Zalma’s Insurance Fraud Letter
Barry Zalma, Esq., CFE
Insurance claims expert, consultant at Barry Zalma, Inc. and author/Publisher at ClaimSchool, Inc.
a ClaimSchool? Publication ? 2022, Barry Zalma & ClaimSchool, Inc., Go to my blog & Videos at: Zalma on Insurance, And at https://zalma.com/blog, ?Go to the Insurance Claims Library, Listen to the Podcast: Zalma on Insurance, Videos from Zalma on Insurance, Subscribe to Barry Zalma on Substack.com.
Volume 26, Issue 1 – January 1, 2022, Subscribe to e-mail Version of ZIFL, it’s Free! Read last two issues of ZIFL here. Go to the Barry Zalma, Inc. web site here, Videos from “Barry Zalma on YouTube” ?Go to Barry Zalma videos at Rumble.com at https://rumble.com/zalma
Quote of the Issue
“Unfortunately, no matter how frivolous the lawsuit, you still, of course, have to pay people to defend you on it.” -- Kelly Ayotte
State Farm & Allstate Fight Fraudsters With Qui Tam Suits
It Is Essential That Insurers Are Proactive Against Insurance Fraud
Insurance companies are the victims of billions of dollars every year from insurance fraudsters. They have found that states and police agencies are either unable or unwilling to prosecute those who defraud insurers. In The People ex rel. State Farm Mutual Automobile Insurance Company v. Sonny Rubin et al., G059509, California Court of Appeals, Fourth District, Third Division (December 14, 2021) State Farm has taken proactive steps by filing qui tam suits based on the California Insurance Fraud Protection Act (IFPA) that allows qui tam plaintiffs to file lawsuits on the government's behalf and seek monetary penalties against perpetrators of insurance fraud.
The introduction of the State Farm complaint describes the alleged scheme. It states Dr. Rubin "routinely recommend[ed] predetermined 'one-size-fits-all' treatment plans without regard to medical necessity or patient safety, to fraudulently increase the value of the patients' claims and to maximize his own revenue, profit, and income." In furtherance of this scheme, defendants "prepared bills for treatment and procedures represented to have been rendered by [Dr. Rubin]," which contained false statements about the "nature of services allegedly provided, the cost of such services, and the location of where services were provided." The introduction then explains in part how this scheme was accomplished: "[t]hrough the manipulation of billing codes to maximize reimbursement, bills submitted by [defendants] grossly inflate[d] the value of the services rendered and often contain[ed] charges for treatment that was never provided or multiple charges for the same treatment."
Under the IFPA, a defrauder is assessed penalties for each fraudulent insurance claim it presented to insurers. To prevent duplicative lawsuits, the IFPA contains a "first-to-file rule" that bars parties from filing subsequent actions related to an already pending lawsuit. State Farm Mutual Automobile Insurance Company (State Farm) filed an IFPA action alleging defendants Sonny Rubin, M.D., Sonny Rubin, M.D., Inc., and Newport Institute of Minimally Invasive Surgery (collectively, defendants) fraudulently billed insurers for various services performed in connection with epidural steroid injections. A month prior, however, another insurer, Allstate (defined below), filed a separate IFPA lawsuit against the same defendants, alleging they were perpetrating a fraud on Allstate, also involving epidural steroid injections.
The trial court sustained defendants' demurrer to State Farm's complaint under the IFPA's first-to-file rule, finding it alleges the same fraud as Allstate's complaint. State Farm appealed, arguing its complaint alleges a distinct fraud. In applying the rule, the court and both parties only focused on whether the two complaints allege the same fraudulent scheme. But, in this matter of first impression, we find the IFPA's first-to-file rule requires an additional inquiry. Courts must also review the specific insurer-victims underlying each complaint's request for penalties. If each complaint seeks penalties for false insurance claims relating to different groups of insurer-victims, the first-to-file rule does not apply. A subsequent complaint is only barred under the first-to-file rule if the prior complaint alleges the same fraud and seeks penalties arising from the false claims, submitted to the same insurer-victims.
Here, both complaints largely seek penalties relating to separate pools of victims. Allstate's complaint only seeks IFPA penalties for the false insurance claims that defendants presented to Allstate. State Farm's broader action seeks penalties for all the false insurance claims that defendants submitted to any insurer. Allstate is the only overlapping victim. Thus, even if the two complaints allege the same fraud, State Farm is only precluded from pursuing IFPA penalties for the false claims that defendants billed to Allstate. As to the other inquiry, there is partial overlap between the fraudulent schemes alleged in the complaints. Both complaints allege a common scheme in which defendants presented false claims to insurers pertaining to epidural steroid injections. However, State Farm's complaint also alleges a distinct scheme involving false charges for magnetic resonance imaging (MRI) interpretations that defendants billed independently from epidural spinal injections.
Based on these findings, as to the portion of State Farm's IFPA action relating to epidural steroid injections, the first-to-file rule only bars State Farm from pursuing penalties for the false claims that defendants allegedly submitted to Allstate. It may still pursue penalties for any false claims that defendants submitted to other insurers. For the portion of State Farm's action based on MRI charges billed independently from epidural spinal injections, State Farm may pursue penalties for any false claims that defendants submitted to any insurer, including Allstate.
Facts And Procedural History
The IFPA (Ins. Code, § 1871 et seq.) was enacted in 1993 to combat workers' compensation fraud. (People ex rel. Allstate Ins. Co. v. Weitzman (2003) 107 Cal.App.4th 534, 547 (Weitzman).) It was extended to insurance fraud through a 1994 amendment. To assist in the fight against insurance fraud, the IFPA contains a qui tam provision empowering interested persons to file lawsuits on behalf of the government against perpetrators of insurance fraud. The person who brings the qui tam action, called the “relator,” stands in the shoes of the People of the State of California, who are deemed to be the real party in interest. The relator in a qui tam action under section 1871.7 does not personally recover damages but, if successful, receives a substantial percentage of the recovery as a bounty. Penalties are assessed for each fraudulent claim presented by a defendant to a victim-insurer.
A qui tam relator is essentially a self-appointed private attorney general, and his recovery is analogous to a lawyer's contingent fee. The relator has no personal stake in the damages sought-all of which, by definition, were suffered by the government.
This enforcement mechanism is intended to provide incentives for individual citizens to come forward with information uniquely in their possession and to thus aid the Government in ferreting out fraud. The bounty advances the public purpose and benefit by encouraging private qui tam actions; indeed, this prospect of reward may be the only means of inducing such private parties to come forward with their information.
The statute contains a "public disclosure rule," that precludes "parasitic or opportunistic actions by persons simply taking advantage of public information without contributing to or assisting in the exposure of the fraud." The provision at issue here, section 1871.7, subdivision (e)(5), is generally known as a "first-to-file rule." As explained below, other state and federal statutory schemes contain similar first-to-file rules. The IFPA's first-to-file rule provides that "[w]hen a person or governmental agency brings an action under this section, no person other than the district attorney or commissioner may intervene or bring a related action based on the facts underlying the pending action unless that action is authorized by another statute or common law." (§ 1871.7, subd. (e)(5), italics added.)
This Action
On October 23, 2019, State Farm filed this qui tam action under the IFPA against defendants, which are comprised of Sonny Rubin, M.D. (Dr. Rubin) and two entities he controls: Sonny Rubin M.D., Inc. (Rubin Inc.), the medical corporation through which Dr. Rubin bills the services he performs, and Newport Institute of Minimally Invasive Surgery (Newport Institute), an ambulatory surgery center owned and controlled by Dr. Rubin.
Dr. Rubin specializes in pain management procedures, including patients experiencing neck and/or back pain. State Farm alleges Dr. Rubin fraudulently billed for various services performed in connection with epidural steroid injections, a form of pain management. These services included: (1) fluoroscopy, (2) epidurography, (3) myelography, and (4) evaluation and management services.
Fluoroscopy is used to obtain images of the internal structures of the body. A physician injects a dye into the targeted area and uses special equipment to view the flow of the dye. Epidural spinal injections are commonly performed under fluoroscopic guidance to ensure proper placement of the needle and flow of medication during the injection. When fluoroscopy is performed to assist with an epidural spinal injection, they are billed together using the same Current Procedural Terminology (CPT) code. CPT codes are standardized five-digit numeric codes established by the American Medical Association. They are used by healthcare providers to quickly describe to insurers the services for which the provider is billing. According to State Farm, when one CPT code includes multiple components of a service or procedure, healthcare providers must use that code to support a single charge. A provider cannot "unbundle" that CPT code and separately bill for each individual component of the bundled code. State Farm alleges defendants inflated bills by improperly unbundling fluoroscopy services and charging them separately from epidural steroid injection procedures. This alleged creation of two separate charges fraudulently inflated defendants' total bills for these services.
Epidurography uses fluoroscopic imaging to assess the condition of a patient's epidural space in the spine. Myelography is similar to epidurography. While the latter is used to visualize the epidural space (the space outside the dura), myelography is used to visualize the space inside the dural membrane.
State Farm alleged Dr. Rubin submitted false bills for epidurography and myelography services purportedly done in connection with epidural spinal injections. State Farm claims these services were not performed or, if they were performed, were not medically necessary. Among other things, Dr. Rubin's medical records failed to note the clinical basis or rationale for either of these procedures. Nor did they contain summaries of any findings from the purportedly performed procedures, and Dr. Rubin was unable to produce any images or reports from these procedures when requested by State Farm. Further, a myelogram should not be performed on the same day as an epidural steroid injection to protect patient safety. Yet Dr. Rubin's bills show these services were performed at the same time. According to State Farm, this suggests these myelograms were not actually performed.
In addition, State Farm also alleges defendants engaged in fraudulent billing relating to MRI interpretations. MRI is a procedure that produces images of the muscle, bone, tissue, and nerves. These images must be interpreted by a physician, typically a radiologist. State Farm asserts Dr. Rubin falsely billed for MRI interpretations that he did not perform. Instead, he relied on the interpretations of third party radiologists, for which he could not bill. To the extent he did perform any independent MRI interpretations, State Farm alleges those services were not medically necessary. Among other things, Dr. Rubin did not provide independent written reports to support these MRI interpretation charges.
While the allegedly false charges for the other four procedures (fluoroscopy, epidurography, myelography, and evaluation and management services) were all billed in connection with epidural steroid injections, the MRI charges largely were not. This is apparent from State Farm's complaint, which contains spreadsheets showing all the allegedly fraudulent charges billed by defendants to State Farm. Though a handful of the allegedly false MRI charges were billed in connection with epidural spinal injections, the bulk were not and are identified on the spreadsheet as standalone charges.
