Tag Archives: Fraud

Ex-wife indicted in $600,000 Medicaid fraud

Kay Le Farmer, who lives in Katy, has been indicted for defrauding Medicaid of more than $600,000.

Her ex-husband is a licensed professional counselor, who operated a practice in West Houston from 2009 to 2013. Ms. Farmer and the counselor were married from 2000 to 2014. They separated in 2013 and divorced the following year.



From 2012 until 2013, Ms. Farmer was the office manager for the practice and had access to patient information as well as the practice’s billing records. In June 2013, it is alleged she began billing Medicaid for services not provided by her now ex-husband. She channeled the funds received to a newly-opened bank account that she controlled.

The fraud continued even after Ms. Farmer began employment as an office manager with a Pediatrician in Katy. Between November 2017 and March 2018, she submitted claims for 25 patients associated with the Pediatrician for psychotherapy services purportedly provided by her ex-husband.

In total, from June 2013 until June 2018 Ms. Farmer billed Medicaid $617,000. She was paid about $475,000, which she then transferred to her personal accounts.

In 2018, when one of the insurance companies requested records from Ms. Farmer regarding services billed, she requested a records extension and falsely claimed her ex-husband had suffered a massive stroke and was in hospital.

If convicted, Farmer faces up to 10 years in federal prison and a possible $250,000 maximum fine for each count of health care fraud. She was indicted on 22 counts (each count represents a specific fraudulent claim made in 2017 or 2018).

https://www.justice.gov/usao-sdtx/pr/therapist-s-ex-wife-charged-defrauding-medicaid-and-stealing-patient-information

KBR to pay $12 million to settle inflated billing allegations in Iraq

KBR has agreed to pay the US government $12 million to settle allegations of inflated billing and kickbacks during 2002-2003 regarding its work supporting the war in Iraq.

At the time, KBR was owned by Halliburton, with the split not occurring until 2007.

The lawsuit concerned the Logistics Civil Augmentation Program (LOGCAP) that KBR was awarded in 2001 to provide logistical support to the US military in the Middle East.



Three separate KBR employees rigged bidding processes for subcontract work involving trucks and trailers to two different Kuwaiti companies. In return, the employees received kickbacks from those companies. In addition, the third employee extended two contracts for an additional six months, even though the equipment had been returned to the subcontractor.

The settlement amount is actually $13,677,621 and includes $4,253,174 in restitution for over-billing. KBR will have to pay cash of $12 million within 10 days. The other $1.677 million has already been settled by credits that KBR previously provided.

Officially, the settlement agreement is neither an admission of liability by KBR nor a concession by the United States that its claims are not well founded. However, KBR self-reported these violations to the government.

In 2021, following more than seven years of litigation, the U.S. District Court for the Southern District of Texas granted partial summary judgment to the United States on several of its False Claims Act and Anti-Kickback Act claims. This settlement resolves these allegations and other pending claims and issues, for which trial had been scheduled to commence on May 23.

Last year, the US government obtained a $51 million judgment against KBR concerning a larger overpayment that KBR made to one of the Kuwaiti subcontractors under a separate subcontract in the Iraq Theater.

https://www.justice.gov/opa/pr/kbr-defendants-agree-settle-kickback-and-false-claims-allegations

 

Houston resident indicted in Texas fake paper tag scheme

Another Houston resident has been indicted in the Texas fake paper tag scheme that’s cost the state nearly $100 million dollars. Daniel Rocky Christine-Tani was arrested in Sugar Land and will appear in court on June 2, 2022.

Co-conspirators Leidy Areli Hernandez Lopez, Houston, Emmanuel Padilla Reyes, Houston and Octavian Ocasio from New York were charged in May 2021. The new indictment adds more charges against Reyes, aka Christian Hernandez Bonilla, who remains at large.



I wrote about the scheme in my blog post from May 2021 that highlighted the virtually non-existent controls in the system.

