose position is appropriate and who needed help to allow a trier of fact – judge or jury – to understand appropriate claims handling.
I hope to be able to fulfill the resolutions, and by so doing, work to reduce the amount of fraud and reduce the logarithmic growth of insurance fraud in the United States.
Wisdom
“It’s not how much we give but how much love we put into giving.”— Mother Teresa
“We must always take sides. Neutrality helps the oppressor, never the victim. Silence encourages the tormentor, never the tormented” ?– Elie Wiesel
“All truly great thoughts are conceived while walking.” — Friedrich Nietzsche
“Sitting also can be very enjoyable. Sitting and doing nothing. Just enjoying your sitting, enjoying your breathing. Feel that you are alive.” – Thích Nh?t H?nh
‘Many of life’s failures are people who did not realize how close they were to success when they gave up.” — Thomas Edison
?“Mercy to the guilty is cruelty to the innocent.” – Adam Smith
“To ease another’s heartache is to forget one’s own.” — Abraham Lincoln
”I am the master of my fate. I am the captain of my soul.” ― William Ernest Henley
Fraudster Cannot Obtain Cash Under the California Unclaimed Property Law
Money Held by the State Can’t be Given to a Fraud
Golden State Pharmaceuticals LLC (Golden State), a cancelled limited liability corporation, filed claims with the California State Controller (the Controller) for money the Controller held under the California Unclaimed Property Law (UPL). When the Controller failed to act on the claims, Golden State brought a civil action under the UPL to recover the money. The trial court granted Golden State’s motion for summary judgment, awarding it $121,989.13. The Controller appealed. In Golden State Pharmaceuticals LLC v. Betty T. Yee, California State Controller, B308625, California Court of Appeals, Second District, Fifth Division (November 23, 2021) the trial court ordered the state to pay Golden State and the Controller appealed.
BACKGROUND
Marisa Schermbeck Nelson worked as a personal assistant to Doctor Munir Uwaydah from 2000 to June 2010. Uwaydah owned and controlled several companies that were held in other persons’ names to hide his ownership and control from creditors, insurance investigators, and government agencies. During Nelson’s employment with Uwaydah, Uwaydah directed her to put her name as owner, officer, or manager of various corporations or limited liability companies even though he owned and solely controlled the operation of those entities.
Uwaydah owned Golden State yet directed Nelson to put her name as Golden State’s owner. Nelson also was designated as the owner of a bank account associated with Golden State. At Uwaydah’s direction and until her employment with Uwaydah ended in June 2010, Nelson moved money in and out of the Golden State bank account.
On March 16, 2017, the Los Angeles County District Attorney filed a complaint against Nelson and others for, among other crimes, conspiring to commit insurance fraud in violation of Penal Code sections 182, subdivision (a)(1) and 550, subdivision (a)(6). The complaint alleged the insurance fraud was committed between November 15, 2004, and February 20, 2015, and was based, in part, on the operation of Golden State. On July 26, 2017, Nelson pleaded guilty to that charge as stated in a third amended felony complaint.
Nelson testified that Uwaydah, who “was the true owner of Golden State . . . created a list of prescription medications and insisted that each patient seen at Frontline [a medical clinic also controlled by Uwaydah] be prescribed all medications on the list or at least a certain dollar amount . . .. The billing reflected that each patient was essentially prescribed the same medication.” She added that “[p]rescriptions would often be returned to the clinic or pharmacy and these medications would be relabeled with different patient names and the insurance company would be re-billed for the same medication. Nelson also testified that Golden State operated under a fraudulent scheme from its founding to her departure from Uwaydah’s employment in June 2010.
On January 17, 2019, a Criminal Grand Jury of Riverside County indicted Uwaydah, Hunt, and others for, among other crimes, conspiring to knowingly make false or fraudulent claims for payment of health care benefits in violation of Penal Code sections 182, subdivision (a)(1) and 550, subdivision (a)(6).
The Insurance Claims
Between May 2015 and June 2016, the Controller received 37 submissions from insurance companies and other entities for insurance claim benefits, insurance claim reimbursements, and workers’ compensation benefits that identified Golden State as the owner of the submission proceeds.
On March 9, 2017, Hunt, on behalf of Golden State, filed claim forms with the Controller concerning the 37 submissions. From October 2017 to February 2018, Zachary Peccianti, the Controller’s Bureau Chief, communicated with Hunt and Steven Gardner, Golden State’s attorney, concerning documents necessary to “complete the claim.
On August 30, 2018, Golden State filed its complaint against the Controller to recover its claimed money under the UPL. It moved for summary judgment. The trial court granted the motion and, on August 3, 2019, entered judgment for Golden State in the amount of $121,989.13.
DISCUSSION
The UPL governs the state’s handling and disposition, generally through the Controller, of property such as bank accounts and securities, held by entities such as banks, brokerage firms, and insurance companies, the owners of which have not acknowledged or claimed their interest in for several years, generally three. Such property by statute escheats (becomes the property of the state), nonpermanently, and the holder must transfer it to the controller. The UPL is not a permanent or “true” escheat statute. Instead, it gives the state custody and use of unclaimed property until such time as the owner claims it. Its dual objectives are to protect unknown owners by locating them and restoring their property to them and to give the state rather than the holders of unclaimed property the benefit of the use of it, most of which experience shows will never be claimed.
The trial court impliedly ruled that Golden State did not file its complaint within the time prescribed in section 1541, but expressly ruled that the statute of limitations was equitably tolled. The Controller contended that the court erred in applying equitable tolling because Golden State failed to provide the Controller with notice of its intent to litigate and failed to conduct itself reasonably and in good faith.
Golden State filed its complaint on August 30, 2018, over 270 days after March 9, 2017, and outside the statute of limitations. Thus, for Golden State to proceed with its time-barred claim, it had to satisfy the elements of equitable tolling.
Equitable tolling is a judge-made doctrine which operates independently of the literal wording of the Code of Civil Procedure to suspend or extend a statute of limitations as necessary to ensure fundamental practicality and fairness. Equitable tolling has three elements: timely notice, and lack of prejudice, to the defendant, and reasonable and good faith conduct on the part of the plaintiff.
The Controller Demonstrated a Triable Issue of Material Fact Concerning Golden State’s Ownership of the Claimed Money
The Controller concedes that the insurance companies and other entities that delivered the contested money to the Controller listed Golden State as the owner of that money.
There is a triable issue of material fact as to whether Golden State was formed and operated as part of a criminal conspiracy to commit insurance fraud. Nelson, who was designated for some period as Golden State’s sole manager, pleaded guilty to conspiring to commit insurance fraud in connection with Golden State’s operation. Golden State operated under a fraudulent scheme from its founding to her departure from Uwaydah’s employment in June 2010.
This evidence supported an inference that a criminal conspiracy generated the insurance payments that were the submissions to the Controller. There was a question of material fact whether Golden State owned those check proceeds as the person who had legal right to the property before its escheat it would have had no legal right to money criminally obtained.
The judgment was reversed. The Controller was awarded its costs on appeal.
ZIFL OPINION
The UPL, logically, does not allow the state to pay to a fraud perpetrator funds the state controlled.?The fraud was obvious and established. If anyone had a right to the funds were the insurers who were defrauded and paid claims that they did not owe. It should be axiomatic that neither a state agency nor a court should do anything to allow a fraud perpetrator to profit from his crime.
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Defendants Claimed Their Fraud Was Obvious so Insurer was not Damaged
GEICO Proactively Fights Fraud by Suing Providers for Damages
When health care providers admit that they defrauded an insurer but claimed they were not liable because the fraud was so obvious the insurer could not prove the reliance element of common law fraud, their defense and appeal is contumacious. In Government Employees Insurance Co., GEICO Indemnity Company, GEICO Casualty Company, GEICO General Insurance Company v. Quality Diagnostic Health Care, Inc., et al., Jorge E. Martinez, Luis Anibal Queral, M.D., Moulton Keane, M.D., Ivelis Garcia, Michel Viera, LMT, No. 21-10297, United States Court of Appeals, Eleventh Circuit (November 5, 2021) the Eleventh Circuit refused to buy the ridiculous defense that it was GEICO’s fault that they successfully defrauded GEICO.
BACKGROUND
Th appeal arose from claims – submitted by Defendants to GEICO – for reimbursement under the Florida Motor Vehicle No-Fault Law, Fla. Stat. §§ 627.730-627.7405. Florida’s No-Fault Law requires automobile insurance policies to include personal-injury protection (“PIP”) coverage to provide persons injured in automobile accidents with benefits for medical treatment. Pursuant to a valid assignment of PIP benefits by the insured, the healthcare provider may submit claims directly to the insurance company to receive payment for medical services rendered.
In Florida an insurance company is not required to pay a claim for reimbursement under certain circumstances, including to a “person who knowingly submits a false or misleading statement relating to the claim or charges,” “[f]or any treatment or service that is up-coded,” or for charges that do “not substantially meet the applicable” statutory requirements. Florida’s No-Fault Law also prohibits reimbursement for services – including physical therapy services – performed by massage therapists.
GEICO contended that the Defendants were involved in fraudulent billing practices through Quality Diagnostic Health Care, Inc. (“Quality”), a Florida health care clinic that purported to provide patient examinations and physical therapy services to patients injured in car accidents. GEICO says Defendants submitted or caused to be submitted fraudulent insurance claims that were nonreimbursable under Florida’s No-Fault Law.
