Actor and Accountant Agree to Plead Guilty to Conspiracy Charges in Mortgage Fraud Scheme That Cost Banks $3.8 Million

Actor Tommy Lister, who has appeared in approximately 100 movies, and a San Fernando Valley accountant were charged in federal court with conspiring to commit mortgage fraud in a scheme that led to $3.8 million in losses.

Lister, who is also known as “Tiny” and “Zeus,” a 54-year-old Chatsworth resident, was charged this afternoon in a criminal information with one count of conspiracy.

A second person involved in the scheme—Arcelia Chavez, 48, of Northridge, who is a self-employed certified tax preparer—was also charged today with conspiracy.

In plea agreements that were also filed this afternoon in United States District Court, both Lister and Chavez agreed to plead guilty to the conspiracy charges.

The court documents filed today outline a scheme that ran from November 2005 through June 2007 and involved Lister, Chavez, and several other individuals, including: Sami Sager Sweiss, formerly a mortgage loan officer based in Woodland Hills; Jason Patterson, a real estate agent in Long Beach; J.R., formerly a manager of a Washington Mutual Bank branch in Woodland Hills; and Wanda Tenney, formerly an escrow officer based in the San Fernando Valley.

Lister conspired with these individuals to fraudulently acquire title to four residential properties he could not afford. With the help of these individuals and others, Lister obtained mortgages for the four properties through fraudulent means, including submitting mortgage applications that included inflated income and asset amounts; fabricating bank statements and falsifying other documents to substantiate the fraudulent statements in the loan applications; and falsifying escrow records to deceive lenders into believing Lister had made required down payments.

In addition to fraudulently obtaining the mortgages, Lister and his co-conspirators concealed from lenders the fact that he would receive kickbacks from sellers after the real estate deals closed.

Relying on the fraudulent applications and documents, lenders issued mortgages totaling $5.7 million. Lister subsequently defaulted on the four mortgages, causing those lenders and their successors to lose approximately $2.6 million.

After acquiring title to the four residential properties, Lister obtained fraudulent home equity lines of credit on each of the four properties. Lister drew down a total of $1,146,000 in cash from the four HELOCs but did not pay back any of the principal.

Lister also admitted in his plea agreement that Chavez aided and abetted him in obtaining one of the fraudulent mortgages and a fraudulent HELOC by preparing a false CPA letter, as well as fabricating W-2s and a pay stub. The false CPA letter stated that Chavez had prepared Lister’s tax returns. Chavez separately admitted in her plea agreement that she prepared the false and fictitious documents, actions that caused lenders to lose approximately $1.1 million.

Lister and Chavez will be summoned to appear in federal court in Los Angeles in September.

The charge of conspiracy carries a statutory maximum sentence of five years in federal prison.

On July 30, 2012, Sweiss pleaded guilty to a conspiracy count before United States District Judge Dale S. Fischer. As part of his guilty plea, Sweiss admitted that he conspired with Lister, Patterson, Tenney, and Chavez to commit mortgage fraud. Sweiss is scheduled to be sentenced on March 18, 2013.

The charges in this case are the result of an investigation by the Federal Bureau of Investigation and IRS-Criminal Investigation.

Three Former UBS Executives Convicted for Frauds Involving Contracts Related to the Investment of Municipal Bond Proceeds

A federal jury in New York City today convicted three former financial services executives for their participation in frauds related to bidding for contracts for the investment of municipal bond proceeds and other municipal finance contracts, the Department of Justice announced.

Peter Ghavami, Gary Heinz, and Michael Welty, all former UBS AG executives, were found guilty on conspiracy and fraud charges in the U.S. District Court in New York City. Ghavami was found guilty on two counts of conspiracy to commit wire fraud and one count of substantive wire fraud. Heinz was found guilty on three counts of conspiracy to commit wire fraud and two counts of substantive wire fraud. Welty was found guilty on three counts of conspiracy to commit wire fraud. Heinz was found not guilty on one count of witness tampering, and Welty was found not guilty on one count of substantive wire fraud.

The trial began on July 30, 2012. Ghavami, Heinz, and Welty were initially indicted on December 9, 2010.

“For years, these executives corrupted the competitive bidding process and defrauded municipalities across the country out of money for important public works projects,” said Scott D. Hammond, Deputy Assistant Attorney General of the Antitrust Division’s criminal enforcement program. “Today’s convictions demonstrate that the division is committed to holding accountable those who seek to unfairly and illegally undermine competitive markets.”

According to evidence presented at trial, while employed at UBS, Ghavami, Heinz, and Welty participated in separate fraud conspiracies and schemes with various financial institutions and with a broker at various time periods from as early as March 2001 until at least November 2006. These financial institutions, or providers, offered a type of contract—known as an investment agreement— to state, county, and local governments and agencies and not-for-profit entities throughout the United States. The public entities were seeking to invest money from a variety of sources, primarily the proceeds of municipal bonds that they had issued to raise money for, among other things, public projects. Public entities typically hire a broker to assist them in investing their money and to conduct a competitive bidding process to determine the winning provider.

According to evidence presented at trial, while acting as providers, Ghavami, Heinz, and Welty, with their provider and broker co-conspirators, corrupted the bidding process for more than a dozen investment agreements to increase the number and profitability of the agreements awarded to UBS. At other times, while acting as brokers, Ghavami, Heinz, Welty, and their co-conspirators arranged for UBS to receive kickbacks in exchange for manipulating the bidding process and steering investment agreements to certain providers.

Ghavami, Heinz, and Welty deprived the municipalities of competitive interest rates for the investment of tax-exempt bond proceeds that were to be used by municipalities to refinance outstanding debt and for various public works projects, such as for building or repairing schools, hospitals, and roads. Evidence at trial established that they cost municipalities around the country and the U.S. Treasury millions of dollars.

During the trial, the government presented specific evidence relating to approximately 26 corrupted bids and approximately 76 recorded conversations made by the co-conspirator financial institutions. Among the issuers and not-for-profit entities whose agreements or contracts were subject to the defendants’ schemes were the Commonwealth of Massachusetts, the New Mexico Educational Assistance Foundation, the Tobacco Settlement Financing Corporation of Rhode Island, and the RWJ Health Care Corp at Hamilton.

“Corrupt bidding schemes serve to weaken the public’s trust in the municipal bond market and prevent public entities from enjoying the benefits of a true competitive bidding process,” said Mary E. Galligan, Acting Assistant Director in Charge of the FBI in New York. “Today’s conviction is further proof of our efforts to weed out these corrupt criminals and ensure justice is served.”

“Today’s verdict is important because it confirms that these complex, seemingly uninteresting backroom deals have a real impact on taxpayers, who should benefit from a municipal bond issue and are ultimately responsible for paying it off,” said Richard Weber, Chief, Internal Revenue Service-Criminal Investigation (IRS-CI). “Today’s convictions send a strong message to the municipal bond industry and demonstrates the commitment of the Internal Revenue Service and the Justice Department to rid the industry of corrupt practices.”

A total of 20 individuals have been charged as a result of the department’s ongoing municipal bonds investigation. Including today’s convictions, a total of 19 individuals have been convicted or pleaded guilty, and one awaits trial. Additionally, one company has pleaded guilty.

Two of charged fraud conspiracies carry a maximum penalty per count of 30 years in prison and a $1 million fine. A third fraud conspiracy charge carries a maximum penalty of five years in prison and a $250,000 fine. The two wire fraud charges carry a maximum penalty per count of 30 years in prison and a $1 million fine. These maximum fines per count may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either amount is greater than the statutory maximum fine.

The verdict announced today resulted from an ongoing investigation conducted by the Antitrust Division’s New York and Chicago Offices, the FBI, and the IRS-CI. The division is coordinating its investigation with the U.S. Securities and Exchange Commission, the Office of the Comptroller of the Currency, and the Federal Reserve Bank of New York.

Today’s convictions are part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ Offices and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

Anyone with information concerning bid rigging and related offenses in any financial markets should contact the Antitrust Division’s New York Field Office at 212-335-8000, the FBI at 212-384-5000 , or IRS-CI at 212-436-1761 ; or visit www.justice.gov/atr/contact/newcase.htm.

Four of Six Arrested on New Indictment in Sutter County Benefits Fraud Case

Arrests were made on new charges in a continuing investigation into a fraudulent unemployment and disability benefits scheme based out of Sutter County, United States Attorney Benjamin B. Wagner announced.

“Whether it’s against the employer-funded unemployment insurance program or the employee-funded disability insurance program, fraud is costly to all of us,” said EDD Director Pam Harris. “Our department and its dedicated investigators are committed to detecting and deterring fraud and ensuring justice is served in this case and any other where individuals are cheating a system meant to benefit hard-working Californians and businesses.”

In a 24-count indictment that was unsealed today, a federal grand jury charged Ryan Herbert Smith, 46, of Turlock; Chindo Gharu, 49, of Yuba City; Seema Rajput, 45, of Modesto; Rajinder Kaur Dhillon, 70, of Sacramento; Rajinder Kaur Dhillon 47, of Yuba City; and Balwinder Singh Khangura, 64, of Yuba City and Sacramento, with participating in a scheme to defraud the state of California of unemployment and disability benefits. Smith, Gharu, Rajinder Kaur Dhillon, and Khangura were arrested. The remaining two defendants are expected to self-surrender.

