Category Archives: Healthcare

Houston Pharmacy owner and Accountant charged with $134 million fraud

Mohamed Mokbel and Fathy Elsafty have been charged with conspiracy to commit healthcare fraud. Mr. Mokbel is the owner of several Houston area pharmacies, while Elsafty is his accountant.

Mr. Mokbel was the CEO of 4M Pharmaceuticals, the parent company for several retail pharmacies that operated in Houston, Fort Worth, Florida and elsewhere. He also allegedly had ownership in the subsidiary pharmacies. Mr. Elsafty served as 4M’s accountant and tax preparer.

The indictment alleges that 4M functioned as an outbound telemarketing call center that solicited Medicare, Medicaid and commercial insurance patients nationwide. Call center employees would offer patients medically unnecessary diabetic supplies and topical creams. In many instance, 4M would bill the patient’s insurance plan, even if the patient had refused the solicitations.

4M would also target doctors by sending fax requests for prescriptions that patients often did not authorize. Some prescription requests were sent for dead patients.

The scheme ran from December 2013 to March 2020. 4M collectively received over $134 million in payments from Medicare and others.

The funds were allegedly used, in part, to pay for Mokbel’s $1.5 million residence in the Galleria area, $15 million in gambling and casino expenses and purchases and payments for a Ferrari and a Bentley. Mokbel also transferred and controlled over $6 million in health care fraud proceeds in certificate of deposit accounts at banks, according to the allegations.

Mokbel and ElSafty are charged with one count of a conspiracy to commit healthcare fraud, three counts of healthcare fraud and four counts of money laundering. All carry a possible prison sentence of 10 years in prison and a $250,000 maximum fine. The use of telemarketing to target people over 55 as a means to commit healthcare fraud carries an additional penalty of 10 years.

Previous trial and acquittal

In 1999 Mr. Mokbel was charged, with others, with money laundering and conspiracy in relation to a case where individual cans of infant formula had been purchased and then repackaged into trays for resale to wholesalers.

It was alleged at trial that some of the cans had been stolen. A jury convicted the defendants. However, an appeals court overturned the verdict because the evidence supporting the stolen goods charge was insufficient to meet the $5,000 minimum value threshold that applies to interstate transportation of stolen goods. Mr. Mokbel was cleared of all charges.


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.

Senior finance exec leaves Carriage Services

Viki Blinderman will be leaving her role of Chief Accounting Officer and Secretary of Carriage Services (‘CSV’) at the end of March. CSV is based in the Galleria and operates 180 funeral homes and 32 cemeteries in 27 states

In practical terms, Ms. Blinderman is the co-CFO alongside Ben Bright. For a time, between 2015 and 2017 that was their official titles. Since February 2017 Mr. Bright has been CFO while she has been Chief Accounting Officer and Secretary. However, for the past three years Ms. Blinderman and Mr. Bright have received the same salary, bonus and stock awards.

Ms Blinderman joined the company in 2002. She will continue to receive her base salary for two years ($300,000 per annum) and a one-time payment. This is not specified in the 8-K but she is entitled to a pro-rata bonus for 2021 ($37,500).

SEC filing – Blinderman

Appeals court overturns $4.3 million fine on MD Anderson

The Fifth Circuit Court of Appeals has overturned a $4.3 million fine on MD Anderson Cancer Center. The fine was originally levied by the US Department of Health and Human Services (HSS) in 2018 for HIPAA violations. HIPAA is the acronym for the Health Insurance Portability and Accountability Act of 1996 that governs patient privacy.

Initial breaches

The fine arose out of three incidents that occurred in 2012 and 2013

  • A laptop of a faculty member was stolen. It was not password-protected or encrypted but contained electronic protected health information (ePHI) for 29,021 individuals.
  • An MD Anderson trainee lost an unencrypted USB thumb drive during her evening commute. This contained ePHI for over 2,000 individuals.
  • A visiting researcher misplaced another unencrypted USB thumb drive, containing ePHI for nearly 3,600 individuals.

MD Anderson disclosed these incidents to HSS who determined that MD Anderson had violated two federal regulations One was the failure to encrypt information covered by HIPAA, the other was unpermitted disclosure of protected health information.

HSS also determined that MD Anderson had ‘reasonable cause’ to know that it had violated the rules. The Administrative Law Judge imposed a fine of $2,000 for each day it wasn’t compliant between 24 March 2011 and 25 January 2013 as well as a $1.5 million fine each year for its
noncompliance in both 2012 and 2013. The total fine was $4.3 million.

