Letter of Apology » Health Fraud

Lance Poulsen Trial: Sherry Gibson Testifies

Dave Westheimer — Mon, 13 Oct 2008 05:56:53 +0000

The fraud trial of former National Century CEO and co-founder Lance Poulsen is recessed until October 20 due to prior commitments by US District Judge Algenon Marbley. The government’s key witness, former Executive VP for Compliance Sherry Gibson, testified on Thursday and Friday that she had falsified records at Poulsen’s specific request “report by report, and sometimes line by line” dating all the way back to 1992. Among other things, she said she was told to show falsify the balances shown in the company’s reserve accounts, and she explained how the company would deceive auditors by creating false backup reports and by varying audit dates for different entities in order to shuffle funds between accounts.

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 trial of five other executives who were convicted in March, and also in the March trial of Poulsen and his associate Karl Demmler for witness tampering. They were convicted of trying to bribe her to change her testimony; Poulsen was sentenced to 10 years in prison in August in that case.

Earlier in the week, FBI Special Agent Jeffrey Williams testified that investigators discovered $1.3 billion in unsecured loans to companies owned or controlled by Poulsen and other National Century principals.

(Columbus Dispatch, Columbus Bizjournal)

Poulsen Trial: Witnesses Describe Cooked Books

Dave Westheimer — Tue, 07 Oct 2008 05:50:57 +0000

Testimony to date in the fraud trial of former National Century CEO Lance Poulsen has centered on how investors were allegedly deceived by the company’s accounting practices. National Century represented to investors that it was buying valid and collectible receivables from health care providers in exchange for cash to pay their bills. The receivables were packaged as bonds which were sold to investors. However, both former director of securitization Jon Beacham and former associate vice president of funding Jessica Bily both testified that National Century never actually purchased the receivables from six providers and instead deliberately overfunded them as part of a scheme to enrich Poulsen and two other principals, who controlled the six providers. Bily said that Poulsen ordered her to make false entries in the official books to make it appear that these were legitimate. Bily also testified that the scheme was going on as long ago as 1994. National Century collapsed in 2002 (Columbus Bizjournal, Columbus Dispatch).

Opening Statements Today In Poulsen Trial

Dave Westheimer — Thu, 02 Oct 2008 06:28:38 +0000

Twelve jurors and four alternates were selected on Wednesday in the fraud trial of former National Century CEO Lance Poulsen, with opening arguments scheduled for Thursday morning. (Columbus Bizjournal). Poulsen’s defense team will have one tactical advantage not available to his co-defendants who were convicted in March: since then, the SEC has put some of the blame on other parties. As the Columbus Dispatch pointed out:

The Securities Exchange Commission found Bank One and JPMorgan Chase, which now owns Bank One, culpable for negligent conduct while serving as National Century’s bank trustees.

The SEC has made similar findings with accounting firms PricewaterhouseCoopers and Deloitte & Touche while auditing National Century.

Still, Poulson faces long odds, and he has the additional problem of the tape recordings that sunk him in his witness tampering trial.

Poulsen’s Fraud Trial Begins Today

Dave Westheimer — Wed, 01 Oct 2008 17:07:16 +0000

Jury selection begins today in Columbus before US District Judge Algenon Marbley in the fraud trial of Lance Poulsen, former CEO and co-founder of National Century Financial Enterprises. Poulsen faces one count of conspiracy, one count of wire fraud and money laundering conspiracy, four counts of concealment of money laundering and six counts of securities fraud in connection with the company’s 2002 collapse; the loss to investors has been estimated at anywhere from $1.9 billion to as much as $3 billion.

Five of Poulsen’s co-defendants have already been convicted, and four have been sentenced to prison (here and here) with the fifth, Rebecca Parrett, still at large. Poulsen’s trial was separated after he and an associate were charged with witness tampering for trying to bribe the prosecution’s star witness. Both were convicted; Poulsen has been sentenced to 10 years in prison in that case.

(Columbus Dispatch, Columbus Bizjournal)

Medical Equipment Company Owner Convicted In Motorized Wheelchair Fraud

Dave Westheimer — Wed, 24 Sep 2008 06:13:30 +0000

Yet another example of the blatant Medicare fraud that’s been going on in public for years: a federal jury in Los Angeles on Monday convicted the owner of durable medical equipment supplier Pacific City Group in connection with a scheme to get Medicare to pay for motorized wheelchairs that weren’t needed. Leonard Nwafor was convicted on 11 counts including health care fraud and conspiracy. Between January 2006 and May 2008 his company billed Medicare over $1.1 million and was paid $526,000 for the wheelchairs, which sell for as much as $7,000 each. Evidence at the trial allegedly showed that prescriptions for the motorized wheelchairs purporting to be from several LA-area doctors were forged. A “beneficiary” testified that a company representative posing as a Medicare official threatened her with loss of benefits if she and her husband didn’t accept two wheelchairs they didn’t need.