Based on the above allegations, State Farm asserts two IFPA causes of action against defendants. The first, against Dr. Rubin and Rubin, Inc., is based on the false claims Dr. Rubin made to insurers for all five services identified above (fluoroscopy, epidurography, myelography, evaluation and management services, and MRI interpretations). The second, against Dr. Rubin and Newport Institute, is based on false claims and fraudulent facility fee charges relating to certain fluoroscopy and myelography services purportedly performed by Dr. Rubin. For both causes of action, State Farm seeks broad relief, requesting penalties for all the false claims that defendants presented to any insurer under the same fraudulent scheme. Neither the Insurance Commissioner nor any district attorney intervened in State Farm's lawsuit.
The Allstate Lawsuit
On September 27, 2019, a few weeks before State Farm filed this action, Allstate Insurance Company and several of its affiliates (collectively, Allstate) filed their own IFPA lawsuit against defendants and several other entities connected to Dr. Rubin. Allstate's complaint was still sealed when State Farm filed this action. Accordingly, there is no reason to believe State Farm's complaint derived any material information from Allstate. The allegations in Allstate's complaint are far more generalized than State Farm's. Allstate asserts Dr. Rubin "exaggerated the severity of his patients' medical conditions and recommended pre-ordained courses of treatment without regard to patient need, patients' medical histories, test results, imaging studies, and subjective complaints. For every patient that [Dr. Rubin] examined, he prepared . . . templated narrative reports containing uniform findings, used to support his pre-determined, 'one-size-fits-all' treatment regimens, including repeated epidural steroid injections and facet blocks, which were billed at exorbitant rates . . .."
Allstate also alleges that "[t]hrough the manipulation of billing codes to maximize reimbursement, bills submitted by [defendants] grossly inflate[d] the value of the services rendered and often contain[ed] charges for treatment that was never provided or multiple charges for the same treatment." In particular, Dr. Rubin "engaged in several types of fraudulent billing practices, including 'unbundling' [CPT] codes, billing for treatment not rendered, and double billing when only one service was provided. The billing statements were knowingly presented to . . . [Allstate] by Defendants . . . including numerous instances of false, fraudulent, or misleading use of CPT codes to make it falsely appear that more treatment was rendered [than] actually occurred."
As with this action, neither the district attorney nor the Insurance Commissioner intervened in Allstate's lawsuit.
Defendants' Demurrer
In this action, defendants demurred to State Farm's complaint on grounds it was barred by Allstate's action under the IFPA's first-to-file rule. The trial court agreed. State Farm appealed, arguing the court incorrectly sustained the demurrer. Generally, it maintains the first-to-file rule does not apply because the two complaints at issue allege different frauds.
Discussion
In first-to-file-rule analysis, the court's review is generally limited to the four corners of the relevant complaints. The first-to-file bar is designed to be quickly and easily determinable, simply requiring a side-by-side comparison of the complaints. Judicial notice may be appropriate in certain cases.
Applicable Law
This case requires a deeper look at the IFPA's first-to-file rule, reviewing its underlying policy and purpose as well as analogous statutory schemes.
The Federal False Claims Act's First-to-File Rule
Since there is limited California authority interpreting the IFPA's first-to-file rule, we look to other statutory schemes for guidance. Namely, cases interpreting a similarly worded first-to-file rule within the federal False Claims Act since Section 1871.7 was modeled after the California False Claims. The IFPA, California False Claims Act, and FCA all contain first-to-file rules, and the FCA's rule is substantially similar to the IFPA's: "When a person brings an action under [the FCA], no person other than the Government may intervene or bring a related action based on the facts underlying the pending action." (italics added.)
Further, the IFPA and FCA share a similar design and purpose. They are qui tam statutes designed to supplement government enforcement to uncover and prosecute fraudulent claims. The FCA's first-to-file rule is part of the larger balancing act of the FCA's qui tam provision, which attempts to reconcile two conflicting goals, specifically, preventing opportunistic suits, on the one hand, while encouraging citizens to act as whistleblowers, on the other. All federal circuits that have interpreted the rule apply the same standard. A subsequent action is barred if it alleges the same material elements of fraud described in an earlier suit, regardless of whether the allegations incorporate somewhat different details.
Under the FCA's first-to-file rule, it is not enough that FCA claims be related in the loose sense that they arise out of the same general kind of wrongdoing. The FCA's rule does not apply if the two actions allege different frauds with different mechanisms. The complaints must share facts in common to trigger application of the FCA's first-to-file rule.
The IFPA seeks to prevent insurance fraud. Insurers, not the federal government, are the direct victims of the fraud. Generally, many of those victims will be unknown to the party filing the initial IFPA action since the scope of the defendant's fraudulent scheme will likely be unclear when the action is filed.
Relying on case law construing the FCA's first-to-file rule, defendants and State Farm both assert the only relevant inquiry is whether the State Farm and Allstate complaints allege the same fraud. Allstate, however, filed an amicus brief arguing the first-to-file rule does not apply here because the two complaints involve different pools of victims. Allstate only seeks IFPA penalties for the false insurance claims involving its insureds. And although State Farm seeks penalties for the false claims involving all insureds, Allstate appears to suggest State Farm can only pursue penalties for the false claims involving its own insureds; it cannot seek penalties for the false claims that defendants submitted to any other insurer
The relevant issues are legal, not factual. Given the lack of cases interpreting the IFPA's first-to-file rule, this decision involves an important issue of policy. The relevant issues have been adequately addressed by the parties.
The court importantly adopted a standard that is partially based on the FCA's first-to-file rule but also accounts for the differences between the FCA and IFPA. The identity of the insurer-victims underlying an IFPA action is material. A nonparasitic IFPA action that alleges the same fraud as a pending suit is not barred if it seeks penalties based on a distinct victim pool. Thus, under the IFPA's first-to-file rule, a court must determine - in any order - whether the two complaints (1) seek penalties based on distinct victim pools, and (2) allege the same fraud.
Contrary to Allstate's suggestion, an insurer-relator can pursue IFPA penalties for all the false insurance claims submitted to any insurer that are part of the same fraud. Nothing in the statute suggests an insurer-relator can only pursue penalties for the false claims involving its own insureds. Indeed, a relator can bring a qui tam action under the IFPA even if it has not suffered an injury. As such, it stands to reason an insurer can bring a broad IFPA action covering all the false claims a defendant has billed to any insurer. Besides, limiting insurers to IFPA actions involving their own insureds would subvert the IFPA's goal of fighting insurance fraud. Such a rule would arbitrarily limit the scope of IFPA actions, likely reducing the total amount of penalties recovered against a defendant.
Whether to pursue a narrow or broad IFPA action is within the discretion of the relator. Nothing in the text of section 1871.7 requires a relator to pursue penalties for all the false insurance claims a defendant billed to all the insurer-victims under the same fraud. The statute does not mandate an all or nothing approach.
As a matter of policy, relators should be allowed to control the scope and risk of their IFPA lawsuits. The enticement of a bigger bounty will certainly encourage many relators to pursue broad IFPA actions covering all the false claims within the same scheme. Still, some relators (such as smaller insurers) may not want to undertake the expense and risk of a large-scale IFPA action, especially since the full scope of a fraudulent scheme may be unclear when an IFPA action is first filed. When weighing these variables, a relator may reasonably desire to pursue a limited IFPA action that is less expensive, involves clearly defined direct victims, and carries reduced risk. Indeed, narrow IFPA actions do not appear uncommon. In contrast, requiring relators to seek broad relief might discourage some from filing an IFPA action to avoid the expense and/or risk of a large-scale lawsuit. This would interfere with the IFPA's purpose of uncovering and deterring insurance fraud.
Therefore, a nonparasitic IFPA action that alleges the same fraud as a pending action is not barred if it seeks penalties based on a separate pool of victims. Allowing multiple FCA actions for the same fraud and same direct victim reduces the total amount of money recovered by the government.
In contrast, an insurance fraud scheme typically involves numerous direct victims; specifically, the defrauded insurers. Unlike an FCA action, an IFPA relator can seek penalties based on the false claims a defendant billed to a single insurer, to a limited group of insurers, or to all insurers. The identity of the specific victims underlying a relator's request for penalties is material in an IFPA action. IFPA penalties are intended to be remedial and aimed towards "disgorging unlawful profit, restitution, compensating the state for the costs of investigation and prosecution, and alleviating the social costs of increased insurance rates due to fraud." (§ 1871.7, subd. (c).)
The scope of the initial IFPA action determines whether any additional, nonparasitic lawsuits may be brought based on the same fraud. If the victim pool at issue in a later-filed IFPA lawsuit is completely subsumed by a prior IFPA lawsuit, it is barred. The later-filed suit may only proceed if it seeks penalties based on victim-insurers that were not covered by the first lawsuit and if it is not barred by any other rule, such as the public disclosure rule.
In addition to determining whether two IFPA complaints cover distinct victims, courts must also evaluate whether they allege the same fraudulent scheme. When two IFPA relators file complaints alleging the same fraud and the same victims, the subsequent suit unfairly shares in the bounty. It adds no extra remedial benefit and does nothing to reduce insurance fraud. Nor does it disgorge any additional unlawful profit.
If an initial IFPA action seeks penalties based on an overly narrow group of insurer-victims, the government may intervene to enlarge the scope of the action. Finally, in the event multiple lawsuits are pending involving the same fraud but different victims, we trust our trial courts can coordinate proceedings and transfer cases as necessary to avoid or reduce any inefficiencies.
The two complaints primarily involve separate victim pools. Allstate only seeks penalties for the false insurance claims that defendants presented to Allstate, while State Farm seeks penalties for all the false claims that defendants billed to any insurer. Though the only overlapping victim is Allstate, the two complaints do not allege the same fraud. Since the two complaints only share one common victim, even if we find below that they allege the same fraud, State Farm would only be barred from pursuing IFPA penalties for the false claims involving Allstate's insureds.
The Insurance Commissioner (the real party in interest) filed a statement of interest in support of State Farm, in which it contends "the Allstate complaint did not put the Commissioner on notice of the fraud alleged in [State Farm's] complaint." Likewise, it maintains that "without the benefit of [State Farm's] complaint, [it] could have discovered the fraud alleged by [State Farm] only through an intensive and resource-consuming investigation.
In summary, as to the portion of State Farm's IFPA action relating to fluoroscopy, epidurography, myelography, evaluation and management services, and the MRI charges billed in connection with epidural spinal injections, State Farm may pursue penalties for the false claims that defendants presented to any insurer except Allstate. As to the remaining MRI charges, State Farm may pursue penalties for those charges that defendants billed to any insurer, including Allstate, that were not billed in connection with an epidural spinal injection.
The judgment was reversed. On remand, the court is instructed to overrule defendants' demurrer.
