BOSTON – Two women pleaded guilty today in connection with a multi-million-dollar Medicare fraud scheme.

Talia Alexandre, 30, of Palm Springs, Fla., pleaded guilty to one count of receiving kickbacks in connection with a federal health care program. Stefanie Hirsch, 51, of Los Angeles, Calif., pleaded guilty to violating the HIPAA statute. U.S. Senior District Court Judge George A. O’Toole Jr. scheduled the sentencing hearings for June 24, 2021.

According to charging documents, co-conspirator Nathan LaParl and Alexandre sold Medicare patients’ personal and medical data to Juan Camilo Perez Buitrago. Alexandre and LaParl worked with foreign call centers to contact Medicare patients to ask if they were interested in durable medical equipment (DME) such as arm, back, knee and shoulder braces “at little to no cost.” The call centers collected demographic and insurance information from Medicare patients, which Alexandre and LaParl sold to Perez Buitrago. Alexandre received more than $1.4 million from Perez Buitrago for the patient data. Perez Buitrago used that patient data to submit more than $109 million in false and fraudulent claims, submitting claims for DME that was not prescribed, not necessary, and, in many instances, never requested or received.  

To perpetuate the scheme, Perez Buitrago and LaParl checked Medicare patients’ insurance eligibility by improperly accessing a patient eligibility tool provided by Hirsch. Hirsch owned EI Medical, Inc., a Medicare-enrolled wheelchair and scooter repair company that qualified for access to a health care clearinghouse that contains Medicare patients’ personal, medical and insurance information. Hirsch improperly gave LaParl and Perez Buitrago access to that clearinghouse and charged them about $0.25 per patient eligibility check. Using Hirsch’s credentials, LaParl accessed the personal and medical data of more than 350,000 patients and Perez Buitrago’s credentials were used for 150,000 patients.

LaParl pleaded guilty in January 2021 and is scheduled to be sentenced on May 20, 2021. In October 2020, Perez Buitrago pleaded guilty to health care fraud and paying kickbacks in connection with a federal health care program and is scheduled to be sentenced on May 5, 2021. Two other defendants, Jessica Jones and Elizabeth Putulin, pleaded guilty in January 2021 and are scheduled to be sentence on May 19, 2021.

United States Attorney Andrew E. Lelling; Johnnie Sharp Jr., Special Agent in Charge of the Federal Bureau of Investigation, Birmingham Field Division; Phillip Coyne, Special Agent in Charge of the Department of Health and Human Services, Office of the Inspector General, Boston Division; and Joseph W. Cronin, Inspector in Charge of the U.S. Postal Inspection Service made the announcement today. Assistant U.S. Attorney Elysa Q. Wan of Lelling’s Health Care Fraud Unit is prosecuting the case.

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BOSTON – A Colorado woman and a Houston woman were sentenced today in federal court in Boston for their roles in a multi-million-dollar Medicare fraud scheme.

Jessica Jones, 32, of Lakewood Colo., and Elizabeth Putulin, 31, of Houston, Texas were each sentenced by U.S. District Court Senior Judge George A. O’Toole, Jr. to three years of supervised release, the first year to be served in home detention. Judge O’Toole, Jr. also ordered Jones to pay restitution in the amount of $8.6 million and ordered Putulin to pay restitution in the amount of $20.7 million. Jones and Putulin are also barred from engaging in an occupation business in the health care industry. On Jan. 20, 2021, Jones and Putulin each pleaded guilty to one count of conspiracy to commit health care fraud.

Jones and Putulin conspired with Juan Camilo Perez Buitrago to submit more than $107.6 million in false and fraudulent claims for durable medical equipment (DME) such as arm, back, knee and shoulder braces. Jones and Putulin helped Perez manufacture and submit false and fraudulent Medicare claims by establishing shell companies in more than a dozen different states, including Massachusetts. At Perez’s request, Jones and Putulin purchased Medicare patient data from foreign and domestic call centers that targeted elderly patients and instructed call centers to contact the Medicare beneficiaries with an offer of ankle, arm, back, knee and/or shoulder braces “at little to no cost.” Perez then submitted Medicare claims for those patients without obtaining a prescriber’s order to ensure that the braces were medically necessary. Jones and Putulin further facilitated the fraud by answering frequent phone calls from Medicare patients who received DME that they did not request, want or need. Additionally, Jones and Putulin responded to insurance companies’ requests for prescriber’s orders and medical records, which they were unable to provide.

United States Attorney Rachael S. Rollins; Johnnie Sharp Jr., Special Agent in Charge of the Federal Bureau of Investigation, Birmingham Field Division; Phillip M. Coyne, Special Agent in Charge of the Department of Health and Human Services, Office of the Inspector General, Boston Division; and Ketty Larco Ward, Inspector in Charge of the U.S. Postal Inspection Service made the announcement today. Assistant U.S. Attorney Elysa Q. Wan of Rollins’ Health Care Fraud Unit prosecuted the case.

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Acting U.S. Attorney Bridget M. Brennan announced today that a grand jury sitting in Cleveland, Ohio returned an eleven-count indictment charging Samir Wahib, age 53, of Canfield, and Joni Canby, age 62, of Poland, for their roles in a scheme to defraud Medicare and Medicaid and obtain reimbursement for testing that was not medically necessary.

Michelle Kapon, age 41, of Youngstown, was also named in the indictment, but charged separately in a bill of information for conspiring with Wahib and Canby to accept kickbacks from Wahib.

“These defendants are physicians accused of orchestrating a scheme to defraud a tax-payer funded health care benefit program created to assist vulnerable populations,” said Acting U.S. Attorney Bridget M. Brennan. “Their alleged conduct, which included kickbacks and medically unnecessary testing, was designed specifically to enrich themselves. We are grateful for the hard work of the investigating agencies who, like us, are dedicated to bringing allegations of fraud and illegal kickbacks before the Court.”

“The payment of kickbacks is a corrupt and illegal practice that inappropriately influences an individual or entity’s capacity to make unbiased decisions, which is of particular concern in the health care environment,” said Lamont Pugh III, Special Agent in Charge, U.S. Department of Health & Human Services, Office of Inspector General - Chicago Region. “Kickbacks can result in the overutilization of diagnostic testing and other services that ultimately lead to an increase in program costs, waste valuable tax-payer dollars, and can expose patients to medically unnecessary services. The OIG will continue to work with our law enforcement partners to ensure that those who choose to engage in this type of practice are held accountable.”

“These doctors schemed and defrauded a taxpayer-funded program that assists individuals in obtaining needed healthcare,” said FBI Special Agent in Charge Eric B. Smith. “Healthcare fraud is a concern to all of us; our tax dollars should be utilized responsibly, not to line the pockets of greedy physicians. The FBI will continue to work with our partners to ensure healthcare fraud is rooted out and those responsible answer in a court of law”

“Subjecting patients to unnecessary tests is bad medicine,” Ohio Attorney General Dave Yost said. “Stealing from taxpayer-funded healthcare while doing so is criminal, and that’s when we, and our federal law enforcement partners, come in.”

The indictment charges defendants Wahib and Canby with conspiring with Kapon to solicit, receive, offer and pay kickbacks in connection with a federal health care program; and it charges Wahib and Canby with conspiracy to commit health care fraud and health care fraud. Defendant Wahib is also charged with obstruction of a criminal investigation of federal health care offenses, as well as four additional counts of paying kickbacks in connection with a federal health care program. Defendant Canby is charged with two additional counts of receipt of kickbacks in connection with a federal health care program.

At the time of the allegations, Wahib was a Doctor of Osteopathic Medicine and an obstetrics and gynecological (“OBGYN”) specialist; Canby was a Doctor of Osteopathic Medicine and an OBGYN specialist and Kapon was a Doctor of Medicine. All three physicians were licensed in the State of Ohio and practiced medicine in the Youngstown area.  

According to the indictment, Wahib is accused of conspiring, from March of 2014 through January of 2017, to pay kickbacks to Canby and Kapon to induce them to order gonorrhea and chlamydia testing to be performed by Wahib on specimens of Canby’s and Kapon’s patients. Wahib allegedly then billed and was paid by the federal government for this testing. Wahib and Canby are also accused of conspiring, through this scheme, to test Canby’s and Wahib’s patients when it was medically unnecessary to do so.

The indictment alleges that Wahib paid Canby and Kapon per specimen that they sent to him for testing. Wahib would then submit claims for reimbursement through the Medicaid and Medicare programs. Furthermore, Wahib allegedly provided Kapon, who was not an OBGYN specialist, with compensation in kind in the form of supervision of her OBGYN treatment of patients at a Youngstown-area hospital.

Wahib allegedly paid kickbacks with checks drawn on his business checking account, which he attempted to disguise as “physician coverage” by noting this on the memo line of the checks. Wahib intended to make these checks appear that they were payment for Canby and Kapon having treated Wahib’s patients when he was unavailable. The indictment further states that an employee and relative of Wahib, working on his behalf, provided Canby and Kapon with the necessary supplies to collect and retrieve the specimens. That employee would also retrieve the specimens from Canby’s and Kapon’s offices and perform testing of the specimens on a specialized machine at Wahib’s medical office.

An indictment is only a charge and is not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.

If convicted, the defendant’s sentence will be determined by the Court after review of factors unique to this case, including the defendant’s prior criminal record, if any, the defendant’s role in the offense, and the characteristics of the violation.

In all cases, the sentence will not exceed the statutory maximum, and in most cases, it will be less than the maximum.

The investigation preceding the indictment was conducted by the United States Department of Health and Human Services - Office of Inspector General, the FBI, and the Healthcare Fraud section of the Ohio Attorney General’s Office. The case is being prosecuted by Assistant U.S. Attorney Brendan O’Shea, and Special Assistant U.S. Attorney Jonathan Metzler of the Ohio AG’s Office.

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GRAND RAPIDS – U.S. Attorney Andrew B. Birge announced a series of criminal and civil enforcement actions taken as part of a joint-agency healthcare fraud operation in the Western District of Michigan investigating medical practitioners who signed off on illegitimate orders for medical braces and cancer genetic testing promoted by telemarketers. The ongoing investigation—dubbed Operation “Happy Clickers” to reflect many of the practitioners’ habits of approving these orders with little to no review—resolves alleged fraud losses to date to the Medicare Program of over $7.3 million.

These actions follow nationwide takedowns of so-called marketers and owners of durable medical equipment (“DME”) supply companies and cancer genetic testing laboratories who conducted large-scale fraud schemes designed to defraud the Medicare Program (see press releases for takedowns on April 9, 2019, September 27, 2019, and September 30, 2020). The marketers called Medicare beneficiaries, often through overseas call centers, soliciting them for medically unnecessary braces and cancer genetic testing for screening purposes. The marketers, typically working through locum tenens companies, paid medical practitioners to purportedly review and sign these orders under the guise of telemedicine and then sold those signed orders to the owners of the DME supply companies and laboratories in violation of the federal anti-kickback statute.

