Zalma’s Insurance Fraud Letter

Aug 01, 2024

Zalma’s Insurance Fraud Letter Volume 28, Issue 15

Guilty of Workers’ Compensation Fraud

Inflating On-The-Job Injury is Fraud

A jury found Waliullah Nazari guilty of two counts of making false and fraudulent statements for the purpose of obtaining workers’ Compensation benefits and seven counts of attempted perjury under oath.

In The People v. Waliullah Nazari, D081940, California Court of Appeals, Fourth District, First Division (July 18, 2024) the Court of Appeals affirmed the conviction because surveillance proved Nazari had lied to his physician and insurer.

FACTUAL BACKGROUND

In January 2019, Nazari fell off a ladder at work rendering him unconscious. Hospital records indicated he suffered a broad-based disc herniation between vertebrae 4 and 5, with resulting bilateral/lateral recess stenosis, and sciatica. Nazari submitted a workers’ compensation claim to Liberty Mutual Insurance (Liberty Mutual) and received benefits between January 5 and July 19 totaling $99,656.96.

Nazari’s treating physician recommended he receive an epidural steroid injection but Nazari’s insurance company declined coverage. Nazari saw an orthopedic surgeon for a second opinion about his need for the injection. Among other things, Nazari told the orthopedic surgeon that he needed a walker to stand and could not walk without using a walker. After a physical examination, the orthopedic surgeon recommended that Nazari receive the injection and follow-up with his treating physician.

THE SUB ROSA INVESTIGATION

On April 11, a private investigator working for Liberty Mutual conducted a recorded surveillance session and saw Nazari enter his car and drive away. He saw Nazari return in the car, exit the car, and walk without using a walker and with a normal gait. Later that day, he saw Nazari walk unassisted to a car, remove a folding aluminum walker from the trunk, assemble the walker, and then carry the walker out of view. A few minutes later, he observed Nazari walking slowly with a walker for support to a medical transport van where the driver assisted him into the van. When the van returned to the residence, the investigator watched as Nazari used the walker to slowly ambulate up the driveway and out of view. Nazari was later videotaped carrying a small child in his arms, assisting the child into a vehicle, and driving away.

Liberty Mutual deposed Nazari during the time between the video surveillance sessions and saw conditions different than shown during surveillance. During his second deposition, Nazari claimed, among other things, that he was unable to carry his child and could not drive because he used a walker.

Liberty Mutual closed the investigation and as required by California statute and regulations, reported the matter to the local District Attorney’s Office and California Department of Insurance.

DISCUSSION

The People alleged that Nazari falsely or fraudulently told the orthopedic surgeon on April 1 that he “cannot walk without his walker” (count 1) and “cannot stand without his walker” (count 2).

APPELLATE CLAIMS

To determine the sufficiency of the evidence, courts review the entire record in the light most favorable to the prosecution to determine whether it contains evidence that is reasonable, credible and of solid value, from which a rational trier of fact could find that the elements of the crime were established beyond a reasonable doubt. Nazari contends the sub rosa videos of him walking and standing without the use of a walker after his April 1 visit do not show the falsity of his statements on April 1 because the orthopedic surgeon observed symptoms consistent with a back injury and he presumably received relief from the epidural injection.

There was no evidence in the record to support Nazari’s contention he received an epidural injection before he was subject to surveillance. Second, the orthopedic surgeon relied on Nazari being truthful when forming his conclusions.

Surveillance video taken on four subsequent dates showed Nazari walking normally and standing without the assistance of a walker. On two occasions, Nazari walked without the walker and then, minutes later, he required the assistance of a walker when transportation arrived to pick him up.

From the videos, the jury could conclude Nazari misrepresented his pain level, faked reliance on the walker during his physical examination, and falsely told the orthopedic surgeon that he required a walker to stand or walk.

The Court of Appeals concluded that the jury concluded that Nazari’s statements to the orthopedic surgeon were made for the purposes of obtaining workers’ compensation benefits. Accordingly, substantial evidence supported Nazari’s two convictions for workers’ compensation fraud under section 1871.4, subdivision (a)(1).

ZIFL OPINION

Regardless of the fact that the trial court suspended imposition of sentence and placed Nazari on probation for two years, sentenced him to 365 days in jail as a condition of probation, stayed pending successful completion of probation, and ordered him to pay restitution totaling $53,879.44 at $100 per month he filed this spurious appeal. People who commit fraud, in my experience, are astounded that they did not succeed and have gained enough from their crime to pursue a spurious appeal. The Court of Appeal should have reversed the sentence and made him spend the 365 days in jail.

Wisdom

“The fundamental source of all your errors, sophisms and false reasonings is a total ignorance of the natural rights of mankind. Were you once to become acquainted with these, you could never entertain a thought, that all men are not, by nature, entitled to a parity of privileges. You would be convinced, that natural liberty is a gift of the beneficent Creator to the whole human race, and that civil liberty is founded in that; and cannot be wrested from any people, without the most manifest violation of justice.” — Alexander Hamilton

“If men are so wicked with religion, what would they be if without it?” — Benjamin Franklin

“A man is bitter against those that envy him and is grieved if no one does.” — Mishle Yehoshua

“To Love oneself is the beginning of a lifelong romance.” – Oscar Wilde

“There are no shortcuts to any place worth going.” — Beverly Sills

“All are lunatics, but he who can analyze his delusions is called a philosopher.” –

“In California everyone goes to a therapist, is a therapist, or is a therapist going to a therapist.” – Truman Capote

“Remember that happiness is a way of travel --- not a destination.” — Roy M. Goodman

“I knew her before she was a virgin.” – Oscar Levant

“If all economists were laid end to end, they would not reach a conclusion.” – George Bernard Shaw

“Men are born ignorant, not stupid; they are made stupid by education.” – Bertrand Russell

What is Insurance Fraud?

Insurance fraud is the most popular and perpetrated crime in the world next to, perhaps, tax fraud. The possibility of a tax-free profit, coupled with the commonly held belief (supported by actual arrest and conviction records) that criminal prosecution will not occur, is sometimes too difficult for normally honest people to resist.

Each year, the effect of insurance fraud runs to billions of dollars. It is estimated that insurance fraud takes between 33 and 38 percent of the premiums collected and annually drains as much as $300 billion or more from the assets of insurers in the United States.

Insurance fraud occurs when a person or entity makes false insurance claims in order to obtain compensation or benefits to which they are not entitled. Insurance fraud is committed in many forms, but regardless of the type, it is considered a serious crime in all jurisdictions.

The Federal Bureau of Investigation (FBI) describes the crime of insurance fraud as follows:

The insurance industry consists of more than 7,000 companies that collect over $1 trillion in premiums each year. The massive size of the industry contributes significantly to the cost of insurance fraud by providing more opportunities and bigger incentives for committing illegal activities.

Costs of Fraud

The total cost of insurance fraud (non-health insurance) is estimated to be more than $40 billion per year. That means Insurance Fraud costs the average U.S. family between $400 and $700 per year in the form of increased premiums.

Common Schemes

Premium Diversion

Premium diversion is the embezzlement of insurance premiums.
It is the most common type of insurance fraud.
Generally, an insurance agent fails to send premiums to the underwriter and instead keeps the money for personal use.
Another common premium diversion scheme involves selling insurance without a license, collecting premiums and then not paying claims.

Fee Churning

· In fee churning, a series of intermediaries take commissions through reinsurance agreements.

· The initial premium is reduced by repeated commissions until there is no longer money to pay claims.

· The company left to pay the claims is often a business the conspirators have set up to fail.

· When viewed alone, each transaction appears to be legitimate—only after the cumulative effect is considered does fraud emerge.

Asset Diversion

· Asset diversion is the theft of insurance company assets.

· It occurs almost exclusively in the context of an acquisition or merger of an existing insurance company.

· Asset diversion often involves acquiring control of an insurance company with borrowed funds. After making the purchase, the subject uses the assets of the acquired company to pay off the debt. The remaining assets can then be diverted to the subject.

Workers’ Compensation Fraud

· Some entities purport to provide workers’ compensation insurance at a reduced cost and then misappropriate premium funds without ever providing insurance.

