Health Fraud

Attorneys for James Dierker, one of the five National Century Financial Enterprises executives convicted on March 13, on Tuesday filed a motion for acquittal based on claims of newly discovered evidence; alternatively they asked that he be granted a new trial. Dierker testified during the trial that he was unaware of any fraud. Tuesday’s motion asserts that prosecutors withheld SEC documents that would have supported his defense. The documents allegedly show that Dierker relied on opinions of outside auditors who failed to properly evaluate company records, leading him to believe the company was sound (Columbus Business First).

Dierker is the only one of the four rearrested executives who was allowed out on bond pending sentencing. He was National Century’s associate director of marketing and vice president of client development, a lesser position than the other convicted executives, and he faced fewer charges. He was found guilty on one count of conspiracy to commit securities/wire fraud and three counts of money laundering.

Angela Isley of Atlanta, former COO of medical supplier Orthoscript, Inc., was convicted on Monday by a federal trial jury in Atlanta on 52 counts including health care fraud, mail fraud and money laundering. Isley was indicted in February 2007 in connection with a three year scheme in which she allegedly submitted $600,000 in fraudulent claims to Medicare and embezzled $360,000 to pay her and her partner’s credit card bills. The Medicare billing fraud involved assigning incorrect product codes to certain products to obtain higher reimbursements.The embezzlement entailed coding company checks as legitimate business expenses while using them to pay her bills. Sentencing is scheduled for July 28 before US District Judge Charles Pannell (Atlanta Business Journal).

Federal prosecutors in Columbus, Ohio on Monday moved to recoup some of the funds lost in the 2002 collapse of National Century Financial Enterprises: the government is seeking to “attach a $1.7 billion IOU” to each of the five National Century executives who were convicted in March (here and earlier) on multiple counts including conspiracy, wire fraud, securities fraud and money laundering. US District Judge Algenon Marbley is expected to rule on the motion in June (Columbus Dispatch).

After a hearing in Columbus that lasted all day Wednesday, US District Judge Algenon Marbley ruled that convicted National Century Financial Enterprises executives Donald Ayers, Randolph Speer and Roger Faulkenberry were flight risks and will remain in custody. The fourth, James Dierker was released on bond pending sentencing. The four executives and a fifth, company co-founder Rebecca Parrett, were convicted on March 13 of securities fraud and related charges in connection with the company’s 2002 collapse (here and earlier). All were allowed to remain free on bond with electronic monitoring, but Parrett disappeared (here) and remains at large. The other four were taken into custody on April 2 following disclosure of an alleged plot to escape to Aruba (here and here). Dierker currently works in marketing for Victoria’s Secret, and testimony from the company’s president and CEO Sharen Turney apparently helped convince Judge Marbley that Dierker would not flee (Columbus Business First, AP).

Meanwhile, the US Marshal Service is offering a reward for information leading to the arrest of Parrett — but won’t say how much the reward is (Columbus Dispatch).

Mary Lou Hernandez, owner of Angel Care Medical Supply in San Antonio, was sentenced on April 9 by US District Judge W. Royal Furgeson to 24 months in prison. In November 2006, Hernandez pleaded guilty to a 3-count Information charging her with conspiracy, health care fraud and violation of the anti-kickback statute. She admitted paying $800 to$1000 kickbacks to five area doctors for Certificates of Medical Necessity which were  needed to get reimbursement for motorized wheelchairs or scooters from Medicare and Medicaid. She then fraudulently billed approximately $3 million to Medicare and $1.4 million to Medicaid for the unnecessary equipment between 2001 and 2004. The doctors involved have not yet been charged (San Antonio Express-News, DOJ).