According to the previous indictment, Mohammad Nawaz Khan, 56; Mohammad Adnan Khan, 31; Iqila Begum Khan, 31, all of Live Oak; and Mohammad Shahbaz Khan 56, of Yuba City, controlled a series of companies that were reported to the Employment Development Department as farm labor contractors. The Khans sold fake paystubs to other people in the community and used the companies they controlled to report false wages for the individuals who purchased those paystubs. The Khans at times instructed the purchasers how the fake paystubs could be used to fraudulently claim unemployment and disability benefits. Over the course of the conspiracy, the defendants reported wages for over 400 separate individuals that resulted in more than 2,000 fraudulent claims for unemployment and disability benefits. The loss in this case is over $5 million.

According to the new indictment, Smith, Charu, Rajput, Dhillon, Dhillon, and Khangura purchased paystubs that falsely showed they had been paid wages by companies controlled by the Khans. The defendants would then use that paystub to file for unemployment benefits, disability benefits, or both.

The investigation in this case is ongoing to determine the full extent of the fraud.

This case is the product of a joint investigation by the Federal Bureau of Investigation, the Department of Labor-Office of Inspector General, and the Employment Development Department-Investigations Division. Assistant United States Attorney Jared Dolan is prosecuting the case.

The maximum statutory penalty for mail fraud is 20 years in prison and a $250,000 for each count. The actual sentence, if convicted, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

The charges are only allegations and the defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.

AEP Power Surge Scammers Sentenced to Federal Prison

U.S. Attorney Booth Goodwin announced that three individuals were sentenced to federal prison in connection with a scheme to obtain money by submitting fraudulent claims for power surge damage to American Electric Power Service Corporation Inc. (“AEP”). Lead defendant and former AEP property damage claims adjuster Deborah Farmer, 47, was sentenced to three years in prison. Farmer previously pleaded guilty in April to conspiracy to commit mail and wire fraud. Farmer admitted she arranged the scheme and conspired with other individuals to unlawfully obtain money from the power company by submitting the fraudulent claims. Co-defendant Julia Washington, 45, of Charleston, was sentenced to two years in prison. Washington previously pleaded guilty in April to conspiracy to commit mail and wire fraud. A third defendant, Freda Bradshaw, 47, of Pliny, Putnam County, West Virginia, was sentenced to one year in prison (six months of which will be served on home confinement) and three years of supervised release. Bradshaw previously pleaded guilty in April to conspiracy to commit mail and wire fraud.

Four other co-defendants involved in the conspiracy were also sentenced for their roles in the conspiracy: Jonathan Shaffer, 32, of Charleston, was sentenced to eight months of home confinement with electronic monitoring. Tiffany Shaffer, 24, of Poca, West Virginia, was sentenced to four months of home confinement with electronic monitoring. Bryan P. Javins, 33, of Nitro, West Virginia, was sentenced to four months of home confinement with electronic monitoring. Jeanette Boggs, 58, also of Nitro, was sentenced to four months of home confinement with electronic monitoring. These four defendants also received five years of probation once their sentences have been discharged.

A two-year investigation revealed that false claims were filed with AEP related to phony power surge damage to homes. These claims were submitted by Deb Farmer. Claims checks, ranging from $2,000 to as much as $25,000 per fraudulent claim, were mailed to the defendants at various times between March 2009 and March 2010. Farmer and Washington recruited other people into the scheme in exchange for a “cut” of the claims checks. A total of 57 fraudulent claims were filed resulting in a loss of approximately $598,485. The final restitution figure was slightly lowered due to account for some offsets that were uncovered in the course of the investigation and one scam participant settling with AEP in the civil suit filed in Putnam County.

At sentencing, the court also ordered Farmer and Washington to pay $558,412.36 in restitution, jointly and severally with each other. Defendant Freda Bradshaw was ordered to pay $115,639.07 in restitution. Defendant Jonathan Shaffer was ordered to pay $44,929 in restitution. Defendant Bryan Javins was ordered to pay $20,945 in restitution and defendant Janette Boggs was ordered to pay $25,724.57 in restitution, with a $5,000 down payment due in 20 days. All defendants were placed on payment plans.

Judge Copenhaver stated during the sentencing of defendant Deborah Farmer that he was shocked at the “ease in which more than 30 people were recruited into this fraudulent scheme.” The court continued that Farmer spent a considerable amount of time “assailing the treasury of AEP” and “acting with abandon until the scheme ended in March 2010.”

The Federal Bureau of Investigation (FBI), the United States Postal Inspection Service, and the West Virginia State Police conducted the investigation. Assistant United States Attorney Erik S. Goes handled the prosecution.

Two Investment Advisers Convicted in California of High-Yield Investment Fraud

William J. Ferry, a former stock broker and investment adviser, and Dennis J. Clinton, a former real estate investment manager, were found guilty by a federal jury in Santa Ana, California for their roles in a conspiracy to defraud a wealthy investor of $1 billion in a high-yield investment fraud scheme, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division. The investor was, in reality, part of an undercover FBI team that posed as wealthy investors and investment managers in an effort to stop fraudsters before they actually harmed victims.

“Mr. Ferry and Mr. Clinton tried to dupe undercover agents into believing their high-yield investment program would earn them extremely high rates of return,” said Assistant Attorney General Breuer. “In fact, Ferry and Clinton were conspiring to steal their money, along with the money of trusting investors. Undercover operations are an integral part of our efforts to stop financial fraudsters before they wipe out the life savings of innocent victims. Based on today’s verdict, the defendants will now pay a heavy price for their conduct.”

Ferry, 70, of Newport Beach, California, and Clinton, 64, of San Diego, were each found guilty in U.S. District Court for the Central District of California of one count of conspiracy, two counts of mail fraud, and six counts of wire fraud. They face a maximum penalty of 20 years in prison on each fraud count. They will be sentenced on February 1, 2013.

Paul R. Martin, a former senior vice president and managing director of Bankers Trust, was found guilty in U.S. District Court for the Central District of California for his role in the scheme in a separate trial on August 3, 2012. Martin, 63, of New Jersey, was convicted of one count of conspiracy, two counts of mail fraud, and six counts of wire fraud. At sentencing, scheduled for February 1, 2013, Martin faces a maximum penalty of 20 years in prison on each fraud count.

On August 21, 2008, Ferry, Clinton, and Martin were indicted along with Oregon resident John Brent Leiske, Canadian citizen and resident Alex Chelak, Iowa resident Richard Arthur Pundt, California resident Brad Keith Lee, and Florida resident Ronald J. Nolte.

Evidence at trial established that, from February to December 2006, Ferry, Clinton, Martin, and others conspired to promote a high-yield investment fraud scheme promising an extremely high return at little or no risk to principal. The defendants claimed that their high-yield investment program (HYIP) was a “Fed trade program” regulated by the “Fed” (Federal Reserve Bank), that they had to follow strict Fed guidelines, and that a Fed trade administrator administered their program, with compliance duties handled by a Fed compliance officer.

Investors also were told that once they had passed compliance, they would become registered with the Fed in Washington, D.C. The defendants falsely represented to FBI undercover agents that they would arrange for them to meet a Federal Reserve official and/or the chairman of the board of a major U.S. bank to confirm the existence of the defendants’ HYIP. The defendants falsely claimed that these Fed investment programs existed primarily to generate funds for project funding and humanitarian purposes, such as Hurricane Katrina relief. They further falsely claimed that the promised profits from investing in a Fed program had to be divided, in equal amounts, with one portion going for some humanitarian purpose, another portion for some kind of project financing, and the remainder to the investor. The defendants represented to the undercover agents that the agents’ offshore bank account would be managed by a Swiss banker who was already managing billions of dollars for the defendants. In the scheme, Ferry acted as an underwriter and member of the compliance team; Martin acted as a banking expert; Clinton acted as a troubleshooter during the compliance phase and transfer of funds to the Swiss banker; Lee acted as the contact with the Swiss banker; and Leiske acted as the trader. Chelak is charged with having acted as a compliance officer.

On April 13, 2009, Lee pleaded guilty to wire fraud and conspiracy to commit mail and wire fraud. On January 11, 2010, he was sentenced to 24 months in prison.

Leiske’s case was transferred to the District of Oregon, where he pleaded guilty to all counts on January 24, 2012. He is scheduled to be sentenced on September 19, 2012.

Nolte was acquitted today of all charges by a jury in the Central District of California. In August 2010, charges against Pundt were dismissed by the government.

Chelak remains a fugitive.

This continuing investigation is being conducted by the FBI. This case is being prosecuted by Senior Trial Attorney David Bybee and Trial Attorney Fred Medick of the Justice Department Criminal Division’s Fraud Section.

Detroit-Area Resident Pleads Guilty in $13.8 Million Health Care Fraud Scheme

A Detroit-area resident pleaded guilty today in federal court in the Eastern District of Michigan for his role in managing a $13.8 million psychotherapy fraud scheme, announced the Department of Justice, the Department of Health and Human Services (HHS), and the FBI.

Jawad Ahmad, 42, pleaded guilty before U.S. District Judge Gerald E. Rosen in Detroit to one count of conspiracy to commit health care fraud. At his sentencing, scheduled for November 28, 2012, Ahmad faces a maximum potential penalty of 10 years in prison and a $250,000 fine.

The guilty plea was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney for the Eastern District of Michigan Barbara L. McQuade; Special Agent in Charge of the FBI’s Detroit Field Office Robert D. Foley III; and Special Agent in Charge Lamont Pugh III of the HHS Office of Inspector General’s (HHS-OIG) Chicago Regional Office.