Disaster Fraud Schemes

· False or exaggerated claims by policyholders.

· Misclassification of flood damage as wind, fire, or theft.

· Claims filed by individuals residing hundreds of miles outside the disaster-zone.

· Bid-rigging by contractors, falsely inflating the cost of repairs.

· Contractors requiring upfront payment for services, then failing to perform the agreed upon repairs.

· Charity fraud scams designed to misappropriate funds donated for disaster relief.

Some varieties of insurance fraud include:

Allegedly Stolen Cars

Criminals use a stolen car insurance scam in two different ways.

First, if a legitimate owner sells the vehicle to a body shop for parts, it could be reported as stolen. The body shop tends to be in on the scheme, which means that the authorities do not know the parts are even sold.

Second, the person insured simply hides the car and then declare that it was stolen. The insurance company would not be able to force the car owner to return the money after the car is found.

Car Accidents

Many accidents are staged, where the victim and the driver are accomplices.

Sometimes, the scheme is even larger and involves witnesses and insurance investigators as well. This is rare, but it does happen.

In the large scale schemes, the value of the vehicle that caused the accident, and the vehicle that was involved in the accident, are usually inflated greatly. The cost of damage is inflated as well, meaning the insurance company will write off the vehicles and pay for their value. The money is then used to repair the vehicles so the fraud can be committed again, and the rest of the money is spread between those involved in the scheme.

Car Damage

Sometimes, people report a small accident and then receive an estimate to have the car fixed. The money they receive is then not used to repair the vehicle.

Health Insurance Billing Fraud

Health care professionals involved in fraudulent schemes do so to profit without providing health care services. For instance, they may bill health insurance companies for work that wasn’t done, or for unnecessary work, or they may inflate the prices for services that they rendered. A patient may visit a physician for a regular check-up, but, without the knowledge of the patient, the doctor bills the insurance company for an in-patient surgery. In so doing, the patient, as well as the insurer, is actually the victim of fraud, but he or she will never know about it.

Unnecessary Medical Procedures

If you feel that your physician is constantly ordering tests for you that you do not understand, you may be a victim of insurance fraud. This is unfortunate, but it is also very common. Since a person with health insurance is not paying for the service they do nothing to compel the health care provider to only provide necessary services and only bill for necessary services.

Staged Home Fires – Arson-for-Profit

This is one of the most dangerous forms of fraud and it has actually cost people their lives. Insurance companies pay out billions of dollars every year for home insurance, and fire is one of the most prevalent claim. Sometimes, the fire is staged by the person insured. Sometimes it is done through vandalism. In a staged fire, homeowners will usually remove any items of value and keep their family away before causing a fire. Alternatively, they insure certain high value items first, and then cause the fire.

With staged home fires, the homeowners themselves are usually not at home. They also generally have a sound alibi for their actual whereabouts. This is because they will hire a criminal to start the fire, often also staging a break-in first. This makes it look as if the homeowner has been the victim of a serious crime.

Storm Fraud

Whenever a heavy storm happens, the number of claims for storm damage goes up. While most of these claims are genuine, a number of them will be fraudulent. Property owners may, for instance, declare higher damage costs so that they can receive a higher settlement. Alternatively, some will present a claim for a non-existent loss, guessing that the insurance company is too busy to come and check the damage, particularly if it is quite minor.

Abandoned House Fire

For instance, homeowners may have difficulties selling their properties when they have to move to a different city for work. Alternatively, a landlord may be struggling to rent out properties in an unpopular neighborhood.

Whenever an abandoned house burns down, there is always a fire inspector on site. This is the result of a morale hazard that few, if any insurer, is willing to take. By leaving the property empty and unlocked it tempts a homeless person to “camp” in the house and set a fire to keep warm only to find the entire dwelling in flames. The insured may then collect for the fire damage even though the insured had no actual involvement in the fire cause.

Faked Death

Fraudsters will take out an insurance policy on their own life, making their spouse the sole beneficiary. After a few months, the con artist will fake their own death, and the spouse will receive the benefit. After the funeral, the spouse will suddenly disappear and move abroad, and the spouses reunite and make use of the claimed money.

Renter’s Insurance

The fraudster will usually take out a renter’s insurance policy, which is very affordable, to cover their belongings. Before they move out, or when their finances turn sour, the renters will sell their possessions without leaving a paper trail. Afterwards, they will report it as stolen and seek to collect the true value of the property that had been sold earlier from the renter’s insurance company.

Adapted from my book Insurance Fraud – Volume I Available as a Kindle book; Available as a Hardcover; Available as a Paperback

More McClenny Moseley & Associates Issues

This is ZIFL’s thirty third installment of the saga of McClenny, Moseley & Associates and its problems with the federal courts in the State of Louisiana and what appears to be an effort to profit from what some Magistrate and District judges indicate may be criminal conduct to profit from insurance claims relating to hurricane damage to the public of the state of Louisiana.

July 9, 2024

The law firm, Morris Bart filed a Complaint for Injunctive Relief and for Declaratory Judgment against MMA in the Eastern District of Louisiana years ago. That suit sought a declaration that MMA attorney employment contracts are absolutely null and that MMA cannot collect attorney’s fees on any of its contracts. Matthew Monson reported on that suit over a year ago at https://lnkd.in/dg9XaPWt.

That suit was dismissed for lack of standing.

MMA would not have guessed that Morris Bart would return in the bankruptcy proceeding and file a Complaint for Declaratory Judgment Determining That Settlement Proceeds Obtained By Morris Bart On Behalf of Former MMA Clients Are Not Property of the Estate Subject To The Automatic Stay.

You can read the details in the filing Case 24-03137 Document 1 Filed in TXSB on 07/09/24.

The Compact Book of Adjusting Property Claims Fourth Edition

In Kindle, paperback and hardback formats, The Compact Book of Adjusting Property Claims, Fourth Edition is now available for purchase here and here. The Fourth Edition contains updates and clarifications from the first three editions plus additional material for the working adjuster and the insurance coverage lawyer.

A Primer for the First Party Property Adjuster The insurance adjuster is seldom, if ever, mentioned in a policy of insurance. The strict wording of the first party property policy sets the obligation to investigate and prove a claim on the insured.

Standard first party property insurance policies, based upon the more than a century old New York Standard Fire Insurance policy, contain conditions that require the insured to, within sixty days of the loss, submit a sworn proof of loss to prove to the insurer the facts and amount of loss.

In general, failure to file the proof within the time limited by the policy is fatal to an action upon it (White v. Home Mutual Ins. Co., 128 Cal. 131, 60 P. 666 (1900); Beasley v. Pacific Indem. Co., 200 Cal.App.2d 207, 19 Cal.Rptr. 299 (Cal. App. 1962).

The California Supreme Court in 1900, when it decided White v. Home Mutual concluded that the requirement of proof of loss by the insured within the 60-day limit provided by the standard form of policy is a condition precedent to the right of the insured to maintain suit.

Available as a hardcover here. Available as a Kindle Book here. Available as a paperback here

Free Insurance Videos

Barry Zalma, Esq., CFE has published five days a week videos on insurance claims, insurance claims law, insurance fraud and insurance coverage matters at https://www.rumble.com/zalma.https://rumble.com/c/c-262921.

He now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud equally for insurers and he practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 55 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 55 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals. See the more than 500 videos at https://www.rumble.com/zalma.

Health Insurance Fraud Convictions

Help to the DOJ From Whistleblower/Qui Tam Suits

$2.45 Million Health Care Fraud Settlement

Vista Clinical Diagnostics, LLC, for allegedly submitting or causing the submission of false claims to Medicare and Medicaid programs in North Carolina, Virginia, and Florida. These settlement funds will be returned to the Medicare and Medicaid programs.

From Jan. 1, 2017, through Dec. 31, 2021, Vista Clinical allegedly submitted or caused to be submitted reimbursement claims to Medicare and Medicaid by adding diagnosis codes into patients’ reimbursement submissions that had not been provided by those patients’ physicians.

It should be noted that the civil claims resolved by settlement here are allegations only, that there has been no judicial determination or admission of liability, and that Vista Clinical and its related pass-through entities deny the allegations.