A federal jury in McAllen, Texas on Monday convicted former Hidalgo County Commissioner Guadalupe Garces Jr. and his wife, Araceli Garces on one count of conspiracy and several substantive counts of health fraud. They used their Edinburg, Texas ambulance company A-Stat Ambulance Inc. to transport people to and from dialysis clinics knowing that transportation by ambulance was not medically necessary. They billed Medicare and Medicaid $12 million and received $4.5 million in payments. Then after Medicare and Medicaid suspended payments, they incorporated  A-Care E.M.S. Inc. in the name of their 20 year old son and continued the scheme, billing another $3 million and receiving $1.6 million in payments. US District Judge Ricardo Hinojosa scheduled sentencing for July 18 and allowed the couple to remain free on their current bonds. They could face up to 10 years in prison (AP, DOJ).

Brent Detelich of Clearwater, Florida, formerly a chiropractor in Hermitage, Pennsylvania, was sentenced on Friday to three years in prison by US District Judge Joy Conti in Pittsburgh. Detelich was convicted by jury trial in March 2007 on one  count of health care fraud and one count of mail fraud. Detelich owned and operated Detelich Chiropractic and Advanced Medical and Holistic of Hermitage.  Between 1996 and 2000, he submitted over $91,000 in fraudulent claims to Highmark Blue Cross/Blue Shield for chiropractic treatment and services which were never rendered.  When Highmark paid the claims, he split the payments with some of his patients who were involved in the fraud (AP).

We note that Detelich authored a chapter in a PowerPoint presentation for chiros published in 2005 called The Complete Insurance Guide. His contribution: “Dr. Detelich focuses on the billing- and insurance-related aspects of a chiropractic activecare approach.” No kidding!

Jailed former National Century Financial Enterprises CEO Lance Poulsen said Monday that a confidential informant was lying when he told authorities that Poulsen told him that four convicted National Century executives had a plan to flee to Aruba if they were convicted. The four executives — Donald Ayers, Randolph Speer, Roger Faulkenberry and James Dierker — were arrested on April 2 (earlier) following disclosure of the alleged plan and the disappearance of the fifth executive, Rebecca Parrett (earlier), who remains at large.

Poulsen’s statement came in a letter from one of his attorneys which was attached to a motion filed on Friday by attorneys for Randolph Speer, who denies any knowledge of a plot and says the whole story was made up by the informant to reduce his prison sentence. Poulsen believes that the confidential informant is Robert Cihy, an inmate where Poulson is currently jailed. Cihy is being held on federal bank robbery charges; in a remarkable coincidence, he reached a plea agreement with the government on April 3, one day after the four executives were arrested. However, US District Judge Algenon Marbley on Monday denied a motion to compel the government to disclose its source. A bond revocation hearing for the four executives is scheduled for April 16 (Columbus Business First, Columbus Dispatch).

In Miami on Wednesday, Rita Campos Ramirez of Miami was sentenced to 10 years in prison by US District Judge Alan S. Gold for her role in a $170 million Medicaid fraud scheme. Campos pleaded guilty last August to one count of conspiracy to commit health care fraud and one count of submitting false claims to Medicare. Campos admitted that from 2002 to 2006 she owned and operated R&I Medical Billing Inc., a medical billing company submitted bills to Medicare on behalf of HIV infusion clinics; she knowingly submitted approximately $170 million in fraudulent medical bills to Medicare on behalf of 75 HIV infusion clinics in Miami-Dade County that were part of the scheme. Medicare wound up paying about $105 million and Campos received about $5 million personally (DOJ Press Release).

In a related case, on Wednesday seven Miami area residents were indicted on charges that they set up a fake HIV infusion clinic and billed Medicare for $11 million in non-existent treatments (AHN). And in a previous related case, Dr. Orestes-Alvarez Jacinto was sentenced to 18 months in prison last October after pleasing guilty to conspiracy to commit health care fraud. He was a doctor at St. Jude’s Rehab Center, one of the clinics serviced by R&I Medical Billing; he admitted submitting $7 million in fraudulent claims to Medicare, of which $5 million was paid.

