Four charged in $32 million healthcare fraud scheme

A medical director, operator and two unlicensed practitioners have been charged for their alleged role in a $32 million healthcare fraud scheme.



Farrah Forough Farizani, D.O, was the medical director of Hillcroft Physicians, a family practice in SW Houston. Her husband, Hamid Razavi was its operator. Elie Hajjar and Juan Acuna were unlicensed practitioners there.

Farizani, Razavi, Hajjar, and Acuña allegedly misled patients and staff to believe that Hajjar and Acuña were licensed to practice medicine in Texas.

The scheme began in 2010 and continued through 2017. Hajjar and Acuna examined, diagnosed, treated and prescribed prescriptions for patients. However, the practice billed Medicaid and Medicare as if Farizani had provided the services, even if, sometimes, she was out of the country.  Medicaid and Medicare were billed more than $32 million and paid out over $12 million.

The indictment charges all four with one count of conspiracy to commit health care fraud. Farizani, Razavi and Hajjar are also charged with five counts of making false statements relating to health care matters.

https://www.justice.gov/opa/pr/four-charged-32-million-health-care-fraud-scheme

Houston woman charged with $3.6 million PPP loan fraud

LaDonna Wiggins, 37, has been charged with bank fraud and money laundering in relation to two Paycheck Protection Program (PPP) loans. She received $3.6 million and allegedly used these funds to buy two houses, multiple vehicles and luxury goods.



She made two loan applications for her businesses Wiggins & Graham Enterprise, dba ‘The Concession Stand and Pink Lady Line. In May 2020, she submitted an application for the first business stating she had 108 employees. The application for the second business was made the following month. She stated that she had 107 employees for that business.

Both loans were funded by Kabbage, Inc, an online funding company for small business owners.

Some of the funds were allegedly spent as follows;

  • $688k for a house in Cypress, Texas
  • $248k for a house in Katy, Texas
  • $79k for a 2020 Range Rover
  • $52k for a 2020 Nissan Murano
  • $63k at Chanel
  • $188k on a new swimming pool
  • $180k on construction work
  • $6k on an aquarium and tropical fish
  • $200k to buy an unnamed business

If convicted, Wiggins faces up to 30 years in federal prison and a possible $1 million maximum fine. The government also intends to seize the remaining cash in her bank accounts (approx. $0.5 million), the two houses and the Range Rover.

Wiggins indictment – pdf

https://www.justice.gov/usao-sdtx/pr/local-woman-charged-fraudulently-receiving-millions-under-cares-act

You can read about the other Houston-area residents charged with PPP fraud;
Six-houston-area-men-charged-in-16-million-ppp-loan-fraud/
Houston-woman-charged-with-1-9-million-ppp-loan-fraud/
Houston-man-charged-with-spending-covid-relief-funds-on-lamborghini/
Houston-funeral-director-charged-with-ppp-fraud/
Another-houston-man-charged-with-ppp-fraud/

CFO promoted to CEO at ENGlobal Corporation

Mark Hess has been appointed as the new CEO at ENGlobal Corporation. The company is an Engineering and Construction business with its head office in north Houston. It has a market capitalization of $142 million.



Mr. Hess replaces Bill Coskey, who is stepping down as CEO, effective March 12. Mr. Coskey co-founded the company in 1985 and has been the CEO on-and-off since that time. He will continue as the Chairman of the Board.  The last person, other than Mr Coskey, to be in the CEO role, held it for just over two years between May 2010 and July 2012.

Mr. Hess joined the company in July 2011 as its Corporate Controller and was promoted to the CFO position in September 2012.

Replacing Mr. Hess as CFO is Darren Spriggs, the current Corporate Controller. He joined the company in June 2019. Prior to that, he served as the Director of Accounting for ABM Industries.

Roger Westerlind, the President of the company’s US subsidiary since December 2000, was also promoted to Company President.

No new compensation details were disclosed.

SEC filing – ENGlobal CEO

Baker Hughes has legal troubles on two fronts

Baker Hughes filed its annual report at the end of last week and disclosed legal troubles on two different fronts. The company is one of the big three US oilfield services company. It has its head office near George Bush Intercontinental Airport.

In December 2020, the Company received notice that the Securities and Exchange Commission (SEC)  is conducting a formal investigation into whether the company sold products and services on projects impacted by U.S. sanctions.



The company is cooperating with the SEC and providing requested information. The Company has also initiated an internal review with the assistance of external legal counsel regarding internal controls and compliance related to U.S. sanctions requirements.

Baker Hughes didn’t disclose any more details. However, Reuters reported that the company and 17 other firms had recently quit working on Russia’s Nord Stream 2 gas pipeline to avoid being sanctioned for it.