Internal controls lacking

Car dealers in Texas must obtain a GDN (general distinguishing number) license to buy or sell vehicles. The license application portal is online and a license can easily be acquired using fake ID documents, such as a driver license from any state. Once a dealer obtains a GDN license, they can access the online eTag portal of the TX Department of Motor Vehicles to create temporary tags.

However, there were a couple of gaping holes in the system. Firstly, a GDN holder can set up other users on their account who can create and issue temporary tags. Secondly, there are no checks on the vehicle, buyer or vehicle identification number (VIN) entered into the portal.

In that way, the co-conspirators issued 700,000 fake paper plates in a matter of months in 2020. Fake plates were sold for between $125 and $150 each, although more recently plates can be bought for less than $100.

New state law being to have an effect

The Texas Department of Motor Vehicles is a relatively new department, only created in 2009. It only began investigating title fraud in 2014 when it hired its first fraud inspector.  A 2019 report by the Texas Legislature stated that the department had no fraud reporting tools.

The state passed a bill that became law in September 2021 to improve controls over paper plates. For example, the law requires all new  dealer applicants to be fingerprinted in order to obtain a GDN. That has not yet been enacted.

The law also allowed the DMV to deny or revoke a dealer’s access to the eTag portal if there was fraudulent activity. Prior to the law passing, the DMW was specifically prohibited by statute from denying a dealer access to the database.

Limits have also been put in place on the number of tags that a dealer can issue. They appear to be having an effect.

At the February DMV board meeting it was reported that 17 independent dealers were part of an organized criminal group that issued 1.2 million buyer tags in 2021 or 25,000 a week. In 2022, these numbers dropped to a few hundred a week.

However, the criminal group is now moving onto creating tampered documents without using the eTag portal.

If convicted, each defendant faces up to 20 years in prison and a possible $250,000 maximum fine.

https://www.justice.gov/usao-sdtx/pr/another-indicted-nationwide-fraudulent-car-buyer-paper-tag-scheme

Dental clinic operator indicted for not paying $1.7 million in taxes

Jonathan Louis Lepow, a dental clinic operator, has been indicted for failing to pay $1.7 million in employment taxes to the IRS.

Lepow operated the business side of his father’s dental practice, Kenneth A Lepow, DDS, Inc (‘Lepow DDS’) between 2005 and 2017. The practice is based in NW Houston.

According to the indictment, around 2012, Lepow stopped paying employment taxes to the IRS. The IRS assigned a Revenue Officer in 2014, who began contacting Lepow to bring the business into compliance. The outstanding tax obligation for 2012-2016 was $1.7 million.

Instead, Lepow allegedly deposited funds from Lepow DDS into the bank accounts of the Texas Center for Continuing Education. Beginning in 2016, he also allegedly deposited funds into the bank accounts for the benefit of Top Tree Agency Corp, a marijuana marketing business in Seattle.

If convicted, Lepow faces up to 10 years of imprisonment and a possible $250,000 maximum fine.

Lepow DDS filed for Chapter 7 bankruptcy in 2017.

https://www.justice.gov/usao-sdtx/pr/dental-clinic-operator-arrested-failing-pay-17-million-taxes

10 Texas Doctors agree to pay $1.7 million to settle allegations of kickbacks

Ten Texas Doctors, including five from the Houston-area, have agreed to pay of total of $1.68 million to resolve allegations involving illegal kickbacks. There was no determination of liability.



The cases revolve around Little River Healthcare, an operator of a hospital (and related clinics) based in Rockdale, TX, located between Austin and College Station. Little River went into bankruptcy in June 2018 and closed in December of that year.

The Scheme

Between 2013 and 2016, the hospital embarked on an aggressive growth strategy by adding surgery centers, diagnostic imaging centers and over 50 physician offices. It utilized third party laboratories to perform tests that the hospital itself was unable to perform. They created a way for physicians, who were ordering tests from out-of-network laboratories to provide those services in-network through Little River’s hospital contract with Blue Cross Blue Shield (BCBS).