This settlement results from a whistleblower lawsuit, and the investigation and the prosecution of this case was conducted by the United States Attorney’s Office for the Middle District of Florida, the Office of Inspector General of the United States Department of Health and Human Services, the Medicaid Investigations Division of the North Carolina Attorney General’s Office, the Florida Office of the Attorney General, the Office of the Virginia Attorney General’s Medicaid Fraud Control Unit, and the Virginia Department of Medical Assistance Services.

Precision Lens Agrees to Pay $12 Million to the United States for Kickbacks to Doctors in Violation of the False Claims Act

Precision Lens and the estate of its former principal, Paul Ehlen, have agreed to pay the United States $12 million to resolve a case involving kickback payments to ophthalmic surgeons in violation of the False Claims Act and the Anti-Kickback Statute.

On February 27, 2023, a federal civil jury found that Precision Lens violated the False Claims Act and the Anti-Kickback Statute by paying kickbacks to ophthalmic surgeons to induce their use of Precision Lens products in cataract surgeries reimbursed by Medicare. Precision Lens provided kickbacks to physicians in the form of travel and entertainment, including high-end ski trips, fishing, golfing, hunting, sporting, and entertainment vacations, often at exclusive destinations. For many of the trips, physicians were transported to luxury vacation destinations on private jets, including trips to New York City to see a Broadway musical, the College Football National Championship Game in Miami, Florida, and the Masters Tournament in Augusta, Georgia. Precision Lens sold frequent flyer miles to its physician customers at a significant discount, enabling the physicians to take personal and business trips at well below fair market value.

The jury found that Precision Lens’s conduct resulted in $43,694,641.71 in fraudulent claims submitted to Medicare. By operation of the statute, the court entered a $487,048,705.13 judgment against the company and its owner, which included treble damages and civil penalties under the False Claims Act. Following post-trial motions, the court reduced the judgment to $216,675,248.55. After the United States conducted a review of the defendants’ financial position and ability to satisfy the judgment, the parties entered into a settlement agreement which requires Precision Lens and the estate to immediately pay $12 million to resolve the United States’s claims.

With this resolution, the United States has collected nearly $27 million as a result of the misconduct alleged in this case. The United States previously announced a $12 million settlement of related allegations with Sightpath Medical, Inc. and TLC Vision Corporation and their former CEO, James Tiffany. Dr. Jitendra Swarup also resolved claims that he had accepted kickbacks in a settlement agreement of more than $2.9 million.

The civil settlement arises from a case brought under the qui tam or whistleblower provisions of the False Claims Act by Kipp Fesenmaier. Under those provisions, a private party can file an action on behalf of the United States and receive a portion of a recovery. The qui tam case is captioned United States of America, et al., ex rel. Fesenmaier v. The Cameron-Ehlen Group, Inc., d/b/a Precision Lens, et al., Case No. 13-cv-3003.

DaVita to Pay Over $34M to Resolve Allegations of Illegal Kickbacks

DaVita Inc., headquartered in Denver, Colorado, has agreed to pay $34,487,390 to resolve allegations that it violated the False Claims Act by paying kickbacks to induce referrals to DaVita Rx, a former subsidiary that provided pharmacy services for dialysis patients, and by paying kickbacks to nephrologists and vascular access physicians to induce the referral of patients to DaVita’s dialysis centers.

The Anti-Kickback Statute prohibits anyone from offering or paying, directly or indirectly, any remuneration — which includes money or any other thing of value — to induce referrals of patients or of items or services covered by Medicare, Medicaid and other federally funded programs.

The United States alleges that DaVita paid kickbacks to a competitor to induce referrals to DaVita Rx to serve as a “central fill pharmacy,” or prescription fulfillment provider, for that competitor’s Medicare patients’ prescriptions. In exchange, DaVita paid to acquire certain European dialysis clinics and agreed to extend a prior commitment to purchase dialysis products from the competitor. DaVita would not have paid the price that it did for these deals without the competitor’s commitment to refer its Medicare patients’ prescriptions to DaVita Rx in return.

The United States further alleges that DaVita provided management services to vascular access centers owned by physicians in a position to refer patients to DaVita’s dialysis clinics. DaVita paid improper remuneration to these physician-owners in the form of uncollected management fees to induce referrals to DaVita’s dialysis centers.

Finally, the United States alleges that DaVita paid improper remuneration to a large nephrology practice to induce referrals to DaVita’s dialysis clinics. DaVita gave the practice a right of refusal to staff the medical director position at any new dialysis center that opened near the nephrology practice and paid the practice $50,000 despite the practice’s decision not to staff the medical director position for those clinics.

The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by Dennis Kogod, a former Chief Operating Officer of DaVita Kidney Care. Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery. The qui tam case is captioned United States ex rel. Kogod v. DaVita, Inc., et al., No. 17-cv-02611-PAB (D. Colo.). Kogod will receive $6,370,000 of the proceeds from the settlement.

Kindred and Related Entities Agree to Pay $19.428M to Settle False Claims Act Lawsuits

Gentiva, successor to Kindred at Home, agreed to pay $19.428 million to resolve allegations that Kindred at Home and related entities (Kindred) knowingly submitted false claims and knowingly retained overpayments for hospice services provided to patients who were ineligible to receive hospice benefits under various federal health care programs. Gentiva’s hospice operations, headquartered in Atlanta, include entities that previously operated Kindred at Home hospice locations under the names Avalon, Kindred, SouthernCare and SouthernCare New Beacon.

The settlement resolves allegations made by the United States and the State of Tennessee in a consolidated complaint filed in 2021 against certain Kindred related entities alleging that, from 2010 until February 2020, the defendants knowingly submitted or caused to be submitted false claims for hospice services provided to Avalon hospice patients in Tennessee who were ineligible for the Medicare or Medicaid hospice benefit because they were not terminally ill. The settlement also resolves the complaint’s allegations that the defendants improperly concealed or avoided Avalon’s obligation to repay those hospice claims.

In addition, the settlement resolves allegations that certain Kindred, SouthernCare and SouthernCare New Beacon hospice locations knowingly submitted, or caused to be submitted, false claims for hospice services provided to patients who were ineligible for hospice benefits under Medicare and other federal health care programs because the patients were not terminally ill. Those hospice locations were Kindred’s locations in Warwick, Rhode Island; Beaumont, Texas; and Independence, Missouri; SouthernCare New Beacon’s location in Demopolis, Alabama; and SouthernCare’s locations in Daphne, Alabama; Mobile, Alabama; South Bend, Indiana; and Youngstown, Ohio. The settlement also resolves allegations that those Kindred, SouthernCare and SouthernCare New Beacon locations knowingly and improperly concealed or avoided obligations to repay the foregoing hospice claims.

Further, the settlement resolves allegations that SouthernCare New Beacon allegedly violated the Anti-Kickback Statute by willfully paying renumeration to a consulting physician, between Oct. 1, 2016, and Oct. 1, 2022, to induce hospice referrals of Medicare beneficiaries to its Gadsden, Alabama, location. The settlement of those allegations stems from a voluntary self-disclosure made by New Beacon Healthcare Group LLC doing business as SouthernCare New Beacon Hospice. The Anti-Kickback Statute prohibits offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid and other federally funded health care programs. It is intended to ensure that medical providers’ judgments are not compromised by improper financial incentives and are instead based on the best interests of their patients.

The Medicaid program is funded jointly by the state and federal governments. As a result of the settlement announced today, the federal government will receive $18,956,151.32, the State of Tennessee will receive $448,800 and the State of Ohio will receive $23,618.68.