According to court documents, beginning in July 2008, two of Ahmad’s co-conspirators, Tausif Rahman and Muhammad Ahmad, acquired control over a home health care company known as Physicians Choice Home Health Care LLC (Physicians Choice). From in or around January 2009 and continuing through in or around March 2010, Jawad Ahmad managed the operations of Physicians Choice.

Court documents indicate that Jawad Ahmad managed numerous aspects of the fraud at Physicians Choice, including delivering the payment of kickbacks to beneficiary recruiters who obtained Medicare beneficiaries’ information needed to bill Medicare for home health services, including physical therapy and skilled nursing, that were never rendered. Jawad Ahmad also provided information to employees of Physicians Choice to check the billing eligibility of the Medicare beneficiaries before Physicians Choice began billing them.

In exchange for kickbacks, Medicare beneficiaries pre-signed forms and visit sheets that were later falsified to indicate they received home health services they had never received. Jawad Ahmad delivered the pre-signed beneficiary paperwork to various medical professionals, including nurses, physical therapists, and physical therapy assistants to create and/or sign fictitious patient files to document purported home health services that were never rendered. From in or around January 2009 through in or around March 2010, Medicare paid more than $5 million for fraudulent home health care claims submitted by Physicians Choice.

According to court documents, from in or around May 2010 through in or around September 2011, Jawad Ahmad managed Phoenix Visiting Physicians PLLC, a company incorporated by co-conspirator Dr. Dwight Smith. Dr. Smith signed home health care referrals for beneficiaries he had not seen or treated. Phoenix employed individuals who held themselves out to be “doctors,” but who were not, in fact, licensed in the state of Michigan to perform any medical services. The unlicensed “doctors” met and purported to examine non-homebound Medicare beneficiaries for home health care services. Jawad Ahmad drove one unlicensed “doctor” to meet and purportedly examine beneficiaries who were not, in fact, homebound.

Between 2008 and 2009, Ahmad’s co-conspirators acquired beneficial ownership and control over three additional home health care companies: First Care Home Health Care LLC, Quantum Home Care Inc., and Moonlite Home Care Inc. Each of these home health companies billed Medicare and operated in a manner the same as or similar to Physicians Choice. Each of these companies received fraudulent home health referrals from Dr. Smith through Phoenix Visiting Physicians. From in or around May 2010 through in or around September 2011, Medicare paid more than $5 million for fraudulent home health care claims submitted by Physicians Choice, First Care, Quantum, and Moonlite based on Dr. Smith’s fraudulent referrals. The four home health companies at the center of the indictment received approximately $13.8 million from Medicare in the course of the conspiracy.

Eight other defendants have pleaded guilty in this case, including Tausif Rahman and Muhammad Ahmad, who each pleaded guilty to one count of conspiracy to commit health care fraud and one count of money laundering, as well as Dr. Dwight Smith who pleaded guilty to one count of conspiracy to commit health care fraud.

The case is being prosecuted by Trial Attorney Catherine K. Dick of the Criminal Division’s Fraud Section. The case was investigated by the FBI and HHS-OIG and 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 for the Eastern District of Michigan.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,330 defendants who have collectively billed the Medicare program for more than $4 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

Forensic Accountant Found Guilty of Bankruptcy Fraud

Attorney Robert E. O’Neill announces that a federal jury found John K. Freeman (66, Mount Dora) guilty of concealing property belonging to the estate of a bankruptcy debtor. Freeman faces a maximum penalty of five years in federal prison. His sentencing hearing is scheduled for November 30, 2012.

A superseding indictment was returned against Freeman on September 7, 2011.

According to testimony presented at trial, Freeman, who is a certified public accountant and forensic accountant, did not disclose that he was in possession of over $700,000 in checks the day before he filed for bankruptcy in the Middle District of Florida. Bank and real estate records revealed that several checks were made out to his 85 year-old mother, while Freeman had the legal authority to negotiate the checks as his mother’s “attorney in fact.”

Within a week of filing bankruptcy, Freeman opened a joint bank account under his mother’s Social Security number and deposited the checks into the account. Representatives from the Office of the United States Trustee testified that Freeman had the obligation to disclose the existence of the checks and the account during the creditors meeting and amend his bankruptcy petition, but failed to do so. Bank records showed that between August 2005 and the time that the account was closed, in July 2006, Freeman used funds from the account to pay a Lake County, Florida country club, purchase a luxury vehicle, pay various attorneys, pay-off an existing mortgage for a commercial building that he owned in Indiana, and withdraw approximately $150,000 in cash. He transferred the balance of the account (approximately $380,000) to another account on the day that he filed a motion to dismiss his bankruptcy petition.

At trial, Freeman testified that he notified his bankruptcy attorney of all of the facts surrounding a real estate transaction and assignment of judgment that caused the checks to be issued; that he was not present at a real estate closing when the checks were issued; that his elderly mother had a valid judgment lien against him and that she opened the joint bank account, made the initial deposit, and directed him to write the various checks in 2005 and 2006.

This case was investigated by the Federal Bureau of Investigation and assistance was provided by the Office of the United States Trustee. It is being prosecuted by Assistant United States Attorney Daniel W. Eckhart.

Houston Doctor Arrested on Charges of Health Care Fraud

Dr. Emmanuel Nwora, 48, of Houston, has been arrested following the return of a sealed indictment alleging health care fraud and conspiracy to commit health care fraud, United States Attorney Kenneth Magidson announced.
The 13-count indictment was unsealed just moments ago upon Nwora’s arrest by agents with FBI, the Texas Attorney General’s Medicaid Fraud Control Unit, and Department of Health and Human Services-Office of Inspector General, Office of Investigations. He is expected to appear before U.S. Magistrate Judge Nancy Johnson. Also charged is Charles Harris, 52, aka Celestine Nwajfor and Okechi Nwajfor, also of Houston. Harris (photo below) is currently a fugitive and a warrant remains outstanding for his arrest. Anyone with information about his whereabouts is asked to contact the FBI at 713-693-5000.

The indictment alleges that from 2007 to 2010, Nwora and Harris falsely billed Medicare and Medicaid under vestibular diagnostic codes. They allegedly billed Medicare and Medicaid approximately $850,000 and were paid approximately $390,000. Vestibular problems are traditionally inner ear problems with the patients reporting chronic dizziness and balance problems.
Nwora operated a family practice clinic in Houston called Houston Optimum Care Medical Association, while Harris operated a Houston business called Cevine Health Care and Rehabilitation Center. According to the indictment, Harris would send unlicensed persons into Medicare beneficiaries homes to perform some types of vestibular testing. Harris allegedly would then submit “superbills” to Nwora and his billing contractor for this testing. The indictment indicates that patients reported either that none of the testing was performed or that some form of testing was performed but not in the quantity that was actually billed. One patient’s Medicare number was allegedly billed for more than 800 tests on 161 different days over the course of one year. Others were billed for more than 500 tests over a period of one year, according to the indictment. The patients, their families or their treating doctors reported that these patients did not need vestibular testing and did not complain of dizziness.

Nwora allegedly billed Medicare and Medicaid for these diagnostic tests and split the paid claims with Harris. The indictment indicates that Nwora kept 35 percent, while Harris received the remainder.

Each of the 13 counts in the indictment carry as possible punishment up to 10 years in federal prison and a possible $250,000 fine.

The charges are the result of the investigative efforts of the Department of Health and Human Services-Office of Inspector General, Office of Investigations as well as the Texas Attorney General’s Medicaid Fraud Control Unit, FBI, and the United States Attorney’s Office. Special Assistant United States Attorney Suzanne Bradley is prosecuting the case.

An indictment is a formal accusation of criminal conduct, not evidence. A defendant is presumed innocent unless and until convicted through due process of law.

Former President of Children’s Social Networking Company and Stockbroker Found Guilty of Securities Fraud and Commercial Bribery Charges

A federal jury in Brooklyn returned guilty verdicts against Pino Baldassarre, the former president of Dolphin Digital Media, Inc. (“Dolphin”) and Robert Mouallem, a stockbroker, on conspiracy, securities fraud, and commercial bribery charges. These charges arose from the defendants’ scheme to sell their shares of Dolphin at inflated prices by bribing stockbrokers. When sentenced by United States District Judge Jack B. Weinstein, the defendants face a maximum sentence of 25 years’ imprisonment on the most serious charge.
The verdicts were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and Janice K. Fedarcyck, Assistant Director in Charge, Federal Bureau of Investigation, New York Field Office.
According to the evidence at trial, Dolphin created secure social networking websites for children. Its stock was publicly traded on the Over The Counter Bulletin Board. In addition to serving as Dolphin’s President, Baldassarre was a substantial shareholder of the company. Baldassarre was fired from Dolphin in March 2009. Shortly thereafter, Baldassarre and another Dolphin shareholder met with an individual, identified as “John Doe,” who claimed to have access to a network of stockbrokers who managed client brokerage accounts and to have authority to trade in those accounts on behalf of their clients. John Doe agreed to have these stockbrokers purchase, through their clients’ accounts, Dolphin shares owned by Baldassarre and the other shareholder in exchange for a kickback of 30 percent of the sale proceeds. Baldassarre and the other shareholder arranged for Mouallem to act as their stockbroker to sell their Dolphin shares. Mouallem, who knew of the kickback arrangement, placed orders to sell the stock in such a way as to ensure that John Doe’s network of stockbrokers bought the conspirators’ Dolphin stock instead of other Dolphin stock that may have been available for sale. Unbeknownst to Baldassarre, Mouallem, or the other Dolphin shareholder, John Doe was a special agent of the Federal Bureau of Investigation acting in an undercover capacity. In March and April 2010, Baldassarre, Mouallem, and the other shareholder orchestrated five test sales of their Dolphin stock, supposedly to John Doe’s network of stockbrokers. In each case, Baldassarre paid the 30 percent kickback to John Doe.
“Rather than let the market set the true value of Dolphin stock, these defendants engaged in a bribery scheme to manipulate the market for Dolphin stock for corrupt personal gain,” stated United States Attorney Lynch. “It is essential for the securities markets to be free of such corruption in order to preserve investor confidence. Those who would engage in such manipulation schemes should consider whether their ‘partners’ in crime are actually working for the FBI.”
FBI Assistant Director in Charge Fedarcyk stated, “Schemes like this one not only stack the deck unfairly for the schemers and undermine investor faith in the integrity of the marketplace. If not for the presence of the FBI undercover agent, this scheme would have resulted in real shareholders unknowingly paying inflated prices for stock.”
The government’s case is being prosecuted by Assistant United States Attorney Patrick Sinclair.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ Offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
The Defendants:
PINO BALDASSARRE
Age: 53
Residence: Indialantic, Florida
ROBERT MOUALLEM
Age: 57
Residence: Boca Raton, Florida