FCPA issues

The company has been fined by the SEC before for breaches of the Foreign Corrupt Practices Act (FCPA). In 2007, it paid $23 million in relation to bribes in Kazakhstan. It also paid a $10 million fine as its actions in Kazakhstan breached an earlier 2001 cease-and-desist order related to bribes paid in Indonesia.

BMC lawsuit

The other legal issue relates to its new helix logo. In December 2019, Houston-based BMC Software sued Baker Hughes. It alleged that Baker’s logo infringed on a trademark that BMC holds (see its logo below). The lawsuit is still ongoing.

BMC the global leader in software solutions for IT (PRNewsFoto/BMC)

Normally, most customers wouldn’t confuse a software company and an oilfield services company. However, Baker Hughes announced an alliance with Microsoft in November 2018 to bring ‘enterprise artificial intelligence solutions to the energy industry’. As a result, BMC argues that the new logo is likely to ’cause confusion, mistake and deception, among consumers, the public and the trade’.

BMC Complaint against Baker Hughes

 

 

 

Houston blank check company completes $250 million IPO

Flame Acquisition Corp has completed its Initial Public Offering (IPO) by selling 25 million units at $10 each. The company is based in downtown Houston.

The company only filed its S-1 in early February. However it confidentially filed with the SEC back in November 2020.



Flame is led by CEO and Chairman James Flores, the former CEO of Sable Permian Resources and prior to that, CEO of Plains Exploration and Production. The CFO is Gregory Patrinely, the former CFO of Sable. He also worked in the Oil and Gas division of Freeport-McMoRan, where Mr. Flores also worked for a time.

Sable Permian was formed in 2017 after it was spun off from American Energy Partners, which was formed by the late Aubrey McClendon, after he left Chesapeake. Sable filed for bankruptcy in June 2020. Mr. Flores and Mr. Patrinely left Sable days after if exited from Chapter 11 bankruptcy in February 2020.

The company is targeting opportunities in the the exploration and production and midstream sectors.

Flame has been added to the list of Houston-area public companies. There are now 8 SPAC’s or blank check companies on the list, which you can see the list here.

Third and Fourth James Graf blank check companies file for IPOs

Not to be outdone by Tilman Fertitta, James Graf has also filed initial public offerings for his third and fourth SPAC (also known as a blank check company). The second ($225 million) filed to go public two weeks ago.



Graf Acquisition Corp III will be a $300 million IPO, while Graf Acquisition IV will be a $150 million IPO. All three will have the same management teams and objectives and be based in The Woodlands.

Graf Acquisition Corp I ($244 million IPO Oct 2018) completed its initial business combination with Velodyne Lidar in September 2020 for $1.5 billion.

Mr. Graf has also been involved in several other SPACs

  • Platinum Eagle Acquisition Corp ($325m IPO Jan 2018) – reverse takeover of Houston-based Target Hospitality for $1.3 billion in Mar 2019.
  • Double Eagle Acquisition Corp ($500m IPO Sept 2015) – combined with William Scotsman for $1.1 billion in Nov 2017.
  • Silver Eagle Acquisition Corp ($325m IPO July 2013) – combined with Videocon d2h for $273 million in March 2015.
  • Global Eagle Acquisition Corp ($190m IPO May 2011) – combined with Global Eagle Entertainment in Jan 2013.

S-1 filing Graf Acquisition III

S-1 filing Graf Acquisition IV

Mining blank check company files for $300 million IPO

ESM Acquisition Corporation has filed for a $300 million initial public offering (IPO).  The company has its head office in the River Oaks area.



The CEO of the company is Sir Mick Davis, who was the CFO of mining group Billiton plc (the predecessor to BHP Group) and the CEO of Xstrata plc, an Anglo-Swiss mining company that merged with Glencore plc in 2013. Until July 2019, Mr. Davis was the CEO and Treasurer of the British Conservative Party. He was born in South Africa but has British nationality. He is based in London.

The Chairman is John Raymond, who is Co-Founder and CEO of The Energy and Minerals Group, a leading natural resources-focused private equity firm, based in Houston. It manages funds of approximately $10 billion.

The company is seeking a “target that is positioned to benefit from the global transition towards a low carbon economy… In particular a target that explores for, mines, processes and/or refines commodities that are critical in order to achieve de-carbonization. Among other commodities, this may include cobalt, copper, graphite, lithium, manganese, nickel, palladium, platinum, rhodium, vanadium, rare earth elements, and/or other directly related raw materials.”

The company plans to list on the NYSE. Credit Suisse is the sole bookrunner on the deal.