GEICO sought to recover insurance payments already made to Quality (about $145,000) and sought a declaration that GEICO owed no legal obligation to pay the remaining outstanding claims submitted by Quality (about $79,000). In pertinent part, GEICO asserted against Defendants claims for declaratory judgment, common law fraud, unjust enrichment, and for violation of the Florida’s Deceptive and Unfair Trade Practices Act (“FDUTPA”).
The district court granted GEICO’s motion for summary judgment. The district court found to be undisputed these facts:
In the light of these facts, the district court determined that none of Quality’s bills to GEICO were eligible for reimbursement under Florida’s No-Fault Law. Given Defendants’ knowing false representations the district court also granted summary judgment on GEICO’s claims for common law fraud and for violation of FDUTPA.
DISCUSSION
Under Florida law, a plaintiff asserting a claim for fraud must show:
Much to the surprise of the trial court and GEICO, the defendants admitted the claims billed to GEICO inflated falsely the level of service provided and, thus, were upcoded and represented falsely that the physical therapy services had been provided by or under the direct supervision of a licensed physician.
Regardless of the admission of fraud, the defendants contended that GEICO could not show justifiable reliance because GEICO knew or should have known that Defendants’ claims misrepresented the nature and extent of the patient examinations. According to Defendants, the billing deficiencies were “obvious” from the underlying treatment records and accident reports (to which GEICO had access) and, thus, GEICO was on notice that Defendants’ representations on their invoices for reimbursement were false.
The district court properly rejected these arguments. Under Florida law, a person “may rely on the truth of a representation, even though its falsity could have been ascertained had he made an investigation, unless he knows the representation to be false or its falsity is obvious to him.” [Besett v. Basnett, 389 So.2d 995, 998 (Fla. 1980)]
A falsity is “obvious” when “a mere cursory glance would have disclosed the falsity of the representation” or when a “cursory examination or investigation” would make “patent” the falsity. In the insurance context, we have said that – absent “some circumstance which directs attention to them” – information somewhere in an insurer’s records is insufficient to put an insurer on notice of the falsity of representations made to it. See Schrader v. Prudential Ins. Co., 280 F.2d 355, 362 (5th Cir. 1960) that explained that an “insurer is entitled to rely on the representations of an insured, without checking all its files to determine if the insured is committing a fraud.”
The Eleventh Circuit was unable to determine that the falsity of Defendants’ misrepresentations were “obvious”. The falsity was not readily observable upon a cursory examination. GEICO was entitled to rely on Defendants’ misrepresentations made in their invoices for reimbursement, even if a more thorough investigation of the full treatment records and accident reports might have uncovered the falsity of Defendants’ statements.
UNJUST ENRICHMENT & FDUTPA
To state a claim for unjust enrichment under Florida law, a plaintiff must prove three elements:
A cause of action for unjust enrichment exists when an entity accepts and retains benefits that it is not legally entitled to receive in the first place.?GEICO paid Defendants over $145,000 as reimbursement for patient examinations and for physical therapy services purportedly rendered by Quality. That Defendants’ claims – as submitted – were non-reimbursable under Florida’s No-Fault Law is undisputed. Because Defendants had no legal entitlement to the reimbursement payments, the district court committed no error in granting GEICO summary judgment on its claim for unjust enrichment.
To establish a claim for violation of the FDUTPA, a plaintiff must show “(1) a deceptive act or unfair trade practice; (2) causation; and (3) actual damages.” [See Dolphin LLC v. WCI Cmtys., Inc., 715 F.3d 1243, 1250 (11th Cir. 2013).] The district court concluded that GEICO was entitled to summary judgment because Defendants admittedly engaged in “deceptive acts” or “unfair trade practices” when they upcoded charges and represented falsely that Dr. Keane performed or directly supervised the physical therapy services and (2) a causal connection existed between Defendants’ deceptive acts and GEICO’s payment of the PIP claims.
ZIFL OPINION
It takes a great deal of unmitigated gall to appeal an adverse judgment after admitting that the conduct that resulted in a summary judgment in favor of GEICO was contumacious since they admitted that they had defrauded GEICO and raised the silly argument that GEICO should not have paid the fraudulent billing since they were obviously fraudulent. I can only wonder why the defendants or their lawyers were not sanctioned for bringing such a frivolous appeal.
Good News From the Coalition Against Insurance Fraud
The Coalition Hall of Shame
Damian Labeaud
Busy freeways stretching around New Orleans were frightening ordeals for truckers passing through town.
Damian Labeaud led a sprawling crime ring that maneuvered innocent big rig drivers into at least 40 sideswipes and collisions.?
Labeaud packed cars with passengers like motorized sardine cans. Then he and his cohorts staged the freeway crashes, claiming the innocent truckers were at fault. The passengers were unharmed, yet lied they had painful neck and back whiplash injuries. Many passengers were ghosts. They weren’t even in the cars, yet claimed they were hurt.
Labeaud feasted on the truckers’ insurers with millions of dollars in dummied-up injury claims. Whiplash is a hard-to-prove soft-tissue injury. Unlike broken bones that can easily show up in X-rays, whiplash is easy to fake and hard for insurers to medically dispute.?
Piles up false, expensive lawsuits?
A personal-injury lawyer in cahoots with the ring knew the trucking firms were required to carry at least $1 million of insurance. The lawyers piled on large lawsuits, draining insurers for up to $200,000 apiece in false injury claims.?
In one setup wreck, Lois Russell, Tanya Givens and John Diggs teamed with passenger James “Curtis” Williams to stage a separate wreck with a tractor-trailer. Roderick Hickman drove Russell’s car. He rammed the 18-wheeler and fled with Labeaud in a getaway car. Russell lied to police that she drove the attack car. She made false injury claims, along with Givens and Diggs. Insurers paid out $272,500.
In another case, four ring motorists sued after claiming a truck rammed them while turning into a truck stop. The driver and three passengers claimed no injuries in the police accident report. The report also cited only minor damage to the car — and not even a scratch on the truck. The officer even cited the car driver with two tickets and arrested her.?
Yet the driver and her passengers sued the trucker’s insurer nine months later. They claimed “severe and disabling injuries.” The case was settled out of court.
Unhurt, yet endure neck surgery
Labeaud was just as active. He drove a Chevy Avalanche into a truck — yet claimed the trucker caused the wreck. Labeaud’s colluding attorney arranged bogus injury treatment for his “passengers” — some who weren’t even in the vehicle. Lucinda Thomas was unhurt, yet endured worthless neck surgery to increase her insurance take. The truck’s dashcam tipped off investigators, showing the entire bogus collision as it unfolded. That helped blow the lid off the ring, leading to the arrest of Labeaud and his crash cohorts. Many of the same ring members kept showing up in the same crashes and lawsuits, further fueling the months of investigations.
Federal prosecutors methodically dismantled Labeaud’s ring in court. Most members now have criminal records. The Louisiana State Police played an invaluable role in the successful investigations.?
Labeaud will spend up to five years in federal prison when he’s sentenced. As he discovered to his dismay, insurance fraud was a freeway straight to jail.
Ali F. Elmezayen
Onlookers heard the tires screech as Ali F. Elmezayen’s car sped down a commercial fishing wharf and shot into the harbor at Los Angeles.
The Honda Civic quickly sank in 20-30 feet of murky salt water. Elmezayen swam out through the open driver-side window. His two autistic kids were tightly strapped in child seats. They never had a chance and drowned, still in their seats.?
Elmezayen also tried to drown his ex-wife. Rabab Diab couldn’t swim yet luckily, she was rescued by fisherman after barely escaping through the car window.
Elmezayen portrayed the wreck as a horrible accident. In fact, it was stone-cold murder. Elhassan (age 13) and Abdelkrim (age 8) needed high levels of medical care, including state support. So, the Egyptian native bought more than $7 million of life and accidental-death policies on himself, the kids’ lives and Diab.?
The accelerator pedal was his chance to cash in. His kids and wife were mere profit centers, not a family.
Insurance money buys real estate, boat
Elmezayen earned less than $30,000 a year in wages. Yet he somehow found the money to pay more than $6,000 of insurance premiums annually to keep the policies afloat.
He frequently contacted the insurers, asking to confirm they wouldn’t investigate for fraud if he made the claims two years after buying the policies. That’s the time window that life insurers typically require for investigating deaths of insureds.
So sure enough, Elmezayen raced his car off the pier just two years and 12 days after the policy purchases. He soon collected more than $260,000 on his dead sons’ lives. He used part of the money to buy real estate in Egypt, and a boat.??
Elmezayen garbled his stories when investigators questioned him after the kids died. He may have accidentally pressed the accelerator, he said. Or maybe he passed out from medicines he took for a blood disorder. Or maybe he fell prey to an “evil inside of me that pushed me to go.”
Killer wants a second wife
At trial, prosecutors said Elmezayen beat Diab and phoned her parents in Egypt, “threatening to send her home in a coffin.” He’d “bury her alive” and take a second wife.
His intentions were clear during a recorded call to an insurer. Elmezayen is heard in the background, speaking in Arabic with Diab. “May God compensate us for the kids. …” he said. “May God give us better than them.”