Honest, they were just going to help look for Natalee Holloway: The FBI on Wednesday arrested four of the five executives of National Century Financial Enterprises who were convicted on March 13 of securities fraud and related charges in connection with the company’s 2002 collapse (here and earlier); US District Judge Algenon Marbley ordered the arrests of Donald Ayers, Randolph Speer, Roger Faulkenberry and James Dierker after the FBI learned of an alleged plan to flee the country. According to a filing in US District Court in Columbus:

• The (FBI) developed information from a confidential source, who reported to FBI that (former National Century CEO Lance Poulsen) told the confidential source that the NCFE defendants had a plan to flee to Aruba if they were convicted.

This follows the disappearance of  the fifth executive, Rebecca Parrett, who remains at large. The new filing alleges that Parrett attempted to obtain false identification papers before the trial. All five defendants had been allowed to remain under house arrest with electronic monitoring pending sentencing. Poulsen faces trial August 4 on similar fraud charges; he and his associate Karl Demmler were convicted of witness tampering last week in connection with the fraud charges. Columbus Business First, Columbus Dispatch.

In Columbus, Ohio on Thursday evening, US District Judge Gregory Frost issued a bench warrant for the arrest of Rebecca Parrett, one of the five executives of National Century Financial Enterprises convicted on March 13 on fraud charges in connection with the company’s 2002 collapse (here and earlier). Parrett, a co-founder of the company and vice chairwoman, secretary, treasurer and director, was found guilty of one count of conspiracy, six counts of securities fraud, one count of wire fraud and one count of money laundering. After the verdicts were announced, US District Judge Algenon Marbley allowed all five convicted executives to remain under house arrest with electronic monitoring pending sentencing. Parrett was supposed to report to the Pretrial Services Office near her home in Carefree, Arizona, for installation of an electronic ankle bracelet but she failed to show up and her whereabouts are unknown. The US Marshal’s Office has begun a search. Columbus Business First, Bloomberg.

After about 6 hours of deliberation yesterday and today, a federal jury in Columbus, Ohio has convicted former National Century Financial Enterprises CEO and co-founder Lance Poulsen and his associate Karl Demmler on one count each of conspiracy to obstruct justice, witness tampering, witness tampering by influencing testimony and corruptly persuading a federal witness. They face a possible maximum of 55 years in prison. The charges arose from their attempt to pay former National Century Executive VP for compliance Sherry Gibson $500,000 to $1 million to have a “memory lapse” when called to testify against Poulsen in his fraud trial in connection with National Century’s 2002 collapse. Poulsen’s trial on 47 counts including conspiracy, wire fraud, securities fraud and money laundering is now scheduled to begin August 4.

US District Judge Algenon Marbley has not set a date for sentencing but ordered Demmler held without bond because of threats he made against two local judges and an attorney in the taped conversations which were entered into evidence at the trial. Poulsen is already in custody because his bond on the original fraud charges was revoked after he was indicted on the witness tampering charges. Columbus Business First, Bloomberg, our earlier trial coverage here, here and here.

The defense rested on Monday in the in the witness tampering trial of former National Century Financial Enterprises CEO and co-founder Lance Poulsen and his associate Karl Demmler (earlier here and here). The government rested on Friday after playing tapes of conversations between Poulsen and Demmler which appear to confirm that Poulsen suggested to Demmler that former Executive VP for compliance Sherry Gibson should plead unfamiliarity with the fraud charges against Poulson and other executives (AP here). The defense had contended that it was all a misunderstanding and that Poulson was merely seeking to help Gibson; however, when Poulson took the stand in his own defense Monday, he alleged that Gibson was an abusive employee “both sexually and physically” and that she had stabbed him in the back by agreeing to become a government witness. The case is expected to go to the jury today Columbus Business First here.