Wisdom
“Success is sometimes the outcome of a whole string of failures.” – Vincent van Gogh
“What good is the warmth of summer, without the cold of winter to give it sweetness.” – John Steinbeck
“Style is knowing who you are, what you want to say, and not giving a damn.” – Gore Vidal
“The principal goal of education in the schools should be creating men and women who are capable of doing new things, not simply repeating what other generations have done.” — Jean Piaget
“True happiness is to enjoy the present, without anxious dependence upon the future.” – ?Seneca
“We need to remember that tolerance is not a Christian virtue. Charity, justice, mercy, prudence, honesty - these are Christian virtues. But tolerance is never an end in itself. In fact, tolerating grave evil within a society is itself a form of serious evil.” - Archbishop Chaput
“Money brings some happiness. But after a certain point, it just brings more money.” —?Neil Simon
“The progress of science is strewn, like an ancient desert trail, with the bleached skeleton of discarded theories, which once seem to possess eternal life.” — Arthur Koestler
"For they sow the wind, and they shall reap the whirlwind." — Hosea 8:7
“You don't luck into integrity. You work at it.” – Betty White
“We can easily forgive a child who is afraid of the dark; the real tragedy of life is when men are afraid of the light.” ― Plato ?
“It was an age of miracles, it was an age of art, it was an age of excess, and it was an age of satire.”— F. Scott Fitzgerald
“Only by not forgetting the past can we be the master of the future.” – Ba Jin
Insurance Fraud Perpetrators are Annoying
People who commit insurance fraud believe that it is a crime without punishment because no one is hurt except an insurance company. They are wrong but refuse to accept the fact. As an example of how annoying an insurance criminal can be is Steve Ellis Karacson v. David Shaver, No. 21-12100, United States District Court, E.D. Michigan, Southern Division (November 23, 2021) who filed a pro se petition for writ of habeas corpus. Steve Ellis Karacson, (“Petitioner”), pursuant to 28 U.S.C. § 2254, challenges his conviction for insurance fraud and arson of an insured dwelling. Petitioner previously filed a petition for writ of habeas corpus before Judge Matthew F. Leitman which challenged the same conviction. The petition was held in abeyance while Petitioner exhausted additional claims in the state courts [Karacson v. Shaver, No. 4:20-CV-13100 (E.D. Mich. May 27, 2021)] Petitioner moved for Judge Leitman to reopen that case, claiming that he has now exhausted his state court remedies. Petitioner subsequently filed the instant petition, in which he again seeks habeas relief from the conviction that he challenged in the active petition before Judge Leitman.
The court found, however, that the petition is subject to dismissal because it appears duplicative of Petitioner's pending habeas action in Case No. 20-13100. ?A suit is duplicative, and subject to dismissal, if the claims, parties, and available relief do not significantly differ between the two actions. Petitioner's current habeas petition is subject to dismissal as being duplicative of his still pending first habeas petition, because both cases seek the same relief. A district court can properly dismiss a habeas petition as being duplicative of a pending habeas petition, where the district court finds that the petition is essentially the same as the earlier petition. Accordingly, the petition for writ of habeas corpus was Summarily Dismissed.
ClaimSchool, Inc. – Insurance Education
Barry Zalma Presents What Your Insurance Organization Needs.
Mr. Zalma’s presentations are practical, thought-provoking, entertaining and will fit easily into any budget.
Enthusiastically committed to professionalism in insurance and insurance claims Mr. Zalma positively influences other insurance professionals through the spoken and written word.
Mr. Zalma specializes in clarifying the importance of insurance in a modern society and in making insurance understandable. He also provides everything needed by the insurance claims professional to complete the thorough investigation of a property, casualty or liability claim efficiently, equitably, empathetically and in good faith.
How Will You or Your Group or Organization Benefit from Working with Barry Zalma?
You can expect live or video presentations supplemented with texts that are:
Live Training Available
Barry Zalma Presents What Your Insurance Organization Needs.
He positively influences other insurance professionals through the spoken and written word. He specializes in clarifying the importance of insurance in a modern society and in making insurance understandable.
The Excellence in Claims Handling Program Will Cover:
Insurer’s Summary Judgment Granted
US District Court judges often rely on the work of a Magistrate Judge to assist the District Judge in dealing with the volume of cases brought to the court. The Judge can accept, modify or reject the report made by the Magistrate Judge. In Sean Parsons v. Liberty Insurance Corporation, Civil Action No. 3:20-CV-1682-K, United States District Court, N.D. Texas, Dallas Division (December 1, 2021), United States Magistrate Judge David L. Horan, made recommendations to grant some, but not all, of the grounds stated by Liberty Insurance Corporation to dismiss the plaintiff’s complaint. Liberty objected to the Report and recommendations.
Where there are no objections to a Magistrate Judge's Report and Recommendation, a District Court is to review the report for findings and conclusions that are either clearly erroneous or contrary to law. However, a District Court is required to review a Magistrate Judge's Report and Recommendation in light of specific objections made by either party within ten days of receipt of the report.
The Court need not consider objections that are frivolous, conclusive, or general in nature. Here, Defendant filed timely objections solely relating to the Magistrate Judge's finding that a material issue of fact remains as to whether Defendant has tendered all potential interest owed to Plaintiff for alleged violations of the Texas Prompt Payment of Claims Act (“TPPCA”). The Court has therefore reviewed the Report and Recommendation's findings on the interest payment under the de novo standard and the remaining portions of the Report and Recommendation under the clearly erroneous or contrary to law standard.
The Court reviewed the Magistrate Judge's findings that Defendant's Motion for Summary Judgment on Plaintiff's claims for (1) breach of contract; (2) unfair or deceptive trade practices; (3) breach of the common law duty of good faith and fair dealing; (4) breach of express and implied warranty; (5) insurance fraud; and (6) violations of the Texas Prompt Payment of Claims Act based on alleged violations of Texas Insurance Code §§ 542.056 and 542.057 should be granted and concludes they are neither clearly erroneous nor contrary to law. Accordingly, the Court adopts the Magistrate Judge's Recommendation to grant summary judgment on these claims.
The Court has reviewed de novo the Magistrate Judge's finding that Defendant's summary judgment motion should be denied as to Plaintiff's TPPCA claim based on violations of § 542.058 because a genuine issue of material fact exists as to whether Defendant tendered all potential interest owed Plaintiff. After reviewing Defendant's objections, and in light of the additional evidence provided elucidating the method by which Defendant calculated the potential interest owed and paid to Plaintiff, the Court concluded there remains no genuine issue of material fact as to Defendant's full payment of potential interested owed on Defendant's TPPCA violations. Defendant has shown it is entitled to summary judgment on this issue. Therefore, the Court rejects the Magistrate Judge's Recommendation to deny Defendant's Motion for Summary Judgment on this claim.
The Court therefore ordered that the Magistrate Judge's Report and Recommendation to grant Defendant's Motion for Summary Judgment is adopted and summary judgment was granted in Defendant's favor as to Plaintiff's claims for (1) breach of contract; (2) unfair or deceptive trade practices; (3) breach of the common law duty of good faith and fair dealing; (4) breach of express and implied warranty; (5) insurance fraud; and (6) violations of the Texas Prompt Payment of Claims Act based on alleged violations of Texas Insurance Code §§ 542.056 and 542.057.
Plaintiff's claim for violations of the Texas Prompt Payment of Claims Act based on alleged violations of Texas Insurance Code § 542.058 and Plaintiff's Motion for Summary Judgment was denied.
Free Insurance Videos
Barry Zalma, Esq., CFE has published five days a week videos on insurance claims, insurance claims law, insurance fraud and insurance coverage matters at
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at https://www.zalma.com and [email protected].
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.
Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/ podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4
Another Annoying Insurance Criminal Whose Motion for Early Release is Denied
A woman who faked the death of her husband, who cremated and buried a stranger as if he was her husband, and stole more than two million dollars from an insurer brought a motion to be released because of a claim of illness and cancer without evidence of being a person with cancer met a US District judge who, appropriately refused to buy her claim.
In United States of America v. Irina Vorotinov, No. 15-CR-0054(1) (PJS/HB), United States District Court, D. Minnesota (December 9, 2021) Irina Vorotinov pleaded guilty to mail fraud and engaging in a monetary transaction in criminally derived property. She was sentenced to 37 months in prison and two years of supervised release and ordered to pay $2,056,554.09 in restitution. Vorotinov was released from prison in August 2019 and began serving her term of supervised release.
On September 14, 2021, the Court held a revocation hearing at which Vorotinov admitted violating the conditions of her supervised release by committing another crime-specifically, the crime of structuring transactions to evade federal reporting requirements. Vorotinov further admitted that she had violated her supervised-release conditions by failing to truthfully answer her probation officer's questions, failing to provide the officer with requested financial information, and failing to promptly notify the officer of material changes in her economic circumstances that might affect her ability to pay restitution.?The Court revoked her term of supervised release and sentenced her to 12 months in prison.
Vorotinov, expressing unmitigated gall moved for a sentence reduction. Under § 3582(c)(1)(A)(i), a court may reduce a defendant's term of imprisonment if, “after considering the factors set forth in section 3553(a) to the extent that they are applicable,” the court finds that “extraordinary and compelling reasons warrant such a reduction” and “that such a reduction is consistent with applicable policy statements issued by the Sentencing Commission.”
The court has recently clarified that although district courts may not ignore the statute altogether. United States v. Marcussen, 15 F.4th 855, 859 (8th Cir. 2021). This holding accords with this Court's approach of affording deference to § 1B1.13's definition of “extraordinary and compelling.” See United States v. Logan, 532 F.Supp.3d 725, 730 (D. Minn. 2021).
Accordingly, while the Court recognizes that it has the discretion to grant a sentence reduction even in circumstances that do not comport with the terms of § 1B1.13, the Court continues to treat § 1B1.13 as a useful guide in determining whether and how to exercise its discretion. Vorotinov contends that her various health conditions put her at heightened risk from the COVID-19 pandemic. In particular, Vorotinov claims that she has breast cancer, has had two heart attacks, and suffers from shortness of breath, lung damage, and severe depression. Vorotinov has not submitted any medical records to support her claims, and the government points out that medical records from her previous time in custody (as well as more recent records from Sherburne County) do not fully support those claims. For example, while the records indicate that Vorotinov has a history of cancer, they do not indicate that she presently has cancer. Moreover, the risk that Vorotinov faces from COVID-19 is substantially mitigated by the fact that she is vaccinated.
Even assuming that Vorotinov's medical conditions constitute an extraordinary and compelling reason under § 3582(c)(1)(A)(i), the Court declined to grant her motion. First, the Court already considered and rejected these same arguments at the September 14, 2021 revocation hearing and nothing appears to have changed. While the Court recognizes that it is not precluded from considering circumstances that existed at the time of sentencing, the Court generally gives little weight to such circumstances. Here, as Vorotinov's sentencing was just three months ago, the Court sees no reason to give these factors any weight.