The federal judge compensated Elmezayen with 212 years in prison.?
“These two boys deserved a loving father,” said U.S. Attorney Nick Hanna. “Instead, they got a man who put his greed and self-interest above their lives.”
Wade Walters
Bland-looking tubes of creamy compound medicines were worth more than gold and diamonds to Wade Walters. His low-key pharmacy in Hattiesburg, Miss. began as the nerve center of a sprawling $510-million siphoning of health insurers — especially Tricare, the federal military insurer.?
Walters rapidly grew rich by hawking expensive and medically worthless compound medicines — mostly to young U.S. military service members around the U.S. who didn’t need the stuff.?
And hard-working taxpayers footed his insurance bills.
Compound meds are flypaper for insurance fraud. They cost insurers much more than standard medicines. Ideally, compounds are hand-mixed and customized for each patient. That makes the stuff expensive — billed to insurers for thousands of dollars per tube.
Targeting military members made sense to Walters. Military life can be hard and physical. So, Walters’ fraud ring pureed compound pain and scar creams, and vitamin pills. For Tricare, the service members plausibly needed the medicines.
More to the point, the glop was lucrative for Walters. Some pain creams, which contained ketamine or tramadol — both controlled substances — were falsely billed to Tricare and other insurers for up to $14,000 per tube.
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Military service members bribed
Walters’s fast-growing network included doctors, pharmacies, patient marketers and others. Marketers bribed hundreds of military service members to hand over their insurance information. They were covered by Tricare.
In some cases, marketers convinced Marines they were joining a drug trial for pain and scar creams. Marines were paid about $300 in illegal cash kickbacks each month after handing over their insurance information for billing.
Corrupt doctors prescribed the compound ointments without meeting the patients — or even determining if they needed the ointments. Ring members rigged prescriptions to ensure the highest possible insurance payouts.?
Pharmacies then mixed tubes of the medicines, and bottles of pills. The service members’ medical exams were forged to ensure the fraudulent bills fooled insurers.
Tubes of compound medicine were repeatedly mailed to service members on a recurring basis. This maximized each prescription’s illicit insurance profits. Yet service members didn’t use the ointment, because they didn’t need it.
Insurance money poured in. Walters’ scam rapidly expanded into a loosely built criminal network around the U.S. as word spread that compound medicines meant easy insurance money.
Patient paralyzed, in pain
Leslie Cook had a severe reaction to a compounded vitamin pill she took. “It felt like I was vomiting blood,” said Cook. She was paralyzed and couldn’t speak when searing pain overtook her. Cook was alone at home for hours until her husband arrived and rushed her to the hospital.
She later asked the pharmacist what was in the pills. They contained capsaicin, the ingredient that makes chili peppers hot.?
Needy military vets were victimized as well. Walters’ ring stole so much insurance money that Tricare was forced to reduce healthcare programs that vets depended on. Tricare even had to ask the feds for more money to operate at full strength.
Justice finally caught up with Walters. He pled guilty, and streams of convictions have shelved other ring members. Walters was given 18 hard years in federal prison, and must repay more than $287 million.?
“My life has turned upside down,” Walters said. “I’ve embarrassed my family, my friends and my church family. I’m tired. I’m ready to move on and serve my time.”
Imad and Bahaa Dawara
Imad and Bahaa Dawara’s flailing efforts to run a hookah bar had fizzled. They were $64,000 behind on rent, and feuding with their landlord. Their final bet to make money on the failed venture: torch the place for $750,000 of insurance money.
The brothers botched insurance fraud even worse than they ran their hookah bar. The explosive gasoline fire ruined a scenic old neighborhood on Chestnut Street in the heart of Philadelphia’s historic district. Flames and smoke drove hundreds of people from their businesses and homes, killed pets and caused millions in damage.
The Dawaras’ landlord had reached the end of his patience. Unpaid rent piled up, and the landlord also wouldn’t let them hire a DJ or use hookahs. So, the brothers shuttered the bar, and the landlord permanently ejected them.?
Blaze flares out of control
Their last hope of recouping their losses after screwing up: Insurance fraud. The Dawaras had been uninsured for years. Then they suddenly bought a $750,000 policy that covered accidental fires — just 16 days before their arson fire. And even though their club had closed its doors. They ignited a gasoline fire in the basement at 3 a.m. The combustible brew quickly flared out of control.?
Searing flames and menacing smoke rapidly flared through the neighborhood. Panicky business owners, hotel guests and apartment dwellers bolted for safety amid the fiery chaos. The blaze destroyed the Dawaras’ historic brick building, wrecking a treasured landmark.?
More than 400 firefighters had to combat the flames. Around 160 people were evacuated; some sought shelter in a city bus that was set up as a refuge. At least 10 pets died. The neighborhood remained shut down for months. The damage drove several restaurants out of business permanently. Many neighbors lost their homes.?
Guests in one neighborhood hotel were forced to evacuate in the middle of the night. They waited for days before they could return to retrieve their belongings. They found that most of their possessions were destroyed. Most of the hotel’s 25 employees lost their jobs.
Calls crippling fire merely a “mistake”
The Dawaras’ rushed to pull down their false $750,000 claim — contacting their insurer the day after the blaze.?
The federal judge shared the community’s outrage after the Dawara were convicted. They each were handed nine years in prison, and must somehow repay $22 million. Bahaa showed little remorse in court. He merely called their ruinous insurance scheme a “mistake.”
“You took gas and poured it into a basement. What did you think was going to happen? Mistake?” U.S. Chief District Judge Juan R. Sánchez shot back. “You were playing with fire and you never thought there was a threat to people, property and the life of the city? You think this was a mistake?”
Dr. Javaid Perwaiz
Women trusted Dr. Javaid Perwaiz, their tragically reassuring OB-GYN. Today, many former patients wrestle with consuming anger, betrayal and chronic pain. Perwaiz convinced them to have painful hysterectomies and other irreversible surgeries they didn’t need, maiming many for life.
Perwaiz’s supercharged scalpel made him Ferrari-rich from nearly $21 million of dollars he received from false and inflated insurance billings.
Fully 173 women reported unneeded surgeries under the Chesapeake, Va. OG-GYN’s supposed care. Perwaiz also botched many of the procedures; some women still suffer from chronic pain and other complications. Patients often were left with large scars as permanent reminders of his money-churning insurance scheme.?
Phony cancer threats fool patients
Perwaiz ran a hard-charging medical insurance fraud factory. He performed up to 30 surgeries a day. Staff could barely keep up with Perwaiz as he rushed from procedure to procedure.?
Cancer was imminent and Donna Ingram-Allen needed a hysterectomy right away, Perwaiz warned her. She chose to have her ovaries removed instead.?
When Ingram-Allen awoke in recovery, she discovered Perwaiz had inflicted a total abdominal hysterectomy. He also perforated her bladder. Ingram-Allen was rushed back to the hospital with blue skin, three days later. She’d developed a bad infection and was hospitalized for six days. She later obtained her medical files; they didn’t even mention precancerous cells.
Angela Lee suffered from complications after a hysterectomy led to heavy bleeding. She was placed in an induced coma for days. Another patient says she can no longer use the bathroom normally after an unneeded hysterectomy.
A patient Perwaiz treated for pregnancy problems discovered her fallopian tubes were “burnt down to nubs” without her knowledge or consent. She no longer can conceive naturally. Perwaiz also pressured patients to have permanent sterilizations, lying that the procedures were easily reversed.
At least 33 pregnant women had early induced labor without a valid medical reason. Rushing their childbirths let Perwaiz deliver the babies on days he worked at the hospital — and thus would be paid by insurers.
Cons patients into repeated surgeries
Many patients were lower-income Medicaid women who trusted Perwaiz’s medical diagnoses. Perwaiz persuaded them to keep having unneeded surgeries. Some came back every year, yet didn’t even know what surgeries he performed, or why.
Perwaiz also billed insurers hundreds of thousands for diagnostic procedures he didn’t perform. Perwaiz even charged for hysteroscopies — used to view a woman’s uterus — yet his office scope was broken.
Insurance money rolled in from Medicaid and private insurers. Perwaiz spent more than $2.3 million on credit card purchases. And he bought a fleet of luxury cars, including a Bentley, Jaguar, Mercedes and red Ferrari.?
Perwaiz’s samurai scalpel also bought him 59 years federal prison. The Virginia AG provided invaluable assistance in the case.
“He doesn’t care about any of us. It was all about greed, money and a lavish lifestyle. That’s all he ever wanted,” former patient Anita Fuller said in court.
Melissa Alvarez Torres and Jose Luis Olmos
More than 250 pregnant women from Mexico believed they bought affordable health insurance that let them legally give birth in the U.S., while covering the large maternity expenses.
Instead, the trusting women were foils for a scheme that stole premium dollars the lower-income women could scarcely afford to lose. The ruse also imperiled their U.S. non-resident visas — their lifelines to an income and better living.?
Melissa Alvarez Torres and Jose Luis Olmos Hernandez set up the women, who’d hoped for their private slice of the American Dream. The San Diego-area duo lured the women into buying coverage for which they weren’t eligible. The goal: steal their hard-earned premium money.