The settlement includes the resolution of claims in nine lawsuits brought under the qui tam or whistleblower provisions of the False Claims Act by various current and former Kindred employees. Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery. The qui tam cases are captioned: United States ex rel. Pence, et al. v. Curo Health Services Holdings, Inc., et al., Civil Action No. 3:13-00672 (M.D. Tenn.); United States,, et al. ex rel. Anderson et al. v. Curo Health Services, LLC d/b/a Avalon Hospice, Civil Action No. 3:20-cv-00168 (M.D. Tenn.); United States ex rel. Riar v. Kindred Healthcare, Inc., et al., Civil Action No. 3:18-CV-52 (W.D. Ky.); United States ex rel. Didde, et al. v. Kindred Healthcare Inc. et al., Civil Action No. 19-2321-JWB-JPO (D. Kan.); United States ex rel. Mut v. Gentiva Certified Healthcare Corp. D/B/A Kindred at Home, Civil Action No. 1:21-cv-00425-JJM-PAS (D.R.I.); United States ex rel. Harris v. SouthernCare, Inc., Civil Action No. 3:18-cv-643-HTW-LGI (S.D. Miss.); United States,, et al. ex rel. Roy v. Curo Health Services, LLC, et al., Civil Action No. 3:18-cv-643-HTA-LRA (S.D. Miss.); U.S. ex rel. Petrey v. Curo HealthCare Services, LLC, et al., Civil Action No. 1:19-CV-00617 (S.D. Ala.), and United States ex rel. Medved, et al. v. SouthernCare, Inc. D/B/A SouthernCare, et al., Civil Action No. 2:23-cv-3345 (S.D. Ohio). The share of the settlement to be received by the whistleblowers has not yet been determined.

Danbury Non-Profit Settles Allegations It Enrolled Children of Employees Who Falsely Claimed to be Homeless into its Head Start Programs

CONNECTICUT INSTITUTE FOR THE COMMUNITIES, INC. (“CIFC”) has entered into a civil settlement agreement and has paid $85,600 to resolve allegations that two of its now-former employees falsely claimed to be homeless while enrolling their children in CIFC’s Head Start programs.

CIFC is a Danbury-based non-profit corporation that receives federal grants to operate Head Start programs in several locations in Connecticut. The Head Start program supports children’s growth from birth to age five through services centered around early learning and development, health, and family well-being. Services are available for children from birth to age three (“Early Head Start”) and ages three to five (“Head Start”) in center-based, home-based, or family child care settings.

Head Start programs are intended primarily for “children from low-income families” and “homeless children.” Head Start rules also permit programs to enroll children whose families are not “low income,” receiving public benefits, homeless, or in foster care, but the total number of children from such families cannot exceed 10 percent of all program slots. Grantees, such as CIFC, are required to verify applicants’ program eligibility and to keep paper records of those eligibility determinations.

The government alleged that, between September 4, 2013 through August 31, 2016, CIFC enrolled into its Head Start programs the children of two now-former CIFC employees – including the now-former Manager of Eligibility, Recruitment, Selection, Enrollment, and Attendance for CIFC’s Head Start programs – which were falsely documented as homeless and for which false supporting documents were created. The CIFC employees were not homeless.

To resolve its liability, CIFC has paid $85,600. CIFC received credit in the settlement for its cooperation with the government during its investigation.

The False Claims Act allegations resolved by the settlement were originally brought in a lawsuit filed by two whistleblowers under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private parties to bring suit on behalf of the government and to share in any recovery. The relators (whistleblowers), former employees of CIFC, will receive $18,832 as their share of the recovery. The case resolved by this settlement was captioned U.S. ex rel. Nichols et al. v. Connecticut Institute for Communities, Inc. (Docket No. 3:20-CV-00262).

Substance Use Disorder Treatment Clinics to Pay More than $850,000 to Resolve Allegations They Knowingly Overbilled Medicaid for Office Visits

Crossroads Treatment Center of Petersburg P.C., ARS Treatment Centers of New Jersey P.C., Crossroads Treatment Center of Greensboro P.C. and Starting Point of Virginia P.C. – are part of a chain called Crossroads, which is headquartered in Greenville, South Carolina. The United States and the Commonwealth of Virginia have reached an $863,934 civil settlement with certain substance use disorder treatment clinics serving patients from Virginia to resolve allegations that these clinics submitted false and fraudulent claims to the Medicaid program.

The United States and the Commonwealth contended that, from 2016 through mid-2023, the clinics submitted claims to Virginia Medicaid containing code 99215, which signifies a meeting with a patient involving at least two of the following three components: a comprehensive medical history, a comprehensive medical examination, and medical decision making of high complexity. However, the clinics knew the meetings were regular check-ins during substance use disorder treatment and did not meet those criteria. Of the $863,934 civil settlement, the United States will receive $356,891 and the Commonwealth will receive $507,043.

The United States’ investigation was prompted by a lawsuit filed under the whistleblower provisions of the False Claims Act, which permit private parties to sue on behalf of the government when they believe that defendants submitted false claims for government funds and to receive a share of any recovery. The settlement agreement in this case provides for the whistleblower, Diana France, a former Director of Network Management and Contracting for Crossroads, to receive $60,671 as her share of the federal recovery. The settlement agreement also provides for the whistleblower to receive a share of the Commonwealth’s recovery. The case is captioned United States ex rel. France v. Crossroads Treatment Ctrs., No. 6:21-cv-01263 (D.S.C.).

Mental Health Services Providers Pay Over A Million To Settle False Claims Liability

Texas Behavioral Health PLLC (TBH) and United Psychiatry Institute LLC (UPI), two mental health care providers in the South Texas area agreed to pay $1,083,000 to resolve False Claims Act (FCA) allegations regarding the submission of claims to Medicare, TRICARE and Medicaid that non-physician personnel rendered.

From 2017 through 2020, Texas Behavioral Health PLLC (TBH) and United Psychiatry Institute LLC (UPI) allegedly engaged in a pattern and practice of falsely billing Medicare Part B. According to the allegations, TBH and UPI would submit claims for mental health services that physicians had not rendered or not directly supervised as Medicare regulations require. Some services occurred on dates when the physicians were traveling outside of the United States and thus unable to provide the services. Others allegedly occurred at times when it was not logistically possible for the physicians to have rendered them or directly supervised the services themselves due to the sheer volume of patients at multiple office locations located in and around the Houston area.

Certain non-physician practitioners can provide mental health services but must have their own benefit categories and must bill the government programs directly using their own provider numbers. This did not happen in this case, according to the allegations. As a result of the alleged improper billing, Medicare, TRICARE and Medicaid reimbursed TBH and UPI at a higher physician rate.

The settlement stems from a qui tam or whistleblower complaint filed under the FCA, which permits a party to file an action on behalf of the United States and receive a portion of any recover. The qui tam case is United States ex rel. Gonzalez v. Texas Behavioral Health PLLC et al. The whistleblower will receive 17% of the proceeds from the settlement.

Admera Health Agrees to Pay Over $5M to Settle False Claims Act Allegations of Kickbacks to Third Party Marketers

Admera Health LLC (Admera) has agreed to pay the United States $5,389,648 to resolve allegations that it violated the False Claims Act by paying commissions to third party independent contractor marketers in violation of the Anti-Kickback Statute (AKS). Admera will pay an additional $147,851 to individual states for claims paid to Admera by state Medicaid programs.

Admera is a New Jersey-based company that provides biopharmaceutical research services for healthcare institutions and provided clinical laboratory testing services to healthcare providers relating to pharmacogenetics until 2021. Pharmacogenetics analyzes how a patient’s genetic attributes affect their response to therapeutic drugs. The settlement announced today resolves allegations that, from Sept. 1, 2014, through May 21, 2021, Admera made commission-based payments to independent contractor marketers in return for recommending or arranging for the ordering of genetic testing services in violation of the AKS. The AKS prohibits offering or paying remuneration in return for arranging for or recommending items or services covered by Medicare and other federally funded programs.

As part of the settlement, Admera has admitted that it made millions of dollars of commission payments to independent-contractor marketers (the Marketers) to induce them to arrange for or recommend that healthcare providers order and refer clinical laboratory services to Admera, including genetic tests, that were reimbursable by Medicare and/or Medicaid, that it paid Marketers through arrangements that took into account the volume and value of genetic testing referrals, and that Admera was informed that the payment of commissions to independent contractors did not comply with the AKS but continued to enter into such contracts.

The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by relators, Sunil Wadhwa and Ken Newton, co-founders of Financial Halo LLC/MedXPrime, a former third-party marketer for Admera. Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery. The qui tam case is captioned U.S. ex rel. Wadhwa and Newton v. Admera Health, LLC et al (E.D. Cal.). Relators will receive $862,343 of the proceeds from the settlement.