Setting that aside, the Court's consideration of the relevant § 3553(a) factors lead it to deny Vorotinov's motion notwithstanding the evidence of her medical conditions. Vorotinov's underlying offense was brazen:
She conspired with her former husband to fake his death and claim $2 million in life-insurance proceeds. As the Court noted at Vorotinov's sentencing, a great deal of planning went into the scheme. . .. [A]t a minimum, the fraud involved acquiring a fresh corpse, staging the discovery of that corpse, and bribing at least two government officials. Vorotinov also traveled to Moldova to (mis)identify the corpse, obtained a death certificate, brought the cremated remains of an unknown person back to the United States for burial, and held a funeral for her husband, knowing full well that he was still alive.
As noted, Vorotinov was ordered to pay over $2 million in restitution. To facilitate the recovery of this sum, the Court ordered her, as part of her conditions of supervised release, to promptly notify the probation officer of any material change in her economic circumstances and to provide any requested financial information. After her release from prison, Vorotinov began violating these conditions and committing crimes in order to hide assets. She opened multiple bank accounts that collectively received hundreds of thousands of dollars in electronic transfers and then withdrew much or all of the money in cash in amounts of $10,000 or less. She also repeatedly purchased BitCoin with cash, with the transactions structured in such a way as to avoid reporting requirements. In her February 2021 financial disclosures to the probation officer, she did not disclose the bank accounts or any of these transactions and claimed to be unemployed.
Vorotinov has consistently denied that she benefitted from the insurance-fraud scheme and claims that, in these recent financial transactions, she was simply acting as a broker with other people's money. Although there is no direct proof that these transactions involved the illegal proceeds of her insurance fraud, her explanation for these transactions is preposterous, and that is at least circumstantial evidence that she continues to control some or all of the $2 million that she and her husband stole. If Vorotinov's actions were legitimate, then there would be no reason for her to structure the transactions to avoid reporting requirements, there would be no reason for Vorotinov to hide those transactions from the probation officer, and there would be no reason for her to claim to be unemployed.
Her conduct demonstrates her intent to avoid paying her restitution obligation. As her underlying crime was primarily motivated by greed, the Court takes this conduct very seriously and sees it as a perpetuation of the harm from her original offense as well as strong evidence that she is unrepentant and poses a high risk of recidivism. Under these circumstances, no reduction was warranted. Accordingly, Vorotinov's motion was denied.
Good News From the Coalition Against Insurance Fraud
A new law in Florida requiring adjusting companies to register with the state is working as the state continues clamping down on dishonest operators, says the state CFO Jimmy Patronis. More than 400 adjusting firms have now registered with the state DOI under the new requirement. While that number sounds impressive, Florida now has almost 175K licensed public and independent adjusters, the DOI notes. The CFO praised the new law’s registration requirement. “It’s not enough to yank a bad adjuster’s license,” Patronis says. “We needed the authority to go after their entire business organization. Otherwise, we couldn’t get to the root core of some of these fraudulent activities.”
Whether it is selling phantom windshield replacements, inflating claims through assignment of benefits, staging crashes, or submitting false reports of drivers, mileage, violations, or garaging, the Coalition Against Insurance Fraud estimates that auto insurers lose at least $29 billion per year to these scams,” NAMIC writes in a detailed analysis of auto-insurance cost drivers. “Auto manufacturers continue to introduce improved anti-theft measures like remote tracking that assist insurers and law enforcement in efforts to recover stolen vehicles, but thieves continue to develop sophisticated tools for defeating these devices.”
Tam Vuong was a workers’ comp fraud recidivist. The owner of employment agencies cheated his insurer twice in the last 10 years — earning federal and state convictions. The latest case is federal: Vuong ran Prime Labor and UT Services in Worcester, Mass. He paid a few employees by check but paid most employees in cash. Vuong didn’t report or pay taxes on the cash wages, which he concealed in workers comp audits and tax filings. Vuong hid millions in cash wages between 2012 and 2017. More than $30M of Prime Labor checks were cashed at a check-cashing business in Worcester. Vuong didn’t report the wages to his comp insurer or the IRS. He also lied to UT Services’ comp insurer Travelers that the firm had only one employee and an annual payroll of only $50K. In fact, UT Services had dozens of employees and a significantly higher payroll. UT Services handed forged insurance certificates to several clients and didn't tell clients when its comp policy was cancelled. Vuong shifted operations from Prime Labor to UT Services after federal search warrants were executed. Vuong was handed two years in federal prison. He was convicted in 2010 of misclassifying Travelers out of $500K of premiums. He received state probation in that case.
Spiking his wife’s cereal with a deadly heroin overdose for $120K of life insurance has earned Jason Harris life without parole. Christina Ann-Thompson Harris’ death in Davidson, Mich. Her death was initially ruled an accidental overdose. Yet Harris practically convicted himself by blabbing about her murder seemingly to anyone who’d listen. He told his siblings about “getting rid of her.” Harris also asked them what pills were odorless and tasteless after trying to put Xanax in Christina’s water. And he told them he wanted to knock Christina out so he could move her body without her feeling anything. Harris told coworkers that he paid a hitman $5K to kill Christina, but the hitman was arrested while doing surveillance. Harris then asked coworkers if they’d kill his wife for $5K. He also told multiple people that he fixed Christina a bowl of cereal the night before, and she passed out. All this convinced investigators that Harris put heroin in Christina’s cereal. Christina was not a drug user. Frozen samples of her breast milk found no drugs.
David Pettis fatally laced his wife Peggy’s ice cream with pain meds to steal the proceeds of three life policies. The Spokane, Wash. man ground up pills that were 10 times the therapeutic dose of hydrocodone. He then mixed the powder into a bowl of ice cream he gave Peggy. Pettis fell asleep on the couch and woke up two hours later to find her lying face down on the bedroom floor, he claimed. Yet Pettis took out three life policies on Peggy. They included a $150K policy he bought just three days before she died. Peggy mixed booze with the pain pills that fatal night, Pettis lied to investigators. Yet officials found no prescription pills in Peggy’s name. Nor did the toxicology report find alcohol in her system. In fact, Peggy was prescribed only 13 hydrocodone pills in recent years. She also told her sister that Pettis’ spending habits had damaged their finances. Pettis was preparing to run off with an old high school girlfriend as well. A jury convicted him this week. Pettis will be sentenced early in 2022.
Health Insurance Fraud Convictions
Medical Director of Long Beach Addiction Clinic in Connection to Four-Year Medi-Cal Fraud Scheme
Howard Wallace Oliver, M.D. medical director of West Coast Counseling Services — an addiction treatment facility in Long Beach, California that purported to serve patients with substance use disorders. From late 2009 through July 2013, West Coast Counseling stole more than $2.8 million from Medi-Cal by submitting fraudulent claims for services that were not performed or were not medically justified. Today, in Los Angeles County Superior Court, Oliver was sentenced to seven years, eight months in state prison. A restitution hearing is scheduled for December 29, 2021. Oliver has been in custody since September 15, 2021, when a jury returned a verdict of guilty on all the felony charges against him. The charges included Medi-Cal fraud, conspiracy, insurance fraud, grand theft, fraudulent claims, and four counts of tax evasion.
In July 2013, representatives from the California Department of Health Care Services (DHCS), which administers the Medi-Cal program and certifies substance use treatment facilities, inspected West Coast Counseling. DHCS became suspicious that the facility was submitting fraudulent claims to Medi-Cal, and subsequently referred the matter to the California Department of Justice (DOJ) for criminal investigation.
During the course of DOJ’s investigation, it was uncovered that the facility’s managers, including Oliver, forced the staff at West Coast Counseling to make up phony counseling notes in support of fraudulent claims or they would face firing or demotion. As medical director, Oliver was responsible for approving all substance disorder treatment services.?
At trial, the jury was shown more than 700 patient charts bearing Oliver’s signatures, approving treatment without medical justification even after counselors told him repeatedly that they were ordered to make up charts for “ghost patients.”
The three additional defendants have also been held accountable for their roles in the fraud. In 2017, Perry Bailey, a supervisor at West Coast Counseling, pleaded no contest to conspiring to commit grand theft and Medi-Cal Fraud. He was sentenced to two years in county jail. In 2018, Lou Cannon, the Chief Executive Officer of the facility, pleaded guilty to conspiracy. She will be sentenced in January 2021. On August 30, 2021, Juanita Antiporda, West Coast’s Program Director, pleaded guilty to one count of grand theft.?She is scheduled to be sentenced in August 2022.
The December 7, 2021 sentence was the result of an investigation and prosecution by DOJ’s Division of Medi-Cal Fraud and Elder Abuse (DMFEA). Through DMFEA, the Attorney General’s Office works to protect Californians by investigating and prosecuting those who perpetrate fraud on the Medi-Cal program. DMFEA also investigates and prosecutes those responsible for abuse, neglect, and fraud committed against elderly and dependent adults across the state. DMFEA regularly works with whistleblowers, DHCS, and local law enforcement agencies in its investigations and prosecutions.
Las Vegas Medicaid Provider Randi Jewel to Serve 19 to 48 Months in Prison in Fraud Case
Randi Jewel Lewis, 30, of Las Vegas, was sentenced in a Medicaid fraud case involving falsely billing for Medicaid services allegedly provided to Medicaid recipients.
Lewis pleaded guilty to one count of Medicaid Fraud and one count of Money Laundering. District Court Judge Jasmin Lilly-Spells sentenced Lewis to between 19 to 48 months in prison, suspended, and placed her on probation. Lewis was also ordered to pay more than $30,000 in restitution, penalties and costs.
The investigation began after the Medicaid Fraud Control Unit (MFCU) received an allegation that Vegas Health LLC (Vegas Health) submitted false information to Medicaid. The investigation revealed that Lewis and her co-defendant, Shonna Nicole Marshall, formed a ghost company with the sole objective of fraudulently billing Medicaid.
Lewis and Marshall used Medicaid providers’ and recipients’ personal information without their knowledge or consent. Lewis and Marshall then transferred the fraudulently obtained funds into multiple bank accounts and to multiple associates in order to conceal the source of the funds. Marshall, who pleaded guilty to one count of Medicaid Fraud and twenty-six counts of Money Laundering, is scheduled to be sentenced in January for her role in the fraudulent scheme.
The MFCU investigates and prosecutes financial fraud by those providing healthcare services or goods to Medicaid patients. The MFCU also investigates and prosecutes instances of elder abuse or neglect.
Vista, California Caretaker Guilty for Committing Multiple Acts of Financial and Sexual Elder Abuse in San Diego County
Brandon Benavente, a caretaker for elderly and dependent persons in San Diego County. While working as a caretaker, Benavente sexually assaulted three elderly dependents, and stole personal property including money, jewelry, and a handgun. On December 13, 2021 in the San Diego County Superior Court, Benavente pled guilty to 11 felonies relating to sexual assault, financial and elder abuse, as well as theft. Additionally, Benavente’s girlfriend and co-defendant Odaliz Mendez also pled guilty to multiple felonies relating to her involvement in the theft scheme. Benavente and Mendez’s sentencing is scheduled for January 12, 2022. The parties have agreed to request that the court enter a sentence against Benavente in excess of 14 years, which would be one of the longest elder abuse sentences imposed in a case brought by the California Department of Justice. Mendez's sentence is to be determined. In addition, both defendants will be ordered to pay restitution to their victims.