Ads tout fake health insurance
Facebook ads hawked phony maternity coverage. Torres and Hernandez promoted a bogus health insurance provider called Seguros Americanos Embarazo (American Pregnancy Insurance) to lure the women in.?
The women crossed into the U.S. mostly work or tourist visas. Alvarez and Hernandez lied that their so-called health plan was a safe and legal way to give birth, thus offering their babies U.S. citizenship by birthright.?
U.S. hospitals also were safer, some women with high-risk pregnancies also figured.?
So, the victims believed they’d bought private pregnancy coverage. In fact, Torres and Hernandez secretly signed them up for Medi-Cal, the state-run health insurance plan. They lied that the women were California residents, and thus were eligible for a special Medi-Cal maternity healthcare program for working class women without health coverage.?
In truth, the Mexican women weren’t eligible for Medi-Cal because they were only in the U.S. on their visas.
Torres and Hernandez harvested the sensitive personal information the women submitted from the false Facebook ads.?
Pregnant woman reports scheme
The pair also convincingly faked the documents needed to create the illusion the women were California residents. They invented fake addresses, elaborate tax and employment documents in the women’s names, and supporting letters from U.S. employers who hadn’t hired the women.
One pregnant woman realized her purported health insurance was Medi-Cal, not the private insurance she was told she bought. The woman called authorities to report she was a fraud victim, then had her baby in Mexico.?
A state investigator looking into suspicious insurance applications knocked on doors in Imperial County to verify the women’s residences. That sleuthing prompted a call from a woman targeted by the scheme. She provided evidence that further helped break open the health ruse.
Each faces up to 20 years in federal prison when sentenced, and must repay the stolen $1.5 million.?
So, Torres and Hernandez now have their own piece of the American Dream — one that’s reserved for criminals.
Joshua Ryan Joles
Police raided a Miami-area house. They found a batch of prescription pills, seemingly being moved by a small-time drug ring.?
In fact, the basic search discovered a fast-growing criminal network that would balloon into a $78-million scheme that exploited a thriving black market for expensive prescription drugs around the U.S.
Joshua Ryan Joles was a key drug mover in the operation, which hauled in $78 million by reselling large volumes of stolen medicines for high-profit markups throughout the U.S. Life-giving drugs for HIV, cancer and psychiatric illnesses were the ring’s stock in trade.
Thousands of bottles of potentially defective drugs ended in the hands of unknowing consumers. They had no idea their health was imperiled by drugs that often were expired, deliberately mislabeled, or decayed from unsafe storage.
Steals from Medicare, Medicaid beneficiaries
Joles convinced Medicare and Medicaid patients who filled their prescriptions at discounted prices to sell their medications to his network for extra spending money. He also acquired the expensive drugs by cargo theft and burglarizing pharmacies.?
Joles’ network soon spanned the U.S., disbursing drugs in Florida, Arizona, Delaware, Washington and Puerto Rico. It was the largest prescription drug ring South Florida had seen in recent years.
Ring members picked up boxes of stolen black-market drugs by the hundreds in random parking lots or streets across South Florida. Ring members then repackaged the expensive medicines for resale to unwitting retail pharmacies and consumers.?
They removed the labels on drug bottles with lighter fluid and other chemicals. Then they forged new labels and glued them on to make the drugs seem fresh and legitimately obtained. In addition, they created phony paperwork saying the drugs came from mainstream wholesale suppliers.?
Casinos cost agent Vicki Boser her freedom and career. The Snohomish, Wash. agent pocketed premium payments from high-risk clients and provided fake insurance certificates to some of them. Boser used the money to support her gambling habit at area casinos. Boser had clients across the U.S. Many were small, family-owned businesses that trusted Boser. Among her victims were an Illinois property inspection firm, and firms that maintain foreclosed homes. Some insurers cancelled their coverage for lack of payment. Boser received the insurer notices and hid them from her clients. Some clients only learned their policies were cancelled when they contacted their insurer directly about renewing the policies. The premiums cost tens of thousands of dollars — in one case more than $100K. The investigation was triggered when the clients complained to the state insurance department. Boser must repay more than $273K to eight insurers or brokers. She was given two years in federal prison and must repay the stolen money.
Working as controller for an insurtech insurer, Kevin J. Mix stole nearly $6M from Insureon, which covers small businesses. The Chicago man wired the money to his bank accounts, then to his shell companies. Mix made false entries in the firm’s records, created fake emails, and lied to employees of the firm and its bank. The money went to pay vendors, investors and other expenses, his false entries said. In one case, Mix sent an email to the firm’s audit staff purporting to be from a vendor that sought payment of a $480K bill. Mix spent his stolen money on a Lexus RX SUV, Mercedes GT63C4, gold bars and diamond jewelry. He also bought real estate in Chicago and Columbus, Ohio. Mix sought pretrial release after his arrest. Forget it — he’s a flight risk, the federal court ruled. Mix’s fiancé and children live in the Dominican Republic. He also sent stolen money there. Mix made frequent trips there and has substantial local ties. He also paid $100K to a private jet charter firm. Mix pleaded federally guilty and could spend up to 20 years in federal prison when sentenced.
Life without parole. That’s the court’s resentencing decision for Scott Peterson after he murdered his wife Laci and their unborn son Conner for $250K of life insurance. The Modesto, Calif. man dumped their bodies in the chilly San Francisco Bay after the murders. Peterson’s alibi was odd. He said he made a solo Christmas Eve fishing trip to chilly San Francisco Bay, 90 miles from the couple’s home. The separate bodies of Laci and unborn Conner washed up months later, close to where Peterson said he was fishing. Peterson also had financial problems and needed the insurance money. Plus, he was having an affair with a young massage therapist. Prosecutors wove a circumstantial case that made worldwide headlines. Authorities say Peterson was eerily calm when detectives questioned him the night Laci disappeared. When police showed up to arrest Peterson, his naturally dark brown hair was dyed blonde, and his Mercedes was overstuffed with possessions –– including nearly $15K in cash, 12 Viagra tablets, survival gear, camping equipment, several changes of clothes, four cell phones, and his brother’s driver license in addition to his own. Prosecutors theorized was preparing to flee to Mexico. Peterson received the death penalty in 2005. The state Supreme Court tossed his death sentence in 2020. A lower court reinstated Peterson’s life sentence this week.
A workers comp administrative law judge in Iowa was fired for falsely placing her 26-year-old daughter on her employer-provided insurance. A federal court then quashed Susan Ackerman’s lawsuit. Ackerman placed her daughter on her policy, even though her daughter was separated yet officially still married. Ackerman gave testimony several months earlier to the Iowa Senate that was adverse to Teresa Wahlert, director of Iowa Workforce Development. That’s the agency where Ackerman worked. Ackerman then sued after being fired. Her termination and the fraud probe were retaliation for the testimony, she claimed. Ackerman didn’t provide enough evidence to support her contentions, the U.S. Court of Appeals for the Eight Circuit ruled. [Ackerman v. Iowa , 2021 BL 463412, 8th Cir., No. 20-2226, 12/6/21].
A Mercedes rear-ended a car, and a Toyota Tacoma rammed the Mercedes from behind in a three-vehicle accordion. The lead car had deliberately jammed its brakes to force the Mercedes collision. The Tacoma was an unfortunate collateral victim: The driver lost a tooth and broke a foot, requiring surgery. Eduardo Retana and Ausencio Gomez drove the lead fraud car, setting up the collision to lodge false injury claims for insurance money. They teamed with Victor Valle-Diaz to stage 15 crashes involving 21 victims, some who had serious injuries. Valle-Diaz was the ring’s capper. He bought auto policies for Retana and Gomez — often using false IDs. Valle-Diaz also developed scripts so his crew could convincingly tell insurers about the crashes. And he coordinated the crashes, while making sure the claims were properly filed. The trio collected nearly $330K of insurance payouts. Valle-Diaz received seven years in state prison, Retana six years and Gomez four years. The ring was taken down by the Los Angeles Auto Insurance Fraud Task Force. It comprises the insurance department and California Highway Patrol.
Spiking his wife’s cereal with heroin was the death tool for Jason Harris’ bid to steal $120K of life insurance, prosecutors charge in Genesee County, Mich. Christina Ann Thompson-Harris’ death first was ruled an accidental overdose. Harris was at work and asked a neighbor to check up on Christina at their home in Dawson. The neighbor found Christina dead. In fact, Harris had poisoned her cereal the night before. Another woman moved into the home two weeks later, and Harris collected his $120K. Harris didn’t exactly hide his murder plot. He’d talked to his siblings about “getting rid of her.” Harris asked them what pills were odorless and tasteless after trying to put Xanax in Christina’s water. He told them he wanted to knock Christina out so he could move her body without her feeling anything. Harris even told coworkers that he paid a hitman $5K to kill Christina, but that the guy was arrested while doing surveillance and was jailed. Harris then asked coworkers if they’d kill her for $5,000. He also told multiple people that he fixed Christina’s bowl of cereal the night before, and she passed out. This made investigators believe Harris put heroin in her cereal. Nor was Christina a drug user; samples of her breast milk frozen earlier revealed no drugs. Harris was convicted, and faces up to life without parole in state prison when sentenced this month.