Law interpreted incorrectly

After MD Anderson appealed to the Fifth Circuit Court of Appeals, the government conceded that the maximum fine it could impose was $450,000. Instead the Appeals Court quashed the fine as being arbitrary, capricious and otherwise unlawful. They ruled that the Judge had not interpreted the law correctly in the following ways;

  • The HIPAA Act states that entities must have a mechanism to encrypt ePHI. MD Anderson gave its employees an ‘IronKey’ to encrypt and decrypt data and trained employees on how to use it. The Appeals Court ruled that was a ‘mechanism’, even if three employees failed to follow it.
  • Under the terms of regulation HSS wrote, disclosure of protected health information was defined as ‘release, transfer, provide and divulge’. In other words, an active participant not a passive loss of information.  Also, the HSS could not prove that that someone outside MD Anderson actually received the protected information.
  • The judge did not consider other cases involving similar breaches of HIPAA. For instance, a Cedars-Sinai employee lost an unencrypted laptop containing 33,000 patient records. No penalty was imposed in that case.
  • Congress stated that for ‘reasonable cause’ violations, the maximum fine was $100,000 per year. Fines for ‘willful neglect’ can be $1,500,000 per year. However the judge had determined that the violations in this case were not the result of willful neglect.

5th Circuit – MD Anderson



Houston Doctor pleads guilty to receipt of kickbacks

Dr. Ghyasuddin Syed has pleaded guilty to receiving $475,992 in kickbacks from the owner of a Houston toxicology laboratory. Dr. Syed operates a pain management clinic in Baytown.

Uday Shah, who owned and operated several labs, originally pleaded guilty in October 2019.  He was sentenced to 24 months’ imprisonment. Timothy Andrews of Deer Park, who worked as a marketer for Mr Shah, pleaded guilty in June 2019. He got 15 months.

The scheme ran from November 2014 through August 2017. Mr Shah paid kickbacks to Dr Syed, though the payments were disguised as rent payments from Mr Shah to entities controlled by Dr. Syed or his wife, Shazana Begum. In return, Dr. Syed referred urine drug testing to Shah’s labs, including Pinnacle Laboratories in Lexington, Kentucky.  Medicare paid the labs $325,739 to which they were not entitled.

Dr. Syed is scheduled to be sentenced in March 2021 in the Eastern District of Kentucky.  He faces up to five years in prison for the conspiracy to violate the Anti-Kickback Statute, and a maximum fine of $250,000.

Dr. Syed’s wife, Shazana Begum, has entered into a pretrial diversion agreement wherein she admitted her role in the offense. She agreed to be under the supervision of the United States Probation Office for 12 months, to pay restitution of $325,739 along with Shah and Andrews, and to perform community service.

It appears that the case was first brought to the attention of authorities by a lawsuit filed in 2015 by an employee at the laboratory in Kentucky. However, the lawsuit remained sealed until September 2019.

Medical device start-up appoints new CEO

Soliton has appointed Brad Hauser as its new CEO, replacing Dr Chris Capelli, who becomes Chief Science Officer. The company is a medical device start-up that has its head office near Bellaire.

The company uses technology licensed from MD Anderson Cancer Center. Its main device uses rapid pulses of designed acoustic shockwaves to disrupt cellular and subcellular structures. The company believes that the technology can be used for tattoo removal, cellulite reduction and fibrotic scar treatment. As yet, the company has not recorded any revenue.

The company went public in February 2019, raising $11 million at $5 per share.  It subsequently raised another $35 million in June at $8.30 per share.  The current share price is $7.12.

Mr Hauser has been a non-executive director of the company since June 2018. His day job was the Vice President, R&D and General Manager for CoolSculpting, a technology that reduces fat by non-surgical methods. CoolSculpting was developed  by Zeltiq Aesthetics, which was acquired by Allergan for $2.4 billion in 2017.

Mr Hauser will receive a base salary of $475,000. He will also receive a restricted stock grant of 200,000 shares that will vest over four years.

Dr Capelli will maintain his current salary of $450,000 in his new role.

SEC filing – Soliton CEO


US Physical Therapy hires new CFO

US Physical Therapy has appointed Carey Hendrickson as its new CFO. He replaces Larry McAfee, who is retiring.

The company operates 551 outpatient physical therapy clinics in 39 states as well as managing 32 physical therapy facilities for third parties. It also has a industrial injury prevention division. The company has its head office in west Houston and has a market capitalization of $1 billion.

In March and April, many of its clinics were closed. At the lowest point in mid-April, visits were about 45% of pre-pandemic levels. By August, they were at 85%, The company cut costs aggressively through salary reductions, furloughs and rent deferrals. It increased its EBITDA in Q2 over Q1, despite revenues being down nearly 30%.

Mr Hendrickson joins from Capital Senior Living Corporation, a publicly-traded company based in Dallas (market cap $20 million), where he was CFO. Prior to joining them in 2014, he was the CFO at Belo Corp, the operator of television stations. Mr Hendrickson will receive a base salary of $450,000. He also received a grant of stock worth $400,000 that will vest over four years.