United States Obtains $26M in False Claims Act Judgments Against Laboratory Companies

Patrick Britton-Harr and multiple laboratory companies owned by him on July 18, the U.S. District Court for the District of Maryland entered default judgments for the United States totaling $26,341,951.38 against for violations of the False Claims Act. The court entered these judgments after Britton-Harr and his companies failed to defend against the United States’ allegations.

Patrick Britton-Harr owned and operated Provista Health, LLC as well as multiple other corporate entities that sought to profit from the unfolding COVID-19 pandemic by offering COVID-19 tests to nursing homes as a way to bill Medicare for a wide array of medically unnecessary respiratory pathogen panel (RPP) tests. The complaint alleged that these RPP tests were not medically necessary because the beneficiaries had no symptoms of a respiratory illness and because the tests were for uncommon respiratory pathogens.

The complaint also alleged that Britton-Harr and Provista Health submitted claims for RPP tests that were never ordered by physicians and sometimes for RPP tests that were never performed, including over 300 claims that stated that the nasal swab test sample was supposedly collected from the beneficiary on a date after the beneficiary had died.

Despite a court order prohibiting Britton-Harr from selling his house in Annapolis without approval from the court, he sold the house on Sept. 23, 2023, for $575,000 and dissipated the financial proceeds from the sale. On March 4, the court granted the United States’ motion to hold Britton-Harr in civil contempt for violating this order and ordered him to deposit $575,000 with the court’s registry.

The United States’ pursuit of this lawsuit illustrates the government’s emphasis on combating healthcare 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 HHS at 800‑HHS‑TIPS (800-447-8477).

Santa Paula Doctor Pleads Guilty to Health Care Fraud for Role in $3.2 Million Hospice Scam

Dr. Victor Contreras, 68, of Santa Paula, pleaded guilty to one count of health care fraud. Contreras, a Ventura County physician who worked for two Pasadena hospices pleaded guilty today to defrauding Medicare out of more than $3 million by billing the public health insurance program for medically unnecessary hospice services.

According to his plea agreement, from July 2016 to February 2019, Contreras and co-defendant Juanita Antenor, 61, formerly of Pasadena, schemed to defraud Medicare by submitting nearly $4 million in false and fraudulent claims for hospice services submitted by two hospice companies: Arcadia Hospice Provider Inc., and Saint Mariam Hospice Inc. Antenor controlled both companies.

Medicare only covers hospice services for patients who are terminally ill, meaning that they have a life expectancy of six months or less if their illness ran its normal course.

Contreras falsely stated on claims forms that patients had terminal illnesses to make them eligible for hospice services covered by Medicare, typically adopting diagnoses provided to him by hospice employees whether or not they were true. Contreras did so even though he was not the patients’ primary care physician and had not spoken to those primary care physicians about the patients’ conditions. Medicare paid on the claims supported by Contreras’ false evaluations and certifications and recertifications of patients.

In total, approximately $3,917,946 in fraudulent claims were submitted to Medicare, of which a total of approximately $3,289,889 was paid.

According to Medical Board of California records, Contreras is a licensed physician in California, but has been on probation with the Board since 2015 and is subject to limitations on his practice.

Antenor remains at large. Co-defendant Callie Black, 65, of Lancaster, who allegedly recruited patients for the hospice companies in exchange for illegal kickbacks, has pleaded not guilty and is currently scheduled to go on trial on October 15.

Riverside County Chiropractor Agrees to Pay $180,000 to Resolve Allegations of Health Care Fraud

Chiropractor Kevin Michael Brown, of Menifee, California has agreed to pay $180,000 to resolve allegations that he violated the False Claims Act by submitting hundreds of false claims to Medicare for surgically implanted neurostimulators.

As part of the settlement, Brown stipulated that, through his companies, Revive Medical of San Diego and Revive Medical LLC, located in Oklahoma City, he submitted claims to Medicare for surgically implanted neurostimulator devices, even though his companies did not perform surgery or implant neurostimulators. Brown stipulated that he and his companies instead taped a disposable “electroacupuncture” device called “Stivax” to their patients’ ears. Stivax devices do not require surgical implantation and are not reimbursable by Medicare. The United States alleges that this conduct violated the False Claims Act. In addition to paying the civil settlement, Brown agreed to a five-year exclusion period from Medicare, Medicaid, and all other federal health care programs.

Doctor Convicted for Illegally Distributing Over 1.8M Doses of Opioids and $5M Health Care Fraud

Adrian Dexter Talbot, 58, of Slidell, owned and operated Medex Clinical Consultants (Medex), located in Slidell, Louisiana. Medex was a medical clinic that accepted cash payments from individuals seeking prescriptions for Schedule II controlled substances. A federal jury convicted a Louisiana physician yesterday for conspiring to illegally distribute over 1.8 million doses of Schedule II controlled substances, including oxycodone and morphine, and for defrauding health care benefit programs of more than $5.4 million.

According to court documents and evidence presented at trial, Talbot routinely ignored signs that individuals frequenting Medex were drug-seeking or abusing the drugs prescribed. In 2015, Talbot took a full-time job in Pineville, Louisiana, and although he was no longer physically present at the Slidell clinic, he pre-signed prescriptions, including for opioids and other controlled substances, to be distributed to individuals there whom he did not see or examine. In 2016, Talbot hired another practitioner who, at Talbot’s direction, also pre-signed prescriptions to be distributed in the same manner at the Slidell clinic in exchange for cash deposited into the Medex account.

The evidence also demonstrated that Talbot falsified patient records to cover up the scheme. With Talbot’s knowledge, individuals filled their prescriptions using their insurance benefits, thereby causing health care benefit programs including Medicare, Medicaid, and Blue Cross Blue Shield of Louisiana to be fraudulently billed for prescriptions that were written without an appropriate patient examination or determination of medical necessity.

The jury convicted Talbot of one count of conspiracy to unlawfully distribute and dispense controlled substances, four counts of unlawfully distributing and dispensing controlled substances, one count of maintaining a drug-involved premises, and one count of conspiracy to commit health care fraud. He is scheduled to be sentenced on Oct. 23 and faces a maximum penalty of 10 years in prison for conspiracy to commit health care fraud and a maximum penalty of 20 years in prison for each of the other counts. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Owner of Home Health Care Company Convicted of Multimillion Dollar Health Care Fraud Scheme

Faith Newton, 56, was convicted of one count of conspiracy to commit health care fraud, one count of health care fraud, and three counts of money laundering. The jury found the defendant not guilty on one count of money laundering conspiracy. Sentencing will be scheduled at a later date. Newton was arrested and charged along with co-defendant Winnie Waruru in February 2021.

Newton, a Westford, Massachusetts woman was convicted Friday, July 19, 2024 following a nine-day jury trial in federal court in Boston in connection with a home health care fraud scheme.

From January 2013 to January 2017, Newton was a part owner and operator of Arbor Homecare Services LLC. Newton and others engaged in a conspiracy to use Arbor to defraud MassHealth of at least $100 million.

Specifically, evidence at trial demonstrated that Arbor, through Newton and others, failed to train staff, billed for home health services that were never provided or were not medically necessary and billed for home health services that were not authorized. Arbor, through Newton and others, paid kickbacks for patient referrals, regardless of medical necessity. They also entered sham employment relationships with patients’ family members to provide home health aide services that were not medically necessary and routinely billed for fictitious visits that Newton knew did not occur.

Newton used the laundered proceeds of the $100 million scheme to purchase a house and a Maserati.

Newton’s co-defendant, Waruru, pleaded guilty to her role in the conspiracy in September 2022. She is scheduled to be sentenced on Sept. 18, 2024 before U.S. Senior District Court Judge George A. O’Toole Jr.

Newton’s previous trial, beginning on June 26, 2023, ended in a mistrial during jury deliberations on July 10, 2023.

The charges of health care fraud, conspiracy to commit health care fraud, and money laundering each provide for a sentence of up to 10 years in prison, three years of supervised release and a fine of up to $250,000 or twice the amount of the money involved in the laundering. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.

Ohio Medical Doctor Sentenced to Prison for Health Care Fraud Scheme

Ankita Singh, 42, formerly of Maumee, Ohio, was sentenced to 26 months in prison by U.S. District Judge Jack Zouhary, for her role in a durable medical equipment (DME) scheme that defrauded the U.S. Department of Health and Human Services Medicare Program. She was also ordered to pay restitution in the amount of $4,470,931.02, serve two years of supervised release, and pay a special assessment fee of $600.