In May 2020, Benavente was caught on video surveillance entering the room of a resident and removing cash from the resident’s wallet, prompting an investigation by the San Diego County Sheriff’s Office. In June 2020, the San Diego County Sheriff’s Office asked the California Department of Justice’s Division of Medi-Cal Fraud and Elder Abuse (DMFEA) to join their investigation against Benavante. The joint investigation found that between December 2019 and December 2020 Benavente committed multiple acts of burglary, theft, fraud, identity theft, and sexual abuse against a resident residing at Vista Village Senior Living and other victims throughout San Diego County. The two defendants stole jewelry, a handgun, and thousands of dollars from their victims.
Prison for Two North Carolina For False Claims
Luis Angel Lozada of Clayton, North Carolina was sentenced to 70 months in prison and three years of supervised release, and Humberto Mercado was sentenced to 15 months in prison, three years of supervised release after pleading guilty to conspiracy to commit health care fraud. Lozada was also ordered to pay $1,130,137 in criminal restitution while Mercado was ordered to pay $494,688 in restitution to the North Carolina Fund for Medical Assistance.
In 2016, Lozada formed Cornerstone Family Services Group, a behavioral health business headquartered in Zebulon and with additional offices opened later. Between 2016 and 2020, Lozada conspired with multiple people to submit more than $1 million in false and fraudulent reimbursement claims for behavioral health services from Cornerstone, but these services were never provided. The false claims relied on and incorporated stolen beneficiary and clinician information.
Between 2016 and 2017, for example, Lozada partnered with co-conspirators Reginald Van Reese, Jr., and Ruben Samuel Matos to source and integrate the stolen Medicaid beneficiary data into Cornerstone’s billings. Mercado was recruited to fabricate treatment records and began to do so before the first billings were submitted to Medicaid. Reese and Matos also pleaded guilty to conspiracy to commit health care fraud in separate related cases and were previously sentenced.
Illinois Woman Pleads Guilty to Health Care and Public Housing Scams
Shomanicka Holly, 36, of East Saint Louis, Illinois, pled guilty today to a two-count felony information charging her with health care fraud and making materially false statements on a public housing form.
As part of her plea, Holly admitted to defrauding a government funded health care program by requesting payment for services that she never performed. The Illinois Department of Human Services (“IDHS”) operates a program known as the Personal Assistant program, which pays people to work as personal assistants for qualified disabled individuals. The program, which utilizes federal Medicaid funds, will only pay for work performed while the disabled individuals are present in their homes.
According to court documents, Holly served as a personal assistant to a qualified disabled person from August 2016 to June 2019. During that time, Holly submitted timesheets requesting payment for providing personal assistant services on dates and times when she was working at another job. In doing so, Holly defrauded the program out of funds by falsely certifying that she was at the disabled person’s home when, in fact, she was on the clock somewhere else.
In addition, Holly pled guilty to a separate charge of making materially false statements on a public housing application. Court documents alleged that Holly received public housing assistance through a program funded by the U.S. Department of Housing and Urban Development (“HUD”).
At her plea hearing, Holly acknowledged that she knowingly failed to disclose on her housing assistance renewal application that another adult resided in her home and earned income. The housing agency relied on this information to allocate its limited resources, including in determining whether Holly was eligible for public housing assistance and the amount of assistance. Holly withheld the information to receive more benefits than she was entitled to.
Health care fraud carries a maximum sentence of ten years in prison. Holly faces up to five years in prison for making a materially false statement on a housing form. She may also be fined up to $250,000 and ordered to pay restitution on each charge.
领英推荐
Sentencing is scheduled for April 13, 2022, at 10:00 a.m. in the federal courthouse in East St. Louis, Illinois.
Owner Of Telemedicine Company Pleads Guilty to Health Care Fraud Conspiracy
Conspired with Owner of Tennessee Genetic Testing Laboratory, Marketing Companies, and Physicians to Defraud the United States
Elizabeth Turner, 34 of Glenview, Kentucky, was charged by criminal Information in November with conspiring with Fadel Alshalabi, the owner of Crestar Labs, LLC, based in Spring Hill, Tennessee, Melissa Lynn “Lisa” Chastain, the owner of marketing company Genetix, LLC, located in Belton, South Carolina, as well as other marketers and physicians, to offer, pay, solicit and receive illegal kickbacks and to defraud the Medicare and Medicaid Programs.
Turner, a Kentucky woman pleaded guilty December 20, 2021 in U.S. District Court in Nashville, to conspiracy to pay and receive health care kickbacks, announced Acting U.S. Attorney Mark H. Wildasin for the Middle District of Tennessee.
Between approximately February 2018 and ending around August 2019, Turner was the owner of telemedicine company Advanced Tele-Genetic Counseling (“ATGC”), which received kickback payments from marketers in exchange for providing signed doctors’ orders for Cancer genomic (“CGx”) testing. CGx testing uses DNA sequencing to detect mutations in genes that could indicate a higher risk of developing certain types of cancers in the future. CGx testing is not a method of diagnosing whether an individual presently has cancer. The marketers targeted Medicare and Medicaid patients through door-to-door marketing, at senior citizen fairs, at nursing homes, and at other locations, and convinced patients to provide their genetic material via a mouth swab kit. The marketers then provided the swab kits to Crestar Labs for CGx testing in exchange for kickbacks paid by Crestar Labs. Crestar Labs billed Medicare and Medicaid for the tests.?
Turner, through ATGC, paid kickbacks to doctors for signed orders for CGx tests, without regard for the medical necessity of the tests. Turner knew the doctors were not the patients’ treating physicians, were not treating the patients for any specific medical problem, symptom, illness, or diagnosis, and were not using the results in the care of the patients.?Turner was aware that the doctors often never contacted the patients at all.
As a result of Turner’s involvement in the conspiracy, ATGC received approximately $234,730 in illegal kickback payments from marketing company co-conspirators, including Genetix, LLC. As a result of the conspiracy, Medicare and Medicaid paid laboratories, including Crestar Labs, LLC millions of dollars in reimbursements they were not entitled to receive because the CGx tests had been procured through the payment of kickbacks, and were otherwise ineligible for reimbursement.
Turner faces up to five years in prison when she is sentenced on May 2, 2022, and a fine of up to $250,000; restitution to the Medicare and Medicaid programs; and forfeiture of the ill-gotten proceeds.
Pain Clinic and Ambulatory Surgery Center Agree to Pay $836k To Resolve Allegations of Overbilling
Integrated Pain Associates, PLLC (“IPA”), a pain clinic headquartered in Killeen, and Central Texas Day Surgery Center, LLC (“CTDSC”), an affiliated ambulatory surgery center, have agreed to pay the United States and the State of Texas $836,702.88 to resolve allegations they violated the False Claims Act by overbilling federal healthcare programs.
The United States’ allegations arise from IPA and CTDSC’s submission of claims to Medicare, Medicaid, and TRICARE for facet joint injections, transforaminal injections, and radiofrequency ablation procedures. The United States contends that the defendants billed for more units or levels of these procedures than they performed. For example, the United States alleges that even when a patient received only a single injection, IPA and CTDSC would sometimes bill the government as though the patient had received two or three injections, thereby increasing the amount paid for the procedure.
The civil settlement of these allegations includes the resolution of claims brought under the qui tam provisions of the False Claims Act by Susan Edwards. 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 case is captioned United States and Texas ex rel. Edwards v. Integrated Pain Associates, et al., 5:15-cv-00315-FB (W.D. Tex.).
Registered Nurse Sentenced for Drug Diversion
Marietta Strickland, 61, was sentenced by U.S. District Court Judge Indira Talwani to 15 months in prison and three years of supervised release. In October 2020, Strickland pleaded guilty to one count of tampering with a consumer product, specifically the Schedule II controlled substance oxycodone, which is used for pain relief.
Strickland, a Dighton registered nurse was sentenced today in federal court in Boston for drug tampering.
While working as a registered nurse at Dighton Care and Rehabilitation Center, Strickland tampered with three blister card packages of oxycodone prescribed to an 89-year-old hospice patient who suffered from Alzheimer’s disease, severe dementia and breast cancer. To avoid detection, Strickland replaced the stolen oxycodone pills with other prescription drugs disguised to look like oxycodone. As a result of Strickland’s tampering, the victim was deprived of her prescribed oxycodone for at least a month and ingested at least 77 unnecessary prescription tablets.
Former Indian Health Service Doctor Sentenced To 120 Months of Imprisonment for Abusive Sexual Contact
Pedro Ibarra-Perocier, age 60, was sentenced to 120 months in federal prison, followed by five years of supervised release, a $35,000 fine, and a special assessment to the Federal Crime Victims Fund in the amount of $500.
Ibarra-Perocier, South Dakota, man formerly employed as a physician at the Wagner Indian Health Service Clinic was sentenced on five counts of Abusive Sexual Contact on December 13, 2021, by U.S. District Judge Karen E. Schreier.?
Ibarra-Perocier was indicted by a federal grand jury on February 4, 2020.?He pled guilty to five counts of Abusive Sexual Contact on August 26, 2021.
The conviction stemmed from several incidents that occurred between approximately February 2007 and August 2018, when Ibarra-Perocier was a licensed physician practicing at the Wagner Indian Health Service Clinic and sexually abused five Native American women who came to see him at the clinic for medical appointments.?Ibarra-Perocier frequently locked the door to the examination room before he sexually abused those women.?Ibarra-Perocier often touched and rubbed their breasts and genitals, either directly or through their clothing, without their consent and when there was no medical reason to do so.?Ibarra-Perocier also forced some of his victims to touch his genitals, either directly or through his clothing.??Ibarra-Perocier threatened or placed some of them in fear that they would not receive the medications or medical care they needed unless they complied with his sexual demands in the clinic examination rooms.
“Dr. Ibarra-Perocier abused his position of trust as a physician to sexually abuse five Native American women—his patients—all in the examination rooms at the Indian Health Service Clinic where he practiced,” said Acting U.S. Attorney Dennis Holmes.?“Because these five women bravely came forward, this predator was held accountable for his actions.”
“Today’s sentence ensures that the defendant will not be in a position to harm his patients any longer, and women in the community can once again seek medical care without fear of becoming a victim,” said FBI Special Agent in Charge Michael Paul.?“Every medical professional takes an oath to do no harm, and I want to thank the FBI agents and analysts who worked side by side with the Department of Health and Human Service’s Office of Inspector General to ensure that the defendant was held accountable for his actions and that his victims received the justice they deserved.”?
“Dr. Ibarra-Perocier’s actions were unconscionable— he violated his?position of trust to abuse vulnerable patients at an Indian Health Service clinic and threatened to withhold needed medical care if his victims did not comply.?These illegal acts will never be tolerated,” said Special Agent in Charge Curt L. Muller of HHS Office of Inspector General.?“We remain committed to aggressively investigating corrupt health professionals and protecting patients across the country.”