California Hedge Fund Manager Doug Whitman Found Guilty in Manhattan Federal Court on All Counts for Insider Trading

Preet Bharara, the United States Attorney for the Southern District of New York, announced that DOUG WHITMAN, a portfolio manager at Whitman Capital, LLC, was found guilty by a jury in Manhattan federal court of conspiracy and securities fraud crimes stemming from his involvement in two insider trading schemes that earned his firm more than $900,000 in illegal profits. WHITMAN was convicted on all four counts with which he was charged. As part of the schemes, WHITMAN executed trades based on material, non-public information (“Inside Information”), related to three publicly traded companies: Marvell Technology Group, Ltd. (“Marvell”); Polycom, Inc. (“Polycom”); and Google, Inc. (“Google”). He was convicted after a three-week trial before U.S. District Judge Jed S. Rakoff.
Manhattan U.S. Attorney Preet Bharara said: “Douglas Whitman now joins the grim procession of convicted Wall Street professionals who decided that the rules don’t apply to them. The rules do apply. Over and over again, juries of good, common-sense citizens have said the rules do apply, and they have held defendants like Mr. Whitman accountable for breaking them. Mr. Whitman had a hedge fund with his name on the door, with rules against insider trading. He flouted those rules, tarnished his name, and now is a convicted felon facing imprisonment. I want to thank both the jury for their service and the fine career prosecutors from my office who so ably tried this case for their hard work and dedication.”
According to the indictment, evidence presented at Whitman’s trial, as well as testimony from other trials and court proceedings:
From 2007 through 2009, while running Whitman Capital, WHITMAN bought and sold Marvell stock and options based on Inside Information, including earnings, revenue, and/or other material financial and business information. The Inside Information was provided to WHITMAN by Karl Motey, an independent research consultant, who had obtained it from certain Marvell employees. In exchange for the Inside Information, WHITMAN paid Motey through a soft dollar payment arrangement between Whitman Capital and Motey’s consulting firm. WHITMAN also provided the Marvell Inside Information to Wesley Wang, in exchange for other Inside Information.
In another scheme, from 2006 to 2007, WHITMAN obtained Inside Information, including earnings information and other material financial information, pertaining to Polycom and Google from Roomy Khan, who worked in the hedge fund industry. Khan obtained the Polycom Inside Information from an employee at the company, and she obtained the Google Inside Information from an employee of a firm that provided investor relations services to Google. WHITMAN used the Polycom and Google Inside Information to execute securities transactions that earned his firm more than $900,000 in illegal profits. In exchange for the Inside Information, WHITMAN provided Khan with information about other publicly traded technology companies.
WHITMAN, 54, of Atherton, California, was convicted of two counts of conspiracy to commit securities fraud and two counts of securities fraud. Each of the conspiracy counts carries a maximum penalty of five years in prison and a fine of $250,000, or twice the gross gain or loss from the offense. Each of the securities fraud counts carries a maximum penalty of 20 years in prison and a maximum fine of $5 million. WHITMAN is scheduled to be sentenced by Judge Rakoff on December 20, 2012, at 4:00 p.m.
WHITMAN’s co-conspirators, Karl Motey, Roomy Khan, and Wesley Wang, previously pled guilty to insider trading charges and are awaiting sentencing.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation and thanked the U.S. Securities and Exchange Commission. He noted that the investigation is continuing.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a co-chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Jillian Berman, Christopher LaVigne, and Micah Smith are in charge of the prosecution.

SEC Shuts Down $600 Million Online Pyramid and Ponzi Scheme

The Securities and Exchange Commission announced fraud charges and an emergency asset freeze to halt a $600 million Ponzi scheme on the verge of collapse. The emergency action assures that victims can recoup more of their money and potentially avoid devastating losses.
The SEC alleges that online marketer Paul Burks of Lexington, N.C. and his company Rex Venture Group have raised money from more than one million Internet customers nationwide and overseas through the website ZeekRewards.com, which they began in January 2011.

According to the SEC’s complaint filed in federal court in Charlotte, N.C., customers were offered several ways to earn money through the ZeekRewards program, two of which involved purchasing securities in the form of investment contracts. These securities offerings were not registered with the SEC as required under the federal securities laws.
The SEC alleges that investors were collectively promised up to 50 percent of the company’s daily net profits through a profit sharing system in which they accumulate rewards points that they can use for cash payouts. However, the website fraudulently conveyed the false impression that the company was extremely profitable when, in fact, the payouts to investors bore no relation to the company’s net profits. Most of ZeekRewards’ total revenues and the “net profits” paid to investors have been comprised of funds received from new investors in classic Ponzi scheme fashion.
“The obligations to investors drastically exceed the company’s cash on hand, which is why we need to step in quickly, salvage whatever funds remain and ensure an orderly and fair payout to investors,” said Stephen Cohen, an Associate Director in the SEC’s Division of Enforcement. “ZeekRewards misused the power of the Internet and lured investors by making them believe they were getting an opportunity to cash in on the next big thing. In reality, their cash was just going to the earlier investor.”
The SEC’s complaint alleges that the scheme is teetering on collapse with investor funds at risk of dissipation without its emergency enforcement action. Last month, ZeekRewards brought in approximately $162 million while total investor cash payouts were approximately $160 million. If customers continue to increasingly elect to receive cash payouts rather than reinvesting their money to reach higher levels of rewards points, ZeekRewards’ cash outflows would eventually exceed its total revenue.
Burks has agreed to settle the SEC’s charges against him without admitting or denying the allegations, and agreed to cooperate with a court-appointed receiver.
According to the SEC’s complaint, ZeekRewards has paid out nearly $375 million to investors to date and holds approximately $225 million in investor funds in 15 foreign and domestic financial institutions. Those funds will be frozen under the emergency asset freeze granted by the court at the SEC’s request. Meanwhile, Burks has personally siphoned several million dollars of investors’ funds while operating Rex Venture and ZeekRewards, and he distributed at least $1 million to family members. Burks has agreed to relinquish his interest in the company and its assets plus pay a $4 million penalty. Additionally, the court has appointed a receiver to collect, marshal, manage and distribute remaining assets for return to harmed investors.
The SEC’s investigation was conducted by Brian M. Privor and Alfred C. Tierney in the SEC’s Enforcement Division in Washington D.C. The SEC acknowledges the assistance of the Quebec Autorite des Marches Financiers and the Ontario Securities Commission.

Owner of Miami Home Health Company Pleads Guilty in $60 Million Health Care Fraud Scheme

The owner of a Miami health care agency pleaded guilty for his participation in a $60 million home health Medicare fraud scheme, announced the Department of Justice, the FBI, and the Department of Health and Human Services (HHS).

Rodolfo Nieto Jr., 40, of Miami, pleaded guilty before U.S. District Judge Cecilia M. Altonaga in the Southern District of Florida to one count of conspiracy to defraud the United States and to receive health care kickbacks.
According to the court documents, Nieto was the owner and operator of Ronat Home Health Care Inc. According to court documents, during the time of the conspiracy, Ronat was a Florida home health “staffing agency” that purported to provide home health care and physical therapy services to eligible Medicare beneficiaries. Ronat subsequently became a home health agency.
According to court documents, from approximately January 2006 to approximately November 2009, Nieto accepted kickbacks in return for recruiting Medicare beneficiaries to be placed at Nany Home Health Inc., a Miami home health agency that purported to provide home health care and physical therapy services to eligible Medicare beneficiaries. The owners and operators of Nany paid Nieto kickbacks in return for allowing Nany to bill the Medicare program on behalf of the patients Nieto had recruited through Ronat. Specifically, as part of the scheme, Nany billed Medicare for home health services purportedly provided by Ronat.
In a related case, on April 25, 2012, Roberto Gonzalez and Olga Gonzalez, president and vice president of Nany, and their son, Fabian Gonzalez, all of whom operated Nany, were sentenced to 120, 87, and 87 months in prison, respectively, following their December 19, 2011 guilty pleas to one count each of conspiracy to commit health care fraud. From approximately January 2006 through November 2009, Roberto, Olga, and Fabian Gonzalez and their co-conspirators submitted approximately $60 million in false and fraudulent claims to Medicare, and Medicare paid approximately $40 million on those claims.
At sentencing, scheduled for October 23, 2012, Nieto faces a maximum penalty of five years in prison and a fine of $250,000 or twice the pecuniary gain or loss.
The plea was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; Jeffrey C. Mazanec, Acting Special Agent in Charge of the FBI’s Miami Field Office; and Special Agent in Charge Christopher B. Dennis of the HHS Office of Inspector General (HHS-OIG), Office of Investigations, Miami Office.
This case is being prosecuted by Senior Trial Attorney Joseph S. Beemsterboer of the Criminal Division’s Fraud Section. The case was investigated by the FBI and HHS-OIG and 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 for the Southern District of Florida.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,330 defendants who have collectively billed the Medicare program for more than $4 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.
To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to: www.stopmedicarefraud.gov.

