Category Archives: Healthcare

Two nurses charged in $2.1 million medicare fraud

Another week, another Medicare fraud indictment in Houston. Joseph Nwankwo of Houston and Stacey Ajaja of Richmond have been arrested. They appeared in court in the Southern District of Texas last Friday.



According to the indictment, Mr Nwankwo and Ms Ajaja owned Hefty Healthcare Services from 2009 through 2017. The company was based off the Westpark Tollway in Mission Bend. From July 2013 through November 2016, the company billed Medicare $1.6 million for home health services that were never provided and not medically necessary. The pair obtained patient referrals by paying marketers and patients. They bribed physicians to authorize medically unnecessary home health services. Medicare paid out $2.1 million on these claims.

Nwankwo and Ajaja are both charged with one count of conspiracy to commit health care fraud, five counts of health care fraud and one count of conspiracy to pay and receive health care kickbacks.

If convicted, they face up to 10 years in prison for the fraud charge and up to 5 years for the kickback charge. They also face fines of $250,000 and $25,000 for the charges.

Earlier this month, a Houston doctor was convicted in a $16 million fraud scheme.

https://www.justice.gov/usao-sdtx/pr/two-nurses-charged-health-care-fraud-and-illegal-kickback-scheme

 

Houston doctor convicted in $16 million medicare fraud scheme

Yolanda Hamilton, M.D., has been found guilty of participating in a $16 million Medicare fraud scheme. After a six-day trial, she was convicted of

  • one count of conspiracy to commit health care fraud,
  • one count of conspiracy to solicit and receive health care kickbacks and,
  • two counts of false statements relating to health care matters.



Dr Hamilton was the owner and operator of HMS Health and Wellness Center, based in SW Houston. Between January 2012 and August 2016, Hamilton signed false and fraudulent plans of care and other medical documents to make it appear that patients of Hamilton and her co-conspirators qualified and received home-health services under Medicare. In fact, Hamilton paid patients to sign up and charged home-health agencies an illegal kickback in the form of a $60 patient ‘fee’ for certifying patients for home-health services.

The scheme resulted in approximately $16 million in false and fraudulent claims.

Hamilton will be sentenced at a later date.

This is not the first time Dr Hamilton has been in trouble. Back in August 2013, the Texas Medical Board and Hamilton entered into an Agreed Order requiring Dr Hamilton to refrain from treating chronic pain patients. Another physician was also required to monitor her practice. The Board found that Dr Hamilton failed to maintain adequate medical records. In addition, in some instances, she lacked full justification for the continued prescriptions of opiates and muscle relaxers.

https://www.justice.gov/opa/pr/texas-physician-convicted-16-million-medicare-fraud-scheme

Biotechnology company hires interim CFO

Salarius Pharmaceuticals has hired Mark Rosenblum as Interim CFO. He replaces Scott Jordan, who has been appointed Chief Business Officer.

Salarius is based in the Medical Center. The primary drug in its pipeline is one that treats Ewing sarcoma, a bone cancer that affects children and young adults. The company moved from Salt Lake City in 2016 after receiving a $19 million grant from the Cancer Prevention and Research Institute of Texas.  The company went public in July 2019 via a reverse takeover.



According to LinkedIn Mr Jordan is based in Chicago while Mr Rosenblum is based in Dallas. Mr Rosenblum has been working as a consultant to Salarius since February 2019. He has previously served as CFO of another biotech company, Advaxis.

Although he is described as the Interim CFO, Mr Rosenblum has converted from a consultant to an employee. He will be paid $265,000. He will also get a guaranteed bonus of $19,300 for 2019 and $14,500 for Q1 2020.

SEC filing – Salarius Rosenblum

Houston healthcare executive sentenced to 10 years for $16m fraud

Starsky Bomer of Houston has been sentenced to 10 years in prison for his role in a $16 million Medicare fraud scheme.

Mr Bomer was convicted in October 2018 of one count of conspiracy to pay and receive healthcare kickbacks, two counts of violating the Anti-Kickback Statute and one count of conspiracy to commit health care fraud.