This case was investigated by the Federal Bureau of Investigation and the Department of Health and Human Services, Office of Inspector General, Office of Investigations.?Assistant U.S. Attorney Ann M. Hoffman prosecuted the case.
Ibarra-Perocier has been allowed to self-surrender to the custody of the Bureau of Prisons by January 10, 2022.
Former Long Island Doctor Sentenced To 23 Years in Prison for Causing the Overdose Deaths of Two Patients and Illegally Distributing Oxycodone
Michael Belfiore, a former medical doctor, was sentenced by United States Circuit Judge Joseph F. Bianco to 23 years in prison for the illegal distribution of oxycodone causing the deaths of two patients and the illegal distribution of oxycodone to those patients and to an undercover detective. In addition, Belfiore was ordered to forfeit $7,270 in illegal fees that he took from the two deceased patients and the undercover detective and to pay $17,000 in restitution based upon costs associated with the overdose deaths that he caused. Belfiore was convicted of the charges by a federal jury in May 2018 following a five-week trial. Belfiore’s medical license has lapsed and he is no longer practicing medicine.
Belfiore, a former doctor of osteopathic medicine who primarily operated out of an office in Merrick, New York, illegally distributed oxycodone outside the usual course of professional practice and not for a legitimate medical purpose. Oxycodone is a powerful and highly addictive drug that is increasingly abused because of its potency when crushed into a powder and ingested. It is a controlled substance that may be dispensed by medical professionals only to patients suffering from significant pain that is documented through medical exams, diagnostic testing—such as x-rays and MRIs—and other objective proof. Although oxycodone is commonly prescribed in five milligram tablets, the trial evidence showed that Belfiore wrote thousands of 30 milligram prescriptions for oxycodone in quantities of up to 180 pills per month.?
At trial, the evidence established that on February 28, 2013, Belfiore gave an illegal prescription for 120 30 mg oxycodone pills to 42-year-old Edward Martin. On March 5, Mr. Martin overdosed and died in his bed after snorting the oxycodone obtained from Belfiore’s prescription. On April 12, 2013, Belfiore gave an illegal prescription for 150 30 mg oxycodone pills to 32-year-old John Ubaghs. On April 13, 2013, Mr. Ubaghs was found unresponsive after overdosing on oxycodone prescribed by Belfiore, and was pronounced dead at the hospital.
Between March 2013 and August 2013, Belfiore intentionally dispensed six prescriptions of oxycodone without a legitimate medical purpose to an undercover detective with the NCPD’s Narcotics Vice Squad. Belfiore created fake medical charts to justify those prescriptions and during office meetings with the undercover detective, Belfiore’s “treatment” consisted of a discussion of the defendant’s trip to San Diego and his interest in helicopters, yachts and cigarette boats.
Former Long Island Doctor Sentenced To 23 Years in Prison for Causing the Overdose Deaths of Two Patients and Illegally Distributing Oxycodone
Michael Belfiore, a former medical doctor, was sentenced by United States Circuit Judge Joseph F. Bianco to 23 years in prison for the illegal distribution of oxycodone causing the deaths of two patients and the illegal distribution of oxycodone to those patients and to an undercover detective. In addition, Belfiore was ordered to forfeit $7,270 in illegal fees that he took from the two deceased patients and the undercover detective and to pay $17,000 in restitution based upon costs associated with the overdose deaths that he caused. Belfiore was convicted of the charges by a federal jury in May 2018 following a five-week trial. Belfiore’s medical license has lapsed and he is no longer practicing medicine.
Breon Peace, United States Attorney for the Eastern District of New York, Keith Kruskall, Acting Special Agent-in-Charge, Drug Enforcement Administration, New York Division (DEA), and Patrick J. Ryder, Commissioner, Nassau County Police Department (NCPD), announced the sentence.
“In violation of his oath to do no harm, Belfiore intentionally distributed highly addictive and potentially lethal opioids in dosages and quantities that resulted in the overdose deaths of two of his patients,” stated United States Attorney Peace. “Today’s sentence sends a strong message that this Office and its law enforcement partners will fight the opioid epidemic and seek serious punishment for medical professionals like Belfiore who betray their profession and use their prescription pads to further addiction, rather than as a tool to heal. I want to extend my sincere thanks to DEA’s Long Island Tactical Diversion Squad, who tenaciously investigated this case.”
Belfiore, a former doctor of osteopathic medicine who primarily operated out of an office in Merrick, New York, illegally distributed oxycodone outside the usual course of professional practice and not for a legitimate medical purpose. Oxycodone is a powerful and highly addictive drug that is increasingly abused because of its potency when crushed into a powder and ingested. It is a controlled substance that may be dispensed by medical professionals only to patients suffering from significant pain that is documented through medical exams, diagnostic testing—such as x-rays and MRIs—and other objective proof. Although oxycodone is commonly prescribed in five milligram tablets, the trial evidence showed that Belfiore wrote thousands of 30 milligram prescriptions for oxycodone in quantities of up to 180 pills per month.
At trial, the evidence established that on February 28, 2013, Belfiore gave an illegal prescription for 120 30 mg oxycodone pills to 42-year-old Edward Martin. On March 5, Mr. Martin overdosed and died in his bed after snorting the oxycodone obtained from Belfiore’s prescription. On April 12, 2013, Belfiore gave an illegal prescription for 150 30 mg oxycodone pills to 32-year-old John Ubaghs. On April 13, 2013, Mr. Ubaghs was found unresponsive after overdosing on oxycodone prescribed by Belfiore, and was pronounced dead at the hospital.
Between March 2013 and August 2013, Belfiore intentionally dispensed six prescriptions of oxycodone without a legitimate medical purpose to an undercover detective with the NCPD’s Narcotics Vice Squad. Belfiore created fake medical charts to justify those prescriptions and during office meetings with the undercover detective, Belfiore’s “treatment” consisted of a discussion of the defendant’s trip to San Diego and his interest in helicopters, yachts and cigarette boats.
Convicted Of Federal Violations in Health Care Kickback Scheme
Vincent Marchetti, Jr., 57, was found guilty by a jury following a month-long trial before U.S. District Judge Robert W. Schroeder, III.
Marchetti, a Coronado, California, man was found guilty of federal violations related to a health care kickback scheme in the Eastern District of Texas, announced U.S. attorney Brit Featherston today.
According to information presented in court, Marchetti conspired with others to pay and receive kickbacks in exchange for the referral of, and arranging for, health care business, specifically pharmacogenetic (PGx) tests. Pharmacogenetic testing, also known as pharmacogenomic testing, is a type of genetic testing that identifies genetic variations that affect how an individual patient metabolizes certain drugs. The illegal arrangement concerned the referral of PGx tests to clinical laboratories in Fountain Valley, California; Irvine, California; and San Diego, California. More than $28 million in illegal kickback payments were exchanged by those involved in the conspiracy.
In December 2019, twelve individuals from three states were charged for their roles in the kickback conspiracy. A federal grand jury in the Eastern District of Texas returned an indictment against Philip Lamb, 46, of Scottsdale, Arizona; Nicolas Arroyo, 40, of Tempe, Arizona; Vincent Marchetti, Jr.; William Flowers, 56, of Houston; Steven Donofrio; James J. Walker, Jr. a/k/a Jimmy Walker, 47, of Frisco; Timothy Armstrong, 64, of Frisco; Virginia Blake Herrin, 56, of Frisco; Patrick Ridgeway, 52, of Jackson, Mississippi; Chismere Mallard, 41, of McAllen; Dr. Ray W. Ng; and Ashley Kretzschmar, 36, of Aledo; for conspiring to commit illegal remunerations in violation of the Anti-Kickback Statute.
Philip Lamb, Nicolas Arroyo, Jimmy Walker, Virginia Blake Herrin, Patrick Ridgeway, Chismere Mallard, and Ashley Kretzschmar pleaded guilty prior to trial.
Kimberly Willette, 59, of Friendswood, and Edwin Chad Isbell, 48, of McKinney, also pleaded guilty to related charges.
The Anti-Kickback Statute prohibits offering, paying, soliciting, or receiving remunerations in exchange for the referral of or arranging for or recommending the ordering of items or services payable under federal health care programs. Under federal statutes, violations of the Anti-Kickback statute are punishable by up to five years in federal prison.
Medical Equipment Company Owners Sentenced to More Than 12 Years For $27 Million Fraud Scheme
Leah Hagen, 50, of Arlington, and Michael Hagen, 54, a citizen of Austria and Arlington resident, owned and operated two durable medical equipment (DME) companies, Metro DME Supply LLC and Ortho Pain Solutions LLC. From March 2016 to January 2019, the defendants paid kickbacks and bribes to their co-conspirator’s call center in the Philippines in exchange for signed doctors’ orders for DME that were used to submit false claims in excess of $59 million to Medicare. From those claims, Medicare paid the defendants more than $27 million. The defendants transferred millions of dollars overseas to, among other things, purchase a home in Spain.
A Texas woman and an Austrian national were sentenced yesterday to 151 months in prison for a $27 million Medicare kickback conspiracy.
To conceal the payments of kickbacks and bribes from the authorities, the defendants, through their DME companies, signed sham contracts that disguised payments as marketing and business process outsourcing. The DME claims submitted by the defendants to Medicare were for services that were medically unnecessary and not provided as represented. In some cases, beneficiaries were convinced to accept braces they did not need or want and were offered gift cards in exchange for accepting those braces.
On July 8, the Hagens were convicted following an eight-day trial on charges of conspiracy to defraud the United States and to pay and receive health care kickbacks and conspiracy to launder money. The Hagens were sentenced by U.S. District Judge Jane J. Boyle of the Northern District of Texas, who also ordered them to pay $27,104,359 in restitution.
Vascular Surgeon Settles Alleged Health Care Fraud Claims For $3.7 Million
Dr. David Bellamah, and his business, Bellamah Vein & Surgery, PLLC, doing business as Bellamah Vein Center, has entered into a civil settlement agreement with the U.S. Attorney’s Office for the District of Montana, the Department of Health and Human Services Office of Inspector General, the Defense Health Agency, the Department of Veterans Affairs and a third party, Lenore Lezanne. The terms of the settlement agreement require Bellamah and his company to pay a settlement amount of $3,746,324. The settlement agreement resolves a civil complaint alleging violations of the False Claims Act and other common law claims. The civil complaint in intervention was filed today in U.S. District Court for the District of Montana along with a stipulation to dismiss the case.
Bellamah, a Missoula vascular surgeon who operates vein and surgery centers in Missoula and Kalispell has agreed to pay the federal government $3.7 million to settle alleged False Claims Act violations that he performed medically unnecessary surgeries based on improper techniques and submitted fraudulent bills for payment to federal health care programs.