On Feb. 29, 2024, a jury found Singh guilty of six counts of health care fraud for signing false orders for orthotic braces, that patients never requested and did not need, as part of a DME scheme.

Beginning in 2019, Singh worked as an independent contractor for at least two companies, to purportedly provide “telehealth services,” and was paid a fee to conduct patient consultations. The consultations never took place. Telemarketers would cold call Medicare beneficiaries and tell them that orthotic braces would be provided to them at no cost. The beneficiaries were not previously Singh’s patients and she never spoke to them. Singh never saw them in person and did not conduct a telehealth visit. The telemarketers would prepare orders with the beneficiaries’ names, Medicare numbers, and purported diagnosis to support a false diagnosis that the braces were medically necessary. Orders were then electronically sent to Singh to affix her signature and certify that she was treating the Medicare beneficiary and affirm that the brace was medically necessary. Singh signed more than 11,000 prescriptions for orthotic braces for approximately 3,000 Medicare beneficiaries with whom she had no patient-physician relationship, and frequently ordered multiple braces for each patient, without ever having examined them.

As a result of Singh’s false orders, more than $8 million was billed to Medicare for orthotic devices that were not medically necessary. In all, Medicare paid approximately $4.47 million in claims for the fraudulent prescriptions that Singh signed.

Pain Management Physician and Former Member of Kentucky’s Medical Board Convicted

Michael Fletcher, 61, of Tulsa, Oklahoma, was a physician at Interventional Pain Specialists (IPS) in Crestview Hills, Kentucky, and a board member of the Kentucky Board of Medical Licensure (KBML). In his role at the KBML, Fletcher oversaw disciplinary proceedings against physicians, including those who improperly prescribed controlled substances. A federal judge convicted Fletcher, a medical doctor and former member of the today for unlawfully distributing opioids.

According to court documents and evidence presented at trial, however, Fletcher was also illegally prescribing opioids to IPS patients, including some who had tested positive for hard street drugs like cocaine and heroin, in part so he could perform and bill for lucrative and often medically unnecessary procedures on the same patients. Trial evidence showed that seven IPS patients died of drug-related complications shortly after being prescribed opioids by Fletcher.

Fletcher was convicted of three counts of unlawful distribution of a controlled substance. He is scheduled to be sentenced on Dec. 17 and faces a maximum penalty of 20 years in prison on each count. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Whitefish Doctor Admits Defrauding Medicare And Other Federal Health Programs

Ronald David Dean, 64, had an initial appearance and pleaded guilty to an information filed on June 24 charging him with conspiracy to commit wire fraud. The charges are part of the Justice Department’s 2024 National Health Care Fraud Enforcement Action. Dean faces a maximum of 10 years in prison, a $1 million fine and three years of supervised release.

A Whitefish, Montana physician accused in connection with alleged schemes to defraud government health programs admitted on Wednesday to falsely billing Medicare and other health programs in a telemedicine scheme that resulted in more than $39 million in false billing Investigation part of national health care fraud action that resulted in 193 defendants charged and more than $2.75 billion in false claims

A plea agreement filed in the case calls for Dean to pay at least $780,509 restitution.

The government alleged in court documents that Dean, a licensed physician, was paid by a telemedicine company to sign orders for durable medical equipment that patients did not need. Dean then fraudulently charged Medicare, CHAMPVA and the Railroad Retirement Board programs for telemedicine office visits that did not occur. The telemedicine company also used Dean’s information to prescribe unneeded and unnecessary covid tests to patients. The conspiracy ran from about January 2022 until July 2023. In total, Dean’s orders resulted in false billing to government health care programs of more than $39 million.

The case was part of a strategically coordinated, two-week nationwide law enforcement action that resulted in criminal charges against 193 defendants for their alleged participation in health care fraud and opioid abuse schemes that resulted in the submission of over $2.75 billion in alleged false billings. The defendants allegedly defrauded programs entrusted for the care of the elderly and disabled to line their own pockets, and the Government, in connection with the enforcement action, seized over $231 million in cash, luxury vehicles, gold, and other assets.

Addiction Treatment Chain Owner & Company Plead Guilty to Health Care Fraud Conspiracy

Michael Brier, 61, of Newton, MA, and Recovery Connections Centers of America, Inc. (RCCA) admitted to a federal judge that they failed to provide patients with required counseling sessions and treatment, while simultaneously billing Medicare, Medicaid, and other health care payors for 45-minute counseling sessions on a routine basis even though the sessions were often only 5-10 minutes or less.

The owner of a Rhode Island-based chain of addiction treatment centers and his company, who together defrauded Medicare, Medicaid, and other health insurers out of millions of dollars and shortchanged patients suffering from substance abuse disorder in Rhode Island and Massachusetts out of much-needed counseling and treatment, today pleaded guilty.

Briar and RCCA also admitted that they caused a fraudulent application to be submitted to Medicare which, among other things, misrepresented and concealed the role that Brier was playing in the business and failed to disclose Brier’s 2013 criminal conviction for federal tax crimes, which was relevant to Medicare’s consideration of the application; Brier was sentenced to 27 months incarceration by a federal judge as a result of that 2013 conviction.

Court documents illustrate that, if plea agreements filed in this matter are accepted by the Court, Brier will be sentenced in this case to between six and ten years of incarceration, followed by three years of federal supervised release. Additionally, Brier will be ordered to make restitution of more than $3.4 million and will forfeit assets realized as a result of his criminal conduct, including approximately one million dollars contained in various bank and investment accounts, his interest in a beachfront condominium in Caracol Beach, Panama, a 2020 Mercedes Benz, and a 2019 Lexus RX350.

The corporate entity, RCCA, which is now in receivership, faces maximum penalties of $500,000, or twice the gross gain or loss from the offense, whichever is greater, and up to five years’ probation.

Briar and RCCA are scheduled to be sentenced on November 6, 2024. The defendants’ sentences will be determined by a federal district court judge after consideration of the U.S. Sentencing Guidelines and other statutory factors.

Area Pharmacy Agrees to Resolve Civil Allegations of Improper Dispensing of Controlled Substances

Professional Pharmacy & Convalescent Products, Ltd., a pharmacy that was based in Pottstown, PA, agreed to resolve allegations that it had improperly dispensed opioids and other controlled substances to individuals, and submitted claims to Medicare and Medicaid for those illegally dispensed controlled substances. The settlement resolves the case for a payment of $150,000 and comes after the pharmacy surrendered its DEA registration.

Under the Controlled Substances Act, pharmacies like Professional that are registered with the DEA are permitted to dispense controlled substances only to patients based on a valid prescription. A prescription is valid only when issued for a legitimate medical purpose and in the usual course of professional practice. That legal obligation applies to controlled substances broadly and includes drugs like the opioid oxycodone. The settlement between the United States and Professional resolves allegations that, from June 1, 2018, through March 4, 2024, Professional illegally dispensed controlled substances like oxycodone without satisfying these important legal obligations, and illegally submitted claims to Medicare and Medicaid for the drugs. The settlement agreement covers liability under the Controlled Substances Act, which imposes civil penalties for illegal controlled substance prescriptions, and the False Claims Act, which imposes civil damages and penalties for false claims to the federal government.

Cooperating Cancer Testing Company Agrees to Pay Over $900,000 to Resolve False Claims

Guardant Health, Inc., a precision oncology company based in Palo Alto, has agreed to settle allegations that it knowingly violated the False Claims Act (FCA), 31 U.S.C. §§ 3729-31, and regulations of the Defense Health Agency (DHA.

As alleged by the government, in or around April 2021, a physician based in Austin, Texas contacted Guardant’s Human Resources Department to recommend a close friend of the physician’s family member for a position as an Account Manager in Guardant’s Oncology Division. Guardant hired the family friend as an Account Manager. In October 2021, the physician contacted Guardant again, this time seeking a position for his stepdaughter upon her graduation from college. The stepdaughter was considered but rejected for a position in Guardant’s Screening Division. However, in or around February 2022, two Guardant employees arranged for the family friend to be promoted, thereby creating an opening in the Oncology Division for employment of the stepdaughter. These employees knew of the relationship between the stepdaughter and the physician, and that the stepdaughter was not qualified for the role. The physician then ordered significantly more Guardant tests per quarter after both hirings.