The resolutions U.S. Attorney Birge announced involved four of the Michigan practitioners who approved and signed these orders on behalf of the marketers:

Richard Laksonen, N.P., a nurse practitioner from Ishpeming, MI, pleaded guilty on August 6, 2021, to one count of making a false statement relating to health care matters. As part of his guilty plea, Mr. Laksonen admitted that he signed orders for medical braces and cancer genetic testing, attesting that he had performed the assessments and verifying that the orders were reasonably and medically necessary, when, in fact, he typically executed the orders without reviewing the records. For example, Mr. Laksonen admitted that, in a one-week period, he signed approximately 335 separate single-patient files, many containing multiple types of braces, spending on average 18 seconds from the time he opened the record to the time he executed it. Mr. Laksonen continued to approve these orders, even after an investigator for a health insurer warned him that the patient referrals were the result of aggressive telemarketing. The investigation further established that many of these braces and tests were not medically necessary. As part of his plea agreement, Mr. Laksonen admitted that Medicare paid over $5.7 million for the orders he approved and signed. The Court will sentence Mr. Laksonen on November 15, 2021.

Hugh G. Deery II, M.D., of Petoskey, MI, Colleen Browne, D.O., formerly of Portland, MI, and Mosab Deen, D.O., of Royal Oak, MI, resolved civil liability for alleged violations of the False Claims Act by entering into civil settlements with the United States. These physicians approved orders for medically unnecessary braces and cancer genetic testing despite many red flags that these items and services were illegitimate. For example, there were often discrepancies between the brace orders and “examination” notes that the physicians signed and the recorded phone calls between the overseas call centers and the Medicare beneficiaries. Additionally, the marketer often suggested the physicians sign multiple brace orders for each beneficiary, and the physicians were pressured not to deny claims.

Medicare beneficiaries targeted by this fraud scheme complained of being “bombarded” by overseas telemarketing calls offering “free” braces. If the doctors took the time to listen to these recorded phone calls, they would have known that the calls were run by telemarketers and not medical professionals. The orders the physicians signed resulted in hundreds of thousands of dollars paid by Medicare for medically unnecessary braces, which beneficiaries often did not want or use.

To resolve their individual liability, Dr. Deery has agreed to pay $301,140, Dr. Browne has agreed to pay $42,000, and Dr. Deen has agreed to pay $28,545. Dr. Browne’s settlement agreement also resolved allegations that she ordered medically unnecessary cancer genetic testing for Medicare beneficiaries for cancer screening purposes. Generally, Medicare does not cover genetic testing solely for the purpose of screening for cancer.

“Given that their approval and signatures are necessary for Medicare to pay for these braces and testing, medical practitioners are the professional backstop against these fraud schemes,” said U.S Attorney Birge. “And when medical practitioners ignore their professional responsibilities, facilitating these fraud schemes in our district, they will be held accountable.”

“The ordering of medically unnecessary services resulting from purported telemedicine visits to Medicare is blatant fraud,” said Lamont Pugh III, Special Agent in Charge, U.S. Department of Health & Human Services, Office of Inspector General – Chicago Region. “The OIG will continue to work with our law enforcement partners and federal prosecutors to identify and hold accountable those individuals who choose to execute healthcare fraud schemes, and the practitioners who legitimize these schemes, and waste vital taxpayer dollars.”

“As medical professionals, these defendants had an obligation to conduct a good faith review of the devices and medical tests being ordered on behalf of Medicare patients,” said Timothy Waters, Special Agent in Charge of the FBI’s Detroit Field Office. “Their failure to do so contributes to the billions of dollars of fraud losses Medicare suffers annually. Collaborative efforts like this one, demonstrate the FBI and our partners resolve to hold accountable those seeking to defraud the Medicare system.”

Operation “Happy Clickers” is an ongoing initiative by HHS-OIG, the FBI, and the U.S. Attorney’s Office for the Western District of Michigan. Assistant U.S. Attorney Raymond E. Beckering III is overseeing and prosecuting the criminal investigation, and Assistant U.S. Attorney Andrew J. Hull is representing the United States in the parallel civil investigations.

Individuals, including medical professionals, who are aware of past or ongoing conduct involving solicitation and fraudulent approval of medical braces and cancer genetic testing through purported telemedicine services can call the U.S. Attorney’s Office Healthcare Fraud Investigator at 616-808-7572 or submit an online complaint to the HHS-OIG Hotline: https://oig.hhs.gov/fraud/report-fraud/

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Fox Chase-area Pharmacy was the Top Retail Purchaser of Oxycodone in Pennsylvania

PHILADELPHIA – United States Attorney Jennifer Arbittier Williams announced that the United States filed a civil lawsuit against Philadelphia-based pharmacy Spivack, Inc., which previously operated under the name Verree Pharmacy, and its former owner, pharmacist Mitchell Spivack, alleging that they engaged in a years-long practice of illegally dispensing opioids and other controlled substances, and systematic health care fraud. The lawsuit alleges that Verree and Spivack illegally dispensed unparalleled quantities of opioids and other controlled substances into the Philadelphia community. The complaint seeks civil penalties and civil damages, which could total in the millions of dollars, as well as injunctive relief.

The culmination of a multi-year federal-state investigation, the complaint alleges that Verree Pharmacy, its pharmacist and then-owner Mitchell Spivack and other employees of Verree, had a responsibility to dispense opioids and other controlled substances only when appropriate. Instead, the United States alleges that the pharmacy and Spivack dispensed the drugs, even when faced with numerous red flags suggestive of diversion—such as opioids in extreme doses, dangerous combinations of opioids and other “cocktail” drugs preferred by those struggling with addiction, excessive cash payments for the drugs, blatantly forged prescriptions, and other signs that the pills were being diverted for illegal purposes. The complaint alleges that Verree—which was the top retail pharmacy purchasing oxycodone in Pennsylvania—has been a nationwide and regional outlier in its deviant purchasing, dispensing, and billing of controlled substances. To avoid scrutiny from the drug distributors that sold them the pills, Verree through Spivack, allegedly made false statements to maintain the façade of legitimacy and keep the pharmacy stocked with these pills critical to its profits. Behind that façade, the complaint alleges that Spivack drew millions of dollars from the pharmacy while the public suffered the consequences, including one patient who overdosed and died next to Verree Pharmacy bottles dispensed by Spivack.

The United States’ complaint alleges that Verree and Spivack were also engaging in an expansive health care fraud scheme involving fraudulent billings for drugs not actually dispensed. The alleged cornerstone of the scheme was a code used by the pharmacy employees in their internal computer system: “BBDF” or “Bill But Don’t Fill.” Verree, Spivack and their co-conspirators allegedly used BBDF as a means to cover their losses on other drugs and further line their pockets with illicit profits by falsely claiming to insurers, including Medicare, that they had dispensed a drug to a patient, when in fact they had not. According to the complaint, this sophisticated fraud—which one of the employees admitted to investigators—resulted in significant losses to Medicare and other federal programs.

The lawsuit seeks to impose civil penalties and damages on Verree and Spivack under the Controlled Substances and False Claims Acts. If Verree and Spivack are found liable, they could face civil penalties up to $68,426 for each unlawful prescription dispensed, civil penalties up to $23,607 for each false claim they submitted to federal health care programs, and treble damages for the alleged health care fraud against federal programs. The court may also award injunctive relief to prevent Verree and Spivack from committing additional controlled substance violations.

“Pharmacies and pharmacists engage in the deepest violation of the community’s trust when they exploit their access to opioids and other controlled substances and illegally dispense the drugs for their own financial gain,” said U.S. Attorney Williams. “It is even more disturbing when pharmacies take advantage of their position of trust by fraudulently billing Medicare and other federal health care programs for bogus prescription drugs. My Office will use every resource it has to pursue and hold these individuals accountable. I am grateful for the support and investigative teamwork that the DEA, HHS-OIG, and the Pennsylvania Attorney General’s Office provided in this important matter.”

“In a city that has been so adversely and disproportionately affected by the opioid epidemic, Verree Pharmacy was the top retail pharmacy purchasing oxycodone in the entire state of Pennsylvania,” said Thomas Hodnett, Special Agent in Charge of the Drug Enforcement Administration’s (DEA) Philadelphia Field Division. “Spivack and the other employees at Verree routinely demonstrated total disregard for their professional and ethical obligations and improperly dispensed powerful painkillers when numerous warning signs were present.”

“The Medicare and Medicaid Programs provide vital prescription drug services to their beneficiaries, said Maureen R. Dixon, Special Agent in Charge of the Philadelphia Regional Office for the Department of Health and Human Services, Office of Inspector General. “Pharmacies are required to only bill for prescriptions and products they actually provide to their patients. HHS-OIG will continue to work with the U.S. Attorney’s Office, the Pennsylvania Attorney General’s Office, and the DEA to investigate allegations of fraudulent insurance billings.”

“We know that nearly 80% of those who use heroin first started with misusing a prescription opioid,” said Attorney General Josh Shapiro. “Pharmacies and medical professionals have a responsibility under the law to dispense these drugs only when appropriate. These allegations of illegal dispensing and fraud are disturbing -- they hurt families and communities all over the Commonwealth and steal needed resources from taxpayers. Our office is committed to continuing to work with our federal partners, and I am thankful for the women and men who collaborated on this case.”

If the public has any information regarding Verree Pharmacy or any other health care fraud allegation, individuals should contact the HHS-OIG hotline at 800-HHS-TIPS.

The case is being investigated by the Philadelphia Field Division of the Drug Enforcement Administration, HHS-OIG, and the Pennsylvania Office of the Attorney General, with additional assistance from the Office of Personnel Management Office of Inspector General, the Defense Health Agency, and the Defense Criminal Investigative Service. The civil investigation and litigation are being handled by Assistant United States Attorney Anthony D. Scicchitano and auditors Dawn Wiggins and George Niedzwicki.

The complaint contains allegations only that the United States must prove if the case proceeds to trial.

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Indictment Alleges Former Co-CEOs Defrauded Health Insurance Providers and Investors In Schemes Related to Clinical Gut and Vaginal Microbiome Tests and Capital Fundraises

SAN FRANCISCO – A federal grand jury handed down a 33-page indictment today charging Zachary Schulz Apte and Jessica Sunshine Richman with multiple federal crimes including conspiracy to commit securities fraud, conspiracy to commit health care fraud, money laundering, and related offenses in connection with alleged schemes to defraud health insurance providers and investors raise to capital for now-bankrupt microbiome testing company uBiome.  

The announcement was made by Acting U.S. Attorney Stephanie M. Hinds, Federal Bureau of Investigation Special Agent in Charge Craig D. Fair, U.S. Postal Inspection Service (USPIS) Inspector in Charge Rafael Nuñez; U.S. Department of Health and Human Services Office of the Inspector General (HHS-OIG) Special Agent in Charge Steven J. Ryan; Defense Criminal Investigative Service (DCIS) Western Field Office Special Agent in Charge Bryan D. Denny; U.S. Department of Veterans Affairs, Office of Inspector General (VA OIG) Special Agent in Charge is Jason P. Root; Amtrak Office of the Inspector General Special Agent In Charge, Western Field Office, Thomas M. Hopkins; Office of Personnel Management Office of Inspector General (OPM-OIG) Deputy Inspector General Performing the Duties of the Inspector General Norbert E. Vint.