Mr McAfee has been CFO since joining the company in 2003. He originally announced his intention to retire back in January 2020 but later deferred the intended retirement date because of the pandemic. He will stay on until the Annual Meeting in December, at which point he will resign from the Board. Mr McAfee will then enter into a six month consulting agreement where he will be paid an hourly rate, on an as-needed basis.

SEC filing – US Physical Therapy new CFO

Pain doctor pays to settle allegations of deceptive Medicare billing

Dr Syed Nasir has paid $530,000 to settle allegations that he falsely billed Medicare for the use of electro-acupuncture devices.

From March 2019 to October 2019, Dr Nasir billed Medicare for the implantation of neurostimulator electrodes. This is a surgical procedure that usually requires the use of an operating room.

However, Dr Nasir did not perform these surgeries. Instead, he applied a device used for electro-acupuncture. This procedure involves inserting needles into patients’ ears with the neurostimulator taped behind them with an adhesive. Medicare does not reimburse for electro-acupuncture devices as implantable neurostimulators.

Dr Nasir runs Skilled Pain Care Clinic, which is on the 610 loop on the NW side of Houston.

In June, Dr Jaime Robledo of Katy paid $100,000 to resolve similar allegations.

Trading on Houston biopharma companies halted over COVID-19 claims

[UPDATE 5-28-2020: After both companies issued similar press releases on May 27, laying out more specifically the timeline for the drug to get approval, trading in both companies has resumed on 28 May].

The Nasdaq has halted trading on CNS Pharmaceuticals and Moleculin Biotech pending further information from the companies related to a drug candidate for the coronavirus illness COVID-19.

Moleculin Biotech is based in the Rice Military area of Houston and went public in June 2016. CNS is based in the Galleria and completed its IPO in November 2019.

The Securities and Exchange commission temporarily halted trading on May 5 of the two companies.  That temporary halt was due to expire on May 15, until the Nasdaq stepped in. The SEC also halted trading of Vancouver-based WPD Pharmaceuticals, which is traded on the Canadian Stock Exchange. However, WPD will resume trading on the CSE.

University of Frankfurt research

The saga began on March 11 when independent researchers at the University of Frankfurt posted a paper on a website, for peer review. The research found that 2-deoxy-D-glucose (“2-DG”) was able to reduce replication of SARS-CoV-2, the virus that causes COVID-19, by 100% in in vitro testing.

Three companies linked by common shareholder

On March 23, 2020 CNS announced that it had entered into an agreement with WPD for the development of several preclinical drug candidates, including WP1122. The founder and largest shareholder of CNS, Dr Waldemar Priebe, is also the founder and largest shareholder of WPD too.

WPD had previously licensed rights to a portfolio of drug candidates, including WP1122, from Moleculin Biotech for certain regions. Dr Priebe is one of the largest shareholders of Moleculin. He is also the chair of the Scientific Advisory Board of that company.

By day, Dr Priebe is also the Professor of Medicinal Chemistry, Department of Experimental Therapeutics at MD Anderson Cancer Center.

CNS states that WP1122 is a biologically inactive compound that can be metabolized in the body, to produce a form of 2-DG. The March 23 press release stated that WP1122 was being tested for a range of viruses, including SARS-CoV-2.

On April 8, Moleculin issued a press release touting the Frankfurt research. CNS issued its version of the press release on April 13.

Market capitalization rockets

Prior to the March 23 announcement, CNS had a market cap of $24 million. After the April 13 press release, it was $60 million. Likewise for Moleculin Biotech, the market cap rocketed from $24 million to $89 million.

The SEC is concerned that CNS and certain unnamed third parties may have overstated the status of development of WP1122, the status of testing the drug’s impact on COVID-19 and the ability to expedite regulatory approval of any such treatment.

Missouri City Physician to pay $450,000 to resolve fraud allegations

Dr Maaz Abbasi has agreed to pay $450,000 to resolve allegations that he falsely signed home help certifications and plans of care in exchange for money. He also agreed to a three-year exclusion from participation in any federal healthcare program.

Dr Abbasi was connected with Egondu ‘Kate’ Koko. In May 2019, she was sentenced to over 15 years in prison for her role in a $20 million medicare fraud. She owned a number of home health agencies. She admitted to paying illegal kickbacks and bribes to physicians and patients for paperwork necessary for the agencies to bill Medicare.

From 2015 to 2018, Abbasi certified patients for home health services without any knowledge of their medical condition or homebound status. One of the companies owned by Ms Koko paid Abbasi approximately $6,200 in exchange for signing these fraudulent Medicare home health certifications and plans of care. Abbasi also fraudulently signed a fellow physician’s name on these certifications and plans of care without that physician’s authorization, permission or knowledge.

The agreement resolves the allegations without a determination of liability.