S-1 filing – ESM Acquisition Corporation

 

Houston blank check company finds acquisition target

Houston blank check company, Peridot Acquisition Corp, has agreed to buy Li-Cycle for $1.1 billion in a reverse takeover. Li-Cycle is a lithium-ion battery recycling company, based in Toronto.



Peridot went public in September 2020 with the aim of finding an acquisition in the environmental infrastructure or renewables sector, so Li-Cycle definitely fits the bill.

Li-Cycle aims to recycle electric vehicles batteries. In addition to end of lifecycle recycling, 5%-10% of battery production is rejected as waste during the manufacturing process. As EV production ramps, Li-Cycle sees a big and growing market. It uses a non-thermal process to recycle the batteries, allowing it to recover 95% of the battery mass.

Li-Cycle is still in a start-up phase. It currently has three locations in North America that shred and mechanically separate batteries. The company is also developing a hub in Rochester, New York that will produce, at scale, lithium carbonate, Nickel Sulphate and other high-grade minerals for resale.

It has signed 40 commercial contracts with suppliers, including over $900 million in contracted off-take.

The deal values Li-Cycle at 10 times 2023 projected EBITDA. At close, the business will have $566 million in cash on hand. That will allow Li-Cycle to fund the capital expenditures required to complete its business plan.

The combined company will be led by Li-Cycle CEO Ajay Kochhar. Fellow co-founder Tim Johnson will be the Executive Chairman. Peridot CEO Alan Levande will join the Board, as will Scott Prochazka, ex-CEO of Centerpoint Energy.

SEC filing – Peridot Li-Cycle acquisition

 

Two more Houston blank check companies file for IPOs

On Friday 12 February, a record 28 blank check companies filed for Initial Public Offerings (IPO), including two old favorites in Houston. Tilman Fertitta filed for his 4th blank check company, Landcadia Holdings IV, while Graf Acquisition Corp filed their 2nd.



In case you are wondering why Friday was so popular it’s because it was the last day a company with a calendar year-end can file for an IPO using a September 2020 balance sheet.

Landcadia and Graf History

Landcadia Holdings IV filed for a $500 million IPO. As before, the shareholders are Tilman Fertitta and Jefferies. As before, they are seeking companies that operate in the consumer, dining, hospitality, entertainment and gaming industries.

  • Landcadia III just went public in October 2020 and raised $500 million in its IPO. Last month it agreed to buy The Hillman Group for $2.64 billion in a reverse takeover.
  • Landcadia II raised $275 million in May 2019 and acquired Golden Nugget Online Gaming (a Fertitta company) in December 2020.
  • Landcadia I raised $250 million in June 2016 and acquired Waitr in November 2018.

Graf Acquisition Corp II filed for a $225 million IPO, same as the first Graf IPO that was completed in October 2018. The CEO is James Graf. Graf I completed its reverse takeover of Velodyne Lidar in September 2020.

Popularity of SPACs

Special Purpose Acquisition Companies (SPACs) or blank check companies as they are also known, have really taken off in the past couple of years, mainly because of the disadvantages in the traditional IPO route where the process is long (6-7 months) and the valuation (i.e. price) at completion is uncertain.

Furthermore, the investment bankers like their IPOs to be heavily oversubscribed and for the share price to ‘pop’ on the first day of trading. But that means that the selling shareholders have effectively given up part of their returns to the new shareholders.

In contrast, a blank check company can go public in 2-3 months and then spend the next few months negotiating a deal in secret with a potential target company. In this way, both the original sponsor and the shareholders of the target can generate a better return.

S-1 Landcadia Holdings IV

S-1 Graf Acquisition Corp II

Houston scientist settles grant fraud allegations

Dr. Rouzbeth Shahsavari has agreed to pay nearly $150,000 to resolve allegations that he and his company defrauded the National Science Foundation (NSF) and the Navy.



Dr. Shahsavari is the owner and chief scientist at C-Crete Technologies Ltd in Stafford, SW Houston. He started his company while completing his PhD at Massachusetts Institute of Technology (MIT).  The company is developing new uses for advanced materials using nanotechnologies and advanced computations.

The company applied for grants to NSF and the Navy in 2015 and 2016. One of the conditions of any grant was that the applicant must have a subaward agreement with a collaborating research partner. Dr. Shahsavari said he had such an agreement with Rice University when, in fact, he did not. (He is, though, an Assistant Professor at Rice).

The company also failed to notify Navy personnel that their designated principal investigator had stopped working for the company almost three months before the grant was awarded.  Assuming the allegations were true, in both circumstances, the company was ineligible to receive the $147,589 grant.

The claims resolved by the settlement are allegations only. There has been no determination of liability.

https://www.justice.gov/usao-sdtx/pr/houston-scientist-settles-grant-fraud-allegations