Mr Bomer was the CFO & COO of Atrium Medical Center in Sugar Land and Pristine Healthcare in Pasadena. Between 2011 and February 2013, Bomer and others engaged in a scheme to defraud Medicare by submitting false and fraudulent claims for partial hospitalization program (PHP) services. A PHP is a form of intensive outpatient treatment for severe mental illness.

Mr Bomer orchestrated a scheme by which he paid bribes and kickbacks (typically around $1,500) to group home owners and patient recruiters in exchange for sending patients to Atrium and Pristine. Mr Bomer disguised the bribes and kickbacks as salary payments and transportation payments. In addition, Mr Bomer knew that most of the patients admitted to Atrium and Pristine’s PHP did not qualify for and were never provided legitimate partial hospital services.

Mr Bomer has to pay back $6.3 million in restitution and forfeit $158,000.

https://www.justice.gov/opa/pr/texas-hospital-administrator-sentenced-10-years-prison-role-16-million-health-care-fraud

CFO resigns from struggling healthcare company

Brandon Moreno, the CFO of Nobilis Health Corp, has resigned from his position. He was only promoted to the role in January 2019. He lasted a lot longer than previous CEO, Jim Springfield, who joined in December 2018 and left in May 2019!



Marissa Arreola also resigned as the Chief Legal Officer. No replacements were named for either Mr Moreno or Ms Arreola.

Amazingly the company is still not in Chapter 11 and its stock was still trading until 3 September (at 12 cents per share).

The last quarter or annual report filed by the company was for the quarter ended 30 June 2018. In November 2018 the company said it was working with its auditors, Crowe Horwath, to make a significant adjustment to the carrying value of accounts receivable, primarily out-of-network claims over one year old.

According to the last 10-Q filed, the company had $144 million in accounts receivable, of which $39 million was over a year old. The company had ZERO allowance for doubtful debts. That’s despite the amount over one year old virtually doubling since the previous year end.

In November 2018, the NYSE had sent a notice to the company that it was not in compliance with the listing standards. The company sent a plan to regain compliance back in May. That resulted in the NYSE offering an extension of the grace period to August 31. The stock was delisted on September 3 following that expiry.

The company owes its lenders $132 million. A few months ago the lenders hired an Investment Banker to effect a transaction. They also hired a Chief Restructuring Officer from Morris Anderson to assist them in their efforts to recover as much value as possible.

SEC filing – Moreno resignation

Prominent Houston attorney indicted for ambulance chasing

Jeffrey Stern, a prominent Houston personal injury attorney has been indicted for ambulance chasing, i.e. the practice of illegally soliciting clients who may need a lawyer.

Also indicted were;

    • Deborah Bradley, another attorney at his firm
    • Richard Plezia, an attorney with his own firm
    • Frederick Morris, case runner for Stern. His wife owned a healthcare clinic
    • Lamon Ratcliff, case runner and clinic owner
    • Marcus Esquivel (charged separately), case runner and owner of several advertising and consulting businesses.



Murder for hire case

Stern achieved infamy when his wife was shot in May 2010. Stern’s mistress was soon charged with conspiring to hire a hitman to kill his wife. The mistress reached a plea deal and was sentenced to 20 years. However, charges against Stern were dropped in 2012 and Stern and his wife reconciled.

The kickback scheme

The 21-count indictment alleges conspiracy, witness tampering, obstruction of justice and multiple tax violations. According to the indictment, the scheme started in 2006.

Allegedly, Stern would pay kickbacks to the case runners and clinic owners in exchange for referrals of personal injury cases to Stern’s law firm. Stern would deposit such income to personal accounts and cash the checks with check cashers. This income was not reported to the IRS. However, the payments to the case runners were disguised in the business accounts and deducted illegally on Stern’s tax returns.

Beginning in 2006, according to the indictment, Stern sought to disguise his illegal kickback payments as legitimate referral fee payments to attorneys. Stern told Morris to find a lawyer who they could use. Morris suggested Attorney 1 (not named in the indictment), who agreed to take part in the scheme. Morris would cash the checks that Stern had written, using forged endorsements. He would use part of the cash to pay his sources.