According to the indictment, Apte, 36, and Richman, 46, both of whom resided in San Francisco at relevant times, co-founded uBiome in October 2012.  Initially, uBiome offered a direct-to-consumer service, called “Gut Explorer,” which allowed an individual to submit a fecal sample that uBiome would analyze in its laboratory and produce a report comparing the customer’s microbiome to the microbiomes of others who had submitted fecal samples to uBiome, all for less than $100.  The indictment describes how the defendants eventually expanded uBiome’s business model to include development and marketing of “clinical” tests regarding the gut and vaginal microbiomes, which tests would ostensibly be used by medical professionals to make medical decisions and as to which uBiome would seek reimbursement from health insurance providers in amounts up to nearly $3,000.  The indictment alleges that Apte’s and Richman’s efforts to have uBiome develop clinical tests that could be billed to insurance companies were intended to attract large-scale venture capital investment.  By late 2015, shortly before it raised millions of dollars in its “Series B” fundraising round, uBiome began to market a “clinical” version of a test.  Thereafter, the indictment alleges that Apte and Richman caused uBiome to employ various methods to secure health care provider orders for its clinical gut test and clinical vaginal test, including by having its Chief Medical Officer review test requests from customers and endeavoring to build a network of health care providers external to uBiome.

“The innovation that emerges from our Bay Area companies is unparalleled,” said Acting U.S. Attorney Hinds, “but all innovation must exist within the boundaries of the law. Today’s indictment alleges that in their efforts to move fast to drive business and investment capital to their microbiome start up, defendants turned a blind eye to compliance and pursued at all costs a path designed to bring the greatest investment in their company. The indictment alleges defendants bilked insurance providers with fraudulent reimbursement requests, a practice that inevitably would result in higher premiums for us all.  Further, defendants cashed out on the investment that flowed into the company to benefit themselves. Today’s indictment is a cautionary tale about the importance of robust compliance programs rather than lip service, and the importance of honesty with investors.”

“This was the result of a very complex investigation conducted by the FBI and our federal and state partners,” said FBI Special Agent in Charge Fair. “This indictment illustrates that the heavily regulated healthcare industry does not lend itself to a ‘move fast and break things’ approach, but rather to an approach of compliance and accountability.”

“The United States Postal Inspection Service has a long history of successfully investigating complex fraud cases,” said USPIS Inspector in Charge Nuñez. “Anyone who engages in deceptive practices should know they will not go undetected and will be held accountable.  The collaborative investigative work on this case conducted by Postal Inspectors, our law enforcement partners, and the United States Attorney’s Office illustrates our efforts to protect American consumers and businesses.” 

“The announced indictment is a crucial step forward in holding accountable those who, among other things, allegedly engaged in fraudulent schemes against TRICARE, the Department of Defense’s healthcare system for military members and their families,” said DCIS Special Agent in Charge Denny. “DCIS will continue to work with its law enforcement partners to see this matter through in order to protect the best interests of the Department of Defense and the American public.”

“This indictment demonstrates the VA OIG’s unwavering commitment to safeguard the integrity of the programs that support our nation’s Veterans and their families” said VA OIG Special Agent in Charge Root.

“We are very proud of this well-coordinated, joint effort—a true partnership between the U.S. Attorney’s Office and multiple investigative agencies like Amtrak’s Office of Inspector General,” said Amtrak OIG Special Agent in Charge Hopkins. “Because of this joint effort and efforts like it, we continue to achieve success across the country in bringing justice to those who target Amtrak’s health care plan, its employees and their dependents.”

“The OPM OIG is committed to investigating unscrupulous providers that take advantage of the system and defraud the American taxpayer,” said OPM OIG Deputy Inspector General Vint.

The indictment describes how the defendants ultimately adopted several fraudulent practices with respect to its clinical tests.  Specifically, according to the indictment, the defendants developed, implemented, and oversaw practices designed to deceive approving health care providers and reimbursing insurance providers regarding tests that were not validated and not medically necessary.  Further, the indictment alleges the defendants falsified documents and lied about and concealed material facts when insurance providers asked questions to which truthful answers would reveal the fraudulent nature of uBiome’s billing model.  The indictment alleges such practices included (1) fraudulently submitting reimbursement claims for re-tests or re-sequencings of archived samples (referred to internally at uBiome as “upgrades”); (2) utilizing a captive network of doctors and other health care providers who fraudulently were given partial and misleading information about the test requests they were reviewing; (3) fraudulently submitting reimbursement claims with respect to tests that had not been validated under applicable federal standards and/or for which patient test results had not yet been released; (4) manipulating dates of service to conceal uBiome’s actual testing and marketing practices from insurance providers, and to maximize billings; (5) fraudulently not charging patients for patient responsibility required by insurers, and instead, in some cases, incentivizing them with gift cards, and then making false or misleading statements about, or concealing, those practices from insurance providers; and (6) falsifying documents, using the identity of doctors and other health care providers without their knowledge or authorization, and lying to insurance providers in response to requests for information, overpayment notifications, requests for recoupment of billings, denials of reimbursement requests, or audits investigating uBiome’s billing practices.  The indictment alleges that, between 2015 and 2019, uBiome submitted more than $300 million in reimbursement claims to private and public health insurers.  Of these reimbursement claims, uBiome was paid more than $35 million.

The indictment also includes allegations that defendants oversaw an effort to deceive and mislead investors about various aspects of uBiome’s business during its Series B and Series C fundraising rounds, which occurred primarily in 2016 and 2018, respectively.  Specifically, the indictment alleges defendant misled investors about (1) the success of uBiome’s business model in terms of revenues and reimbursement rates; (2) the threats to future revenues represented by uBiome’s failure to collect patient responsibility, marketing of upgrades, and reliance a captive group of health care providers to generate orders; and (3) the lack of clinical utility and acceptance in the medical community of uBiome’s tests.  The indictment alleges that the defendants failed to disclose to investors, and otherwise concealed from investors, that “not only were insurance providers’ questions about and responses to uBiome’s billing practices calling uBiome’s entire business model into question, but [defendants] had had to falsify documents and lie to insurance providers in order to attempt to keep them at bay.”  The indictment alleges that Apte and Richman induced investors to invest more than $64 million in uBiome stock during the Series B and Series C fundraising rounds and, furthermore, that Apte and Richman together sold investors more than $12 million of their personal uBiome during those rounds.

In addition to these charges, the indictment contains allegations that defendants engaged in aggravated identity theft and engaging in transactions with the proceeds of the specified unlawful activities of wire fraud and securities fraud (i.e., money laundering).  With respect to the identity theft charges, the indictment provides examples of how defendants used the names and personal information of various health care providers to create documents for submission to health insurance companies  with respect to certain uBiome customers during and in relation to the conspiracy and scheme to defraud those insurers.  With respect to money laundering, the indictment alleges Apte used more than $10,000 of proceeds of the scheme to defraud investors to make a $2,250,000 payment ostensibly to a law firm for a retainer and to deposit $500,000 into a bank account.  Also with respect to money laundering, the indictment alleges Richman used more than $10,000 of proceeds of the scheme to defraud investors to make payments related to real property in Washington State and Florida, to purchase an annuity from a life insurance company, to pay a law firm $2,000,000 ostensibly for a legal retainer, and to transfer funds in the amount of $900,000 intended as partial payment for the purchase of a residence in south Florida.  

In sum, the defendants are charged with the following crimes and face the following maximum penalties:

The court may order additional terms of supervised release, as well as additional monetary penalties and restitution.  However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

An indictment merely alleges that crimes have been committed, and defendants are presumed innocent until proven guilty beyond a reasonable doubt.  

The defendants’ initial federal court appearances have not yet been scheduled.   

The case is being prosecuted by the Special Prosecutions Section of the U.S. Attorney’s Office for the Northern District of California.  The prosecution is the result of an investigation by the FBI, USPIS, HHS-OIG, DCIS, VA-OIG, Amtrak-OIG; OPM-OIG; and the U.S. Department of Labor, Employee Benefits Security Administration, with assistance from the California Department of Justice Division of Medi-Cal Fraud & Elder Abuse and the California Department of Insurance.  The U.S. Attorney’s Office and all the federal law enforcement agencies also thank the San Francisco Regional Office of the Securities and Exchange Commission (SEC).  The SEC conducted a parallel investigation that was also announced today.

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UC San Diego Health, the academic health system of the University of California, San Diego, has paid $2.98 million to resolve allegations that it violated the False Claims Act by ordering medically unnecessary genetic testing reimbursed by Medicare.

The settlement resolves allegations that, from December 2015 to October 2019, UC San Diego Health ordered and submitted referrals for medically unnecessary genetic testing performed by CQuentia Arkansas Labs, CQuentia NGS and Total Diagnostic II (collectively “the CQuentia labs”). The government alleged that this conduct led to the submission of false claims for payment to Medicare for these tests.

“Hospitals are the gatekeepers for medical care and are expected to ensure that all services performed at their direction, including genetic tests, are medically appropriate,” said Acting Assistant Attorney General Brian M. Boynton for the Justice Department’s Civil Division. “The department will continue to pursue those who undermine the integrity of federal health care programs and waste taxpayer dollars.”

“Ordering unnecessary genetic tests creates a drain on vital government-funded health care programs like Medicare,” said U.S. Attorney Randy Grossman for the Southern District of California. “This settlement is another example of this office’s commitment to work with our law enforcement partners to hold medical providers accountable when their conduct leads to taxpayers bearing the cost of improper billing practices.”

“This resolution demonstrates the FBI’s commitment to pursuing those who abuse our health care system,” said Special Agent in Charge Suzanne Turner of the FBI San Diego Field Office. “False claims diminish trust in our health care while generating enormous unnecessary costs, and the FBI is proud to work alongside our federal partners to disrupt such schemes.”

The resolution obtained in this matter was the result of a coordinated effort between the Civil Division’s Commercial Litigation Branch, Fraud Section and the U.S. Attorney’s Office for the Southern District of California, with assistance from the U.S. Department of Health & Human Services Office of Inspector General and the FBI.

The government’s pursuit of this matter illustrates its emphasis on combating health care fraud. One of the most powerful tools in this effort is the False Claims Act. Tips and complaints from all sources about potential fraud, waste, abuse and mismanagement can be reported to the Department of Health and Human Services, at 800‑HHS‑TIPS (800-447-8477).

This matter was handled by Trial Attorney Nicholas C. Perros of the Civil Division’s Commercial Litigation Branch, Fraud Section, and Assistant U.S. Attorneys Joseph Price and Joseph Purcell of the U.S. Attorney’s Office for the Southern District of California.

The claims resolved by the settlement are allegations only, and there has been no determination of liability.

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BISMARCK - United States Attorney Nicholas W. Chase announced that U.S. District Court Judge Daniel M. Traynor sentenced Patrick Robert McKee, a/k/a William Patrick O’Hara, Age 77 from Flint, MI, to two years in federal prison for the charges of Social Security False Statements, False Statements, Health Care Fraud, and Aggravated Identity Theft. Judge Traynor also sentenced McKee to 3 years supervised release and a $400 Special Assessment.