New London Man Involved in Mortgage Fraud Scheme Sentenced to 18 Months in Prison

David B. Fein, United States Attorney for the District of Connecticut, announced that Michael Hodges, 53, of New London, was sentenced by Senior United States District Judge Alfred V. Covello in Hartford to 18 months of imprisonment, followed by two years of supervised release, for his participation in an eastern Connecticut mortgage fraud scheme. Hodges also was ordered to forfeit $25,000 and to pay restitution in the amount of $328,516.31.
According to court documents and statements made in court, from approximately 2004 to 2007, Jose Guzman and others used mortgage brokerage, property management, and home improvement companies to arrange for individuals (“buyers”) to purchase real estate, primarily residential housing properties located in New London County, by obtaining funding from various mortgage companies and mortgage originators after submitting false information on the buyers’ mortgage loan applications. The fraudulent information included information regarding income, assets, employment, rent history, as well as the buyers’ intention to make the properties their primary residences. The buyers were compensated for participating in the scheme.
Hodges, who was unemployed at the time, acted as a buyer in connection with Guzman’s purchase of one property in New London in 2006 and one property in Norwich in 2007. Hodges also referred individuals to Guzman to act as buyers and identified properties to be bought and sold as part of the conspiracy. Hodges received $5,000 both times he acted as a buyer and additional compensation when he identified a buyer or a property to be bought and sold.
According to previously filed court documents, the government believes that more than 200 fraudulent mortgages were funded through this mortgage fraud scheme, causing more than $9 million in losses to lenders.
On October 12, 2011, Hodges pleaded guilty to one count of conspiracy to commit mail fraud and wire fraud. Fifteen other individuals, including Jose Guzman, have been convicted of various charges stemming from this scheme. Guzman awaits sentencing.
This case has been investigated by the Federal Bureau of Investigation and the U.S. Department of Housing and Urban Development, Office of Inspector General. The case is being prosecuted by Assistant United States Attorneys Michael S. McGarry and David T. Huang.
In July 2009, the U.S. Attorney’s Office and the Federal Bureau of Investigation announced the formation of the Connecticut Mortgage Fraud Task Force to investigate and prosecute mortgage fraud cases and related financial crimes occurring in Connecticut. Citizens are encouraged to report any suspected mortgage fraud activity by calling 203-333-3512 begin_of_the_skype_highlighting FREE 203-333-3512 end_of_the_skype_highlighting and requesting the Connecticut Mortgage Fraud Task Force, or by sending an e-mail to ctmortgagefraud@ic.fbi.gov.
The Connecticut Mortgage Fraud Task Force includes representatives from the U.S. Attorney’s Office; Federal Bureau of Investigation; Internal Revenue Service-Criminal Investigation; U.S. Postal Inspection Service; U.S. Department of Housing and Urban Development, Office of Inspector General; Federal Deposit Insurance Corporation, Office of Inspector General; and State of Connecticut Department of Banking.
To report financial fraud crimes, and to learn more about the President’s Financial Fraud Enforcement Task Force, please visit www.stopfraud.gov.

Groton Resident Sentenced to Federal Prison for Role in Mortgage Fraud Conspiracy

David B. Fein, United States Attorney for the District of Connecticut, announced that Kenneth Perkins, 30, of Groton, was sentenced by Chief United States District Judge Alvin W. Thompson in Hartford to eight months of imprisonment, followed by three years of supervised release, for his role in an extensive mortgage fraud scheme.
According to court documents and statements made in court, between February 2007 and April 2010, Syed Babar of New London orchestrated a scheme to obtain millions of dollars in residential real estate loans, including loans insured by the Federal Housing Administration, through the use of sham sales contracts, false loan applications, and fraudulent property appraisals. Perkins conspired with Babar and others by serving as a “buyer” in approximately eight residential property sales in 2007. All but one of these properties are in Connecticut. Perkins knew that the sales prices on the sales contracts and closing documents were fraudulently inflated in order to secure loans at amounts higher than the prices actually agreed to by the sellers. Also included on the loan applications was false information about his income, his assets and liabilities, his intention to occupy the home as his primary residence, and his ownership interest in property in the prior three years.
Perkins received as much as $20,000 each time he agreed to act as a buyer.
Perkins also assisted the conspiracy by helping to obtain residential real estate loans in the names of other straw buyers. This assistance included creating false documentation in support of loan applications, including false employment records, false wage records, and false bank records. It also included utilizing a bank account into which some of the fraudulent proceeds were funneled and working with an appraiser to generate fraudulent appraisals that would be sent to lenders in support of loan applications.
Babar and his co-conspirators conducted approximately 30 fraudulent mortgage transactions. As a result, various lenders suffered total losses of approximately $4.75 million.
Chief Judge Thompson ordered Perkins to pay restitution in the amount of $4,180,565.
On October 1, 2010, Perkins pleaded guilty to one count of conspiracy to commit wire fraud.
Thirteen individuals have been convicted in connection with this scheme.
On November 28, 2011, Syed Babar was sentenced to 120 months of imprisonment. Six other scheme participants have received prison terms ranging from 30 to 90 months.
This case was investigated by the Federal Bureau of Investigation and the U.S. Department of Housing and Urban Development-Office of Inspector General and is being prosecuted by Assistant United States Attorneys Eric J. Glover, Susan Wines, and Liam Brennan.
Citizens are encouraged to report any suspected mortgage fraud activity by calling 203-333-3512 begin_of_the_skype_highlighting FREE 203-333-3512 end_of_the_skype_highlighting and requesting the Connecticut Mortgage Fraud Task Force, or by sending an e-mail to ctmortgagefraud@ic.fbi.gov.
The Connecticut Mortgage Fraud Task Force includes representatives from the U.S. Attorney’s Office; Federal Bureau of Investigation; Internal Revenue Service-Criminal Investigation; U.S. Postal Inspection Service; U.S. Department of Housing and Urban Development, Office of Inspector General; Federal Deposit Insurance Corporation, Office of Inspector General; and State of Connecticut Department of Banking.
To report financial fraud crimes, and to learn more about the President’s Financial Fraud Enforcement Task Force, please visit www.stopfraud.gov.

Long Island Railroad Retiree Pleads Guilty in Connection with Massive Disability Fraud Scheme

Preet Bharara, the United States Attorney for the Southern District of New York, announced that Gary Satin, a former electrician with the Long Island Railroad (LIRR), pled guilty to federal charges in connection with his participation in a massive fraud scheme in which LIRR workers claimed to be disabled upon early retirement so that they could receive disability benefits to which they were not entitled. Satin also pled guilty today to perjury for making false statements to the grand jury that was hearing evidence in this case. Satin pled guilty before U.S. Magistrate Judge Henry Pitman.

Manhattan U.S. Attorney Preet Bharara said, “The money train has come to a halt for Gary Satin, as it will for others. It was corruption, not coincidence, that caused Gary Satin’s purportedly disabling condition to align with his early retirement, making him eligible for annual benefit payments that almost matched his salary. As he acknowledged today, his disability and its timing were part of a pre-planned scam designed to game the system. What’s worse, in an effort to cover-up his fraud, he lied to a grand jury. He will now answer for his crimes.”

According to the complaint and the superseding information filed today in Manhattan federal court:

The LIRR Disability Fraud Scheme

The Railroad Retirement Board (RRB) is an independent U.S. agency that administers benefit programs, including disability benefits, for the nation’s railroad workers and their families. A unique LIRR contract allowed employees to retire at the relatively young age of 50—the age of eligibility has since changed to 55—if they had been employed by the LIRR for at least 20 years. Eligible employees are entitled to receive an LIRR pension, which is a portion of the full retirement payment for which they are eligible at 65. At 65, they then receive a full RRB pension. For LIRR workers who retired at 50, they would receive less than their prior salary and substantially lower pension payments than those to which the workers would be entitled at 65. However, LIRR employees who retired and claimed disability could receive a disability payment from the RRB on top of their LIRR pension, regardless of age. A retiree’s LIRR pension, in combination with RRB disability payments, can be roughly equivalent to the base salary earned during his or her career.

Hundreds of LIRR employees have exploited the overlap between the LIRR pension and the RRB disability program by pre-planning the date on which they would falsely declare themselves disabled so that it would coincide with their projected retirement date. These false statements, made under oath in disability applications, allowed LIRR employees to retire as early as age 50 with an LIRR pension, supplemented by the fraudulently obtained RRB disability annuity. From 2004 through 2008, 61 percent of LIRR employees who stopped working and began receiving RRB disability benefits were between the ages of 50 and 55. In contrast, only seven percent of employees at Metro-North who stopped working and received disability benefits during the same time period were between the ages of 50 and 55.