Stern also issued checks to Attorney 2 and Attorney 3 who didn’t know about the scheme.

IRS audit

May 2010 was a rough month for Stern. Days after his wife was shot, the IRS notified Stern he was being audited. In 2011 Stern agreed to pay the IRS $1.1 million in assessments and $341,000 in penalties.

Allegedly, Stern also started issuing false 1099s to Attorney 1 which caused the IRS to go after attorney 1. Between 2011 and 2016, according to the 1099’s, Attorney 1 was paid over $7 million. In practice, little of that went to Attorney 1. Stern ended up funneling checks of over $330,000 to the attorney to cover the taxes owed on the declared (but phony) income of Attorney 1.

Of course, Stern didn’t issue 1099s to Attorneys 2 and 3 (as they didn’t know about the scheme) for the $1.7 million of checks written to them, but cashed by Morris.

Other kickbacks

As a result of the IRS audit, for 2011 Stern funneled kickbacks ($308,000) through the company owned by Morris’ wife.

According to the indictment, the kickbacks to Plezia took place between 2006 and 2013 and amounted to $686,000. The kickbacks to Ratcliffe were funneled from Stern via his partner, Bradley, and amounted to $329,000.

Witness tampering

In addition, Stern found out about the federal grand jury investigation in 2016 and ordered Morris not to co-operate and Esquivel to destroy records.

Reading the indictment, it appears that Attorney 1 became a co-operating witness and provided recordings of conversations with Stern that helped build the case.

If convicted, long prison term

Stern is 62 years old. If convicted, he could face up to

  • 5 years in prison for conspiracy to defraud
  • 3 years for filing a false tax return
  • 3 years for aiding and assisting in the preparation of false tax returns
  • 10 years for obstruction of justice
  • 20 years for witness tampering

Morris has pled guilty and will be sentenced in February 2020.

Indictment – Stern

https://www.justice.gov/usao-sdtx/pr/houston-personal-injury-attorneys-and-case-runners-indicted

 

Houston woman sentenced to 5 years for defrauding VA

Eudora McDaniel, 76, has been sentenced to 5 years in prison for conspiring to commit fraud against the Veterans Administration (VA). She was originally indicted in June 2018 and pleaded guilty in January 2019.



McDaniel was a former VA employee who conspired with a vendor, Divine Iron Works, to defraud the VA by submitting fake invoices for good and services that never happened. As a prosthetics representative for the VA, McDaniel had the authority to obtain prosthetic goods and services if a physician found it medically necessary. She was also authorized to pay using a government-issued VISA credit card.

Although Divine Iron Works was an authorized vendor, it was effectively defunct from January 2011 to December 2014.

McDaniel created fake purchase orders for Divine Iron Works and paid them using her government credit card. McDaniel and her co-conspirator, Angela Hunter, also of Houston, then split the payments. Hunter pleaded guilty in August 2018 and is scheduled to be sentenced on August 13, 2019.

McDaniel has also be ordered to pay $290,000 in restitution and a $100,000 fine.

https://www.justice.gov/usao-sdtx/pr/former-va-employee-sentenced-max-fake-invoice-scheme

Contrasting fortunes for two Houston IPO’s pricing this week

There were contrasting fortunes for the two Houston-based companies that were pricing their Initial Public Offerings this week.

Sunnova Energy International, a residential solar energy provider, priced its IPO at $12 per share.  That’s below the expected range of between $16 and $18 per share. However the company is selling the same number of shares (17.6 million). At that price, the company will raise $221 million and have a market value of $1.1 billion.  The shares will begin trading on the NYSE on July 25 under the symbol NOVA.



Castle Biosciences, based in Friendswood, priced its IPO at $16 per share. That’s at the top end of the expected range of $14 to $16 per share. Also the company also increased the number of shares on offer from 3.3 million to 4.0 million. The gross proceeds are expected to be $64 million. The shares will also begin trading on July 25, but on the Nasdaq under the symbol CSTL.