Police found Alexander Jacob Martinez lying dead on the ground in the parking lot of a music studio in Castro Valley, Calif. He had a bullet to his head. His former roomie Albert Jones, Jr. ordered the hit to cash in on three life policies worth $1.35M that he secretly took out on Martinez. The deceased worked at the studio, which has provided production for Bay Area rappers such as Dru Down and Keak da Sneak. Jones bought the policies and hired out the hit on Martinez for revenge and insurance money. Jones was still steaming about a rent dispute with his former roomie. So, he bought the policies, secretly installed a GPS tracking device on Martinez’s car and hired the hitman to track him down and pull the trigger. Jones will spend up to life in prison when sentenced in January.
A former pro soccer player whiffed on a failed plan to fake his death for ￡1M. Hiannick Kamba once played right fullback for a South African football team. He supposedly died in a crash in his native Congo. His wife received a hefty insurance payout after presenting a death certificate from Congo; the couple’s ￡505K policy doubled in case of Kamba’s accidental death. Officials investigated. Kamba finally went to the German embassy in the Congolese capital of Kinshasa. His mother and wife kidnapped him and dumped him in the jungle so they could cash in the policy, he lied. They took Kamba’s money, papers and cellphone, he claimed, leaving him with no way to contact the outside world and stop the insurance plot. Yet Kamba was a smart guy who could’ve easily figured out how to contact the outside world, prosecutors said at his and his wife’s trials. They each received three years and 10 months in Germany.
?Health Insurance Fraud Convictions
Chicago Woman Sentenced To 56 Months for Home Health Care Fraud
Last of Four Individuals Sentenced in this Conspiracy
Angelita Newton, 43, of Chicago, Illinois was sentenced November 29, 2021 in the Northern District of Illinois to 56 months in prison and ordered to pay $6.3 million in restitution for her participation in a conspiracy to commit health care and wire fraud.
According to court documents, and the evidence presented at trial, Newton worked at Care Specialists, a home health care company owned by Ferdinand Echavia and later his wife, Ma Luisa Echavia. While operating between 2011 and 2017, Care Specialists fraudulently billed Medicare at least $6.3 million. At trial, the government demonstrated that around 90% of the patients were not homebound and did not qualify for the types of care that Care Specialists billed Medicare for. Further, many patients received cash bribes to receive home health “visits,” some of which were performed in the visiting nurse’s car. Newton facilitated the conspiracy by falsifying patient visit records which were used to support claims billed to Medicare and was convicted by a federal jury on Feb. 14, 2020.
In addition to issuing Newton’s sentence today, Judge Virginia Kendall previously sentenced three others involved in the conspiracy. On Oct. 21, 2021, Ferdinand Echavia was sentenced to 84 months’ confinement and three years’ supervised release. On Nov. 5, 2021, Ma Luisa Echavia was sentenced to 60 months’ confinement and three years’ supervised release. Another participant in the conspiracy, Reginald Onate, who pleaded guilty and cooperated with the government throughout the investigation, was sentenced to a term of three years’ probation.
Sentenced To Prison For Health Care Fraud Schemes
Nancy Almaguer, 42 and Christopher Felix Montoya, 47 two San Antonio residents were sentenced for their roles in health care fraud schemes on November 29, 2021. Almaguer was sentenced to 18 months in prison Montoya was sentenced to two 18-month prison sentences to run consecutively.
According to court documents, Montoya was a licensed physician’s assistant and owner of TPC Family Care and Medical Clinics in San Antonio and Laredo. Almaguer was the Chief Operating Officer for the clinics. Beginning in September 2018 through June 2019, Montoya and Almaguer agreed to refer lab testing requests to specific laboratories. The labs billed insurance programs, including Medicare and TRICARE, and paid Almaguer and Montoya a percentage of their receipts in return for the referrals.?The kickback schemes resulted in over $500,000 in billings to public and private insurance companies.
In July and September of 2021, Montoya and Almaguer, respectively, pleaded guilty to one count of conspiracy to defraud the U.S. and to pay and receive health care kickbacks.
In a separate case, in July 2021, Montoya pleaded guilty to one count of conspiracy to receive health care kickbacks.?In this case, Montoya admitted that for five months beginning in February 2015 he received kickbacks to write prescriptions for compounded medication from a California-based pharmacy that had high TRICARE reimbursements. Based on the evidence, TRICARE was billed $8,832,268.73 for prescriptions Montoya wrote to which TRICARE paid out $6,690,598.77.
In addition to the prison sentence, Almaguer was ordered to forfeit $137,792.10 in criminal proceeds and pay $52,603.62 in restitution. Montoya was ordered to pay a total of $849,865.93 in restitution.
Crossroads Hospice Agrees to Pay $5.5 Million To Settle False Claims Act Liability
Carrefour Associates LLC; Crossroads Hospice of Cincinnati LLC; Crossroads Hospice of Cleveland LLC; Crossroads Hospice of Dayton LLC; Crossroads Hospice of Northeast Ohio LLC; and Crossroads Hospice of Tennessee LLC (“Crossroads Hospice”), operating in Ohio and Tennessee, agreed to pay $5.5 million to resolve allegations that they violated the False Claims Act by submitting claims to Medicare for non-covered hospice services.
Hospice care is special end-of-life care intended to comfort terminally ill patients. Patients admitted to hospice care generally stop receiving coverage for traditional medical care designed to cure their terminal condition and instead receive medical care focused on providing them with relief from the symptoms, pain and stress of a terminal illness. Medicare patients are terminally ill and hospice eligible when they have a life expectancy of six months or less if their illness runs its normal course.
This settlement resolves allegations that Crossroads Hospice knowingly submitted false claims to Medicare for hospice services for patients who were not terminally ill. According to the settlement agreement, the United States alleged that from Jan. 1, 2012 to Dec. 31, 2014, Crossroads Hospice billed Medicare for hospice care for certain patients with a diagnosis of dementia or Alzheimer’s disease at its Ohio and Tennessee locations who were not terminally ill for at least a portion of the more than three years that the patients received care at these locations.
The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by Leanne Malone, Jackie Burns and Angela Heck, former employees of Crossroads Hospice, as well as Dr. David Weber, a home health physician in Tennessee. Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery. The qui tam cases are United States ex rel. Leanne Malone et al. v. Carrefour Associates LLC et al., No. 1:15-cv-460 (S.D. Ohio) and United States ex rel. David Weber v. Crossroads Hospice of Tennessee, LLC, No. 2:16-cv-02684 (W.D. Tenn.). Under today’s settlement, the whistleblowers in the Malone action will receive approximately $1,045,000.
Pittsburgh Resident Sentenced to More Than Five Years in Prison for Conspiracy, Health Care Fraud, And Aggravated Identity Theft
Tamika Adams, 45, resident of Pittsburgh, Pennsylvania, was sentenced in federal court for conspiracy to defraud the Pennsylvania Medicaid program, health care fraud, and aggravated identity theft ?to sixty-five months of imprisonment, followed by two years of supervised release, for her role in a years-long conspiracy. Adams was also ordered to pay restitution to the Pennsylvania Medicaid program in the amount of $445,131.67.
During her plea hearing on March 13, 2020, Adams admitted that at various times between 2011 and 2014 she was an employee of three related entities operating in the home health care industry—Moriarty Consultants, Inc. (MCI), Activity Daily Living Services, Inc. (ADL), and Everyday People Staffing, Inc. (EPS). MCI, ADL, and a fourth entity, Coordination Care, Inc. (CCI), were approved under the Pennsylvania Medicaid program to offer certain services to qualifying Medicaid recipients (“consumers”), including personal assistance services (PAS), service coordination, and non-medical transportation, among other services. EPS nominally performed back-office functions for MCI, ADL, and CCI.
Between January 2011 and the defendant’s departure from the entities in and around 2014, MCI, ADL, and CCI collectively received tens of millions of dollars in Medicaid payments based on claims submitted for home health services, with PAS payments accounting for the vast majority of the total amount. During that time, Adams admitted that she participated in a wide-ranging conspiracy to defraud the Pennsylvania Medicaid program for the purpose of obtaining millions of dollars in illegal Medicaid payments through the submission of fraudulent claims for services that were never provided to the consumers identified on the claims, or for which there was insufficient or fabricated documentation to support the claims.
As part of the conspiracy, Adams admitted that she fabricated timesheets to reflect the provision of in-home PAS care that, in fact, she never provided to the consumer identified on the timesheets. In one instance, Adams admitted submitting false timesheets claiming that she provided more than 80 hours of care in a single week to a consumer, while also working full-time as the nominal president of ADL. During a two-year period in which the same consumer lived with Adams, the defendant admitted taking steps to conceal their co-habitation and the fact that she served as the consumer’s power of attorney (both disqualifying circumstances) from the Medicaid program.
Likewise, Adams admitted that she paid kickbacks to at least one consumer — her spouse at the time — in exchange for his participation in the scheme. Specifically, Adams admitted that she and her father, co-defendant Tony Brown, used Brown’s name on time sheets for fabricated care of Adams’s then-spouse. At various times, Adams admitted that she, Tony Brown, and her spouse would meet at an MCI office on the day that Brown received payment for the fraudulent care so that the three individuals could divide the proceeds. In total, Adams acknowledged causing losses to the Pennsylvania Medicaid program in excess of $250,000 related to her spouse.