Unfortunately, this way also involved volume-based commissions paid to independent contractor recruiters, who used management service organizations (MSO) to pay doctors for their referrals. That is illegal under Medicare, Medicaid and other federally funded programs. The scheme ran from 2015 to 2018.

Settlements

The Houston doctors involved are (together with the settlement they have agreed to pay);

  • Tamar Brionez, M.D., Spring – $85,006
  • Rakesh Patel, D.O., Houston – $174,539
  • Cuong Trinh, M.D., Houston – $45,056
  • Randall Walker, M.D., Magnolia – $60,898
  • Michael Whiteley, D.O., Tomball – $52,015

The largest settlement involved Gary Goff, M.D. of Dallas who agreed to pay $454,088.

Back in January, in a related case involving Little River Healthcare, seven TX doctors and a hospital CEO agreed to settle allegations of kickbacks for $1.1 million.

Arbitration award

In 2016, BCBS started investigating Little River’s billing practices in relation to third party laboratories and started withholding payments to Little River. That caused a severe liquidity crisis for Little River which forced it into bankruptcy. Prior to bankruptcy, Little River had filed for arbitration in its dispute with BCBS. In May 2020, a Texas arbitrator awarded Little River $108 million.

 

https://www.justice.gov/usao-edtx/pr/ten-texas-doctors-and-healthcare-executive-agree-pay-over-168-million-settle-kickback

Six Houston-area residents charged with mortgage fraud

Six Houston-area residents have been charged in a multi-layered fraud scheme involving mortgage fraud and identity theft.



The US Attorney’s Office in the Southern District of Texas issued a press release, outlining some of the details. However, the original indictment filed last month remains sealed. Therefore, at this time, I don’t know how the scheme started and how long it continued.

The scheme involves

  • Elvina Buckley, a Woodlands realtor
  • Heather Ann Campos, a mortgage broker, based in Spring
  • Melinda Munoz, a notary, based in Spring
  • Leslie Edrington and her daughter, ShyAnne, also based in Spring
  • David Lewis Best Jr, a financial services executive

Ms. Campos and Mr. Best are considered fugitives and warrants remain outstanding for their arrest.

The indictment alleges that the six recruited clients for credit repair and “cleaned” their clients’ credit histories by filing false identify theft reports with the Federal Trade Commission.

After falsely inflating client credit worthiness, the six would fraudulently obtain credit cards, disaster loans and mortgages for themselves and their clients. They maintained control of the properties purchased in their clients’ names for the purpose of, allegedly, building a real estate portfolio worth millions of dollars and enriching themselves with rental income.

If convicted, all face up to 30 years in federal prison and a possible $1 million maximum fine.

https://www.justice.gov/usao-sdtx/pr/area-residents-charged-multi-layered-fraud-scheme

Former COO of Houston Independent School District indicted on bribery charges

Brian Busby, the former Chief Operating Officer of the Houston Independent School District (HISD) has been indicted on corruption charges. Also indicted was Anthony Hutchison, a vendor to HISD.



Five other former HISD officials have pleaded guilty for their role in the scheme, including Rhonda Skillern-Jones, who served as an HISD trustee between 2012-2019.

Hutchison owns a business called Southwest Wholesale that performed grounds maintenance and landscaping services to numerous HISD properties. Starting in 2011, he provided mowing services to HISD and also supplied ‘Kiddie Cushion’ mulch to playgrounds.

The indictment alleges that Hutchison would bill HISD for 35 ‘cuts’ a month, even though they only mowed 20 times. In addition, he inflated both the cost and the volume of mulch supplied to HISD. For some construction contracts awarded, work was billed, but not performed.