Satin’s Fraud

Gary Satin was an LIRR electrician who retired in June 2005 at the age of 55. In his last year of employment, Satin received approximately $84,000 in compensation. After retirement, he sought and obtained sickness and disability benefits from the RRB. In 2010, he received approximately $32,000 in LIRR pension payments and approximately $36,000 from his RRB disability annuity, for a total of $68,000 in annual benefits.

In applying for disability benefits, Satin claimed that he was unable to perform his railroad job and that indoor and outdoor chores were “difficult.” However, as Satin admitted during today’s proceeding, no medical condition prevented him from performing his railroad job. Instead, Satin had pre-planned his false disability to supplement his retirement income. In fact, in the 18 months prior to his retirement, Satin did not take a single day of sick leave, and in the five months prior to his retirement, he worked approximately 154 overtime hours. In the years after his retirement, Satin performed landscaping, contracting, and electrical work for pay. Satin also exploited his false disability to obtain other benefits to which he was not entitled, such as a handicapped parking pass from New York State, claiming that his disability “severely limited” his “ability to walk.”

Satin’s Perjury

On April 28, 2011, Satin appeared before a grand jury in the Southern District of New York. After swearing to tell the truth, and after having been advised of his rights and his obligation to provide truthful testimony, Satin intentionally provided false and misleading testimony on material matters, including falsely denying that he performed landscaping, contracting, and electrical work post-retirement.

The Voluntary Disclosure and Disposition Program

On May 22, 2012, the U.S. Attorney’s Office, in conjunction with the RRB and the LIRR, announced a voluntary disclosure and disposition program. Under the program, the U.S. Attorney’s Office will agree not to prosecute, or file a civil action against, any LIRR retiree who voluntarily comes forward and admits that he or she obtained RRB disability benefits by making false and/or misleading statements to the RRB and agrees to give up his or her right to certain RRB disability benefits. In addition, the RRB will agree not to commence any administrative proceedings seeking the repayment of any disability benefits that are the subject of this program, and the LIRR will agree not to seek forfeiture of LIRR Company Pension Plan(s) benefits. Under the Early Version of the program, any participating LIRR retiree will give up his or her right to future disability benefits, while under the Standard Version of the program, any participating LIRR retiree will give up not only future disability benefits but 50 percent of the RRB disability benefits he or she has already received. The deadline for the Early Version of the program is September 14, 2012. The deadline for the Standard Version of the program is October 15, 2012.

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Satin, 63, of Mooresville, North Carolina, pled guilty to one count of conspiracy to defraud the U.S. RRB and to commit health care fraud, mail fraud; the submission of false claims; and one count of perjury. Each count carries a maximum sentence of five years in prison.
Manhattan U.S. Attorney Bharara praised the RRB-OIG, the FBI, and the MTA-OIG for their outstanding work in the investigation, which he noted is ongoing. He also acknowledged the previous investigation conducted by the New York State Attorney General’s Office into these pension fraud issues.

In addition to Satin, 21 people have been charged in connection with the LIRR disability fraud scheme. They include two doctors and an office manager for one of the doctors who were involved in falsely diagnosing retiring LIRR workers as disabled; two “facilitators” who served as liaisons between retiring workers and the participating doctors; and 17 LIRR retirees, one of whom was also charged as a facilitator. The charges against the defendants are allegations and they are presumed innocent unless and until proven guilty.

The Office’s Complex Frauds Unit is handling the case. Assistant U.S. Attorneys Justin Weddle, Danya Perry, and Daniel Tehrani are in charge of the prosecution.

Mortgage Loan Officers Plead Guilty in $1.8 Million Mortgage Fraud

In federal court, two mortgage loan officers pleaded guilty to recruiting straw buyers to purchase properties at inflated prices and then distributing the excess loan funds among themselves, the straw buyers, and others involved in the scheme. Chad Arthur Anderson, age 38, and Troy Allen Huston, age 42, both of Chisago City, pleaded guilty to one count of conspiracy to commit mortgage fraud through the use of interstate wires. The two were indicted on April 3, 2012, and entered their pleas before United States District Court Judge Joan N. Ericksen.

In their plea agreements, the defendants admitted that from 2006 through 2007, they recruited others, mainly relatives and friends, to act as straw buyers for the purchase of homes in the Twin Cities. At the time, the men worked as loan officers at Prestige Mortgage, a mortgage brokerage company in White Bear Lake, where they brokered numerous fraudulent mortgage loans by submitting false loan applications to prospective lenders. Anderson admitted to recruiting five straw buyers to purchase 17 homes during the course of the scheme, while Huston admitted to recruiting an unspecified number of buyers to purchase additional homes. The scheme involved a total of 32 homes in Minnesota. The properties involved are located in Otsego, Oak Grove, Elk River, St. Francis, Brooklyn Park, Isanti, St. Paul, Chisago City, Becker, Cambridge, Buffalo, Minneapolis, Zimmerman, and Albertville. All of the mortgage loans involved have gone into default, causing losses to the mortgage lenders that exceed $2.5 million.
At all times relevant to this case, Anderson and Huston were also involved in Lofton Property Management, a property management company in Chisago City. They used Lofton’s name on construction invoices and other statements to obtain loan proceeds for property management services never provided. In addition, they used Lofton’s name on property settlement statements, thereby receiving fraudulent mortgage loan proceeds, which they disbursed among themselves, the straw buyers, and others involved in the scam.
At the same time, Huston was involved in YES Financial, a property finance company in Chisago City. Through that company, he received additional, illicitly acquired loan proceeds. Moreover, he arranged for a colluding appraiser, who offered appraisals to support the inflated prices of the properties. He also prepared false loan applications on behalf of the straw buyers, often overstating their income, misrepresenting their employment, and failing to disclose their other mortgage obligations or the true source of their down payments.
For their crimes, the defendants face a potential maximum penalty of five years in prison. Judge Ericksen will determine their sentences at a future hearing, yet to be scheduled.
This case is the result of an investigation by the Federal Bureau of Investigation. It is being prosecuted by Assistant U.S. Attorney David J. MacLaughlin.

Canton Resident Convicted in Health Care Fraud Scheme

A Canton pharmacist and pharmacy owner, along with five other associates, were found guilty by a federal jury on 26 counts of an indictment charging him with conspiracy, health care fraud, and controlled substance distribution, United States Attorney Barbara L. McQuade announced today.
The jury deliberated a little more than three days before returning the verdict, concluding a six-week trial before United States District Judge Arthur J. Tarnow.
McQuade was joined in the announcement by Special Agent in Charge Robert L. Corso of the Drug Enforcement Administration; Special Agent in Charge Robert D. Foley, III of the Federal Bureau of Investigation; and Lamont Pugh, Special Agent in Charge of the Inspector General of the Department of Health and Human Services.
The jury convicted Babubhai (Bob) Patel, 49, and four pharmacists he employed, Brijesh Rawal, 36, of Canton; Ashwini Sharma, 34, of Novi; Lokesh Tayal, 36, of Northville; and Viral Thaker, 31 of Findlay, Ohio; and one of Patel’s business associates, Komal Acharya, 28, of Farmington Hills. Brijesh Rawal, Ashwini Sharma, Lokesh Tayal, and Viral Thaker were convicted of conspiracies to commit health care fraud and to distribute controlled substances; Komal Acharya was convicted of the sole charge she faced, conspiracy to commit health care fraud. In addition, Brijesh Rawal was convicted of one count of substantive health care fraud and three counts of substantive controlled substance distribution, in addition to the conspiracies; Viral Thaker was convicted of two substantive health care fraud counts and two substantive distribution counts. The jury was unable to reach a verdict on the sole count pending against Harpreet Sachdeva.
“These defendants stole money from the Medicare and Medicaid programs, which are designed to provide health care and medicine to some of our most vulnerable citizens,” McQuade said. “Pharmacists and health care providers should be aware that we are scrutinizing records to detect and prosecute health care fraud,” McQuade said.
Robert L. Corso, Special Agent in Charge of DEA’s Detroit Field Division stated, “Confronting the illegal diversion and abuse of controlled pharmaceuticals is a top priority of DEA and our law enforcement partners. Today’s verdicts eliminated one of the largest diversion conspiracies ever uncovered in the state of Michigan. The convictions, particularly of the medical professionals, are significant. These individuals abused their positions of trust and endangered the lives of countless people by illegally distributing opiate painkillers and depressants throughout southeast Michigan and beyond. This investigation makes it clear that the DEA and our partners in law enforcement will continue to investigate and bring to justice those individuals that are responsible for the illegal distribution of prescription medicines.”
“The diversion of prescription drugs, coupled with the submission of fraudulent claims to Medicare, creates a toxic scenario that can place an individual’s health and safety at risk as well as taxpayers’ dollars,” said Lamont Pugh, III, Special Agent in Charge of the Chicago Region for the U.S. Department of Health and Human Services, Office of Inspector General. “The OIG will continue to work diligently with our law enforcement partners to hold those who seek to harm the Medicare program accountable.”
FBI Special Agent in Charge Foley stated, “Those who abuse our health care system by stealing tax payer dollars will be brought to justice. Pharmacists and others who engage in criminal activity in order to enrich themselves financially will be held accountable for their illegal acts. The FBI is committed to stopping this form of fraud.”
The evidence presented at trial demonstrated that, from approximately January 2006 through August 2011, Babubhai Patel owned and controlled over 20 pharmacies, which were operated in and around Detroit, Michigan. In addition, the evidence showed that Patel’s model for turning a profit at his pharmacies was based upon large-scale health care fraud and the diversion of controlled substances. Patel and his associates paid cash kickbacks and other forms of illegal remuneration to physicians in exchange for those physicians writing prescriptions for expensive medications, without regard to medical necessity, that could be billed to Medicare, Medicaid, or a private insurer through one of the Patel Pharmacies. Physicians affiliated with Babubhai Patel would also write prescriptions for controlled substances for their patients, again regardless of medical necessity, which would then be filled at one of the Patel Pharmacies. These controlled substances were distributed to patients and patient recruiters as a kickback in exchange for the patients using a Patel Pharmacy.
Pharmacists within the Patel Pharmacies, including defendants Rawal, Tayal, Sharma, and Thaker, facilitated the fraud and controlled substance distribution schemes by billing Medicare, Medicaid, and private insurers for expensive, non-controlled medications that they had in inventory but never actually dispensed to the patients. The surplus of medications generated through this practice was returned to wholesalers, thereby enabling the Patel organization to maximize its profit on its inventory of medications which were billed for but never dispensed. The defendants billed insurers for dispensing medications that they knew were prescribed outside the course of legitimate medical practice, thus defrauding insurers by billing for medications regardless of medical necessity. The defendants would provide controlled drugs to patients and patient recruiters, knowing that those medications were prescribed outside the course of legitimate medical practice.
Evidence also showed that Acharya assisted Patel in sustaining the illegal health care fraud scheme at his pharmacies, principally by helping Patel and others conceal the proceeds of the fraud.
The case was investigated by the DEA, the Department of Health and Human Services-Office of Inspector General, and the FBI. The case was prosecuted by Assistant United States Attorneys John K. Neal and Wayne F. Pratt.