Adams also admitted that during the conspiracy, she caused the submission of Medicaid claims for PAS care that her friend, an MCI employee, purportedly provided to various consumers, without the friend’s knowledge and when in fact no such care had been provided to the consumers. During this time, Adams admitted that her friend was recovering from a serious injury and unable to work. Adams further misused her friend’s personally identifiable information to obtain and misappropriate the resulting salary payments. Finally, Adams admitted that during the course of audits of MCI, ADL, and CCI, she fabricated documentation for submission to state authorities in an effort to conceal the Medicaid fraud scheme. Among other things, Adams fabricated PAS timesheets, criminal history checks for attendants, child-abuse clearance forms for attendants, and certain consumer affidavits to ensure that files requested as part of the audits appeared complete.
To date, a total of sixteen defendants have been charged in connection with this investigation. Adams was the twelfth defendant to enter a guilty plea. The remaining defendants, including Tony Brown, are presumed innocent unless and until proven guilty.
Flower Mound Hospital to Pay $18.2 Million To Settle Federal and State False Claims Act Allegations Arising from Improper Inducements to Referring Physicians
Flower Mound Hospital Partners LLC (Flower Mound Hospital), a partially physician-owned hospital in Flower Mound, Texas, has agreed to pay $18.2 million to resolve allegations that it violated the False Claims Act by knowingly submitting claims to the Medicare, Medicaid and TRICARE programs that resulted from violations of the Physician Self-Referral Law and the Anti?Kickback Statute.
The Physician Self?Referral Law, commonly known as the Stark Law, prohibits a hospital from billing for certain services referred by physicians with whom the hospital has a financial relationship, unless that relationship satisfies one of the law’s statutory or regulatory exceptions. The Anti?Kickback Statute prohibits offering or paying remuneration to induce the referral of items or services covered by Medicare, Medicaid and other federally funded programs. Both the Stark Law and the Anti-Kickback Statute are intended to ensure that medical judgments are not compromised by improper financial inducements.
The settlement resolves allegations that Flower Mound Hospital violated the Stark Law and the Anti-Kickback Statute when it repurchased shares from physician-owners aged 63 or older and then resold those shares to younger physicians. The United States alleges that Flower Mound Hospital impermissibly took into account the volume or value of certain physicians’ referrals when it (1) selected the physicians to whom the shares would be resold and (2) determined the number of shares each physician would receive.
Medicaid is funded jointly by the states and the federal government. The State of Texas paid for a portion of the Medicaid claims at issue and will receive a total of approximately $500,000 from the settlement with Flower Mound Hospital.????????
In connection with the settlement, Flower Mound Hospital entered into a five-year Corporate Integrity Agreement (CIA) with the HHS-OIG. The CIA requires, among other things, that Flower Mound Hospital maintain a compliance program and hire an Independent Review Organization to review arrangements entered into by or on behalf of the hospital. It also increases individual accountability by requiring compliance-related certifications from key executives.
The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by Leslie Jennings, M.D., a physician-owner at Flower Mound Hospital. Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery. Dr. Jennings will receive approximately $3 million as his share of the recovery in this case. The qui tam case is captioned United States ex rel. Jennings v. Flower Mound Hospital Partners, LLC, et al., Civil Action No. 3-19-CV-02676-B (N.D. Tex.).
Federal Jury Convicts Pharmacy Owner for Role In $174 Million Telemedicine Pharmacy Fraud Scheme
Peter Bolos, 44, of Tampa, Florida, was found guilty on December 2, 2021 by a federal jury in Greeneville, Tennessee, of 22 counts of mail fraud, conspiracy to commit health care fraud and introduction of a misbranded drug into interstate commerce, following a month-long trial.
According to court documents and evidence presented at trial, Bolos and his co-conspirators, Andrew Assad, Michael Palso, Maikel Bolos, Larry Smith, Scott Roix, HealthRight LLC, Mihir Taneja, Arun Kapoor, and Sterling Knight Pharmaceuticals, as well as various other companies owned by them, deceived pharmacy benefit managers (PBMs), such as Express Scripts and CVS Caremark, regarding tens of thousands of prescriptions. The PBMs processed and approved claims for prescription drugs on behalf of insurance companies. Bolos and his co-conspirators defrauded the PBMs into authorizing claims worth more than $174 million that private insurers such as Blue Cross Blue Shield of Tennessee, and public insurers such as Medicaid and TRICARE, paid to pharmacies controlled by the co-conspirators.
Court documents and evidence at trial established that Bolos, Assad and Palso owned and operated Synergy Pharmacy in Palm Harbor, Florida. Under their direction, Synergy agreed with Scott Roix, a Florida telemarketer operating under the name HealthRight, to generate prescriptions for Synergy and the other pharmacies involved in the scheme. The prescriptions were typically for drugs such as pain creams, scar creams and vitamins. To obtain the prescriptions, evidence showed Roix used HealthRight’s telemarketing platform as a telemedicine service, calling consumers and deceiving them into agreeing to accept the drugs and to provide their personal insurance information. HealthRight then paid doctors to authorize the prescriptions through its telemedicine platform, even though the doctors never communicated directly with the patients and relied solely on the telemarketers’ screening process as the basis for their authorizations. Because this faulty and fraudulent process made the prescriptions invalid, the drugs were misbranded under the Food, Drug and Cosmetic Act. Synergy and the other pharmacies nonetheless dispensed the drugs to consumers as part of the scheme, so that Bolos could submit fraudulent reimbursement claims.
Court documents and evidence at trial established that during the conspiracy, which lasted from May 2015 through April 2018, Bolos paid Roix more than $30 million to buy at least 60,000 invalid prescriptions generated by HealthRight. Evidence showed Bolos selected specific medications for the prescriptions that he could submit for highly profitable reimbursements. In addition, Bolos used illegal means to hide his activity from the PBMs so that he could remain undetected. Evidence showed that Bolos was responsible for at least $89 million out of the total $174 million in fraudulently paid billings.
Roix, Assad, Palso, Smith, Maikel Bolos and various associated business entities previously pleaded guilty to their roles in the conspiracy. Taneja, Kapoor, and Sterling Knight pleaded guilty to felony misbranding in a conspiracy with Bolos.
U.S. District Judge J. Ronnie Greer set sentencing for Bolos for May 19, 2022, in the United States District Court for the Eastern District of Tennessee at Greeneville.
Tampa Bay Area Medical Biller Pleads Guilty to Healthcare Fraud, Aggravated Identity Theft, And Tax Offenses
Joshua Maywalt (40, of Tampa, Florida) pleaded guilty to four counts of healthcare fraud, four counts of aggravated identity theft, one count of filing a false federal income tax return, and two counts of failing to file federal income tax returns. He faces a maximum penalty of 10 years in federal prison for each healthcare fraud count, a 2-year mandatory consecutive sentence on the aggravated identity theft counts, a maximum penalty of 3 years for filing a false income tax return, and a up to 2 years for each failure to file an income tax return offense. Through the superseding information, the United States also notified Maywalt that it intends to forfeit $2.2 million in funds and real property located at 5346 Northdale Boulevard, in Tampa, all of which are traceable to proceeds of his offenses.
According to court documents, Maywalt was a medical biller at a Clearwater company that furnished credentialing and medical billing services to its medical provider clients. In that capacity, Maywalt was able to access and utilize the company’s financial, medical provider, and patient information. Maywalt was assigned to a Tampa Bay area physician’s account (“Physician #1”) and was responsible for submitting claims to Florida Medicaid HMOs for services rendered by Physician #1 to Medicaid recipients. Maywalt abused his role as a medical biller by wrongfully accessing and utilizing the company’s patient information and Physician #1’s name and identification number, and using those to submit false and fraudulent claims to a Florida Medicaid HMO for medical services purportedly, but not actually, rendered by Physician #1. Maywalt then altered the “pay to” information associated with those claims so that the payments for the fictitious medical services were sent to bank accounts under his control.
Maywalt knowingly signed and filed a false federal income tax return for tax year 2019, substantially understating his income by reporting only his employment wages and not the substantial amounts he was depositing into his bank accounts as a result of his fraudulent activities. In addition, Maywalt failed to file federal income tax returns for 2017 and 2018 as required by the Internal Revenue Service.?
Greensburg Doctor Sentenced to Nearly Five Years in Prison for Accepting Kickbacks in Exchange for Prescribing Fentanyl
Thomas Whitten, age 71, of Greensburg, PA, was sentenced by United States District Judge William S. Stickman to serve to 57 months of imprisonment followed by three years of supervised release. Whitten, a resident of Westmoreland County, PA, was sentenced in federal court following his convictions for conspiracy to violate the Anti-Kickback Statute, health care fraud, and conspiracy to distribute Schedule IV controlled substances, United States Attorney Cindy K. Chung announced today.
Whitten pled guilty on July 22, 2021. During the change of plea hearing, Whitten admitted that, from May 2013 to November 2015, he conspired to receive kickbacks from pharmaceutical company Insys Therapeutics in exchange for prescribing Subsys, a powerful painkiller approximately 50 to 100 times more potent than morphine. The FDA approved Subsys only for the management of breakthrough pain in cancer patients. Whitten prescribed Subsys to patients for whom the drug was not medically indicated and received more than $100,000 as well as other benefits from Insys in exchange for writing those prescriptions. Prescriptions for Subsys typically cost thousands of dollars each month, and Medicare and Medicaid, as well as commercial insurers, including Highmark, paid millions of dollars to cover illegitimate Subsys prescriptions written by Whitten.