Two Dallas-area men were sentenced to prison last week by US District Judge Sam A. Lindsay for their roles in a scheme involving submission of fraudulent claims to Medicare for power wheelchairs and accessories. Friday Udo Johnny, the owner of Metropolitan Home Medical Equipment in Grand Prairie, was sentenced to 37 months in prison, and Emmanuel “Bob” Edet of Mesquite was sentenced to 30 months in prison; both were ordered to pay restitution. Both men pleaded guilty last year to conspiracy to commit health care fraud and pay illegal remunerations. They admitted to conspiring to pay illegal kickbacks to Lloyd McGriff, M.D., a Dallas physician currently serving a 16 month federal prison sentence. McGriff executed 257 fraudulent Certificates of Medical Necessity (CMNs) for which Johnny and Edet paid $200 each. Over an 11 month period in 2002 and 2003, they submitted more than $1.7 million in claims to Medicare, and Medicare paid the two men $905,000 based on the fraudulent CMNs and claims. Dallas Morning News, DOJ.

In opening statements on Tuesday in the witness tampering trial of former National Century Financial Enterprises CEO and co-founder Lance Poulsen and his associate Karl Demmler (earlier), the defense sought to portray Poulson’s $500,000 offer to former Executive VP for compliance Sherry Gibson as a misunderstanding. According to defense attorney Peter Anderson, Poulsen only sought to “make her whole” because she had gone to prison and given up her assets in her plea deal. And according to Demmler’s attorney Darryl Parker, Demmler was the intermediary because he was a longtime friend of Gibson and was only urging her to use the money to get a new attorney. However, Gibson took the stand on Tuesday afternoon and testified that she construed the initial offer as a bribe, contacted the government and agreed to wear a wire at future meetings with Demmler. The jury heard tapes in which Demmler offered to set Gibson up with an offshore account for a 10% fee if she took Poulsen’s offer and told her ” “Money laundering is my business on private contracts.” And regarding the testimony she was to give in Poulsen’s now-delayed fraud trial, Demmler said “Don’t remember. You don’t have to lie. You’re not lying. He’s not asking you to lie” and referred to a scene in Godfather II where a witness forgets testimony. The government also has taped conversations between Poulsen and Demmler in which they allegedly used code words in case their phones were bugged. Poulson is expected to take the stand in his own defense. Gibson’s testimony in the recently completed fraud trial of five other National Century executives (earlier) also included testimony implicating Poulsen in the fraud. Columbus Business First here and here.

A jury was selected Monday in the witness tampering trial of former National Century Financial Enterprises CEO and co-founder Lance Poulsen, and opening arguments are to begin today in Columbus, Ohio before US District Judge Algenon Marbley. Poulsen had been indicted in 2006 on 47 counts including conspiracy, wire fraud, securities fraud and money laundering in connection with the same acts for which five former executives were convicted last week (earlier) and is scheduled for trial on August 4 in that case. But in this case, he and an associate, Karl Demmler were indicted on one count each of conspiracy to obstruct justice, witness tampering and witness tampering by influencing testimony. The indictment alleges that they attempted to bribe Sherry Gibson, National Century’s former Executive VP for compliance, with $500,000 to “develop amnesia” on the witness stand in the fraud case. Gibson pleaded guilty in 2003 to one count of conspiracy to commit securities fraud and agreed to cooperate with prosecutors; she was sentenced to 48 months in prison in June 2004. She was the government’s star witness in the case that concluded last week and is scheduled to testify in this case. Columbus Business First has the story here.

Jodi Andes in the Columbus Dispatch analyzes last week’s verdicts here.

After two days of deliberations following the five week trial of five former executives of National Century Financial Enterprises, a federal jury in Columbus, Ohio on Thursday convicted all five defendants on all charges, which included conspiracy, wire fraud, securities fraud and money laundering. The defendants were National Century co-founders Rebecca Parrett and Donald Ayers and former executives Randolph Speer, Roger Faulkenberry and James Dierker. The Columbus Business First story here details the specific counts against each defendant. Investors, including many institutions and government bodies, lost $1.9 billion in the 2002 collapse of the health care provider financing company. US District Judge Algenon Marbley allowed the defendants to remain free but subject to electronic monitoring pending sentencing, which is expected in 60 to 90 days.