Investigation determined that Patrick Robert McKee stole the identity of J.C. (Identity Protected) in 1997 and then converted J.C.’s identity to William Patrick O’Hara while retaining J.C.’s social security number. Since 1997, McKee fraudulently lived and worked under J.C.’s identity. He used J.C.’s identity to obtain healthcare benefits, home mortgages, credit cards and for numerous other fraudulent pretenses.

"It has become far too common for people to have their identification stolen and suffer financial disruption and damaged credit," said United States Attorney Nick Chase, and "it is appropriate that this defendant received the maximum penalty under the law for the crime of Aggravated Identity Theft."

"We will continue to pursue those who misuse the Social Security number of others for their own personal gain. For decades, by obtaining benefits and services as

someone else, McKee abused the identity of another person," said Christian Assaad, Special Agent in Charge of the Social Security Administration Office of the Inspector General, Denver Field Division. "I thank our law enforcement partners for working with in this investigation and the U.S. Attorney’s Office for their efforts in prosecuting this case and holding this individual accountable."

"Fraudsters who steal the identity of others to loot taxpayer-funded federal health care programs often do so at the immeasurable risk of undermining the integrity of these programs," said Special Agent in Charge Curt L. Muller of the Department of Health and Human Services Office of Inspector General. "In coordination with law enforcement partners, our oversight agency will continue to investigate those who participate in health care fraud schemes."

This case was investigated by the Social Security Administration – Office of Inspector General; Office of Inspector General, U.S. Department of Health and Human Services; United States Department of Agriculture; and ther United States Marshals Service, and the case is being prosecuted by the United States Attorney’s office, with Assistant United States Attorney Brandi Sasse Russell assigned to the case.

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Tampa, Florida – The United States has filed a civil lawsuit against Dr. Edward Lubin, a pain management doctor practicing in Tampa, alleging that he issued patients medically unnecessary prescriptions for Subsys, a fentanyl-based spray manufactured by Insys Therapeutics, Inc., and used to treat breakthrough cancer pain. Dr. Lubin allegedly participated in Insys’ sham speaker program, through which it paid doctors in exchange for them writing such unnecessary prescriptions for Subsys.

In its complaint, the government alleges Dr. Lubin violated the federal Anti-Kickback Statute and the False Claims Act by repeatedly accepting payments of up to $3,700 from Insys for attending sham speaking events and, in exchange for these payments, prescribed Subsys to patients for whom the drug was either not medically necessary or otherwise inappropriate. These prescriptions were submitted to and paid through the Medicare and TRICARE federal healthcare programs. As further alleged in the complaint, between 2014 and 2016, Dr. Lubin prescribed Subsys to 61 patients, only nine of whom actually had cancer. In total, the United States alleges Dr. Lubin received more than $159,000 in payments from Insys and, in return, wrote Subsys prescriptions for which Medicare paid more than $2.8 million in claims.

The United States previously prosecuted Insys under a criminal information filed in the District of Massachusetts, and Insys agreed to a global resolution of the government’s separate civil and criminal investigations. As part of the civil resolution, Insys agreed to pay $195 million to settle allegations it violated the False Claims Act and, as part of the criminal resolution, it entered into a deferred prosecution agreement with the government, its operating subsidiary pleaded guilty to five counts of mail fraud, and the company was subject to a $2 million fine and $28 million in forfeiture.

Additionally, the United States criminally prosecuted the founder and four former executives of Insys. A federal jury in Boston previously found those defendants guilty of, among other things, using Insys’ speaker program to bribe medical practitioners to prescribe Subsys.

The claims asserted against Dr. Lubin are allegations only, and there has been no determination of liability.

This case was investigated by the Department of Justice, the U.S. Department of Health and Human Services – Office of Inspector General, and Department of Defense Office of Inspector General – Defense Criminal Investigative Service. It is being prosecuted by Assistant United States Attorney Jeremy Bloor.

Tips and complaints from all sources about potential fraud, waste, abuse and mismanagement, can be reported to the Department of Health and Human Services at 800-HHS-TIPS (800-447-8477) and the Department of Defense Office of Inspector General at 1-800-424-9098.

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The United States has intervened and filed a complaint in the U.S. District Court for the Western District of New York under the False Claims Act against Independent Health Association, Independent Health Corporation (Independent Health), DxID LLC (DxID) and Betsy Gaffney, former CEO of DxID. The government alleges that Independent Health, DxID and Gaffney violated the False Claims Act by submitting or causing the submission of inaccurate information about the health status of beneficiaries enrolled in Medicare Advantage Plans in order to increase Independent Health’s reimbursement. Independent Health is headquartered in Buffalo, New York. DxID was headquartered in Buffalo until it ceased operations in August.

“The Medicare Advantage Program relies on accurate information about the health status of enrollees to ensure that they receive appropriate treatment and that participating health plans receive proper compensation for the services they actually provide,” said Deputy Assistant Attorney General Michael D. Granston of the Justice Department’s Civil Division. “The department will continue to hold accountable health plans or providers that report unsupported diagnoses to inflate risk adjustment payments.”

“The defendants are alleged to have submitted unsupported diagnosis codes to inflate reimbursements, which enabled them to receive payments from Medicare that were greater than they were entitled,” said U.S. Attorney James P. Kennedy Jr. for the Western District of New York. “Defrauding taxpayer funded health care programs such as Medicare hurts not only taxpayers but our nation’s entire healthcare system.”

Under Medicare Advantage, also known as Medicare Part C, Medicare beneficiaries have the option to enroll in managed healthcare insurance plans called Medicare Advantage Plans (MA Plans) that are owned and operated by private Medicare Advantage Organizations (MAOs). MA Plans are paid a fixed amount per enrollee to provide benefits covered by traditional Medicare to beneficiaries who enroll in their MA Plan. The Centers for Medicare and Medicaid Services (CMS), which oversees the Medicare program, make upward payment adjustments to MA Plans based on demographic information and the health status of each plan beneficiary. The adjustments are made using what are commonly referred to as “risk scores.” In general, a beneficiary with more severe diagnoses will have a higher risk score, and CMS will make a larger risk-adjusted payment to the MA Plan for that beneficiary.

Independent Health offers two MA Plans in New York State. Its wholly-owned subsidiary, DxID, provided retrospective chart review and addenda services to Independent Health and other MA Plans.

The United States alleges that DxID coded conditions that were not documented in the patient’s medical record during a visit or encounter. The government further alleges that DxID also asked health care providers to sign addenda forms up to a year after a visit or an encounter and subsequently used the addenda as substantiation for adding risk-adjusting diagnoses that were not documented during the patient encounter, in violation of Medicare requirements. DxID operated on a contingency fee of up to 20% of the additional recovery that the MA Plans received based on diagnoses captured by DxID.

The complaint alleges that these unsupported diagnoses inflated the risk scores of beneficiaries, resulting in inflated payments to Independent Health and other MA Plans. The lawsuit further alleges that once Independent Health became aware of these unsupported diagnosis codes, it failed to take corrective action to identify and delete the unsupported codes.

The lawsuit was filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private parties to sue on behalf of the government for false claims and to receive a share of any recovery. The False Claims Act also permits the government to intervene in such lawsuits. Although the United States initially advised the court that it was not intervening in this case, the court subsequently granted the United States’ motion to intervene for good cause. The whistleblower, Teresa Ross, is a former employee of Group Health Cooperative (GHC). GHC was an MAO that offered MA Plans in Washington State. From 2011 to 2012, GHC used DxID’s chart review services. In November 2020, GHC entered into a settlement with the United States and Ross to resolve the claims against it arising out of this matter.

The United States’ intervention in this matter illustrates the government’s emphasis on combating health care fraud. One of the most powerful tools in this effort is the False Claims Act. Tips and complaints from all sources about potential fraud, waste, abuse and mismanagement, can be reported to the Department of Health and Human Services at 800-HHS-TIPS (800-447-8477).

This matter is being handled by the Civil Division’s Commercial Litigation Branch (Fraud Section) and the U.S. Attorney’s Office for the Western District of New York, with assistance from the U.S. Department of Health and Human Services Office of Inspector General.

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WILMINGTON, Del. – U.S. Attorney David C. Weiss announced today that the United States has filed a complaint in partial intervention against Connections Community Support Programs, Inc. (“Connections”) in the United States District Court for the District of Delaware. The United States alleges that Connections violated the False Claims Act by knowingly submitting claims for payment to Medicare and Medicaid that falsely represented the identity and professional qualification of individuals providing mental health services.

Connections provides mental health treatment services at facilities located throughout Delaware. Medicare regulations and policies only allow providers to bill for mental health services rendered by individuals holding specific professional qualifications. Delaware Medicaid regulations and policies similarly condition whether mental health services can be reimbursed, and at which fee rate, on the professional qualification of the rendering provider.

The United States alleges that from at least January 2015 through October 2019, Connections submitted over 4,000 claims to Medicare in which it falsely certified that an individual holding an eligible qualification provided mental health services to Medicare beneficiaries when, in reality, a different Connections staff member who did not hold an eligible qualification provided the mental health service. With respect to Medicaid, the United States alleges that Connections submitted over 250,000 false claims that resulted in either full or partial overpayments due to Connections falsely certifying to the licensure or education level of the rendering provider. As a result of the false claims Connections submitted to Medicare and Medicaid, the United States alleges that Connections was paid more than $4,500,000 for mental health services for which it was not entitled to reimbursement.

“Federal healthcare regulations and policies that govern mental health services exist to ensure that Medicare and Medicaid beneficiaries are treated by qualified professionals,” said U.S. Attorney Weiss. “We expect all providers to submit claims that are true, accurate, and complete, and entrust that they will do so. Connections violated that trust, and in the process, defrauded Medicare and Medicaid out of more than $4.5 million dollars. My office is committed to pursuing all providers who submit false claims to federal healthcare programs to obtain money to which they are not entitled.”

The original complaint was filed in 2019 under the qui tam or whistleblower provisions of the False Claims Act, which allow private parties to file suit on behalf of the United States for false claims and receive a share of any recovery. The act permits the United States to intervene in whole or in part in such actions, as the government has done here. Those who violate the Act are subject to treble damages and applicable penalties.

The matter is being investigated by the U.S. Department of Health and Human Services Office of Inspector General and the Delaware Medicaid Fraud Control Unit. The investigation and litigation are being handled by Assistant U.S. Attorneys Laura D. Hatcher and Jesse S. Wenger.

The claims asserted by the United States are allegations only and there has been no determination of liability.

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DENVER – United States Attorney Jason R. Dunn announced that Joseph Prince, age 61, of Aurora, Colorado was sentenced yesterday to serve 192 months (16 years) in federal prison for health care fraud, conspiracy, payment of illegal kickbacks and gratuities, money laundering, and conflict of interest charges. Prince was also ordered to serve 3 years of supervised release and pay $18,777,134.68 in restitution to the Veteran’s Health Administration. Prince, who appeared at the sentencing hearing free on bond, was remanded at the hearing’s conclusion.