In addition, from November 2017 through December 12, 2019, Whitten conspired to unlawfully distribute Schedule IV controlled substances, phentermine hydrochloride and diethylpropion, to patients at five weight loss clinics. Based on an agreement between Whitten and the owner of those clinics, Schedule IV controlled substances were dispensed to patients under Whitten’s DEA registration numbers, including to new patients and patients who had not been seen at the clinics for years, without any physical examination by Whitten or another appropriately trained licensed medical professional.
As part of his sentence, Whitten must pay restitution totaling over $8 million to the victim insurers, and forfeit both his medical license and DEA registration. Hopefully he has some assets that the government can seize since he will earn nothing while in prison.
Pathology Practice Agrees to Pay $2.4 Million To Resolve False Claims Act Allegations
Princeton Pathology Services P.A. (Princeton Pathology) submitted claims to Medicare under Current Procedural Terminology (CPT) code 85390-26 from Jan. 1, 2015, through Dec. 31, 2020. This CPT code requires written analysis by a pathologist, but Princeton Pathology submitted claims using this code without written substantiation in medical records. As a result, Princeton Pathology billed Medicare for analysis of tests that did not require analysis, causing Medicare to significantly overpay.
Princeton Pathology, a New Jersey pathology practice will pay $2.4 million to resolve allegations that it violated the False Claims Act by making false representations in connection with submissions to the Centers for Medicare & Medicaid Services (CMS).
According to the government’s contentions in the settlement agreement:
Contemporaneous with the civil settlement, Princeton Pathology also entered into a three-year Integrity Agreement with the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), which requires, among other things, training, auditing, and monitoring designed to address the conduct at issue in the case as well as evolving compliance risks on an ongoing basis.
The allegations arose from a lawsuit filed under the whistleblower provisions of the False Claims Act by Jayant Barai M.D. The False Claims Act permits private parties to sue for false claims on behalf of the United States and to share in any recovery. Dr. Barai will receive $456,000 from the federal share of the settlement.
Pharmacist And Two Pharmacies Agree to Pay $1 Million To Resolve Allegations of False Claims for Anti-Overdose Drug
Riad “Ray” Zahr, a pharmacist in Dearborn, Michigan, along with two specialty pharmacies that Zahr formerly owned and operated, have agreed to pay the United States $1 million to resolve allegations that they submitted false claims for the drug Evzio. Evzio was an injectable form of naloxone hydrochloride indicated for use to reverse opioid overdose. Evzio was the highest-priced version of naloxone on the market, and insurers frequently required the submission of prior authorization requests before they would approve coverage for Evzio.
The United States contended that, between Aug. 1, 2017, and June 30, 2019, Plymouth Towne Care Pharmacy dba People’s Drug Store (People’s Drug Store) and Shaska Pharmacy LLC dba Ray’s Drugs (Ray’s Drugs) submitted false claims for Evzio to Medicare. In particular, the government alleged that People’s Drug Store and Ray’s Drugs submitted false and misleading prior authorization requests for Evzio that contained clinical assertions for which the pharmacies lacked any factual basis. At times, Zahr and the pharmacies initiated Evzio prescriptions based on rudimentary patient lists with only basic biographical details. Zahr and the pharmacies also included assertions in Evzio prior authorization requests purportedly authored by prescribing physicians regarding the comparative effectiveness of Evzio that the pharmacies or Zahr actually authored. The prescribing physicians did not review, sign or submit the prior authorizations at issue. The settlement also resolves allegations that Zahr, People’s Drug Store and Ray’s Drugs dispensed Evzio prescriptions to Medicare beneficiaries at times without collecting or attempting to collect co-payment obligations for Evzio, in violation of the Anti-Kickback Statute.
The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by Rebecca Socol, a former employee of kaléo Inc., the manufacturer of Evzio. Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery. As part of this resolution, Ms. Socol will receive $200,000 of the settlement amount. The qui tam case is captioned United States ex rel. Socol v. Plymouth Towne Care Pharmacy, Inc., 18-cv010050-RGS (D. Mass.) (under seal). On Nov. 9, the department announced that kaléo agreed to pay $12.7 million to resolve allegations that kaléo caused the submission of false claims for Evzio.
Physician Pleads Guilty to Making a False Statement Related to Healthcare and Conspiracy
Randall Halley, 65, pleaded guilty before U.S. Chief Magistrate Judge David P. Rush on Tuesday, December 7, 2021 to one count of making a false statement related to healthcare and one count of conspiracy to use a registration number issued to another person in connection with the distribution of a controlled substance. Halley, a Nixa, Missouri, physician pleaded guilty in federal court on December 7, 2021 to making a false statement to Medicare to obtain insurance coverage for a fentanyl prescription and to conspiring with others to use his DEA registration number to issue Schedule II controlled substances to patients in his absence.
Halley, a licensed physician, was employed by Ozark Community Hospital - Christian County Clinic in Nixa, Missouri from 2004 to June 2019. He also was employed from 2009 to 2017 as the medical director at Magnolia Square, a skilled nursing facility in Springfield, Mo.
By pleading guilty yesterday, Halley admitted that he prescribed Subsys, a fentanyl spray manufactured by Insys Therapeutics, to a patient. Halley submitted a request to Medicare for payment coverage of the prescription, falsely stating that the patient had a diagnosis of cancer. Halley knew that the patient did not have a diagnosis of cancer at that time, and was not being treated for breakthrough cancer-related pain – two conditions that Medicare required for payment coverage of Subsys. Due to Halley’s false statement, Medicare paid a total of $11,945 to cover the prescription and subsequent Subsys prescriptions.
Halley also admitted that he conspired with others at the clinic to use his registration number so they could provide prescription medication in his absence, including Schedule II controlled substances. Halley was scheduled to only be present at the clinic in Nixa on Mondays and Thursdays. Although he was often absent on those days, he still scheduled patients for appointments. In order for the clinic to continue issuing prescriptions in Halley’s absence, he directed others at the clinic to prepare prescriptions ahead of time so that he could sign them several days before the patients’ appointments. On those days when Halley was absent, he directed others at the clinic to give the patients their prescriptions, including Schedule II controlled substances. Due to this illegal conduct, Medicare paid a total of $18,901 to cover the cost of those prescriptions.
Halley specifically admitted to conspiring with Susan Gail Morris, a nurse practitioner; Lily (Nga) Nguyen, a nurse practitioner; Amber Moeschler, a licensed practical nurse; and Kimberly Hoffer, a licensed practical nurse, to use his DEA registration number to distribute Schedule II controlled substances. Morris, Nguyen, and Moeschler have already pleaded guilty to crimes related to their conduct in this conspiracy. Co-defendant Hoffer has pleaded not guilty and is set for trial in February 2022.
Under the terms of the plea agreement, Halley will pay a $92,225 fine and $44,887 in restitution to Medicare. The government may seek up to $355,678 in additional restitution to Medicare at the time of Halley’s sentencing hearing for conduct relevant to his false statement involving Subsys prescriptions.?Additionally, Halley agreed to refrain from treating medical patients who may require the issuance of prescriptions for controlled substances, throughout the period of any post-sentencing supervision.
Under federal statutes, Halley is subject to a sentence of up to nine years in federal prison without parole. The maximum statutory sentence is prescribed by Congress and is provided here for informational purposes, as the sentencing of the defendant will be determined by the court based on the advisory sentencing guidelines and other statutory factors. A sentencing hearing will be scheduled after the completion of a presentence investigation by the United States Probation Office.
Dr. Jeffrey M. Gallups and Entellus Medical Agree to Pay $4.2 Million To Resolve False Claims Act Lawsuit Alleging Kick-Back Arrangements
Dr. Jeffrey M. Gallups (founder, owner, medical director and past-CEO of Milton Hall Surgical Associates (“MHSA”) a/k/a The Ear, Nose & Throat Institute) and Entellus Medical have agreed to pay approximately $3 million and $1.2 million, respectively, to resolve allegations that they violated the False Claims Act by entering into unlawful kickback arrangements.
Between 2014 and 2018, Gallups was a non-practicing physician, and devoted his time to acting as the CEO and medical director of MHSA, which employed approximately 12-18 physicians in various locations throughout North Georgia. The government alleges that Gallups controlled these physicians in his capacity as CEO and medical director of MHSA and directed these physicians, in exchange for the kickbacks described herein, to (1) utilize sinuplasty related medical devises exclusively from Entellus; as well as to (2) order toxicology and genetic testing from NextHealth.
First, with respect to Entellus and Gallups, the government alleged that Entellus provided Gallups several forms of remuneration, including cash payments and all-expense paid trips, in return for Gallups requiring MHSA physicians to use Entellus’s sinuplasty medical devices and increase the number of sinuplasty procedures conducted on MHSA patients.
Second, with respect to Gallups and a Dallas, Texas based medical laboratory called NextHeath, LLC (“NextHealth”), it is alleged that NextHealth made payments to?Gallups in the form of supposed “commissions” in return for Gallups requiring MHSA physicians to order medical tests from NextHealth, regardless of medical necessity, and despite objections from MHSA physicians that such tests were not medically necessary.