The United States contended in court documents that its civil claims against Bellamah and his company arose from him billing for certain services that were medically unnecessary and based on false medical records from January 1, 2015 through March 31, 2017. Bellamah specializes in the diagnosis and treatment of venous reflux disease and varicose veins.
In March 2018, Lezanne, who was a sonographer formerly employed at Bellamah Vein Center, filed a suit in U.S. District Court against Bellamah Vein and Surgery, Bellamah and others alleging Bellamah received government funds for performing unnecessary venous procedures based on inaccurate medical records. The United States partially intervened in the case.
In its complaint, the United States alleged that Bellamah and staff at Bellamah Vein Center used improper techniques to conduct and analyze ultrasounds and used false ultrasound findings to conduct and bill for medically unreasonable and unnecessary services related to the diagnosis and treatment of venous reflux disease and varicose veins. The government contends that Bellamah submitted false claims to the Department of Health and Human Services’ Medicare and Medicaid programs, the Department of Defense’s TRICARE program and the Department Veterans Affairs’ CHAMPVA program.
The Settlement Agreement directs Bellamah to pay the United States $3,746,324, plus interest if applicable, of which $1,923,861 is restitution and the remaining $1,822,463 is settlement of additional damages. If the settlement amount is paid in full within 21 days of the effective date of the Settlement Agreement, no interest shall be charged. Otherwise, Bellamah shall make payments, plus interest, over five years. Upon receiving the settlement amounts, the United States will pay Lezanne 17 percent of each payment as her share of the settlement.
Pharmacy And Its Owner Agree to Pay $1 Million To Resolve False Claims Act Liability
LAN Apothecary, Inc. (“LAN Apothecary”) in Philadelphia agreed to pay $1,000,000 to resolve liability under the False Claims Act.
LAN Apothecary and owner-pharmacist Bachtu (“Theresa”) M. Phan will jointly pay $1,000,000 to the federal government to resolve allegations that they violated the False Claims Act by billing Medicare for prescription medications that were not actually dispensed during the period from January 1, 2014 to June 29, 2019. These medications include, but are not limited to, Januvia, Janumet, Zetia, Tradjenta, Linzess, Advair Diskus, Namenda XR, and Dexilant. As part of the resolution with the United States, LAN Apothecary and Theresa Phan will enter into a corporate integrity agreement with the Department of Health and Human Services, Office of the Inspector General. The integrity agreement requires them to undertake substantial compliance obligations and to contract with an Independent Review Organization that will conduct quarterly third-party audits of their Medicare and Medicaid claims and drug inventory.
The settled civil claims are allegations only. There has been no determination of civil liability.
Owner Of Local Compounding Pharmacies Sentenced to Federal Prison for Tax Evasion and Health Care Fraud
Matthew Hogan Peters, 38, was sentenced to three years in federal prison and three years’ supervised release. Peters was also ordered to pay more than $3,441,263 million in restitution to the IRS, in addition to back taxes Peters has already paid.
Peters, a Southern California man who owned and operated two local compounding pharmacies was sentenced to federal prison December 10, 2021 for evading the payment of approximately $5.5 million in personal income taxes and submitting false reimbursement claims to CVS Caremark, a national pharmacy benefit manager.
According to court documents, the U.S. Department of Health and Human Services’ Office of Inspector General, the Oregon Department of Justice’s Medicaid Fraud Unit, and other agencies pursued a multi-year investigation into alleged illegal kickback arrangements at compounding pharmacies owned by Peters and members of his family in several states. Two such pharmacies, Professional Center Pharmacy and Professional Center 205 Pharmacy, were located in Southeast Portland.
The investigation ultimately revealed that Peters had devised various indirect means of incentivizing healthcare providers to write prescriptions for compounded drugs—custom-mixed medications that generate outsized reimbursements from Medicare, Medicaid, and other healthcare-benefit programs—and to direct those prescriptions to his pharmacies for dispensing. These arrangements proved enormously profitable for Peters’ pharmacies.
Peters’s healthcare fraud conviction stemmed from his requests for reimbursements from CVS Caremark, a major pharmacy benefits manger based in Arizona. Peters sought reimbursements of approximately $3.4 million for medication his pharmacies had purportedly dispensed. In mid-2015, CVS Caremark audited Peters’s reimbursement claims and identified nearly a quarter-million dollars in potentially unwarranted reimbursements. Dozens of the discrepant claims lacked records proving customers’ receipt of medications.
In October 2015, seeking to resolve these discrepancies and avoid possible suspension from CVS Caremark’s network, Peters submitted to CVS Caremark 41 forged patient attestations, purportedly confirming individual patients’ receipt of prescriptions. CVS Caremark auditors saw that the patient attestations all bore the same unique digital code and, after further investigation, suspended Peters’ pharmacies from their network. A subsequent federal investigation confirmed that Peters had used Docu-Sign, an electronic signature application, from his personal computer to sign the attestations.
Peters greatly expanded his criminal liability by attempting to hide his pharmacy profits from the IRS. The IRS’s financial investigation into Peters revealed that he had generated nearly $14 million in gross income between 2014 and 2017. Peters developed several schemes to try and conceal his income and fraudulently decrease his federal income tax liability. Most of these schemes involved spending pharmacy profits on personal expenses and telling his accountant (and the IRS) that they were legitimate business expenses.?
Peters’s purported business expenses included $3.3 million for property and construction in Belize; more than $5 million for personal residences in Laguna Beach and San Carlos, California and Incline Village, Nevada; and millions in cash transfers to straw entities and trust accounts in the names of others for Peters’ personal use. All told, between 2014 and 2017, Peters underreported his income tax liability by more than $5.4 million.
On December 19, 2019, a federal grand jury in Portland returned a two-count indictment charging Peters with healthcare fraud and aggravated identity theft. Later, on July 20, 2020, he was charged by superseding criminal information with healthcare fraud and tax evasion.
On August 4, 2020, Peters waived indictment and pleaded guilty to health care fraud and tax evasion
Medical Director at Bridgeville Suboxone Clinic Sentenced for Unlawful Dispensing of Controlled Substances
Mark R. Foster, age 75, a resident of Wexford, Pennsylvania, was sentenced in federal court to two years of probation and 100 hours of community service on his conviction of unlawfully distributing controlled substances, United States Attorney Cindy K. Chung announced today.
According to information presented to the court, co-defendant Terry Brown owned and operated Cherry Way, a Suboxone clinic, located in Bridgeville PA, and Foster was a medical director at Cherry Way. Brown and Foster conspired together to create and submit unlawful prescriptions for Suboxone, Adderall and Percocet, and then unlawfully dispensed those controlled substances to Brown and to other persons not specifically named in the Indictment.
Other Insurance Fraud Convictions
Former Adjuster Sentenced to Three Years in Prison for Kentucky Crop Insurance Fraud.
Timothy Douglas Snedegar, 65, of Mount Sterling, Kentucky, an adjuster who helped Central Kentucky farmers file more than $2 million in fraudulent crop insurance claims was sentenced to three years in prison. Snedegar also is responsible for restitution totaling $2,294,693.
Snedegar worked as an independent insurance adjuster, examining claims of hail damage to crops. He admitted that in crop years 2012 through 2015, he did reports with false information on the amount of damage to tobacco crops, including photos of damage from other fields, and took kickbacks from insurance agents who were involved in the scheme. Snedegar helped file dozens of claims that he knew were false, according to his plea agreement.
The fraudulent claims caused a private insurance company to pay out more than $2.2 million. Snedegar pleaded guilty to conspiracy to commit wire fraud. Assistant U.S. Attorney Kathryn M. Anderson said in a sentencing memorandum that the crop hail insurance industry relies on the honesty of farmers and insurance adjusters to work.
The combination of a dishonest adjuster and dishonest farmers deprived an insurance company of “vast sums of money.”
Snedegar must serve at least 85 percent of his sentence. Several farmers and Michael McNew, an insurance agent involved in the fraud scheme, are liable for restitution with Snedegar. McNew pleaded guilty and was sentenced to seven years and 2 months in prison. Snedegar was among more than 20 people charged criminally in an investigation of what prosecutors have called pervasive and severe fraud involving crop insurance in Central Kentucky.
A total of more than three dozen people have pleaded guilty to criminal charges or resolved fraud accusations through civil agreements as a result of the investigation.
Massachusetts Contractor Pleads Guilty To $1.8 Million Payroll Tax Scheme
George Vasiliades, 58, pleaded guilty to 17 counts of failure to collect, account for and pay over federal employment taxes; 17 counts of aiding and assisting the filing of false tax returns; and one count of making a false statement to the Social Security Administration. Vasiliades, an Ipswich, Mass. man who owned and operated numerous Massachusetts businesses pleaded guilty today in connection with charges that he manipulated his payroll to avoid paying taxes.
Vasiliades operated several businesses, including Alpine Property Services, Boston Central Management, Delta Labor Company, Olympic Painting & Roofing and Turnpike General Contracting. Between 2008 and 2013, Vasiliades concealed the true size of his companies’ payroll from the Internal Revenue Service (IRS). Among other methods, Vasiliades directed certain employees to create shell corporations and then paid employees through these corporations as if they were independent contractors. Vasiliades also paid some employees, including those who were not U.S. citizens and not authorized to work in the United States, from bank accounts that were not connected to his corporate payroll reporting software and, as a result, would not be reported as wages to the IRS. For one non-citizen employee, Vasiliades paid wages using the name and Social Security number of a U.S. citizen employee. In total, Vasiliades’ scheme resulted in more than $1.8 million in tax losses.
The charges of failure to collect, account for and pay over federal employment taxes and making a false statement to the Social Security Administration each provide for a sentence of up to five years in prison, three years of supervised release and a fine of $250,000 or twice the gross gain or loss, whichever is greater. The charges of aiding and assisting the filing of false tax returns each provide for a sentence of up to three years in prison, one year of supervised release and a fine of $250,000 or twice the gross gain or loss, whichever is greater. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.
Peabody Construction Company Owner Pleads Guilty to Tax and Workers' Compensation Fraud
Defendant allegedly failed to pay more than $1 million in federal taxes
Argyrios “Eric” Mavros, 57, pleaded guilty to 10 counts of failure to collect or pay over taxes and one count of mail fraud. U.S. Senior District Court Judge William G. Young scheduled sentencing for Feb. 17, 2022. Mavros was indicted in September 2020.
Mavros, the owner of a now-defunct Peabody construction company pleaded guilty November 1, 2021 in connection with a scheme to defraud the IRS of payroll taxes and to defraud his workers’ compensation insurance carrier by failing to disclose how many workers he employed.