According to the indictment and evidence presented at trial, Prince was one of two Case Management Liaisons for the VA’s Spina Bifida (SB) Health Care Benefits Program. The program covers the medial needs of children of certain Veterans of the Korea and Vietnam wars with SB. Acting as a subject matter expert working in a Denver call center, Prince spoke with health care providers and SB beneficiaries or their families regarding their health care needs and reimbursement for care under the program.

As the architect of an elaborate conspiracy based on a fictional VA home health program the defendant invented, Prince recruited friends and family members to open “home health agencies” knowing they lacked the necessary medical licenses or credentials to bill the VA for SB beneficiaries’ home health services.   The defendant directed every aspect of the home health agencies; no changes were made to business operations without his knowledge, review, and approval.

Further, with direct access to the SB beneficiaries and their family members, Prince identified himself to them as the one in charge of the fictional program. He represented that he had the authority on behalf of the VA to approve family members as home health care providers for the SB beneficiaries, even though the caregivers had no specific training certifications. He told these family members to sign up as contractors with “Vetted” home health agencies, which were those companies owned by his friends and family. The defendant then directed the completion and submission to the VA of fraudulent and inflated claims for home health services by unapproved providers through unlicensed home health companies.

A written plan of care from a medical professional was required for a beneficiary to receive home health benefits under the SB program. In furtherance of his scheme to defraud, Prince would often pre-populate the number of hours the beneficiary was eligible for home health care on a physician’s written plan before submitting the plan for the physician’s signature.   Then when speaking to the beneficiaries, Prince would instruct them to submit logs reflecting the maximum hours of plan service even when beneficiaries said they did not or could not provide that many hours of service, often presenting false information to the beneficiaries about what they were permitted to bill for under the program.

The defendant instructed the home health companies regarding how much to charge the VA for the fraudulent claims, directing them to keep approximately 80% of the paid amount for the company and send just 20% to the caregiver family member. When beneficiaries questioned the disparity between the caregiver’s pay and the agency’s pay on statements of benefits, Prince lied about agency expenses incurred to operate the home health entities.

Between June, 2017 and June, 2018, Prince referred approximately 45 SB beneficiaries to the sham home health entities. During that time, the home health entities submitted fraudulent claims totaling over $20 million to the VA, and approximately $18 million of that was paid out to five home health entities from the SB Health Care Benefits Program. Prince benefited from the scheme through payments to one of the companies owned by his wife, and from kickbacks paid to him by two of the agencies. As part of his agreement with these two, Prince received kickbacks of 50% of the VA payments for each beneficiary after expenses. Prince received approximately $1.5 million in kickbacks from two of the home health entities between December, 2017 and June, 2018.

As a federal government employee, Prince unlawfully used his public office to benefit himself and receive illegal kickbacks and gratuities.

“The defendant stole from taxpayers and from a program designed to help those who served our nation,” said U.S. Attorney Jason R. Dunn. “The defendant will be spending a substantial amount of time in prison because of his fraudulent behavior.”

“Our nation’s Veterans deserve the best healthcare and services available provided by honest public servants,” said Gregg Hirstein, Special Agent in Charge, VA Office of Inspector General. “This sentencing underscores VA OIG’s commitment to protecting American taxpayers from corrupt federal employees using their position for financial gain.”

“Mr. Prince exploited his inside knowledge of the VA’s Spina Bifida Health Care Benefits Program for personal gain, victimizing a program designed for a group in need of extra assistance,” said IRS-CI Special Agent in Charge Andy Tsui. “As this sentence shows, IRS-Criminal Investigation will identify, investigate, and bring to justice those who attempt to defraud government programs designed to support our country’s citizens.”

“Bribery and corruption pose a fundamental threat to our governmental agencies and the public’s confidence in them,” said FBI Denver Special Agent in Charge Michael Schneider. “Joseph Prince’s actions took a significant toll on our community’s trust in the Office of Veteran’s Affairs and its pocketbooks, siphoning away money that could be used for resources beneficial to those who need it most, our Veterans who served our country. The sentence today reflects the tremendous effort in this joint investigation by the FBI, IRS and VA-OIG with prosecution by the Colorado United States Attorney’s Office as we sought justice for our selfless Veterans and to hold accountable those who selfishly abuse their authority.”

Co-conspirator and long-time friend Roland Vaughn pled guilty to paying an illegal gratuity to a public official on August 1, 2019, and is scheduled to be sentenced by Judge Moore on June 25, 2020. Additional friends Glenn Beach and Catherine Beach each pleaded guilty to paying an illegal gratuity to Prince and are scheduled to be sentenced on June 22, 2020.

Prince was indicted by a federal grand jury in Denver on June 21, 2018, and was found guilty by a trial jury on March 12, 2020. He was sentenced by U.S. District Court Judge Raymond P. Moore.

This case was investigated by VA’s Office of the Inspector General, IRS-Criminal Investigation, and the FBI.

This case was prosecuted by Assistant U.S. Attorneys Anna K. Edgar and Hetal J. Doshi.

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PITTSBURGH – A resident of Pittsburgh, Pennsylvania, has been indicted by a federal grand jury in Pittsburgh on charges of violating federal narcotics laws, United States Attorney Scott W. Brady announced today.

The Indictment, returned on August 19, 2020, named Ann Makepeace, age 30, of 519 South Braddock Avenue, Pittsburgh, PA 15221, as the sole defendant.

According to the Indictment, from on or about February 24, 2020, continuing through on or about March 20, 2020, Makepeace used her position as a registered nurse at the VA Hospital to obtain vials of Dilaudid, a Schedule II controlled substance.

The law provides for a maximum total sentence of not more than four years in prison, a fine not to exceed $250,000 or both. Under the Federal Sentencing Guidelines, the actual sentence imposed would be based upon the seriousness of the offenses and the prior criminal history of the defendant.

Assistant United States Attorney Timothy M. Lanni is prosecuting this case on behalf of the government.

The Veterans Affairs – Office of Inspector General and the Veterans Affairs Police conducted the investigation leading to the Indictment in this case.

An indictment is an accusation. A defendant is presumed innocent unless and until proven guilty.

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A U.S. Army Veteran lied about having a disorder and exaggerated his symptoms to scam the Department of Veterans Affairs out of disability benefits, according to federal authorities.

Now Bruce Hay, of Greeley, Kansas, has been sentenced to 37 months in federal prison, according to a Dec. 13 news release from the U.S. Attorney’s Office for the District of Kansas. The 54-year-old man is also ordered to pay over $537,000 in restitution.

Hay was convicted by a federal grand jury in August of six counts of wire fraud and 10 counts of theft of government funds, authorities said.

His defense attorney did not immediately respond to a request for comment from McClatchy News on Dec. 14.

In court documents, prosecutors said Hay pretended to have “conversion disorder with major depressive disorder, generalized choreiform movement disorder, weakness in left lower leg associated with conversion disorder (and) weakness in right lower leg associated with conversion disorder.”

He then claimed he was entitled for monthly benefits compensation, authorities said.

“Conversion disorder is a condition where a mental health issue disrupts how your brain works,” according to the Cleveland Clinic. “This causes real, physical symptoms that a person can’t control.”

Symptoms can include seizures, paralysis and weakness, experts said.

“It’s important to know that conversion disorder is a real mental health condition. It’s not faking or attention-seeking,” according to the Cleveland Clinic. “It isn’t just something in a person’s head or that they’ve imagined. While it’s a mental health condition, the physical symptoms are still real. A person with conversion disorder can’t control the symptoms just by trying or thinking about it.”

But in Hay’s case, authorities said he had a “purported conversion disorder diagnosis” and exaggerated his symptoms.

“Misrepresenting symptoms to the VA to fraudulently obtain benefits takes resources from deserving Veterans and will not be tolerated,” Special Agent in Charge Gregory Billingsley with the Department of Veterans Affairs Office of Inspector General’s Central Field Office said in the release. “The VA OIG will continue to vigorously investigate those who would steal from VA benefits programs and taxpayers.”

Greeley is about 65 miles southwest of Kansas City.

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Between January and June 2020, defendant allegedly stole and sold ventilators, bronchoscopes, and other respiratory support equipment

Seattle - A 41- year-old Bonney Lake, Washington, man was charged today in U.S. District Court in Seattle with theft of government property for his scheme to profit by stealing and selling respiratory support equipment from the Veterans Affairs Medical Center (VAMC), announced U.S. Attorney Brian T. Moran. GENE WAMSLEY was employed as a Respiratory Therapist at VAMC until he was placed on leave from VAMC on June 9, 2020. WAMSLEY made his initial appearance on the criminal complaint today in Seattle.

“Right now respiratory support equipment is critical in medical care for those suffering with COVID-19 infections. To steal and sell equipment needed to care for our Veterans is a shocking betrayal,” said U.S. Attorney Brian T. Moran.

According to the criminal complaint, the investigation began in January 2020 when VAMC reported two bronchoscopes missing from the hospital. A third bronchoscope was reported missing in April 2020. Staff at the VAMC had noticed bronchoscopes listed for sale on eBay from a seller in Bonney Lake, Washington. The investigation linked the sale of three bronchoscopes to WAMSLEY. A further review of eBay records revealed WAMSLEY had sold five ventilators in March and April 2020. Three ventilators were found to be missing from VMAC during the same time period. EBay records reveal a variety of other respiratory support equipment sold by the account linked to WAMSLEY. Administrators at VAMC confirmed the items were used in the respiratory therapy department.

Law enforcement executed a court authorized search warrant at WAMSLEY’s home on June 9, 2020. Medical supplies and eBay sales records were seized in the search.

The charges contained in the criminal complaint are only allegations. A person is presumed innocent unless and until he or she is proven guilty beyond a reasonable doubt in a court of law.

Theft of government property is punishable by up to ten years in prison.

The case is being investigated by the Veterans Affairs Office of Inspector General (VA-OIG). The case is being prosecuted by Assistant United States Attorney Cecelia Gregson.

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People lost hundreds of millions of dollars. But something is happening that might finally stop it.

It was as if the website read Dan Meehan's mind.

“You deserve to not wait for your money any longer.”

Meehan, a 51-year-old Navy Reserve Veteran, needed cash in the spring of 2015, and he needed it right away. He had a check coming — he received $2,906.83 in military disability benefits the first of every month. Maybe he could leverage that to cover the next few rent payments.

Just $5,000 would do, he thought.

Meehan was a psychiatric patient in a Boston Veterans hospital when he sat down at a computer, typed "Veteran disability loans" into a search bar and found a Future Income Payments' website.

What he did later — dialing the number listed on the website — he said is the “biggest blunder in my life.”

Meehan fell into a carefully conceived trap that lured vulnerable Veterans desperate to keep their homes or pay off mounting medical bills or send a child to college. All they had to do was redirect part of their monthly benefits for a cash advance from investors.

It was too good to be true.

This business of buying and selling military benefits spread to at least 33 states before unraveling.

In the last two years, investigators cracked down on the companies. More judges ruled that their transactions violate states and federal laws.

The fallout created two sets of victims: Veterans and the people who provided them money.