Two Doctors Sentenced to Combined 23 Years in Prison for Healthcare Fraud
Novus Health Services Medical Directors Dr. Mark E. Gibbs and Dr. Laila Hirjee, along with Novus RN Tammie Little, were found guilty of conspiracy to commit healthcare fraud and other charges. On December 2, 2020, Chief U.S. District Judge Barbara M.G. Lynn sentenced Dr. Gibbs to 13 years in federal prison and ordered him to pay $27,978,903 in restitution; she sentenced Dr. Hirjee to 10 years in federal prison and ordered her to pay $16,253,281 in restitution. The judge also sentenced Ms. Little to 33 months in federal prison.?
The two doctors who helped a local hospice agency scam Medicare were sentenced to a combined 23 years in prison for healthcare fraud.
According to evidence presented at trial, the defendants helped Novus CEO Bradley Harris defraud Medicare by, among other things, illegally admitting patients who were not appropriate for hospice and submitting materially false claims for hospice services.
Mr. Harris, who pleaded guilty prior to trial, testified against his former employees.
He told the jury that instead of relying on the expertise of licensed medical professions, he and Novus nurses determined which patients would be admitted to or discharged from hospice care, as well as which drugs and dosages they would receive.
They relied upon Novus doctors, including Dr. Gibbs and Dr. Hirjee, to certify that they had examined these patients face-to-face, when no such examinations had occurred, Mr. Harris testified.
Witnesses also testified that Dr. Hirjee and Dr. Gibbs engaged in the prescription of Schedule II controlled substances, such as morphine, hydromorphone, and fentanyl, by pre-signing blank C2 prescriptions and giving those to Brad Harris and others at Novus to let them prescribe controlled substances without any physician oversight.
As Director of Operations Melanie Murphey testified on day five of trial, “I was the doctor.”
Mr. Harris and the nurses used pre-signed prescription pads, prepared by Dr. Gibbs, Dr. Hirjee, and other Novus doctors, to dispense medications like morphine to patients. When Medicare suspended payment to Novus over concerns about billing, Mr. Harris, Dr. Gibbs, and others moved patients and employees to a new hospice company and continued to bill Medicare for hospice services.
In total, Medicare and Medicaid paid the Novus entities approximately $40 million dollars for hospice services before the companies were shut down.
Several of their codefendants – Novus CEO Brad Harris, his wife, Novus Vice President of Patient Services Amy Harris, Novus Director of Operations Melanie Murphy, Novus Medical Director Charles Leach, Novus Medical Director Reziuddin Siddique (deceased), Novus Vice President of Marketing Samuel Anderson, Novus Director of Marketing Slade Brown, Novus RN Jessica Love, Novus triage RN Patricia Armstrong, Novus LVN Taryn Stewart, and Ali Rizvi, the owner of a separate physician home visit company – pleaded guilty to various offenses prior to trial. Love was sentenced 102 months, Stuart was sentenced to 96 months, Armstrong was sentenced to 84 months, Dr. Leach was sentenced to 57 months, and Anderson was sentenced to 33 months. The remaining defendants are facing statutory maximums of between two and 14 years in federal prison.
Other Insurance Fraud Convictions
British Crash for Cash Mastermind Must Surrender 500,000 Pounds Sterling While Serving Seven Years in Prison
Mark McCracken a man who orchestrated an audacious cash for crash scam has been ordered by a judge to surrender more than ￡500,000. Carlisle Crown Court heard the massive fraud saw fake claims being lodged for injuries and damaged cars involved in 27 staged crashes at accident blackspots between 2010 and 2014.
As he sought to make one bogus application, mastermind McCracken pretended to be a woman victim in a recorded phone call to an insurance firm.
At a family address of McCracken were found identity packs which contained fake driving licences, bank books in false names and memory aids on post-it notes for each invented person. McCracken, now 53, was jailed for seven years in November 2016.
Four Carlisle vehicle dealers and garage owners were among almost three dozen associates drawn into an illegal enterprise — said to be valued at more than ￡600,000 — which was picked apart during a painstaking police investigation.
A judge who passed sentence on the gang members said McCracken had “conceived, planned and operated” the frauds.
Financial investigators set about clawing back cash from the key players using tough legislation. And at the crown court this afternoon, McCracken, of Ullswater Road, Carlisle, was present as prosecutor Tim Evans announced eye-watering figures from which the defendant admitted he benefited through criminal conduct and lifestyle.
These totaled just under ￡900,000.
McCracken’s available assets were said to be agreed at ￡501,315.27, prompting Judge Nicholas Barker to make a confiscation order in that sum. Of that, ￡176,171.83 will be used to compensate insurers who were defrauded, while a further ￡3,390 will go to a named individual. McCracken, who listened to proceedings from the court dock, must ensure all of his available assets are surrendered within six months, or face serving all or part of a four-and-a-half-year jail term in default.
Insureon Finance Exec Pleads Guilty In $6 Million Fraud
Kevin Mix, former controller of insurtech company Insureon, pleaded guilty December 7, 2021 to charges related to a scheme in which nearly $6 million was diverted into bank accounts controlled by him to which he was not entitled.
The U.S. District Court for Northern Illinois in Chicago accepted a plea agreement where Mr. Mix pleaded guilty to one count of wire fraud and faces a maximum sentence of 20 years. A lower sentence can be applied if the court determines he accepts personal responsibility for the fraud.
According to the plea agreement, as controller of Chicago-based Insureon, Mr. Mix managed the company’s accounting operations, including provisional approval of invoice payments to vendors. The fraud began around October 2018 when he began rerouting payments for invoices to a bank account he controlled; the scheme escalated in February 2019 when an employee that was leaving the company gave Mr. Mix his access token, username and password to Insureon’s bank account, which Mr. Mix used to complete multiple other fraudulent transfers, court documents say.
“Between October 2018 and June 2020, through approximately 42 wire transfers, Mix fraudulently authorized the disbursement of approximately $5,845,427,” according to court papers.
Mr. Mix agreed to repay the funds and to the forfeiture of various property he bought with the money. Prosecutors allege the property subject to forfeiture includes various real estate holdings, a Mercedes GT63C4, two gold bars and diamond jewelry.
Florida Man and Three Others Sentenced for Millions in Fake Construction Bonds
Timothy Castracane, also known as “Guy,” age 51, of Saratoga Springs, New York, received 46 months. Henry John Hattendorf, 73, of Las Vegas, was sentenced to two years. Robert Michael Wann, 64, of Rancho Mirage, California, was sent to prison for 54 months by a federal judge in Miami, and the apparent mastermind behind the scheme Alexander Robert Xavier, 57, of Boca Raton, Florida, was sentenced to six years in prison for a scheme that sold worthless construction bonds for major building projects in 2015.
Working under the name of Hampton Investment Fund, CHM Secure Trust and several other firms, the men hawked performance bonds and payment bonds to large construction firms in New York and New Jersey.
It turned out that the millions of dollars in bonds were fake and their backing, in the form of billions of dollars in “gold certificates” deposited into bank accounts, was worthless, too.
The preyed-upon construction firms paid more than $1.2 million in fees for the surety bonds, according to the indictment. The defendants were from around the country. Xavier already is in federal prison serving a 12-year sentence after being convicted of selling worthless performance bonds to the U.S. Department of Labor and the Army in 2008, court records show.
The victim construction firms were identified in the indictment only by the initials KVM, JHR and AMC. Some of the construction work was for major public projects, including the Goethals Bridge Road on Staten Island, New York, according to the indictment.
Early in the process, the defendants hired a New York attorney, identified only as “T.B.” in the court records. At some point in 2015, the lawyer resigned as trustee and attorney, telling Xavier that the gold certificates were worthless. Still, the schemers continued to mislead the construction firms and collect fees through the end of the year, court papers indicate.
In addition to incarceration, the men will be asked to pay restitution and interest and will have to forfeit more than $1.2 million in property, the court’s sentencing order shows. Upon release, they will be under probation for three years.
Washington Insurance Agent Sentenced To 2 Years in Wire Fraud Case
Vicki Boser, owner of InsuranceTek, Inc., pleaded guilty in August. At her sentencing she was also ordered to pay $273,137 in restitution to eight companies or insurance brokers she defrauded.
Boser, a Snohomish, Washington, insurance agent was sentenced to two years in prison after pleading guilty to wire fraud in the theft of premium payments from clients. Boser used the money to support her gambling habit at area casinos, federal prosecutors said in a press release. At the sentencing hearing U.S. District Judge James L. Robart likened the conduct to a Ponzi scheme saying, “The conduct is classic in terms of embezzling from clients.”
Boser’s company specialized in helping small businesses that work in high-risk fields secure insurance policies to cover their operations. Clients included private investigators, process servers and security guard companies.
She was required to collect premium payments from the clients and pay them to the insurance companies, but prosecutors said she pocketed some of the payments, created false insurance certificates and led her clients to believe they were insured.
Just saw the ZIFL update from July 2023 tackling insurance fraud ???♂?. It’s fascinating to see how behavioral sciences are being applied to unearth fraudulent claims. ?? Shows the power of understanding human behavior in refining our processes. #insurancefraud #behavioralscience
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