Former CEO and co-founder Lance Poulsen is scheduled for trial on
August 4, 2008 on the same charges but he first faces a March 17 trial for witness tampering in the case. The witness is said to be Sherry Gibson, National Century’s former Executive VP for compliance, who was the star prosecution witness in this case (earlier).

Defense attorneys for defendants Donald Ayers and James Dierker wrapped up the defense’s closing statements on Tuesday morning in the National Century fraud trial; Ayers’ attorney Brian Dickerson stressed the prosecution’s failure to call two cooperating witnesses — former company CFO John Snoble and compliance director Brian Stucke, who have pleaded guilty and were expected to provide key testimony. Following the prosecution rebuttal, Judge Marbley was scheduled to give jury instructions on Tuesday afternoon. Columbus Dispatch story here.

The defense rested Monday and closing arguments began in the healthcare finance fraud trial of five former executives of National Century Financial Enterprises. Co-founders Rebecca Parrett and Donald Ayers and former executives Randolph Speer, Roger Faulkenberry and James Dierker face multiple charges of conspiracy, wire fraud, securities fraud and money laundering in the 2002 collapse of the company, once the country’s largest source of health care provider financing. AUSA Wes Porter placed the blame on the defendants, saying “Every company takes its course because of the actions of people.” Porter accused the company of loaning providers in poor financial shape more than the value of their accounts receivable and lying to investors and auditors about the value of of the future receivables. Attorneys for Faulkenberry, Speer and Parrett each argued that the government had not met its burden of proof that their clients intended to commit fraud or engaged in any conspiracy. Closing arguments continue today with attorneys for Ayers and Dierker and prosecution rebuttal. Columbus Business First story here.

Department of Uh-oh: Jon Bryant, a computer programmer testifying for the defense as an expert witness in the healthcare finance fraud trial of five former executives of National Century Financial Enterprises, was revealed by prosecutors to have been an FBI informant in the same case back in 2002. Bryant testified that crashes in nine of National Century’s computer hard drives would have made it impossible for anyone to draw conclusions about the data. But on cross examination, AUSA Doug Squires asked Bryant if he ever told the FBI there was fraud at the company, if he had ever told the FBI about improper funding, and if he had ever taken documents from the company showing wrongdoing. Bryant said he could not recall but said it was “possible”. And after leaving court, when asked if he had told defense attorneys he had given company documents to the FBI, he said “No. It kinda slipped my mind.” Columbus Dispatch here.

The prosecution rested on Monday as the healthcare finance fraud trial of five former executives of National Century Financial Enterprises entered its fifth week (earlier here and here). Former National Century CFO John Snoble and compliance director Brian Stucke, both cooperating witnesses who have pleaded guilty, were expected to testify but were not called. The twelfth and final prosecution witness was Terrence Glomski, former asset manager for Lincoln Capital, which was acquired by Lehman Brothers in late 2002 after the collapse of National Century. Glomski testified that his pension fund clients were only able to recover $2.9 million of the $49.8 million they had invested in National Century’s AAA rated bonds. US District Judge Algenon Marbley on Tuesday denied a defense motion for acquittal, and the defense called its first witness. Robert DeLuca, a healthcare accounting consultant, testified that the company’s broad definition of receivables meant that National Century’s governing documents allowed the advance of the unsecured loans to health care providers which ultimately brought down the company. Under cross examination he admitted that he had no expertise in securities law. Bizjournal here and here.

In the third week of the healthcare finance fraud trial of five former executives of National Century Financial Enterprises (earlier), the prosecution’s star witness testified on Thursday that the deception by management began years before the company collapsed in 2002, resulting in a $1.9 billion loss to investors. Sherry Gibson, National Century’s former Executive VP for compliance, testified that the complex scheme to falsify records and lie to investors and auditors dated back to 1995 and involved all the firm’s principals and senior executives. Gibson pleaded guilty in 2003 to one count of conspiracy to commit securities fraud and agreed to cooperate with prosecutors; she was sentenced to 48 months in prison in June 2004. The trial continues before US District Judge Algenon Marbley in Columbus, Ohio. Bizjournals story here.