Based on this conduct, the United States alleges that Guardant submitted claims to and received payments from Medicare for clinical laboratory services that had been referred to Guardant by the physician in violation of the Physician Self-Referral Law, or Stark Law, 42 U.S.C. § 1395nn. The United States further alleges that Guardant knowingly submitted or caused the submission of false claims for payment for Guardant tests ordered by the physician during the relevant time period to Medicare Part B in violation of the FCA and to TRICARE in violation of 32 C.F.R. § 199.9.

Guardant cooperated with the government’s investigation of the issues and took prompt and substantial remedial measures. Shortly after receiving information regarding the physician’s referrals, Guardant stopped billing federal health care programs for Guardant tests ordered by the physician. Guardant also terminated the physician’s family member’s employment.

Pharmaceutical Marketer Sentenced for Compounded Medications Fraud Scheme

Quintan Cockerell, 43, of Palos Verdes Estates, California, a Texas pharmaceutical marketer was sentenced today to two years and five months in prison and ordered to pay over $59 million in restitution for conspiring to defraud the United States, receiving illegal kickbacks in exchange for compounded medications prescription referrals, and money laundering.

Cockerell worked with others to create and market expensive compounded medications, which are intended to be custom-tailored to individual patient needs, that were not medically indicated. Cockerell and others used preloaded prescription pads that identified the high-billing formulations for doctors to easily select. Cockerell, along with his co-conspirators at the compounding pharmacy that received the fraudulent prescriptions, implemented “standing orders” that enabled the pharmacy to swap out ingredients in the medications originally prescribed by doctors to maximize insurance reimbursements. Cockerell and others recruited doctors to write prescriptions for these expensive compounded medications by creating so-called “investment opportunities” so that doctors who wrote prescriptions to the pharmacy could profit from pharmacy operations. Cockerell and others also took doctors on expensive and lavish trips to Las Vegas, Mexico, and the Grand Caymans, among other places.

In an effort to conceal the illegal kickbacks Cockerell received in exchange for prescription referrals, the pharmacy paid Cockerell’s wife at the time as a sham employee. Evidence presented at trial demonstrated that Cockerell’s wife did not work at the pharmacy, but that Cockerell communicated with the pharmacy using her email address and received checks for his kickbacks in her name. Cockerell then spent the proceeds from the kickback scheme.

In October 2023, a federal jury in the Northern District of Texas convicted Cockerell of one count of conspiracy to defraud the United States, one count of receiving kickbacks, and one count of money laundering.

Former Georgia Insurance Commissioner Sentenced to Prison

John Oxendine, the former Georgia Insurance Commissioner, was sentenced to three and a half years in prison for conspiracy to commit healthcare fraud in connection with unnecessary lab testing.

According to U.S. Attorney Buchanan, the charges and other information presented in court: John Oxendine conspired with Dr. Jeffrey Gallups and others to submit fraudulent insurance claims for medically unnecessary Pharmacogenetic, Molecular Genetic, and Toxicology testing. Physicians associated with Dr. Gallups’ ENT practice were pressured to order these medically unnecessary tests from Next Health, a lab in Texas. As part of Oxendine’s healthcare fraud scheme, Next Health agreed to pay Oxendine and Dr. Gallups a kickback of 50 percent of the net profit for eligible specimens submitted by Dr. Gallups’ practice to the lab company.

In connection with the scheme, Oxendine gave a presentation at the Ritz Carlton in Buckhead, Georgia where he pressured doctors in Dr. Gallups’ practice to order the unnecessary tests. Next Health later submitted insurance claims seeking more than $3 million in payments from private health insurers for the unnecessary tests. The insurance companies paid more than $750,000 to Next Health because of these fraudulent claims. Next Health then paid $260,000 in kickbacks to Oxendine and Dr. Gallups. Some patients were also charged for the tests, receiving bills of up to $18,000.

To conceal the kickback payments, Oxendine and Dr. Gallups arranged for the payments to be made from Next Health to Oxendine Insurance Services, Oxendine’s insurance consulting business. Oxendine used a portion of the kickback money to pay a $150,000 charitable contribution and $70,000 in attorney’s fees for Dr. Gallups.

When a compliance officer at Dr. Gallups’ practice raised concerns about the kickbacks, Oxendine told Dr. Gallups to lie and say the payments were loans. He also directed Dr. Gallups to repeat the lie after he was questioned by federal agents about Next Health. When Oxendine was interviewed about Next Health by the Atlanta Journal-Constitution in connection with a private lawsuit, he falsely denied working with the lab company or receiving money from the business.

John W. Oxendine, 62, of Port St. Joe, Florida, was sentenced by U.S. District Judge Steve C. Jones to three years, six months in prison to be followed by three years of supervised release. He was also ordered to pay restitution in the amount of $760,175.34, and a $25,000 fine. Oxendine was convicted on these charges on March 22, 2024, after he pleaded guilty.

This case is related to United States v. Gallups, criminal no. 1:21-cr-00370-SCJ, in which Dr. Jeffrey Gallups pleaded guilty to health care fraud and was sentenced to 33 months in prison.

California Dentist Convicted

Dr. Magaly Mercedes Velasquez and her spouse, Maria Jose Talavera, who served as an office manager, were sentenced by the Riverside County Superior Court to 364 days in jail and ordered to pay restitution in the amount of $770,238 to Medi-Cal. Jessica Monique Perez, the billing manager, will be placed on probation for two years. The prosecution in this case was carried out by the California Department of Justice’s Division of Medi-Cal Fraud and Elder Abuse (DMFEA).

Velasquez owned the U-First Dental practice where she served as a dentist and carried out the fraudulent billing scheme from January 1, 2017 to December 31, 2019. Contracted with Borrego Community Health Foundation, a Federally Qualified Health Center that participates in Medi-Cal, Velasquez received reimbursement for each day of service billed rather than for the individual services provided to the patient. However, U-First Dental fraudulently split their services over multiple days on their claims for reimbursement in order to maximize reimbursement from Medi-Cal.

DMFEA protects Californians by investigating and prosecuting those who defraud the Medi-Cal program as well as those who commit elder abuse. These settlements are made possible only through the coordination and collaboration of governmental agencies, as well as the critical help from whistleblowers who report incidences of abuse or Medi-Cal fraud at oag.ca.gov/dmfea/reporting.

Woman Pleads Guilty to Theft of Medicaid Funds

Erma Hasu, age 33, of Milford, New Hampshire, has pleaded guilty to the theft of Medicaid funds. Between September 1, 2021, and September 30, 2022, Hasu submitted fraudulent claims for mileage reimbursement as part of New Hampshire Medicaid’s Family and Friends Mileage Reimbursement Program.

On June 24, 2024, she pleaded guilty to class A misdemeanor Theft by Deception. The Merrimack County Superior Court sentenced her to serve twelve months in the Merrimack County House of Corrections, fully suspended for five years, and ordered her to pay $2,293.52 in restitution to the New Hampshire Department of Health and Human Services. She has been barred from future participation in the Family and Friends Mileage Reimbursement Program.

Property Investigation Checklists: Uncovering Insurance Fraud, 14th Edition

Property Investigation Checklists: Uncovering Insurance Fraud, 14th Edition provides detailed guidance and practical information on the four primary areas of any investigation of suspicious claims. The book also examines recent developments in areas such as arson investigation procedures, bad faith, extracontractual damages, The fake burglary, and Lawyers Deceiving Insurers, Courts & Their Clients During, Catastrophes—A New Type Of Fraud and the appendices includes the NAIC Insurance Information and Privacy Protection Model Act and usable forms for everyone involved in claims and will provide necessary information to the claims adjuster, SIU fraud investigator, claims manager, or coverage lawyer so he or she can be capable of excellence.

The newest book joins other insurance, insurance claims, insurance fraud, and insurance law books by Barry Zalma all available at the

Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

The Reasons for an Examination Under Oath

The EUO Is Not an Adversary Proceeding like a Deposition in a Lawsuit.