Mavros, who owned Mavros Construction, Inc., cashed more than $3.3 million in customer checks at a Peabody check cashing business and used some of those funds to pay his employees in cash. Mavros failed to report these employees or their wages in quarterly corporate tax filings, in an effort to avoid paying Social Security and Medicare taxes on employee wages and withholding federal income taxes. Overall, it is alleged that Mavros failed to pay and withhold federal taxes on more than $2.5 million in wages, resulting in a tax loss of over $1 million. Additionally, Mavros failed to report these employees to his workers’ compensation insurance carrier, thereby defrauding his insurer of premiums.?
The charge of failure to collect and pay over taxes provides for a sentence of up to five years in prison, three years of supervised release and a fine of $10,000. The charge of mail fraud provides for a sentence of up to 20 years in prison, three years of supervised release and a fine of $250,000 or twice the gross gain or loss, whichever is greater. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.
Texas Woman Sentenced for Conspiring to Stage Automobile Accidents
Genetta Isreal age 53, of Houston, Texas, was sentenced December 16, 2021 for Conspiracy to Commit Wire Fraud arising out of staged automobile accidents with tractor-trailers occurring in New Orleans. Thus far, 29 of the 33 indicted defendants have tendered guilty pleas in federal court.
According to documents filed in federal court, Damian Labeaud, Mario Solomon, Larry Williams, and Isreal were charged with staging an accident on June 12, 2017, occurring on Chef Menteur Highway near the Danziger Bridge in New Orleans. Labeaud and Williams planned to stage an automobile accident to obtain money through fraud.
During their planning, Labeaud told Williams that he had an attorney, Daniel Patrick Keating, who has been identified in other documents filed in federal court, who would handle everything. Williams recruited Isreal and another individual, now deceased, to participate in the fraudulent scheme. Williams borrowed a Chevrolet Trailblazer, and Labeaud operated the Trailblazer to collide with a 2015 Peterbilt tractor-trailer.
After the staged accident, Labeaud fled the scene and Williams got behind the wheel to make it appear that he was operating the Trailblazer during the staged accident. Solomon picked up Labeaud after the staged accident. Williams told the New Orleans Police Department that he was the driver of the Trailblazer and that the tractor-trailer was at fault. After the staged accident, Labeaud introduced Williams and Isreal to Keating.
Williams and Isreal were treated by doctors and healthcare providers at the direction of Keating. On June 12, 2018, Keating’s firm filed the Larry Williams Lawsuit in Civil District Court for the Parish of Orleans and on September 14, 2018, Keating’s firm demanded approximately $60,000.00 in settlement for the deceased passenger and approximately $56,155.00 in settlement for Isreal. After the suit was filed, Williams and Isreal each provided false testimony in depositions taken in conjunction with the lawsuit filed by Keating’s firm.
U.S. District Judge Eldon Fallon sentenced Isreal to three years probation with the first six months to be served under home incarceration. In addition, Isreal was ordered to pay restitution in the amount of $28,816.64 and a $100 mandatory special assessment fee. If she doesn’t pay the restitution she will serve the three years
Michigan Man Who Spiked Wife’s Cereal with Heroin, Killing Her, Sentenced to Life
Her death was ruled as an accidental overdose and re-classified as a homicide a few years later
Jason Harris, of Davison, Michigan, 60 miles north of Detroit, was found guilty in November of first-degree murder in the 2014 death of Christina Ann-Thompson Harris, among other charges.
Harris was given a life sentence for fatally spiking his wife's cereal with heroin. Her death was initially ruled an accidental overdose.
"I agree completely with their verdict," Genesee County Circuit Court Judge David Newblatt said before imposing his sentence, you are guilty. You did this. You are a murderer. You are a liar. I want to make that very clear. The jury saw through your lies and I see through your lies."
Harris tried hiring a hitman to kill his wife but settled on spiking her cereal instead, investigators said. He allegedly did it the night before she died.
A neighbor told police that Christina Harris dropped the bowl of poisoned cereal while eating and passed out on the living room floor.
A medical examiner initially determined the death was the result of an accidental overdose but investigators suspected she was murdered. Her family also told police she didn't use drugs.?
A sample of Christina Harris' breast milk collected before her death found no drugs in her system, indicating she was not a drug user before her overdose. The cause of death was eventually re-classified as a homicide in August 2019. A judge in Michigan's Genesee County sentenced Harris to life in prison for the death of his wife.
Harris collected a $120,000 life insurance benefit after his wife died and a woman moved into his home soon after. An investigation also revealed he had been exchanging text messages with a woman before his wife died.
Ex-NFL Wide Receiver Josh Bellamy Gets 3 Years in Prison For $1.2m In Covid Relief Fraud
Josh Bellamy was sentenced to 37 months in prison for a scheme that saw him illegally obtain more than $1.2 million in COVID-19 relief funds.
Bellamy, who last played for the New York Jets in 2019, pleaded guilty to in conspiracy to commit wire fraud on June 9. A federal court in Tampa handed down his prison sentence on Friday and ordered him to pay $1,246,565 in restitution and the same amount in forfeiture for the fraudulently obtained funds.
Bellamy used falsified documents and information to obtain the loan for his company Drip Entertainment, LLC through the federal government's Paycheck Protection Program. PPP was put in place to help businesses maintain their workforces during the COVID-19 pandemic. Bellamy was initially charged among a group of 11 defendants accused of illegally applying for more than $24 million in PPP funds.
According to records, Bellamy used the funds on personal expenditures including jewelry and a stay at the Seminole Hard Rock Hotel and Casino. He also sought loans for family members and said that he used $311,000 in funds to pay back alleged co-conspirator James Stote, whom he claims helped him prepare his fraudulent loan application. Stote has been charged with wire fraud, bank fraud, and conspiracy to commit wire fraud and bank fraud. His case is pending.?
Bellamy, 32, played eight NFL seasons from 2012-19 with the Jets, Kansas City Chiefs, Washington Football Team and Chicago Bears. According to Spotrac, he collected more than $8.1 million in career earnings.?
Bellamy isn't the first former NFL player to plead guilty in a COVID-19 relief fund scheme. Former Jets, Patriots and Raiders wide receiver Kenbrell Thompkins pleaded guilty in October to fraudulently obtaining COVID-19 unemployment insurance benefits from the state of California. He's scheduled to be sentenced on Jan. 6 and faces a maximum of 12 years in prison.
Former Maryland Public Adjuster Sentenced for Theft, Insurance Fraud
Tashoia Starr Grant, a former Maryland public adjuster of Street, Maryland, was sentenced on two counts of theft scheme with a value between $10,000 but less than $100,000, and two counts of insurance fraud with a value of $300 or more.
From March 9, 2015, through August 3, 2015, Grant, a formerly licensed public adjuster operating under the name Primary Asset Integrity Network, engaged in a theft scheme to defraud two homeowners of insurance benefits.
The victims hired Grant to act as their advocate and help them navigate the insurance claims process. Instead of performing her duties as a public adjuster, Grant stole a total of $44,521 in insurance benefits belonging to the victims.
Harford County Circuit Court Judge Paul W. Ishak sentenced Grant to five years incarceration, suspending all but 60 days, and placed Grant on supervised probation for five years, with $38,894 restitution.
North Carolina Comp Attorney Disbarred After Keeping Settlement Money, Tax Issues
Bright Lindler, a Rockingham, North Carolina Workers’ Compensation and personal injury lawyer since 1987, failed to pay more than $1 million in income and employment taxes, the state Bar said in its Dec. 3 disbarment order.
Lindler has agreed to close his practice after he was disbarred for settling a claim against his client’s wishes, then billing her for expenses. The order of disbarment said: “Defendant has admitted that the material facts and allegations upon which the State Bar’s complaint, incorporated herein by reference, is predicated, are true.” The chair of the committee found that the misconduct alleged in the complaint was established.
The order explained that in 2008, Lindler represented an injured worker and negotiated a settlement with the employer for $2,500. The worker, unnamed in the disciplinary proceedings, at first agreed, then decided against the settlement.
Nonetheless, Lindler signed off on a settlement agreement and submitted it to the state’s Industrial Commission. The commission awarded Lindler $625 in attorney fees, deducted from the settlement. The lawyer did not inform his client of the payout, and kept the money. Then he sent her a letter, saying the claimant owed $2,553 in expenses to Lindler’s office.
The client found out about the settlement only after she contacted the Industrial Commission. She then wrote a letter to the agency, detailing Lindler’s actions.
Meanwhile, Lindler had failed to pay income taxes for 2009 through 2014, and the Internal Revenue Service filed liens against him for just over $1 million. The state Department of Revenue also placed liens on Lindler’s property, for more than $90,000.
By willfully failing to pay to the IRS the funds he was required to withhold from the paychecks of his law firm’s employees the state Bar concluded that Lindler committed criminal acts that reflect adversely on his honesty, trustworthiness and fitness and a lawyer, in violation of conduct rules. Lindler has until early February to wind down his practice.
Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/ podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4
New Books for the Insurance Claims Professionals
Fictionalized True Crime Stories of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers.
Fictionalized True Crime Stories of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers.
The stories help to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the Perpetrators than any Other Crime. This book started as a collection of columns I wrote and published in the magazines “Insurance Journal,” “Insurance Week,” and “The John Cooke Insurance Fraud Report” insurance trade publications serving the insurance community in the United States. Since the last edition I have added more stories that were published in my twice monthly newsletter, Zalma’s Insurance Fraud Letter which is available free to anyone who clicks the links.
Available as a Kindle Book and Available as a Paperback from Amazon.com.
Legal Disclaimer
ZIFL is made available by the publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using ZIFL you understand that there is no attorney client relationship between you and the publisher. ZIFL should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.
Barry Zalma, Esq., CFE
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at https://www.zalma.com and [email protected].
Barry Zalma, Inc., 4441 Sepulveda Boulevard, CULVER CITY CA 90230-4847, 310-390-4455;
Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Write to Mr. Zalma at [email protected]; https://www.zalma.com; https://zalma.com/blog; I publish daily articles at https://zalma.substack.com, Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/
?
--
3 个月Hey Barry Salma : sorry to bauther you. Hey Taylor Chastain there's no relation to hb Chastain family trust LLC in are family. Thanks again Samuel w Chastain re [email protected]
Reflecting on ZIFL's insights from June 2023, it's clear how pivotal transparency is in tackling #insurancefraud. It's a reminder for all in the behavioral health space to stay vigilant and ethical. ???♂?#ZIFL #insurance
--
2 年Good to see your on my case of hb Chastain family trust llc. It was left to me when I was 2 years old. Hb Chastain died on July 31 1966 he's my grandfather and his son my father Dewey b Chastain sr died Aug 31 1984. I was born in Dallas Texas on June 23 1965 I'v got all death records and my birth records and all social security card numbers and hb Chastain family trust llc his trust information and royalty information interest in Chisholm oil and gas and LinkedIn thanks again Samuel w Chastain re [email protected]
Publish C.E., Small Press E-Books (CA-approved Insurance C.E. Courses), Editor/Publisher American Segue Magazine.
2 年Impressive! This should become a mainstay of The insurance industry.