Two brothers from the Vineland, New Jersey area were sentenced to prison on Friday by US District Judge Freda Wolfson in Trenton for submitting $5.5 million in false claims to Medicaid for medical services never rendered at their two adult day care centers. Ernest Galletta, vice president of Horizon National Healthcare LLC, was sentenced to 55 months in prison. His brother George Galletta, the owner of Horizon, was sentenced to six months in prison and six months home confinement; he received a lesser sentence because his brother had hidden the fraud from him for more than two years. They had each pleaded guilty on November 2, 2007 to single count informations of conspiracy to commit healthcare fraud. AP here, DOJ Press Release (.pdf) here.

The trial of five former executives of National Century Financial Enterprises is scheduled to begin today in Columbus, Ohio before US District Judge Algenon Marbley. Co-founders Rebecca Parrett and Donald Ayers and former executives Randolph Speer, Roger Faulkenberry and James Dierker face multiple charges of conspiracy, wire fraud, securities fraud and money laundering. The privately held National Century was once the largest source of health care provider financing in the US. It collapsed six years ago and investors, including institutions and government bodies, lost $1.9 billion in what prosecutors allege was a massive and complex fraud scheme. Four former employees who have pleaded guilty are expected to testify. Former CEO and co-founder Lance Poulsen is scheduled for trial on August 4, 2008 but he first faces a March 7 trial for witness tampering. The Columbus Dispatch story is here; AP here.

Arthur Vanmoor: Mensa member, inventor and patent holder; notorious “Big Pimpin’ Pappy” of the escort service business in Broward County, Florida until he was convicted on state racketeering and prostitution charges (2004 story here). Now Vanmoor has been convicted by jury trial on 19 federal counts including mail fraud, wire fraud, Food Drug & Cosmetic Act violations and conspiracy; the March 2005 indictments arose from his operation of websites offering fake cures for cancer, migraine, flu and other diseases or conditions. Vanmoor’s websites falsely claimed to be selling FDA approved drugs and contained fake articles written by fake doctors; evidence at the trial showed that Vanmoor continued to operate the websites in violation of a December 2005 restraining order. Sentencing has not been scheduled; the DOJ Press Release is here.

Attorney Robert Arledge of Vicksburg, Mississippi on Thursday was sentenced to 78 months in prison and ordered to pay $5.8 million in restitution by US District Judge David Bramlette in Jackson. Arledge was convicted by jury trial in October on 7 counts including conspiracy, wire fraud and mail fraud in a scheme to defraud Wyeth Pharmaceutical by knowingly allowing clients to submit false Fen-Phen claims for $250,000 each to a settlement fund. More than 20 claimants were charged in the scheme; most have been sentenced. WAPT has the AP story here.

Merck/Schering-Plough’s Vytorin is a combination of Merck’s Zocor and Schering’s Zetia. Zocor’s patent has expired and Zetia has never been proven effective in improving clinical outcomes. The pharmaceutical joint venture company has been under fire for repeatedly refusing to release the results of clinical trials which examined the effectiveness of Vytorin over Zocor alone. The trials ended in early 2006 . After announced delays in November 2006 and April 2007, the company issued a press release in November 2007 (here) in which it attempted to change the endpoints of the study. After a storm of protest, the company released the results Monday (here): Vytorin is no more effective than Zocor alone.  A Bloomberg story here has further details, including calls by two Congressmen for further investigation of the ad campaign for Vytorin. Sandy Szwarc at Junkfood Science has analyzed the developing story here and previously here.

Now it has been reported (Brandweek NRx via Junkfood Science) that Schering President Carrie Smith Cox sold 900,000 shares of company stock worth $28 million last spring, after the clinical trials ended but long before the results were released. 

Whatever comes next, we can only hope for the demise of the obnoxious and misleading Vytorin commercials.