Three Indicted in $5 Million Fraud Scheme

Two of three men who allegedly defrauded an individual in a funds leasing scheme have been arrested on an indictment charging them with conspiracy and wire fraud. Thomas Bannon, the president of Overseas Investors LLC (“Overseas”); Robert Bardey, Esq., an attorney; and Theodore Sweeten, the president of Symtech International Inc. (“Symtech”), are charged in an 11-count indictment in federal court in Brooklyn. Bardey was arrested and arraigned on July 30, 2012. Sweeten was arrested on Friday, August 10, 2012, and his initial appearance is scheduled this afternoon before United States Magistrate Judge Michael J. Watanabe at the Alfred A. Arraj United States Courthouse at 901 19th Street in Denver, Colorado. Bannon is a fugitive. The case has been assigned to United States District Judge Nicholas G. Garaufis in the Eastern District of New York.
The indictment was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and Janice K. Fedarcyk, Assistant Director in Charge, Federal Bureau of Investigation, New York Field Office.
As alleged in the indictment, Bannon, Bardey, and Sweeten lied to potential investors about their expertise in special investment programs and access to hedge funds that were supposedly willing to lease millions of dollars in exchange for a fee. Specifically, the defendants defrauded an investor by inducing him to invest $5 million to lease or obtain a credit line of $100 million, which in turn would enable him to generate millions of dollars in profit through these special investment programs. The defendants convinced the investor to make the investment through false assurances that the investor’s funds would be held in an attorney escrow account pending confirmation of the posting of $100 million in the leased-funds account. Contrary to their representations, however, the defendants simply distributed the investor’s $5 million among themselves and their co-conspirators shortly after it was deposited into Bardey’s purported escrow account. Bannon eventually provided the purported confirmation that a $100 million account had been created at HSBC by sending the investor fabricated bank documents, including a fake proof of funds letter on HSBC letterhead.
Bardey is also charged with one count of perjury for allegedly giving false testimony to a federal grand jury regarding his release of the supposedly escrowed funds.
“As set forth in the indictment, the defendants claimed expertise in sophisticated financial instruments used in business to support investment. Their only expertise, however, was in lying, and their only special skill was in creating false documents. As alleged, the defendants victimized an individual who was looking for a legitimate investment opportunity through their false representations and phony bank documents. Bardey then compounded his offense by allegedly perjuring himself in his testimony before the grand jury,” stated United States Attorney Lynch. “Those who seek to defraud investors are on notice that we will use all available resources to bring them to justice.”
FBI Assistant Director in Charge Fedarcyk stated, “The three defendants allegedly swindled a potential investor out of $5 million for their own monetary gain without making any actual investments. The scheme was taken even further by the defendants making bogus bank documents to hide their lack of investment trail. These arrests made by FBI agents demonstrate our continued effort to bring to justice individuals who seek to profit from fraud.”
If convicted, the maximum term of imprisonment for each count of wire fraud is 20 years, and the maximum term of imprisonment for perjury is five years.
The government’s case is being prosecuted by Assistant United States Attorney Winston M. Paes.
The charges announced today are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions, and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

Former Nursing Home Operator Sentenced to Prison for 20 Years for Health Care Fraud and Tax Fraud

George D. Houser, 64, of Sandy Springs, Georgia, was sentenced by United States District Judge Harold L. Murphy to serve 20 years in federal prison on charges of conspiring with his wife to defraud the Medicare and Georgia Medicaid programs by billing them for “worthless services” in the operation of three nursing homes. Medicare and Medicaid paid Houser more than $32.9 million between July 2004 and September 2007 for food, medical care, and other services for nursing home residents. This is the first time that a defendant has been convicted after a trial in federal court for submitting claims for payment for worthless services.

Houser was convicted after a bench trial before United States District Judge Harold L. Murphy, who issued an order with findings of fact and conclusions of law on Monday, April 2, 2012. Houser had requested the trial before the judge instead of the jury, and Judge Murphy conducted the trial from January 30, 2012, through February 28, 2012. In addition to the health care fraud conspiracy count, Houser was also convicted of eight counts of failing to pay over $800,000 in his nursing home employees’ payroll taxes to the IRS and failing to file personal income tax returns in 2004 and 2005.
“Senior citizens in nursing homes are among our most vulnerable citizens. This defendant stole millions of dollars in Medicare funds to fund his luxurious lifestyle, while the nursing home residents entrusted to his care went without food or medicine. He will now spend the next 20 years in prison,” said United States Attorney Sally Quillian Yates.
“Criminals don’t need to be lip readers to get this message. Provide horrendous care, while at the same time wallowing in luxury, and you will be punished—severely,” said Derrick L. Jackson, Special Agent in Charge of the U.S. Department of Health and Human Services, Office of Inspector General for the Atlanta region. “Working with other law enforcement agencies, we will continue to aggressively investigate and prosecute these taxpayer-funded, worthless services cases.”
“Business owners have an inescapable obligation to withhold employment taxes from their employees and remit those taxes to the Internal Revenue Service,” stated Donald B. Yaden, Special Agent in Charge with IRS-Criminal Investigation. “Those who fail to do so, in order to reap personal benefit at the expense of their employees, will be prosecuted to the fullest extent of the law.”
Houser was sentenced to 20 years in prison, to be followed by three years of supervised release. Houser was also ordered to pay $6,742,807.88 in restitution to Medicaid and Medicare, and $872,515 in restitution to the Internal Revenue Service.
According to United States Attorney Yates, the charges, and other information presented in court: Houser, assisted by his wife Rhonda Washington Houser, 49, also of Sandy Springs, operated two nursing homes in Rome, Georgia, between July 2004 and July 2007, known as Mount Berry and Moran Lake. Each home had approximately 100 residents. They also operated a nursing home known as Wildwood in Brunswick, Georgia, from September 2004 until September 2007, and it had the capacity for 204 residents. Between July 2004 and September 2007, Houser billed Medicare and Medicaid approximately $41 million, and was paid $32.9 million—based on his certifications and promises that he was providing the residents with a safe, clean physical environment, nutritional meals, medical care, and services that would promote or enhance the residents’ quality of life.
In contrast to the pretenses under which Houser accepted Medicare and Medicaid payments, the court concluded that the evidence presented at trial showed “a long-term pattern and practice of conditions at defendant’s nursing homes that were so poor, including food shortages bordering on starvation, leaking roofs, virtually no nursing or housekeeping supplies, poor sanitary conditions, major staff shortages, and safety concerns, that, in essence, any services that defendant actually provided were of no value to the residents.” The court further found that “defendant was well aware that ongoing jeopardy conditions existed at the nursing homes during this time. Rather than make a good faith effort to remedy the glaring issues impacting the residents’ health and welfare, the evidence shows that defendant chose instead to divert significant nursing home funds for his real estate development ventures and for other personal expenses and that defendant intentionally attempted to cover up and conceal from the surveyors the nursing homes’ issues and his diversion of funds.”
During the trial, the government introduced evidence that instead of providing sufficient care for the nursing home residents, Houser diverted slightly more than $8 million of Medicare and Medicaid funds to his personal use. Houser spent more than $4.2 million on real estate for a hotel complex that he planned to build in Rome, and he also had plans to develop hotels in Atlanta and Brunswick. Houser also bought his ex-wife a house in Atlanta for $1.4 million, and, instead of paying her alimony, he paid her a salary as a nursing home employee, though she never worked at any of the homes. Houser also used the nursing homes’ corporate bank accounts for personal expenses, such as Mercedes-Benz automobiles, furniture, and vacations.
The trial evidence showed several examples of the deficiencies at Houser’s nursing homes, including:
Inadequate staffing: Houser failed to maintain a nursing staff that was sufficient to take proper care of the residents. Staffing shortages started plaguing the homes after Houser started writing bad paychecks to his employees, which resulted in numerous staff resignations. Houser also withheld health insurance premiums from his employees, but sometimes let the insurance lapse for non-payment, leaving many employees with large unpaid medical bills for surgery and treatment. The payroll and insurance problem, and unpaid garnishments prompted many employees to seek work elsewhere and discouraged new applicants.
Inadequate physical environments: The roofs in two of the homes were so leaky that employees used 55-gallon barrels and plastic sheeting to catch and divert the rainwater. The leaks worsened over time, but Houser never replaced the roofs, nor did he repair or replace broken air conditioning and heating units. Fiberglass ceiling tiles would become saturated with water until they fell out of the ceiling, occasionally on residents’ beds. The residents kept their windows open to vent the foul odors in the homes, but flies, other insects, and rodents easily entered the homes through ill-fitting screens and doors. The insect problems were aggravated by mounds of rotting garbage, which piled up around the dumpsters near the homes because Houser failed to pay the trash collection services. The moisture and inability to control the humidity in the homes gave rise to rampant mold and mildew growth.
Failure to pay vendors: The Medicare and Medicaid programs require nursing homes to provide sufficient dietary, pharmaceutical, and environmental service to care for their residents’ needs. Houser failed to provide these services, in part by failing to pay food suppliers and vendors of pharmacy and clinical laboratory services, medical waste disposal, trash disposal, and nursing supplies, and in part by failing to repair washing machines and dryers, water heaters, air conditioners, and leaking roofs. The nursing homes suffered continual food shortages, and employees spent their own money to buy milk, bread, and other groceries so that residents would not starve, but the employees were rarely reimbursed by Houser. Employees also bought nursing supplies for the residents and cleaning supplies for the homes, and they regularly had to wash the residents’ laundry in laundromats or their own homes. One nursing home resident testified that residents used to pass the time by making bets on which service or utility would be the next to be cut off for nonpayment.
The Georgia Department of Human Resources Office of Regulatory Services (ORS) received many complaints about Houser’s nursing homes from families, staff, and vendors. After giving the nursing homes many opportunities to correct deficiencies, the ORS closed the two nursing homes in Rome in June 2007, and it closed the Brunswick home in September 2007. One state surveyor inspected the Moran Lake home in Rome in late May 2007, and she testified that the heat, flies, filth, and stench made for an environment best described as “appalling” and “horrendous.”
In addition to the health care fraud count, Houser was convicted of eight counts of deducting $806,305 in federal payroll taxes from his employees’ paychecks but not paying that money over to the IRS. Houser was also convicted of failing to file personal income tax returns for 2004 and 2005.
Houser and his wife were indicted on April 14, 2010. Rhonda Washington Houser pleaded guilty to misprision of the felony of health care fraud in December 2011, and her sentencing date has not yet been scheduled.
This case was investigated by special agents of the Federal Bureau of Investigation; Health and Human Services, Inspector General; and IRS-Criminal Investigation.
Assistant United States Attorneys Glenn D. Baker and William G. Traynor are prosecuting the case.