Veterans, like Meehan, fell deeper into debt. Investors saw their nest eggs vanish as the Veterans stopped paying and the companies collapsed. They are factory workers, a school librarian and a former Clemson University professor.

Everyone lost more than money. Faith and trust and hope, too.

The architects of these arrangements were the only ones who truly profited. Their bank accounts swelled, sometimes into seven figures. Their riches came from high commissions, sometimes up to 50%, hidden fees and exorbitant interest rates as high as 240%.

Future Income Payments, the company Meehan contacted, ballooned into what's been described as a billion-dollar enterprise. Investors lost $451 million when that business burst last year, according to records obtained by the FBI.

Its founder, Scott Kohn, bought pricey artwork, high-end cars and a $1.7 million mansion in Las Vegas. He also lived in a $4.8 million California home with panoramic views of the Pacific Ocean.

In March, Kohn, 65, was indicted in Greenville, South Carolina, on a federal charge of conspiracy to commit wire fraud and mail fraud in connection with the buying and selling of military benefits. The charge carries a maximum 20-year prison sentence. Jury selection is set for February.

Kohn was caught by U.S. marshals on a beach in San Diego on Sept. 21 as he tried to outrun law enforcement one last time.

Three of his associates are charged with the same offense. One of them, California businessman Kraig Aiken, has reached a plea deal with prosecutors.

Greenville has emerged as the national epicenter for legal battles over the sales of military benefits, an investigation by The Greenville News has found. In the last year, our journalists have traveled across the country and interviewed dozens of Veterans, investors and legal experts. They also reviewed thousands of court documents.

The criminal case against Kohn and his associates is unprecedented. The filing of charges might mark a new era that could protect Veterans and investors from a racket that's been remarkably hard to stamp out.

"Criminal prosecution, which I believe is deserved under these circumstances, may be the deterrent we need," said Stuart Rossman, director of litigation for the National Consumer Law Center.

How Veterans' cash advances left them deeper in debt and broke federal laws

Meehan was in a treatment program for trauma and addiction when he signed his contract.

He didn't tell his counselor at the Veterans Affairs center what he was doing. He couldn't leave the treatment program without permission, so he found a police officer in the hallways who moonlighted as a notary, and the officer stamped the paperwork.

For the $5,000 that Meehan received, he agreed to divert a portion of his disability benefits for five years. With a 100% annual interest rate, he wound up owing more than three times his original payout — $18,780.

Gulf War Veteran Stephen Schmelz had an interest rate twice as high. The disabled Army Veteran needed money for spinal surgery bills, according to a 2017 lawsuit filed by the Minnesota state attorney general. The $2,700 cash advance Schmelz took left him with a $27,000 debt.

The terms of the deal that Army Veteran Michael Haring received caused him to file bankruptcy three years later. Haring, who served in Iraq, got a cash advance in 2013 because of a costly divorce.

“I had the lump sum that solved my immediate crisis needs," he said, "however, what it did is it reduced my income every month, which in the medium and long term was bound to create additional hardships.”

Simply put, the scams worked like this: Companies provided struggling Veterans with cash advances from investors ranging from less than $5,000 to nearly $98,000. Veterans agreed to pay back the money over a period of four to 10 years, using the monthly income from their military disability benefits or pensions.

I had the lump sum that solved my immediate crisis needs; however, what it did is it reduced my income every month, which in the medium and long term was bound to create additional hardships.

What Veterans like Meehan didn't know is that these transactions were illegal, according to at least seven court rulings since 2011 in Arkansas, California, Oregon, Minnesota, South Carolina and Virginia.

The companies argued that they provided unregulated purchase agreements.

But judges ruled that these contracts were null and void. In some cases, judges said they violated state and federal lending laws. In others, the courts cited violations of federal anti-assignment laws.

There are no criminal sanctions such as prison sentences or fines for breaking anti-assignment laws, which date to the Civil War. The criminal cases against Kohn and his associates are based on allegations that they used interstate commerce and the U.S. Postal Service to commit financial fraud.

Veterans 'are people who we should be honoring, not exploiting'

A Government Accountability Office report issued in October said the U.S. Department of Veterans Affairs should do more to prevent the financial exploitation of Veterans.

One recommendation in the report: "Centrally collect and analyze information, such as complaints against companies, that could show the prevalence of these scams, help VA target outreach to Veterans, and help law enforcement go after scammers."

Susan Carter, director of the VA's office of media relations, said the agency is responding to the report's recommendations.

"What Veterans do with their disability benefits they receive from VA is typically outside of VA’s control, but the department works to educate VA benefits recipients about their risk to fraud," she wrote in an email.

Congress has also failed to act, Rossman said. Reform legislation was proposed at least three times since 2013 but has not passed.

The Boston-based lawyer first heard about Veterans selling their benefits as U.S. troops headed to Afghanistan and Iraq after the terrorist attacks of Sept. 11, 2001.

Veterans are particularly susceptible because their guaranteed income streams are akin to "waving a piece of bacon in front of a dog," he said. "It attracts scammers."

Rossman, whose father and father-in-law fought in World War II, said people who prey on Veterans represent the "depths of depravity."

"These are people who we should be honoring, not exploiting," he said.

Kohn directed his employees to use late-night advertising and the internet to reach people “who were in financial disarray and desperate,” a former executive said in an interview with an FBI agent.

Meehan fit the bill. He said he has suffered trauma. He abused alcohol and drugs for decades.

The money he received by selling his benefits only worsened his problems. He paid his rent first as he planned — but the leftover dollars fueled a relapse.

Global conspiracy, nationwide scheme head to courts in SC

The alleged conspiracy involving Kohn and his associates was a global one. He had employees in the Philippines. His company also had offices in Nevada and Michigan.

Charges were filed in a Greenville courthouse partly because of the number of victims in the area, according to the U.S. Attorney's Office.

Ninety-six South Carolinians lost money in Kohn's scheme, the state attorney general's securities division said.

Greenville also is home to the civil suit that the federal Consumer Financial Protection Bureau filed against Kohn. Bureau lawyers are seeking $501 million in restitution and penalties. Kohn has not responded to this 2018 suit.

Besides the Kohn cases, attorneys in Greenville have battled over civil suits involving a smaller nationwide benefit-buying scheme. The central players in that enterprise were Arkansas businessman Andrew Gamber and Candy Kern-Fuller, an attorney from Easley, South Carolina, about 15 miles from Greenville.

Between 2016 and 2018, Kern-Fuller sued at least 34 Veterans from Maryland to California who stopped paying back their cash advances. One of them, a Marine in Massachusetts, said he was unaware of the suit against him that resulted in a $78,000 judgment until he was told by The News this summer.

Kern-Fuller filed all of the suits at the Greenville County Courthouse, just blocks from the federal courthouse where Kohn's case will be heard.

In September, a judge approved a settlement in three federal civil suits that were filed by nine Veterans against Kern-Fuller, Gamber and others. One of the Veterans was a woman who served in Iraq and saw several of her friends burn to death in a tank. Another was an Army medic who completed 700 combat missions in Afghanistan before a roadside bomb left him totally disabled.

Kern-Fuller and others agreed to stop buying and selling military benefits as part of the settlement. But they still dispute that it violates federal law.

There is little hope the Veterans will recover all of their money.

The 'lavish lifestyle' of Scott Kohn

Kohn was in the business of making businesses. Since 1988, the Michigan native created at least 47. There was Jewels by Kimberly. GoldyRocks. Krishna International Products. SK Judgment Recovery Services.

He founded most in either Nevada or California. Almost all are now defunct.

In 2006, Kohn pleaded guilty in California to three felonies for selling counterfeit computer equipment. He was sentenced to 15 months in federal prison.

A few years later, he began building his benefit-buying empire. Future Income Payments was his flagship enterprise, but he had at least 20 other related businesses, including Pension Advance Carolinas and Pension Carolinas.

"We wake up in the morning and fix a cup of coffee," said Robert Rikard, a Columbia, South Carolina, attorney for a hundred investors who say they are among Kohn's victims. "He would wake up in the morning and start a company."

Kohn stayed out of the spotlight. He can't be found on Facebook. Or Twitter. He didn't make headlines — until he got arrested.

Kohn's favorite restaurant is IHOP, federal investigators said.

That's not to say he lived like the common man.

His house in Las Vegas, bought in 2016, had two putting greens in the back yard. He later lived in a gated enclave in California. Kohn's then-wife received $5,000 per pay period from Future Income Payments even though she did not work for the company, one of Kohn's associates told an FBI agent.

The indictment issued by a federal grand jury in Greenville spelled it out: Kohn lived "a lavish lifestyle."

His fortunes soured as state and federal regulators closed in on Future Income Payments. In the final days, the company devolved into a Ponzi scheme, according to Kohn's March 2019 indictment. It tried to stay afloat by funneling money from new investors to pay back previous investors.

During his six months as a fugitive, Kohn holed up in a San Diego apartment, Assistant U.S. Attorney Bill Watkins said.

Today, he is being held without bail. Kohn's considered a flight risk.

He does not have an attorney listed in federal court documents.

Black Harbor company is one of hundreds that found investors

On a Monday morning in September, six people sat among 40 chairs in a room at Furman University's Younts Conference Center in Greenville.

Matthew Dixon stood in front. He led a 90-minute seminar called "Social Security Facts 101 — A Workshop to Maximize Benefits."

He promised an individually tailored "complimentary Social Security report" from Black Harbor Wealth Management, where he is a partner. He promoted Black Harbor's weekend radio show, "Max Money Hour."

“I don’t do a little dog-and-pony show and try to backdoor you and make you pay for this thing,” Dixon said. “I’ve heard so many bad experiences that people have had with financial advisers... This is not going to be one of those.”

He didn’t mention that about 60 of Black Harbor’s clients have had bad experiences with the firm, according to lawsuits filed in South Carolina in 2018 and 2019.

The lawsuits seek to recover money for clients who suffered “devastating” losses. Black Harbor denies many of the claims in the suits, court records show.

The firm has offices in Greenville and in Seneca, about 40 miles away. It opened a location in Asheville, North Carolina, this summer.

Black Harbor was one of the firms Kohn relied on to find investors willing to provide cash advances to Veterans. According to documents obtained by the FBI, 300 sales agents across the country received commissions from Future Income Payments. Some of the agents were paid more than $1 million a year in commissions.

For about two years, Black Harbor peddled a financial plan that included life insurance policies with a death benefit and a source of retirement income. Clients also were encouraged to buy a second investment to fund the annual life insurance premiums.

Many of these clients said they didn't know the second investment was a cash advance to Veterans through Future Income Payments, according to allegations in lawsuits.

The investors could not afford the life insurance premiums after the company failed and stopped collecting from Veterans. When they defaulted on the premiums, investors lost most or all of their money.

“We believed, at first, it was a credible thing,” Matthew Dixon said in an interview at the Younts center. “We are doing the best we can right now to get these people their money back.”

School librarian is one of thousands who lost $451 million

Mary Orem said she handed Chris Dixon, founder of Black Harbor, a check for $50,507.59 in his Seneca office in December 2016. It represented savings from 25 years of work as a high school librarian.