The indictment alleges that Southwest Wholesale systemically overbilled HISD by $7.1 million. In return, the indictment alleges that Hutchison paid bribes of $162,000 to Busby. Hutchison also paid contractors $366,000 for work performed at Busby’s personal residence. An earlier  complaint filed in a civil case against Busby alleged that there were cash deposits of $2,330,315 into accounts that Busby controlled that were not related to his HISD salary or his wife’s earnings.

Board Trustee bribed

Ms. Skillern-Jones was paid $12,000 by Hutchison (via Busby) in 2017. In return, she caused to be placed on a 2017 HISD Board agenda and voted to approve, an expenditure of funds for projects that were awarded to Hutchison.

Area Maintenance Managers

The other HISD officials who pleaded guilty were maintenance managers. Southwest Wholesale also used HISD labor for some of the properties where it had the mowing contract. Busby caused the maintenance managers to authorize and approve overtime to HISD grounds crew, even though Southwest Wholesale billed HISD for the work.

The maintenance managers received between $20,000 and $75,000 each in bribes.

Cash stash

Busby and Hutchison were originally arrested in February 2020. When the FBI searched Busby’s home, they found $90,150 in cash. For Hutchison, they found $73,474 cash in the house and $22,400 in a fanny pack under the seat of his care.

The indictment states that Hutchison maintained a bribe ledger, outlining all the details of the payments he made.

Witness Tampering

Busby and Hutchison also charged with witness tampering. When they realized the FBI were investigating, Busby instructed Hutchison to falsely state to the FBI that the payments in the ledger represented gambling winnings rather than bribes.

If convicted, they face up to 20 years in prison for some of the charges. Those that pleaded guilty face up to 5 years in prison.

Busby Indictment

Busby Civil complaint

Court assesses $170 million in penalties against two Houston opthalmologists

A US District Judge has assessed penalties of $170 million on Dr. Mustapha Kibirige and Dr. Emelike Agomo in relation to fraudulently billing Medicare.



Dr. Libirige owns and operates Outreach Diagnostic Clinic, based in the midtown area of Houston. Dr. Agomo joined the clinic in 2010. The clinic examines patients for glaucoma.

Between February 2006 and December 2011, the clinic billed Medicare for the glaucoma tests performed. Devices that measure eye pressure using a portable pen or puffs of air are billed under one billing code. Imaging scans of a retina are billed under a separate code which has a higher reimbursement rate.  The clinic was performing the former, but billing under the latter.

The clinic submitted 14,450 claims in this manner and received $807,450 in payments from Medicare.

An optometrist at the clinic, who started in 2005, became uncomfortable with the billing practices. In June 2012, he resigned, having failed to persuade Drs. Kibirige and Agomo to change their practices. He later blew the whistle.

The government won a summary judgment in March 2020 against the clinic. As a result, the judge assessed a penalty of

  • Treble damages of $2,422,350
  • A penalty of $11,803 for each claim submitted or $170,553,350.

$11,803 is the minimum penalty that could have been assessed under the statute.

https://www.justice.gov/usao-sdtx/pr/court-assesses-more-170m-penalties-against-two-area-ophthalmologists

Summary Judgment – Damages

Woodlands doctor agrees to pay $0.5 million to settle allegations of fraud

Dr. Emad Bishai, who practices in The Woodlands, has agreed to pay $523,331 to settle allegations that he submitted fake claims for the placement of electro-acupuncture devices as well as making false statements when applying for a loan from the Paycheck Protection Program (PPP).

Dr. Bishai is an anesthesiologist and pain management physician who owns The Woodlands Pain Institute PLLC.



From July 2017 to May 2019, Dr. Bishai billed Medicare and TRICARE (healthcare for military) programs for the surgical implantation of neurostimulator electrodes. This is an invasive procedure for which Medicare pays thousands of dollars. Instead, needles were inserted into the ears of patients and a neurostimulator were taped behind the ears.