Three Nurses, Including Two Owners of a Home Health Care Agency, and the Company Among Six Defendants Indicted in Alleged Conspiracy Involving Kickbacks for Medicare Patients

A home health care agency in suburban Lincolnwood, two nurses who are part owners of the company, a third nurse affiliated with them, and two marketers were indicted on federal charges for allegedly participating in a conspiracy to pay and receive kickbacks in exchange for the referral of Medicare patients for home health care services, federal law enforcement officials announced. Defendants Marilyn Maravilla and Junjee L. Arroyo, both part owners of Goodwill Home Healthcare Inc., and three other defendants allegedly conspired to pay and receive approximately $400,000 in kickbacks to themselves, nurses, marketers, and others for the referral and retention of Medicare patients that enabled Goodwill to bill Medicare approximately $5 million.

Also indicted were Ferdinand Echavia, a licensed nurse who referred patients to Goodwill, and Jean Holloway and Rakeshkumar Shah, both of whom marketed Goodwill’s services to Medicare patients.
The 29-count indictment was returned by a federal grand jury last Thursday and unsealed on Friday following the arrests of Holloway, 41, of Bellwood, and Shah, 46, of Des Plaines. Both were released on bond after pleading not guilty in U.S. District Court.
Maravilla, 55, of Chicago; Arroyo, 44, of Elmhurst; and Echavia, 39, of Chicago, all licensed nurses, together with Goodwill as a corporate defendant, are scheduled to be arraigned on August 22 in U.S. District Court.
All six defendants were charged with one count of conspiracy to pay and receive illegal kickbacks for Medicare patient referrals, and each defendant was also charged with the following number of counts of violating the anti-kickback statute: Goodwill, 16 counts; Maravilla, 15 counts; Arroyo, 16 counts; Echavia, five counts; Holloway, three counts; and Shah, eight counts.
Maravilla began working as a nurse at Goodwill in August 2008 and, sometime during the next two months, became an owner and the administrator of the agency. Arroyo was also an owner and Goodwill’s director of nursing.
The indictment was announced by Gary S. Shapiro, Acting United States Attorney for the Northern District of Illinois; Lamont Pugh III, Special Agent in Charge of the Chicago Region of the U.S. Department of Health and Human Services, Office of Inspector General; and Robert D. Grant, Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation.
“Paying kickbacks to refer Medicare patients is illegal. Money cannot be permitted to be the basis of a medical referral over medical necessity or quality of service,” Mr. Pugh said. The investigation is continuing, the officials said.
Between August 2008 and July 2010, the indictment alleges that Maravilla, Arroyo, and two other individuals—one an officer and an owner of Goodwill, and the other a certified public accountant and Goodwill’s bookkeeper—paid and caused Goodwill to pay kickbacks to nurses, marketers, and other home health care workers who referred patients to Goodwill; assisted in re-certifying patients as homebound; or caused patients to begin new 60-day care cycles of home health care with Goodwill. By offering kickbacks, Maravilla, Arroyo, and others sought to increase Goodwill’s patient census and to enrich themselves and Goodwill. During this time, Goodwill obtained referrals of approximately 900 cycles of home health care, including new patients and the re-certification of existing patients for additional 60-day cycles of care.
According to the indictment, the amount of the kickback payments varied but generally ranged from approximately $400 to $700 for each new care cycle and approximately $100 to $300 for each re-certification. The payments were intended to induce nurses, marketers, and others in the home health industry to refer patients to Goodwill for services to be reimbursed by Medicare, the indictment alleges.
In January 2009, Maravilla and Arroyo allegedly created and circulated to Goodwill employees and affiliates a memo on Goodwill’s letterhead that set forth a structure for kickbacks relating to patient re-certifications, disguising the illegal payments as “bonuses.” The memo provided that a $100 “bonus” would be given to nurses who re-certified a patient for a third cycle, and a $200 “bonus” would be given to a nurse who re-admitted a discharged patient a month after the discharge date.
In order to make certain kickback payments in cash, Maravilla and Arroyo obtained Goodwill checks payable to them and recorded on Goodwill’s books as “loans,” but they allegedly cashed the checks and used the funds to pay kickbacks to marketers.
The indictment alleges that Maravilla, Arroyo, and Goodwill’s bookkeeper paid Echavia cash kickbacks totaling approximately $28,000 and also paid kickbacks totaling approximately $56,000 to a company owned and controlled by Echavia. Maravilla and Arroyo allegedly caused Goodwill to pay approximately $10,400 in kickbacks to Holloway, and kickbacks totaling approximately $21,500 to Shah. In addition, the two owners caused Goodwill to pay approximately $20,000 in kickbacks to two other marketers who were not charged.
The indictment also alleges that Maravilla and Arroyo caused Goodwill to pay at least $58,000 in kickbacks to at least three other nurses who were affiliated with Goodwill and who were not charged. In addition to receiving salary and profits from Goodwill, Maravilla and Arroyo allegedly caused the agency to pay kickbacks to them as well. Maravilla allegedly received approximately $138,000 in kickbacks for patient referrals, and Arroyo allegedly received approximately $44,000 in kickbacks for patients that either he or his wife referred to Goodwill.
Conspiracy and each count of violating the anti-kickback statute carry a maximum penalty of five years in prison and a $250,000 fine. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The government is being represented by Assistant U.S. Attorneys Shoshana Gillers and John Kness.
The public is reminded that an indictment is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
The case falls under the umbrella of the Medicare Fraud Strike Force, which expanded operations to Chicago in February 2011, and is part of the Health Care Fraud Prevention and Enforcement Action Team (HEAT), a joint initiative announced in May 2009 between the Justice Department and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country. Approximately four dozen defendants have been charged in health care fraud cases since the strike force began operating in Chicago last year. In unrelated cases indicted in late June 2012, 10 defendants, including the owners of two Chicago home health care agencies and three physicians, were charged in two separate alleged Medicare referral kickback schemes.
Since their inception in March 2007, strike force operations in nine locations have charged more than 1,330 defendants who collectively have falsely billed the Medicare program for more than $4 billion. In addition, the HHS Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.
To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to: www.stopmedicarefraud.gov.