In recent years, the U.S. Department of Justice (DOJ) has been criticized for failing to prosecute executives for fraud, particularly in the financial sector. In response, the DOJ has begun to more heavily emphasize identifying individual malefactors and prosecuting them. This emphasis is particularly beneficial where a criminal conviction of a healthcare provider entity could result in significant hardship for a community. Adding an exclamation point, over the last three days, the DOJ charged or unveiled charges against 243 defendants across the country for their alleged participation in Medicare fraud schemes. According to the government, it is the largest criminal healthcare fraud takedown in DOJ history.

Former U.S. Attorney General Eric Holder has laid out the government’s interest in pursuing executives when it comes to white collar crimes, which include Medicare and Medicaid fraud. Specifically, Attorney General Holder has stated that the DOJ:

“…recognizes the inherent value of bringing enforcement actions against individuals, as opposed to simply the companies that employ them. We believe that doing so is both important – and appropriate – for several reasons:

First, it enhances accountability. …[C]orporate misconduct must necessarily be committed by flesh-and-blood human beings. So wherever misconduct occurs within a company, it is essential that we seek to identify the decision-makers at the company who ought to be held responsible.

Second, it promotes fairness – because, when misconduct is the work of a known bad actor, or a handful of known bad actors, it’s not right for punishment to be borne exclusively by the company, its employees, and its innocent shareholders.

And finally, it has a powerful deterrent effect. All other things being equal, few things discourage criminal activity at a firm – or incentivize changes in corporate behavior – like the prospect of individual decision-makers being held accountable.

A corporation may enter a guilty plea and still see its stock price rise the next day. But an individual who is found guilty of a serious fraud crime is most likely going to prison.”

Further, in an effort to identify potential targets, including executives, for prosecution, the DOJ has looked to companies to root them out, in part through internal investigations. Principal Deputy Assistant Attorney General Marshall Miller has stated that if an entity wants to receive “full cooperation credit [in connection with disclosing the results of its internal investigations, the entity must], make [its] extensive efforts to secure evidence of individual culpability the first thing [it] talk[s] about when [its representatives] walk in the door to make [a] presentation [to DOJ]. Make those efforts the last thing you talk about before you walk out. And most importantly, make securing evidence of individual culpability the focus of your [internal] investigative efforts so that you have a strong record on which to rely.

The DOJ has also, in pursuing civil fraud cases, increasingly named corporate executives as defendants and has recovered significant monetary penalties from executives, separate and apart from the penalties imposed on their employers. Boards and governing bodies need to be aware that the risk of monetary penalties coupled with the consequences of an executive admitting to misconduct can significantly complicate the executive’s relationship with the entity and the decisions he or she makes on behalf of the entity, given the potential negative effects to the executive. The risk to an entity’s executives may make settlements more difficult for the organization to accomplish.

As examples of the DOJ’s efforts to pursue executives in the healthcare industry, we have compiled a summary below of some recent cases.

Hospital Administrators

Down the River. Earnest Gibson III, the former CEO and president of Riverside General Hospital, was sentenced to 45 years in prison. Gibson’s son, who was the group home operator, was sentenced to 20 years. Regina Askew, a Riverside auditor, received a 12-year sentence. Finally, Mohammed Kahn, an assistant administrator, was sentenced to 40 years. Each was sentenced for submitting claims for partial hospitalization programs (PHP) services that were not medically necessary and, in some cases, never provided. Riverside submitted over $116 million in claims to Medicare for PHP services purportedly provided to the recruited beneficiaries when, in fact, the PHP services were medically unnecessary or never provided. The assistant administrator also admitted that he and his co-conspirators paid kickbacks to patient recruiters and to owners and operators of group care homes in exchange for which those individuals delivered ineligible Medicare beneficiaries to the hospital’s PHPs.

Disguised Bribes Bite Back. Chicago’s Sacred Heart Hospital’s former CFO and COO were convicted on multiple counts for their roles in a 12-year conspiracy that paid bribes and kickbacks for referrals of patients. The illegal payments were allegedly disguised as consulting fees, employment and personal services compensation, rent, and stipends for instructional services. During the trial, their attorneys said there was nothing unorthodox about a hospital trying to drum up business, but one of the recordings captured the hospital’s owner warning “you better make sure the evaluations and paperwork are done because if I go down for this, you're going down with me.” A second former COO, as well as the hospital's former vice president for geriatric services, also pleaded guilty.