Orem trusted Dixon, who is Matthew Dixon's father. He greeted her in his office waiting room with a hug, cookies and coffee. He knew people she knew.

"He was a personable guy, and he made you feel like he was here for you," she said.

Orem had started a new job at Tri-County Technical College in 2015.. The 58-year-old from Pendleton, South Carolina, was still years away from retirement.

Dixon promised he could grow her nest egg by 6% to 8% annually. Orem figured that would prevent her from spending her final years in a shoddy nursing home.

Now, she is unsure when she will stop working. She lost all but about $6,000, she said.

That's why she is suing Black Harbor.

"I know the world is scary and ugly out there and people are greedy and people are out for themselves; I just didn’t think I would run into anyone who would take advantage of me," Orem said.

She is among 2,600 people who lost more than $451 million in 2018 as Kohn's operation went under, according to the documents obtained by the FBI.

An Arizona-based marketing company called Shurwest introduced Chris Dixon and other insurance agents across the country to Future Income Payments from 2016 to 2018, according to allegations in lawsuits.

Dixon had no reason to believe that Shurwest would promote a venture "that would place his customers' assets at risk," said his attorney Benjamin Biard.

Shurwest "had a stellar reputation," he said. Even Dixon's wife invested — and lost — money.

An attorney for Shurwest, Jason Lewis, denied the company had a relationship with Future Income Payments. He said Shurwest fired an employee who secretly worked with Kohn's company.

“It is unfortunate that Mr. Dixon, a financial advisor and fiduciary, recommended a fraudulent investment product to his clients so he could make an extra commission," Lewis said in an email. "It is also unfortunate that Mr. Dixon now chooses to make false accusations instead of taking responsibility for his own poor decisions."

Rikard, the attorney representing Black Harbor's clients, said the insurance agents and financial advisers working with Future Income Payments didn't do their homework. He is also suing Shurwest.

"It's unbelievable that these people in the middle, who are fairly sophisticated and fairly smart people, did not do 10 minutes of due diligence on the product they were selling — and they would have known that this was a horrible idea," Rikard said.

Biard said Dixon and other agents have provided federal authorities in South Carolina with documents about Kohn's company.

"Mr. Dixon, like hundreds of agents across the country, remains committed to helping his customers get their monies back and bringing any wrongdoers to justice," Biard said.

'Make it Southern': Kohn's associates come to court inGreenville

FBI special agent J. Douglas Mathews launched an investigation in May 2018, according to a forfeiture action filed in February. Federal authorities want to seize a lakefront home in Arkansas purchased by Joseph Hipp, one of Kohn's indicted associates.

The first person Mathews interviewed was Jeff Pickett, a financial adviser in Dublin, Ohio, at the time. Pickett said 46 of his clients lost $8 million they invested in Future Income Payments.

In 2015, Pickett met Hipp, a financial planner from Missouri who managed investor solicitations for Future Income Payments. Hipp told Pickett he wouldn't hesitate to have his own mother invest, the forfeiture action stated.

It's unbelievable that these people in the middle, who are fairly sophisticated and fairly smart people, did not do 10 minutes of due diligence on the product they were selling — and they would have known that this was a horrible idea.

Hipp, 49, could not be reached for comment, and his attorney declined to comment. In court filings, he said he wants a judge to throw out Hipp's interview with two FBI agents last year.

The other two defendants connected to Kohn are Kraig Aiken and David Kenneally, former Future Income Payments financial officers.

Aiken and Kenneally traveled from California to the federal courthouse in Greenville on Aug. 8 for their arraignments.

They wore pullover shirts and khaki pants. Their lawyers wore suits, jackets and ties.

Greenville attorney AnneMarie Haynsworth Odom advised her client, Kenneally, to answer questions from Magistrate Judge Jacquelyn Austin with a "yes ma'am" or "no ma'am."

"Make it Southern," said George Workman Buehler, Kenneally's other attorney.

Kenneally responded as instructed during the hearing, and he and Aiken were released on personal-recognizance bonds.

Assistant U.S. Attorney Bill Watkins told the judge both men had “cooperated fully” by giving statements to the FBI and turning over evidence.

In separate interviews with FBI Agent Mathews last year, Aiken and Kenneally said investors were falsely told that Future Income Payments could cover losses from Veterans who didn’t pay back their cash advances. Even as losses mounted, Kohn brushed off their concerns.

Kenneally, who made $250,000 annually, told Mathews he helped hide the fraud because he needed his job. Aiken, who earned $175,000, offered a similar explanation.

A message to Kenneally was not returned, and his attorney declined to comment.

Aiken declined to comment to The News. He agreed in late October to plead guilty to conspiracy to commit mail fraud, court records show.

Authorities are trying to recover money for victims

Future Income Payments is in debt today.

It owes money to people like a retired Army medic from Minnesota. He's identified as "J.F." in a 2017 lawsuit filed by the Minnesota state attorney general.

J.F. took a cash advance for a down payment for a car, the lawsuit states. Nothing flashy, just something reliable so he could get to his volunteer shifts at an organization that helps Veterans.

Money was tight, and life was hard. He suffered a traumatic brain injury in the service.

In July 2018, a judge ordered Future Income Payments to refund $491,000 to him and more than 120 victims in Minnesota.

More than a year later, the company hasn't paid.

Since 2015, at least 13 other states have ordered Kohn's company to pay $68.4 million in refunds and other fees. Federal authorities are also trying to recover more than $400 million for other victims.

It's not clear how much money Kohn and his associates have.

A federal judge has instructed Greenville attorney Beattie Ashmore to track down what remains. Ashmore said about $5 million in assets have been identified so far.

“Unfortunately, in a case like this, the bad guys... were on notice that the gig was up, and they had a head start in terms of hiding and liquidating assets of probably a year or so," Ashmore said.

Between 2013 and 2018, more than $358 million was deposited in five accounts controlled by Kohn and his associates, according to FBI records.

Virtually all of that money has been drained.

Bilked Veteran seeks another chance and a better future

Dan Meehan now lives with his mother in her townhouse outside Boston. A trained carpenter, he does projects around their home instead of paying rent. He built her an office this summer. A kitchen renovation is next.

That's not the dream, though. He's a paralegal who wants to be a lawyer.

Meehan approached Harvard Law School's Veterans Legal Clinic in 2016. After he stopped repaying his cash advance, he sought justice.

"I started to clear up, and I looked back on the terms (of the contract), and I'm like, 'What the heck is this?' I just gave away $15,000 of my money for so long,'" Meehan said. "This can't be right."

An attorney at the legal clinic filed a lawsuit against Future Income Payments on his behalf. Meehan dropped the case after the Massachusetts attorney general banned the company.

Meehan decided it wasn't worth it, even though he wanted to be in the courtroom sitting next to lawyers he admires.

These days, he's sober, he said. He volunteers. He places flags on Veterans’ graves. He helps other Veterans file disability claims.

Meehan finds peace at the Fourth Cliff Family Recreation Area. It's a narrow, rocky beach near an ocean inlet 20 miles east of his mother's house. Veterans, active military and their guests have exclusive access to the seaside resort.

Meehan likes to fish there, but he hasn't caught a lot. That's not the point anyway, he said.

"It's about making myself get out into nature," he said. "It makes me realize how small we really are, how blessed you should be."

Meehan was there on an overcast Saturday afternoon in August. It was windy, and the eyelet at the end of his fishing rod was broken, but that didn't stop him.

He cast his line once, twice, a dozen times. Each attempt was another chance.

It could work, he thought.

Maybe next time.

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ALEXANDRIA, Va. – A Virginia doctor pleaded guilty today to his role in a $1.8 million health care fraud scheme to prescribe medically unnecessary compounded pain and scar creams and other expensive medications.

“Through his deceit and greed, Rosen exploited the trust placed in him as a medical professional to engage in an extensive scheme that defrauded health insurance programs out of $1.8 million,” said Raj Parekh, Acting U.S. Attorney for the Eastern District of Virginia. “Instead of prescribing medications in an honest and lawful manner to help those in need, the defendant sold out his medical license and training, and will now become a convicted felon.”

According to court documents, Leonard Rosen, 72, of Fairfax Station, was an obstetrician-gynecologist (OB-GYN) who practiced in Northern Virginia since 1980. Rosen was also the owner of an OB-GYN medical practice. In 2014, Rosen met Mohamed Abdalla, 48, of Allendale, New Jersey, who was a licensed pharmacist and owned and operated several pharmacies. Shortly thereafter, Rosen entered into an agreement with Abdalla to prescribe expensive compounded pain and scar creams, which Rosen then ensured were sent to Abdalla’s pharmacies. In return, Abdalla agreed to pay Rosen a percentage of the profits. Prior to this scheme, Rosen had not prescribed expensive compounded medications. However, during the scheme, Rosen prescribed countless medically unnecessary compounded medications. In total, Rosen’s illegal actions resulted in $1,880,575.70 in losses to private health care benefit programs.

“Leonard Rosen exploited health care programs and his patients for personal gain by participating in a scheme to prescribe medically unnecessary prescriptions in return for money, and those criminal actions have consequences,” said Wayne A. Jacobs, Special Agent in Charge of the FBI Washington Field Office Criminal Division. “Today’s plea is an example of the dedicated work of the FBI and our partners to root out fraud, ensure the safety of our communities, and hold criminals accountable for their actions.”

For his role in this and other schemes, Abdalla was sentenced on March 19 to four years in prison. Rosen is scheduled to be sentenced on December 10. He faces a maximum penalty of 10 years in prison. Actual sentences for federal crimes are typically less than the maximum penalties. A federal district court judge will determine any sentence after taking into account the U.S. Sentencing Guidelines and other statutory factors.

Raj Parekh, Acting U.S. Attorney for the Eastern District of Virginia; Wayne A. Jacobs, Special Agent in Charge of the FBI Washington Field Office Criminal Division; Chris Dillard, Special Agent in Charge for the Defense Criminal Investigative Service’s (DCIS) Mid-Atlantic Field Office; and Maureen R. Dixon, Special Agent in Charge of the Office of Inspector General for the U.S. Department of Health and Human Services (HHS), made the announcement after Senior U.S. District Judge Claude M. Hilton accepted the plea.

Assistant U.S. Attorneys Monika Moore and Carina A. Cuellar are prosecuting the case.

A copy of this press release is located on the website of the U.S. Attorney’s Office for the Eastern District of Virginia. Related court documents and information are located on the website of the District Court for the Eastern District of Virginia or on PACER by searching for Case No. 1:21-cr-205.

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LOS ANGELES – A West Los Angeles pharmacist was sentenced today to 30 months in federal prison for orchestrating a scheme that fraudulently obtained millions of dollars for compounded drugs in a scheme that paid illegal kickbacks for patient referrals and fraudulently paid patients’ copayments.

Navid Vahedi, 42, of Brentwood, was sentenced by United States District Judge Christina A. Snyder. Vahedi and his West Los Angeles-based company, Fusion Rx Compounding Pharmacy, pleaded guilty in February 2021 to one count of conspiracy to commit health care fraud and payment of illegal remunerations.

