Fraudsters sentenced for various schemes, medical device company settles allegations for $36M

The Department of Justice (DOJ) has continued to crack down on health care fraud in a variety of areas. From a multi-million dollar home health scheme to a mother-son pharmacy fraud team, several perpetrators have been sentenced to prison and ordered to pay restitution for their crimes.

Home health

A Detroit home health care company co-owner was sentenced to 96 months in prison for his part in a fraud scheme. Evidence presented at trial revealed that from 2006 to 2011, he and co-conspirators paid kickbacks to recruiters who passed on cash to patients in order to induce them to sign up for home health care services. Physicians also received kickbacks in exchange for referrals for home health services that were not medically necessary and not provided. This scheme ultimately caused about $33 million in losses to the federal government.

Another co-conspirator was recently sentenced to 360 months in prison for his part in the fraud scheme.

Pharmacy fraud

A mother and son team received prison sentences following their guilty pleas to conspiracy to commit health fraud through their pharmacies. The mother co-owned and operated some Miami-area pharmacies, through which she submitted false and fraudulent claims through Medicare Part D. She led a fraud scheme in which Medicare beneficiaries and patient recruiters were paid for medically unnecessary prescriptions, and various co-conspirators were directed to make kickback payments and conceal fraudulent funds. The son wrote checks to money launderers from the pharmacy in order to facilitate the kickbacks.

In their guilty pleas, the mother admitted that she caused $9.5 million in losses to the government, while the son caused losses of at least $1.5 million. She was sentenced to 120 months in prison, while he was sentenced to 30 months.

Medical devices

Biocompatibles Inc., a medical device manufacturer, pleaded guilty to misbranding an embolic device that was originally designed as a chemotherapy drug delivery device. This device had been cleared for placement in blood vessels to block or reduce blood flow as needed, but was not approved or cleared as a drug-device combination product or a drug-eluting bead. However, Biocompatibles marketed the product for drug delivery for and trained representatives to aggressively penetrate the relevant market. Biocompatibles will pay $36 million to resolve criminal and civil liability, which first stemmed from a qui tam lawsuit brought by a company professional responsible for marketing and management of Biocompatibles’ medical products.

How should compliance officials deal with whistleblowers?

Effective compliance programs give employees an anonymous way to report potential violations, and consistently follow up on all tips received. In a webinar titled “Do You Know What To Do When the Whistle Blows?” and presented by the Society of Corporate Compliance and Ethics (SCCE) and the Health Care Compliance Association (HCCA), Michael Moore, a former U.S. Attorney for the Middle District of Georgia currently with Pope McGlamry, explained best practices for investigating whistleblower complaints.

The False Claims Act (FCA) (31 U.S.C. §3729) allows a whistleblower with knowledge of fraudulent claims submitted to the federal government for payment to file a qui tam action on behalf of the United States and share in any recovery as relator. The most common types of health care fraud include lack of medical necessity, billing for services not rendered, and violations of the Anti-Kickback Statute (42 U.S.C. §1320a-7b) or Stark law (42 U.S.C. §1395nn). Life sciences fraud can also include kickbacks, off-label marketing, and failing to disclose adverse events to the FDA. Moore noted that, although relators get a larger share of recoveries when the government does not intervene in the suit—25 to 30 percent, versus 15 to 25 percent when the government does intervene—recoveries overall are generally much larger when the government intervenes, giving the relator a larger award.

When an aggrieved employee comes forward as a potential whistleblower, the compliance department’s response can make a difference for the organization. Often, Moore said, the employee wants to be heard, have his or her concerns recognized, and believe that something will be done about the problems he or she identified. Routine compliance training, a non-retaliation policy, and implemented written standards and procedures are all hallmarks of effective compliance programs. Practically speaking, compliance departments should do the following when confronted by a complaint:

  • evaluate the credibility of the allegation;
  • appoint an independent, objective “designated person” to respond to the investigation;
  • avoid taking retaliatory action against the potential whistleblower;
  • determine the timeline and scope for the investigation—the involvement of the government is an important component for this determination; and
  • consider self-disclosure, if the investigation discovers conduct that may give rise to FCA liability.

Nursing home executives indicted in $16M fraud scheme

Four individuals, including the former Chief Executive Officer (CEO) and Chief Operating Officer (COO) of a nursing home chain, have been indicted for their roles in a $16 million fraud scheme. The alleged scheme involved American Senior Communities (ASC), located in Indiana.


According to the 32-count indictment, the perpetrators made side deals with vendors at the expense of ASC between 2009 and 2015. To fund these deals, they overcharged ASC for products and services, and then funneled the overcharges through shell companies and back to themselves. Almost all products and services are paid for by Medicare and Medicaid reimbursements.

According to the indictment, the scheme spanned services from landscaping and pharmacy to food supplies, therapies, and decorations. If vendors questioned the overcharges and kickbacks, they were turned down. The funds were allegedly used by the four perpetrators for several personal purposes, including paying real estate, jewelry, and gold bars, as well as making political contributions.

Owner faces payback for falsely claiming to supply medical equipment

Fraudulently billing Medicare for $4 million for power wheelchairs, back braces, and knee braces that were medically unnecessary, not provided to beneficiaries, or both, resulted to time in prison and money penalties for a medical supply company owner. A jury trial on November 6, 2015, resulted in the owner’s conviction on six counts of health care fraud, a sentence of 60 months in prison, and a judicial order for the owner to pay $1,266,860 in restitution for his role in the scheme.

According to evidence presented at the trial, between January 2006 and October 2009, the owner created false documentation to support his false billing claims, including fake reports of home assessments that never occurred and signed documents stating that equipment was delivered that was never delivered. In addition, power wheelchairs were delivered to beneficiaries that were able to walk without assistance.

The Federal Bureau of Investigation and the HHS-Office of Inspector General investigated the case, which was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office of the Central District of California. The case was prosecuted by Ritesh Srivastava and Claire Yan of the Fraud Trial Attorney section of the Department of Justice.