Physician Practices

Who Knew the Good Patients Died Young? Rick Brown, the president of Home Care America, Inc., who controlled the daily operations of a physician practice, Medicall Physicians Group, Ltd., was convicted of falsely billing Medicare for services that were never provided to patients, along with Mary Talaga, the company’s biller. The defendants fraudulently billed Medicare for services to deceased patients, as well as services purportedly provided by medical professionals after they had ended their employment and by medical professionals who worked over 24 hours per day. Evidence also showed that Brown forged physician signatures on medical documents, and that Talaga directed physicians to create false documentation after she had billed for services that had not been documented or provided.

We Buy Medicaid IDs! Christopher White, who managed financial and accounting services for a physician’s medical clinic companies, admitted as part of his guilty plea that he coordinated payments to patient recruiters who illegally sold Medicare beneficiary information to a New Orleans-based medical clinic and its co-conspirators. This information was used by home health companies operated by the clinic’s owner and others to bill Medicare for home health services that were not medically necessary and often not delivered at all. White also admitted that he, along with the clinic’s owner, fabricated tax and employment records in response to a federal grand jury subpoena to conceal the illegal kickbacks paid and mislead the grand jury.

CFO and CEO Divert Clinic Funds. The former CFO of a federally-funded health clinic, Birmingham Health Care, pleaded guilty, and the CEO was indicted on federal fraud charges in an alleged scheme to divert $11 million of funds and assets to corporations allegedly controlled by the former chief executive officer of the Birmingham clinic. Prosecutors alleged that the CFO personally received $1.7 million from the fraudulent scheme.

Bottoms Up! Tonya Rushing, the former CEO of the Endoscopy Center of Southern Nevada, was sentenced to a year and one day in prison for conspiring with the Endoscopy Center's physician owner to defraud Medicare, Medicaid, and other insurers by overstating time records of nurse anesthetists during procedures.

No Free Lunch. Emily Shim, an office manager, was recently accused of Medicare fraud as a result of providing free lunches, massages, cash equivalent coupons and recreational classes to people who agreed to see her chiropractors and therapists. She was also accused of fraudulently submitting claims for medically unnecessary services, services not provided and services that did not meet applicable requirements for payment. In another similar New York alleged scheme, three managers of a therapy center/diagnostic testing facility were charged with Medicare fraud for providing cash inducements to beneficiaries through ambulette drivers and patient recruiters to subject themselves to medically unnecessary procedures. The claims submitted to Medicare are alleged to be false because they were unnecessary, performed by unlicensed personnel, induced by kickbacks, not properly supervised and not performed by licensed personnel.

Mama Mia – It’s Not Ok? Tamara Brown’s mother is a physician. Unfortunately for her, she is accused of receiving kickbacks from two home health agencies in exchange for providing home health referrals for patients that were being seen by her mother. The home health agencies used the patient information provided by Brown to bill for services that were not provided or were medically unnecessary.

Home Health Agencies

Office Administrator. Joe Ann Murthil, an office manager and biller at a home health company, was convicted for her role in a Medicare fraud scheme in which she assisted with the payment of illegal kickbacks to patient recruiters and submitted false claims, representing to Medicare that patients were homebound when some of these patients had jobs, had not received services, or did not want services. In total, 13 defendants were charged for their roles in this scheme.

Miami Home Vice. Dennis Hernandez, a manager and supervisor at Professional Medical Home Health, along with Joel San Pedro, a manager and supervisor, were recently sentenced along with others to lengthy sentences for their roles in a $6.2 million home health fraud scheme. The defendants participated in the company’s submission of claims for physical therapy and other home health services that either weren't medically necessary or weren't provided. In addition to receiving kickbacks for providing Medicare beneficiary names and ID numbers, the defendants also created fake patient records to justify the Medicare claims.

Director of Nursing. Mariamma Viju, the Director of Nursing for Dallas Home Health was recently charged with conspiring to bill Medicare for medically unnecessary services and for services that were never provided. She is also alleged to have exaggerated the nature of the patients’ health conditions to increase the amount billed. Viju was also accused of taking patient identifying information from her former major medical center employer to use in recruiting patients. Finally, Viju was accused of offering improper inducements to beneficiaries by giving them $25 Walmart gift cards, cash and free transportation.

Holy Toledo. Luis Toledo is accused of Medicare fraud and money laundering for writing checks to Countrywide Consulting and EZ Marketing, each of which would return cash to Toledo to be used to pay patient recruiters in return for home health referrals.

And More...