On January 18, Judge Snyder sentenced Fusion Rx Compounding Pharmacy to five years of probation. She has ordered Vahedi and his company to jointly pay $4,400,525 in restitution.

Fusion Rx was a provider of compounded drugs, which are tailor-made products doctors may prescribe when FDA-approved alternatives do not meet the health needs of patients. Vahedi, a licensed pharmacist, and Fusion Rx routed millions of dollars in kickback payments through the businesses of two marketers to steer prescriptions for compounded drugs to Fusion Rx.

As part of the scheme, Vahedi and the two marketers provided physicians with preprinted prescription script pads that offered “check-the-box” options on the form to maximize the amount of insurance reimbursement for the compounded drugs. From May 2014 to at least February 2016, Fusion Rx received approximately $14 million in reimbursements on its claims for compounded drug prescriptions.

As part of its contracts with various insurance networks, Fusion Rx was obligated to collect copayments from patients. Because the copayments might discourage patients from requesting expensive and potentially unnecessary compounded drug prescriptions, Fusion Rx did not collect copayments with any regularity and, in other instances, it provided gift cards to patients to offset the amount of the copayments, according to court documents.

After an audit raised concerns that Fusion Rx’s failure to collect copayments would be discovered, Vahedi directed Fusion Rx funds to be used to purchase American Express gift cards, which were then used to make copayments for certain prescriptions without the patients’ knowledge. Fusion Rx then submitted claims on these prescriptions to various insurance providers, falsely representing that patients had paid the required copayments.

“As a pharmacist offering compounded medications, [Vahedi] had a real opportunity to use his skills to help patients in need, individuals whose unique health challenges made it impossible for them to depend on the FDA-approved medications others rely on,” prosecutors wrote in a sentencing memorandum. “Instead, defendant converted his pharmacy into an assembly line for his own enrichment.”

The two marketers involved in the scheme – Joshua Pearson, 42, of St. George, Utah, and Joseph Kieffer, 41, of West Los Angeles – previously pleaded guilty in this case. Judge Snyder sentenced Kieffer to six months in federal prison and ordered him to pay $1.25 million in restitution. Pearson was sentenced to three years of probation.

The Defense Criminal Investigative Service, the FBI, the Amtrak Office of Inspector General, the Office of Personnel Management’s Office of Inspector General, and the Office of Inspector General for the United States Department of Health and Human Services investigated this matter.

Assistant United States Attorneys Alexander B. Schwab of the Major Frauds Section and Jonathan S. Galatzan of the Asset Forfeiture Section prosecuted this case.

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CLARKSBURG WEST VIRGINIA – U.S. Attorney Bill Powell has announced that Grant Memorial Hospital in Petersburg, West Virginia, has agreed to pay $320,175.71 for false medical claims.

According the settlement, Grant Memorial Hospital filed false claims to Medicare, Medicaid, TRICARE, VA, and Railroad Retirement Programs from September 2014 to March 2016. The claims were for outpatient and inpatient services and items using the National Provider Identifier number and name of a credentialed physician, when, in fact, the services and items were actually provided by a non-credentialed physician.

“This case was the result of the hospital recognizing the mistake and bringing it to the attention of the federal government. I commend the hospital management for ensuring that this wrong was righted. All medical providers should take note, and when a mistake in billing is made, report the issue immediately,” said Powell.

The hospital disclosed the claims in February 2019, pursuant to the Office of Inspector General of the Department of Health and Human Services self-disclosure protocol.

Assistant U.S. Attorney Christopher J. Prezioso litigated the case on behalf of the government. Agencies involved in the investigation and settlement are the Office of Inspector General of the Department of Health and Human Services, the West Virginia Attorney General’s Office, the State of West Virginia Medicaid Fraud Control Unit, the West Virginia Bureau for Medical Services, the Defense Health Agency for TRICARE, and the U.S. Department of Veterans Affairs.

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A Rhode Island woman was charged in federal court Monday with fraudulently claiming to be a U.S. Marine Corps Veteran with lung cancer in a scheme to collect hundreds of thousands of dollars in Veterans benefits and charitable contributions.

Rhode Island U.S. Attorney Zachary Cunha said Sarah Jane Cavanaugh, 31, of Warwick, is charged with using forged or counterfeited military discharge certificates, wire fraud, fraudulently holding herself out to be a medal recipient with intent to obtain money, property, or other tangible benefit, and aggravated identity theft.

There is no record of Cavanaugh ever serving in the U.S. military, Cunha said.

Cavanaugh appeared in U.S. District Court in Providence and was released on a $50,000 unsecured bond. Her attorney did not immediately respond to an email request for comment and the firm, Marin and Barrett, Inc., told a reporter who called that they were busy Monday dealing with current client issues that need undivided attention.

Cavanaugh worked at the Veterans Affairs Medical Center in Providence. She's accused of accessing the records for a Marine who utilizes VA services and using them to falsify military discharge documents, and also using her work email to purchase and later display on a Marine uniform a Purple Heart and Bronze Star, according to court documents.

Cavanaugh did so to request financial assistance and falsely claim that she was being treated for lung cancer from exposure to burn pits in war zones and inhaling particulate matter from a bomb explosion, Cunha said.

Posing as a combat Veteran, Cavanaugh collected $207,000 from the Wounded Warrior program to pay for groceries and physical therapy, collected about $18,500 in financial assistance from “Code of Support” in Virginia for mortgage payments, repairs to her home furnace, a gym membership and other bills, and $4,700 from a fundraising website, Cunha said.

Claiming to be a Purple Heart and Bronze Star recipient, Cavanaugh collected $16,000 from another charity that provides therapy for Veterans through art programs, CreatiVets, according to court documents.

An investigation was launched after the Providence nonprofit HunterSeven contacted the Providence VA because they were suspicious of Cavanaugh's appeal to them. The organization helps Veterans with cancer.

Executive Director Chelsey Simoni said Monday they had issued a $3,000 check to Cavanaugh in January but canceled it once they realized she was lying about service, in part because another female Marine told them that she would've known about Cavanaugh if they served at the same time and Cavanaugh truly did earn a Purple Heart and Bronze Star for valor.

Simoni said that what upsets her most is that Cavanaugh took up time she could've used to help Veterans who do have cancer.

"I was in pain for her. I listened to her, everything a nurse should do," she said. “She not only abused that, she took my compassion and lied. Meanwhile we could have put our services elsewhere. That's what bothers me."

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Defendant allegedly prescribed combinations of benzodiazepines and stimulants

BOSTON – A Worcester psychiatrist was arrested yesterday on charges that he illegally prescribed controlled substances to patients and submitted false reimbursement claims to defraud the Medicare program.

Mohamad Och, 65, was indicted on eight counts of unlawful distribution of a controlled substance and two counts of health care fraud. Och was released on conditions following an initial appearance yesterday before U.S. Magistrate Judge David H. Hennessy in federal court in Worcester.

Och was a licensed psychiatrist who owned and operated Island Counseling Center (ICC), in Worcester, Mass., and has practiced psychiatry elsewhere in Massachusetts including Nantucket. Among other services, Och was authorized to prescribe Schedule II-IV controlled substances to patients.

According to the charging documents, Och repeatedly prescribed a combination of benzodiazepines and stimulants to patients without a legitimate medical purpose. Specifically, it is alleged that on at least numerous occasions between August 2016 and March 2017, Och knowingly issued prescriptions for Adderall (a Schedule II controlled substance) in combination with Xanax or Klonopin (both of which are Schedule IV controlled substances) to patients outside the usual course of professional practice.

It is also alleged that between approximately January 2016 and July 2017, Och engaged in a scheme to defraud Medicare by submitting or causing to be submitted false and fraudulent claims in connection with office visits in order to obtain greater reimbursements than he was entitled to receive based on the services actually provided.

The charge of illegal prescription of a Schedule II controlled substance provides for a sentence of up to 20 years in prison, three years of supervised release and a fine of $1 million. The charge of illegal prescription of a Schedule IV controlled substance provides for a sentence of up to five years in prison, three years of supervised release and a fine of $250,000. The charge of health care fraud conspiracy provides for a sentence of up to 10 years in prison, three years of supervised release and a fine of $250,000. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.

Acting United States Attorney Nathaniel R. Mendell; Brian D. Boyle, Special Agent in Charge of the Drug Enforcement Administration, New England Division; Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Division; and Phillip M. Coyne, Special Agent in Charge of U.S. Department of Health & Human Services, Office of the Inspector General, Office of Investigations, Boston Regional Office made the announcement today. Assistant U.S. Attorney John Mulcahy of Mendell’s Worcester Branch Office is prosecuting the case.

The details contained in the indictment are allegations. The defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

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Ergonomic office furniture maker Workrite Ergonomics LLC, a Delaware company, and its parent, Knape & Vogt Manufacturing Co. (collectively, Workrite), have agreed to pay $7.1 million to resolve allegations under the False Claims Act that they overcharged the federal government for office furniture under General Services Administration (GSA) contracts, the Department of Justice announced today.

“Companies that do business with the United States are expected to charge the government appropriately for their services,” said Acting Assistant Attorney General Jeffrey Bossert Clark of the Department of Justice’s Civil Division. “We will continue to protect the American taxpayers and hold accountable those who misuse federal funds.”

“Federal contractors must be honest and forthcoming,” said U.S. Attorney David L. Anderson of the Northern District of California. “Contractors that overcharge the American taxpayer will be held accountable.”

“American taxpayers deserve fair prices and accurate information from GSA contractors,” said GSA Inspector General Carol Fortine Ochoa. “I appreciate the hard work and dedication that led to this significant recovery.”

“The settlement is a positive outcome that holds Workrite accountable for its questionable business practices,” said Special Agent in Charge Bryan D. Denny, Defense Criminal Investigative Service (DCIS), Western Field Office. “This is but one example of the law enforcement and oversight communities’ on-going, joint efforts to be good stewards of American taxpayer dollars.”

This settlement relates to a contract under which Workrite provided office furniture to government entities from 2009 to 2017 through GSA’s Multiple Award Schedule (MAS) program. The MAS program provides the government with a streamlined process to procure commonly used commercial goods and services. The settlement resolves allegations that Workrite did not fulfill its contractual obligations to provide GSA with accurate information about its commercial sales practices during contract negotiations, and did not subsequently extend lower prices to government customers as required by the GSA contract’s price reduction clause.

The allegations were originally made in a lawsuit filed under the whistleblower provisions of the False Claims Act by Michael J. Franchek, of Park City, Utah, a former Workrite sales manager. The Act permits private parties to sue for false claims on behalf of the United States and to share in any recovery. Franchek will receive approximately $1.27 million from the settlement proceeds.

The settlement with Workrite was the result of a coordinated effort among the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Northern District of California, the GSA’s Office of the Inspector General, the Department of State’s Office of Inspector General, the DCIS, the Defense Contract Audit Agency, and the U.S. Department of Veterans Affairs’ Office of Inspector General.

The lawsuit is captioned United States ex rel. Franchek v. Workrite Ergonomics, LLC, No. 16-cv-02789 (N.D. Cal.). The claims resolved by the settlement are allegations only and there has been no determination of liability.

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