The company is a commercial-stage dermatological company that uses genomes to provide physicians and their patients with more accurate treatment decisions. The main product is a multi-gene expression profile test that predicts the risk of metastasis or recurrence for patients diagnosed with invasive cutaneous melanoma, a deadly skin cancer.

I’ve added the two companies to the list of Houston-area public companies which you can see here. However I have deleted American Midstream from the list, whose deal to go private was completed yesterday.

Sunnova IPO pricing press release

Castle Biosciences IPO pricing press release

Houston Doctor facing murder charges pleads guilty to health care fraud

Dr Rezik Saqer, aged 64, pleaded guilty to health care fraud in the Southern District of Texas. He submitted fraudulent claims to Medicare and other private insurance companies for financial gain.

From January 2010 through September 2015, Saqer and his co-conspirators often overbooked patient appointments to maximize billings. Unlicensed co-conspirators often conducted follow-up appointments. However Saqer billed using higher reimbursement codes and billed millions of dollars in this way.



Conroe crash kills 4

Unusually, the case was only filed on June 28, 2019 and there was a waiver on indictment. That’s probably because it arose out of an investigation following Dr Saqer’s indictment in September 2015 in a Montgomery County District Court.

Prosecutors allege that Dr Saqer ran two illegal pill mills, one in Conroe and one in NW Houston. Saqer owned and operated Integra Medical Clinic and Pharmacy in Conroe and Texas Pain Solutions and Steeplechase Pharmacy on FM 1960.

Saqer allegedly prescribed four bottles of addictive drugs to Ronald Cooper of Montgomery. Cooper took the drugs and then, on September 20, 2015 in Conroe, crashed his car, killing Roland Sedlmeier, his wife Melinda and their two children, while high on the drugs.  In May 2017, Cooper was found guilty on all charges and was sentenced to 80 years in prison.

Murder charges added

In March 2018, Montgomery County filed separate and additional charges. Saqer was charged with one count of engaging in organized criminal activity and six counts of murder. Those individuals died from drug overdoses between February 2010 and September 2015, allegedly as a result of Saqer’s treatment plans and improper delegation of duties.

The cases in Montgomery County are still ongoing.

For the federal case, sentencing will occur in October 2019. At that time, Saqer faces up to 10 years in federal prison and a possible $250,000 maximum fine.

Last month, a Houston manager of an Oregon Pill Mill Clinic was sentenced to 9 years in prison

https://www.justice.gov/usao-sdtx/pr/houston-area-physician-pleads-guilty-health-care-fraud

Houston Biopharma company files for IPO


CNS Pharmaceuticals, a Houston-based biopharma company has filed for an Initial Public Offering (IPO).  The company has its head office in the Galleria area.

It is the second Houston-area biopharma company to file for an IPO recently. Castle Biosciences (which does have commercial revenues) filed for a $58 million IPO last week.



The company doesn’t have any revenues yet and is developing anticancer drugs for the treatment of brain tumors. Based on preclinical data and positive results of the Phase I clinical studies conducted at MD Anderson Cancer Center, the company believes its lead drug candidate, Berubicin, could significantly help in the treatment of glioblastoma, a type of brain cancer that is considered incurable.

Berubicin was discovered at MD Anderson by Dr Waldemar Priebe, the founder of the company. Dr Priebe initially licensed the drug to Reata Pharmaceuticals. They allowed their investigative drug application with the US Food and Drug Administration (FDA) to lapse for strategic reasons.

Dr Priebe engaged a couple of experts who were on the team at Reata. As a result of reviewing the data, the company intends to restart the application.

The company is seeking to raise about $8.5 million at a share price of between $4 and $5. The money will be used to start Phase 2 trials of Berubicin, expected to cost $7 million. Dr Priebe owns 67% of the company

The CEO, and only full-time employee, is John Climaco who joined the company in September 2017. He was previously the CEO of a biopharma startup. The CFO is Matthew Lourie, who is providing services on a part-time, consulting basis.

SEC filing