Nwafor faces a statutory maximum of 110 years in prison. His sentencing is scheduled for December 1 before US District Judge John Walter. He also faces federal mail fraud charges in a separate case (DOJ).

Two Texas Chiros Indicted In Staged Accident Scheme

Dave Westheimer — Tue, 16 Sep 2008 05:32:23 +0000

Minh Huynh and Thien Tuan Vo, two Fort Worth area chiropractors, were indicted last week on charges that they defrauded insurance companies by seeking payments for bogus treatments of “victims” of staged accidents. Huynh was charged with three counts of health care fraud, one count of conspiracy to commit mail fraud and one count of mail fraud. Vo faces one count of health care fraud. The indictment alleges that they received “patients” from a law firm which had contracted to represent participants in staged accidents. They allegedly then supplied the law firm with falsified treatment and billing records which were submitted to insurance companies. Hyunh also allegedly paid kickbacks to an employee of the law firm in exchange for referrals. The Star-Telegram describes the scheme as a fraud that took in more than $1 million; more indictments are likely (DOJ).

Recruiter In Skid Row Medicare Fraud Scheme Pleads Guilty

Dave Westheimer — Sat, 30 Aug 2008 06:21:20 +0000

One of the two men indicted in connection with an alleged scheme to defraud Medicare by recruiting patients from Skid Row in Los Angeles (earlier) has pleaded guilty. Estill Mitts, who operated an “assessment center” in the heart of Skid Row, on Thursday agreed to plead guilty to conspiracy to commit healthcare fraud, money laundering and tax evasion. In the plea agreement, Mitts admits recruiting homeless Medicare and Medi-Cal beneficiaries for three hospitals, where they received unnecessary medical treatments or no treatment at all. One hospital, City of Angels Medical Center, was owned by Dr. Rudra Sabaratnam, who was indicted along with Mitts and has pleaded not guilty (earlier). Mitts will enter his plea on September 10. Sabaratnam’s trial is scheduled to begin on September 30 (LA Times).

Hospital Owner Pleads Not Guilty In Medicare Fraud Scheme

Dave Westheimer — Wed, 20 Aug 2008 06:03:02 +0000

Dr. Rudra Sabaratnam, the CEO of City of Angels Medical Center who was indicted on August 6 in connection with a scheme in which patients were allegedly recruited from Los Angeles’ Skid Row and given unnecessary medical treatment (earlier), pleaded not guilty on Monday in US District Court in Los Angeles. A trial date was scheduled for September 30. Sabaratnam faces eight counts of paying kickbacks for patient referrals (AP).

Los Angeles Hospital Owner, Recruiter Indicted In Skid Row Medicare Fraud Scheme

Dave Westheimer — Mon, 11 Aug 2008 06:41:57 +0000

A principal and CEO of a privately-owned Los Angeles hospital and a man who allegedly recruited homeless patients from L.A.’s Skid Row were arrested last Wednesday following the unsealing of a 21 count federal indictment charging them with operating a sophisticated health care fraud scheme. Dr. Rudra Sabaratnam, CEO of City of Angels Medical Center, was indicted on eight counts of paying kickbacks for patient referrals. Estill Mitts, who operated a storefront “Assessment Center” in skid row, was indicted on four counts of receiving kickbacks for patient referrals, six counts of money laundering and two counts of tax evasion. Mitts and stringers who worked for him allegedly brought the patients to the hospital in exchange for sham consulting fees arranged by Sabaratnam; the hospital allegedly submitted bills to Medicare and Medi-Cal for unnecessary medical treatments or in some cases for treatments never performed. A related civil case has been filed by the City of Los Angeles naming two more hospitals and more defendants, indicating that more federal criminal charges may be forthcoming (LA Times, DOJ).

Poulsen Sentenced To 10 Years For Witness Tampering

Dave Westheimer — Fri, 08 Aug 2008 20:11:40 +0000

Ending this week’s sentencings of former executives of National Century Financial Enterprises, US District Judge Algenon Marbley today sentenced former CEO and co-founder Lance Poulsen to 10 years in prison for witness tampering. Poulsen and his associate Karl Demmler were convicted on March 26 on one count each of conspiracy to obstruct justice, witness tampering, witness tampering by influencing testimony and corruptly persuading a federal witness. They allegedly attempted to pay former executive VP for compliance Sherry Gibson $500,000 to $1 million to plead unfamiliarity with the fraud charges against Poulsen and other executives. Gibson, who had pleaded guilty in 2003 to one count of conspiracy to commit securities fraud and agreed to cooperate, went to authorities instead. She was a key witness in the fraud trial of the five executives who were convicted in March, testified against Poulsen and Demmler in this case and is expected to testify against Poulsen in his fraud trial which begins October 1. Demmler’s sentencing was postponed pending completion of a psychological evaluation (Columbus Dispatch).