Ambulance Company Manager. Harlan Kingsbury, the general manager of Alpha Ambulance, Inc., which specialized in the provision of nonemergency ambulance transportation services to and from dialysis treatments, was convicted of one count of conspiracy to commit healthcare fraud, one count of conspiracy to obstruct a Medicare audit, and one count of making materially false statements to federal law enforcement officers. The government alleged that he conspired with the owners of Alpha and its training supervisor to bill Medicare for ambulance transportation services for individuals who did not need to be transported by ambulance. In addition, Kingsbury instructed emergency medical technicians to conceal the true medical condition of patients they were transporting by altering paperwork and creating false justifications for the transportation services.

Recycled Drugs. Kim Mulder, the former CEO of Kentwood Pharmacy, pleaded guilty to charges that she distributed misbranded and adulterated drugs when she resold drugs that were returned from nursing homes and adult foster homes. The returned drugs allegedly included cross-contaminated drugs that were previously mixed together, drugs bearing foreign substances and residues, and discolored and expired medications.

Alternative Services – No Exception. Darlington Odidika, executive director of Systems and Abilities, Inc., pleaded guilty to his role in a bid-rigging and kickback scheme to defraud Medicaid. Odidika admitted to falsifying bids for modifications to Medicaid recipient’s homes under a nursing home diversion program. By falsifying these bids, Odidika was able to control which contractor won the bid and inflate the amount of payment that Systems and Abilities received as its share of the project. Odidika also admitted to submitting final cost reports, and Medicaid claims based upon these reports, which falsely stated the actual costs of the projects. Similarly, he admitted to falsifying final cost reports in the transition program for moving expenses, which were either never provided or significantly inflated over the actual costs, and submitting Medicaid claims based upon these false reports.

Partial Hospitalization Program. The Eleventh Circuit recently affirmed the convictions and sentences of the CEO, the day-to-day manager, and the Medicare billing and payroll manager of Biscayne Milieu, a partial hospitalization program, for their roles “in a pernicious scheme to defraud Medicare and prey upon vulnerable victims.” The facility and the defendants carried out a scheme in which they: (1) submitted false and fraudulent claims to Medicare for PHP services for patients who were not eligible for PHP treatment, for PHP services that were not medically necessary, for PHP services that were not eligible for Medicare reimbursement, and for PHP services that were not actually provided by Biscayne Milieu; (2) offered, paid, or received kickbacks and bribes for recruiting Medicare beneficiaries to attend Biscayne Milieu; (3) paid kickbacks and bribes to patients to ensure the attendance of ineligible Medicare beneficiaries at Biscayne Milieu; (4) concealed the submission of false and fraudulent claims to Medicare, the receipt and transfer of the proceeds from the fraud, and the payment of kickbacks and bribes to patient recruiters and Medicare beneficiaries; and (5) diverted proceeds of the fraud for personal use.

DME Executive Excluded for Importation of Non-FDA Approved Devices Based Upon Investigation Obstruction Conviction. The exclusion of George Schulte, the former CEO of Spectranetics Corporation (SPNC), which manufactured medical lasers and related devices associated with them such as catheters, was recently upheld by the HHS Departmental Appeals Board (DAB). The exclusion proceedings stemmed from a prior FDA investigation of SPNC for knowingly importing unapproved medical devices, not properly declaring them to U.S. Customs, and then distributing the devices to physicians for use in patients when the devices were not approved by the FDA. Schulte was convicted of interfering with an investigation into a criminal offense as a result of having made false statements to an FDA investigator. Schulte attempted to avoid exclusion by arguing that his false statements to the FDA investigator did not have an impact on the FDA’s investigation since the FDA investigator knew those statements were false and because he corrected the false statements promptly. The DAB found that Schulte’s false statements to the FDA investigator interfered with the FDA’s investigation.

Stamping out healthcare “fraud and holding those who commit this fraud accountable are core missions of the Criminal Division and the Justice Department,” according to Leslie Caldwell in her speech at the May 14, 2015, meeting of the American Bar Association’s Healthcare Fraud Section. With Assistant Attorney General Caldwell’s remarks in mind, it is incumbent on and in the self-interest of healthcare companies and executives to implement and enforce rigorous compliance policies and programs, as well as hire counsel at the outset of a governmental investigation.

BakerHostetler represents and counsels healthcare clients on a variety of state and federal fraud and abuse matters, including False Claims Act litigation, the federal anti-kickback statute, Stark Law, and the Civil Monetary Penalties Law. The Healthcare Industry teamalso includes former Assistant U.S. Attorneys who specialized in prosecuting healthcare fraud and are well-versed regarding DOJ’s expectations around internal investigations, remedial measures, and disclosures.