The Examination Under Oath (EUO) is an investigative tool made available to the insurer. It allows the insurer to delve deeply and under oath into all aspects of the policy and the loss. The testimony to be elicited is not constrained by rules of discovery or the Codes of Civil Procedure.

The only restraint on the EUO is reasonableness although some courts do not even include a reasonableness standard. Regardless, the person taking the EUO must always act reasonably while understanding that unlimited questions are allowed. Only irrelevant and unreasonable questions dealing with facts completely outside the policy, its acquisition or the loss are not favored.

Irrelevant questions are tolerated if there is any possibility the question may lead to an inquiry about facts relevant to the policy or claim. In fact, there are no questions that are irrelevant in an EUO since each question may lead to more important information that could never have been learned about had a foundation not been laid by questions that appear, on their face, to be irrelevant. Since there are no rules for the taking of the EUO any question asked is important and must be answered.

In Ram v. Infinity Select Ins., 807 F.Supp.2d 843 (2011), during the investigation of the insured’s claim, the plaintiff produced limited records. The USDC noted that where an insurer has reason to suspect fraud in relation to a theft claim, inquiries into the insured's financial status are relevant and material, and a refusal to answer questions on that subject constitutes a material breach of the insurance contract.

Plaintiff refused to discuss his 2008 income at his EUO, and much of the income and employment information that he was willing to provide throughout the investigation of his claim was admittedly false. The Court found that Plaintiff's failure to answer income questions constituted a breach of the duty to cooperate and concluded that no reasonable juror could find otherwise.

In Deguchi v. Allstate Ins. Co., Not Reported in F.Supp.2d, 2008 WL 1780271 (D. Hawai’i, 2008) a case where Plaintiffs' testimony raised even more questions of motive, plaintiffs prevented Allstate from further investigating and determining coverage under the Policy. Specifically, Deguchi refused to submit to a further EUO, and Plaintiffs' attorney limited Scalas' EUO to questions on the vessel Princess Natasha, her loss, the two crew aboard her at the time of the loss, and her value. Under the specific circumstances of the case, the court found that Allstate's requests for EUOs were reasonable as a matter of law.

Deguchi, by refusing to allow a second EUO, and Scalas, by refusing to answer even basic questions, breached Plaintiffs' duty under the Policy to “submit to examinations under oath” as reasonably required by Allstate. Because Plaintiffs' refusal prevented Allstate from determining coverage under the Policy, Allstate had no duty to pay Plaintiffs under the Policy.

Similarly, in Powell v. United States Fid. & Guar. Co., 88 F.3d 271 (4th Cir.1996), the insureds' home was destroyed by fire. Under their homeowners' insurance policy, the insureds were required to “submit to questions under oath and sign and swear to them.” During the EUO, the insureds refused to answer several questions and “to turn over financial and other documents,” claiming that an EUO did not permit the insurer to “delve into financial or other information relating to the [insureds'] possible motives to intentionally set the fire ... but ... [was] instead limited ... to an examination relating to the existence and extent of loss under the policy.”

The United States Court of Appeals for the Fourth Circuit disagreed, stating that an EUO “encompasses investigation into possible motives for suspected fraud.” Concluding that the EUO “is not restricted to amount of loss, but the insurer has the right to examine the insured and his witnesses as to any matter material to the insurer's liability and the extent thereof.” Therefore, under the facts and circumstances of the case, the refusal to answer questions about financial circumstances during the EUO violated the terms of the policy and constituted a failure to cooperate.

In Michigan, in the context of a homeowner's insurance policy, the court concluded that the remedy for failing to comply with a requirement to submit to an EUO is dismissal of the insured's action. [Thomson v. State Farm Ins. Co., 232 Mich.App. 38, 45, 592 N.W.2d 82 (1998); Yeo v. State Farm Ins. Co., 219 Mich.App. 254, 257, 555 N.W.2d 893 (1996).] The court saw no reason to distinguish between a valid EUO in a homeowner's insurance policy and a valid EUO in a policy providing uninsured motorist benefits.

An insurance policy is the same as any other contract; it is an agreement between the parties. Because the no-fault statute does not require uninsured motorist benefits, there is no public policy against enforcing the EUO provision and the Michigan court concluded that it must honor the intent of the parties' contract. [Cruz v. State Farm Mut. Auto. Ins. Co., 241 Mich.App. 159, 614 N.W.2d 689 (2000)].

The EUO Should Be Required – Not Requested – by an Insurer:

■ When the insured has insufficient documentary evidence to prove his loss.

■ When the insured refuses to cooperate in the investigation of the insurer.

■ When the insured is unable to present documentary evidence in support of his or her claim.

■ When the Insured needs help proving his or her loss.

■ When the insurer has no other means of "cross examining" the proof of loss submitted by the insured.

■ When the insurer witnesses a fraudulent claim is being attempted.

The preceding list of reasons for requiring an EUO are not the only reasons. They are but a small list of potential reasons for an EUO that can be expanded as the facts of a claim require.

When an insurance professional, whether an adjuster or a lawyer, finds a claim poses questions that cannot be answered by the usual and common methods of investigating a claim, it is important to consider the use of the EUO to get the answers not available anywhere else.

Adapted from my book The Examination Under Oath to Resolve Insurance Claims Available as a Kindle book Available as a paperback. Available as a hardcover.

It’s Time to Subscribe to My Substack

For Subscribers Only I Have Published Special Insurance Articles and Videos

I published on Locals.com more than 25 videos and two webinars of the Excellence in Claims Handling program. I also published on Substack.com videos and webinars of the Excellence in Claims Handling Program available only to Subscribers. The subscribers have access to all the videos and a webinar on “The Examination Under Oath A Tool Available to Insurers to Thoroughly Investigate Claims and Work to Defeat Fraud” among others.

The videos start with the history of insurance and work their way through various types of insurance and how to obtain and deal with insurance claims. Subscribe and receive videos and articles available only to subscribers to the Excellence in Claims Handling at locals.com and to articles and videos also available to subscribers at Substack.com for a small fee of only $50 a year. You can Subscribe to “Zalma on Insurance” at https://zalmaoninsurance.locals.com/subscribe and to “Excellence in Claims Handling” at https://barryzalma.substack.com/welcome.

The Tort of Bad Faith

What Every Insurance Professional, Every Insurance Coverage Lawyer, Every Plaintiffs Bad Faith

Lawyer, and Every Insurance Claims Person Must know About the Tort of Bad Faith

A Book Needed by Every Insurance Claims Professional

The implied covenant of good faith and fair dealing is a concept of insurance law at least three centuries old. It first appeared in British jurisprudence in a case decided by Lord Mansfield sitting in the House of Lords as the highest court in Britain. In Carter v. Boehm 3Burrow, 1905, Lord Mansfield explained that insurance is a contract upon speculation; the special facts upon which the contingent chance is to be computed, lie, most commonly, in the knowledge of the insured only. The underwriter trusts to his representation and proceeds upon confidence that he does not keep back any circumstance in his knowledge, to mislead the underwriter into a belief that the circumstance does not exist, and to induce him to estimate the risk as if it did not exist. Keeping back such circumstance is a fraud, and therefore the policy is void.

The implied covenant explains that no party to a contract of insurance should do anything to deprive the other of the benefits of the contract.

Lord Mansfield stated the rule still followed to this day: “Good faith forbids either party by concealing what he privately knows, to draw the other into a bargain, from his ignorance of that fact, and his believing the contrary.

Available as a Hardcover Available as a paperback Available as a Kindle Book

Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Barry Zalma, Inc., 4441 Sepulveda Boulevard, CULVER CITY CA 90230-4847, 310-390-4455.

Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Go to the podcast Zalma On Insurance at

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog.

He publishes daily articles at https://zalma.substack.com, Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ to consider more than 50 volumes written by Barry Zalma on insurance and insurance claims handling.

Go to Zalma’s Insurance Fraud Letter at https://zalma.com/zalmas-insurance-fraud-letter-2/; Go to X @bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ and GTTR at https://gettr.com/@zalma

[1] https://www.fbi.gov/stats-services/publications/insurance-fraud