In addition to the financial settlement, Dr. Bishai and Woodlands Pain Institute PLLC have agreed to a seven-year-period of exclusion from participation in any federal health care programs.

Indictment re Controlled Substances 

When applying for a $213,400 PPP loan in May 2020 on behalf of his clinic, he answered ‘No’ to the question of whether he had been indicted. In fact, Dr. Bishai was indicted in November 2019 for prescribing controlled substances to patients without a valid medical purpose. Prosecutors allege that his prescriptions resulted in four overdose deaths. Three other doctors in Montgomery County were also indicted at the same time. Charges against one of them were later dropped.

The indictments arose out of a horrific car crash in 2015 in Conroe when a family of four, driving home from a Sunday church service, were killed by another driver, who was impaired due to Valium and oxycodone. Dr Rezik Saqer, the doctor who prescribed the drugs in that case, was later sentenced to 7 years in prison on federal fraud charges. Montgomery County Officials then went looking for other pill mill doctors in the area.

Trial delayed

The trial by jury for Dr. Bishai on the controlled substances charges was set to begin late last month but it was postponed to a later date.

https://www.justice.gov/usao-sdtx/pr/woodlands-pain-doctor-pays-half-million-dollars-fraudulent-ppp-and-billing-allegations

 

Foster Wheeler agrees to pay $177 million to resolve Brazil bribery allegations

Foster Wheeler, now part of the Wood Group, has agreed to pay $177 million to resolve criminal charges stemming from a scheme to pay bribes to officials of Petrobras in exchange for a $190 million contract to design a gas-to-chemicals complex.



The scheme occurred in 2012. At the time, Foster Wheeler was an independent company with its headquarters in Switzerland. In 2014 Amec acquired the company for £1.9 billion. The combined company was later acquired by UK-based John Wood Group plc in 2017 for £2.2 billion. All three companies had large presences in the Houston area.

The Scheme

In 2011 Foster Wheeler hired a Country Manager for Brazil to identify opportunities in the country. The Country Manager reported to the Houston office.

Later that year, an Italian agent learned from a Brazilian agent (an ex-Petrobras employee) that Petrobras were seeking bids on the design of a gas-to-chemical fertilizer plant. Both the Italian agent and the then-Chairman of Foster Wheeler were regular customers of a high-end men’s clothing store in New York. The Store sales manager introduced the two. After the meeting, the chairman forwarded details to the acting CEO, without vouching for the legitimacy of the agent.

In turn, the CEO forwarded the information to the Brazil Country Manager, who responded that the company should not use the Italian agent as ‘we would send a wrong message in the market here’.

The Italian agent was affiliated with a Unaoil, a Monaco company heavily involved in bribery. See my blog post from October 2019 here. When Foster Wheeler did its due diligence on Unaoil, they declined to use it because of its possible violations of US and UK sanctions laws. Despite that, the CEO and COO offered the agent a 2% commission.

Foster Wheeler later agreed a 2% commission with the Brazilian agent. As a result, the company won the front-end engineering and design contract in late 2012. In total, Foster Wheeler ended up paying over $1.1 million in bribes.

In 2014, Petrobras elected not to proceed with the construction phase of the project.

The Settlement

Wood Group issued a press release stating it will pay $177 million over the next three years to resolve all allegations. This covers payments to the UK, US, and Brazil, though the company did not disclose the exact split.

Foster Wheeler is paying the Department of Justice $18.4 million. It is also paying the SEC $22.7 million for FCPA and book-keeping violations (if you are going to bribe someone, you must record it as a bribe). Both will be reduced by penalties paid to Brazil and the UK. The US will receive a net number of $17.8 million.

https://www.woodplc.com/news/latest-press-releases/2021/wood-reaches-resolution-on-legacy-investigations

https://www.justice.gov/opa/pr/amec-foster-wheeler-energy-limited-agrees-pay-over-18-million-resolve-charges-related-bribery

https://www.sec.gov/news/press-release/2021-112