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.

First Lady Scolds Olympian Gabby Douglas for Eating an Egg McMuffin

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.

Utah Man Sentenced to More Than Two Years in Federal Prison on Charges Connected to Multi-Million-Dollar Mortgage Fraud Scheme

A Utah man was sentenced to two years and three months in federal prison on charges connected to a multi-million-dollar mortgage fraud scheme involving properties at a Hurricane, West Virginia subdivision, announced U.S. Attorney Booth Goodwin. Michael S. Hurd, 37, of Salt Lake City, Utah, previously pleaded guilty in November 2011 to conspiracy to commit wire fraud and bank fraud. The defendant also previously pleaded guilty to mail fraud arising out of his involvement in a similar fraud scheme in Modesto, California.

Hurd admitted that during the early and mid-2000s, he operated a company called “The Gift Program,” which he described as a “seller-funded down payment assistance program” used to provide home buyers’ money to make the down payment and initial mortgage payments on real estate purchases. Hurd further admitted that he used The Gift Program to create an elaborate scheme to defraud lenders by concealing the transfer of loan funds to the borrower from the lender. In essence, through the use of The Gift Program, lenders unwittingly funded their own down payment and made the initial mortgage payments.
Hurd admitted that in 2006 he became involved with Deborah and Todd Joyce of Hurricane, West Virginia, in the “flipping” of homes in the Stonegate subdivision in Hurricane. Deborah Joyce obtained inflated appraisals from two local appraisers, James Thornton and Mark Greenlee, and subsequently sent the appraisals on to another co-conspirator Raymond Morris in Salt Lake City, Utah.
Morris admitted that he identified investors to purchase those properties at fraudulently inflated prices. Morris then got those investors in contact with Hurd, who then used The Gift Program to conceal the transfer of a portion of the loan proceeds to the investor from the lender. Hurd admitted that he paid Morris an undisclosed “commission” for this referral.
Hurd also admitted that during the scheme, he wired additional loan funds to the investor to make initial mortgage payments. Once those funds ran out, the investors defaulted on the loans, and the properties went into foreclosure. All told, Hurd, Joyce, and Morris illegally flipped six properties in the Stonegate subdivision. The respective lender losses total almost $2 million.
At the same time, Morris and Hurd orchestrated a similar investment-type scheme in Modesto, California. Hurd acknowledged that he was involved in illegally flipping 20 properties with losses in excess of $5.5 million. As part of his plea agreement, Hurd agreed to transfer those charges from the Eastern District of California to the Southern District of West Virginia so the matters could be disposed of jointly.
During the sentencing, Judge Johnston noted that “this is the sort of activity that contributed to the financial collapse.” Further, the judge stated that “hopefully a prosecution like this will serve to deter others.” In rendering the 27 month sentence, the court noted that Hurd faced significantly more time in prison but received a reduction at the government’s request as a result of his early and expansive cooperation against Morris and others, which has ultimately led to further prosecutions in West Virginia, California and Utah.
Morris, 51, of South Weber, Utah, previously pleaded guilty in July to wire fraud and bank fraud as part of his involvement in the multi-million-dollar mortgage fraud scheme. Morris faces up to 30 years in prison and a $1 million fine when he is sentenced on October 29, 2012, by United States District Judge Thomas E. Johnston.
James R. Thornton, 48, of Wilmington, NC, previously pleaded guilty to aiding and abetting wire for his involvement in the scheme. Thornton received a reduced sentence earlier this week of five-years’ probation as a result of his early cooperation in the federal investigation.
Deborah L. Joyce was sentenced in April 2011 to three years and 10 months in prison and five years of supervised release for her involvement in the Stonegate subdivision mortgage fraud scheme. Joyce’s husband, Todd Joyce, 38, of Hurricane, Putnam County, West Virginia, was also sentenced in April 2011 to one year and six months in prison on mortgage fraud and tax evasion charges.
This case is being investigated by the Federal Bureau of Investigation and the Internal Revenue Service-Criminal Investigative Division. Assistant United States Attorney Thomas Ryan is in charge of the prosecution. The sentence was imposed by United States District Judge Thomas E. Johnston.
This case was prosecuted as part of President Obama’s 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.