Tag Archives: Fraud

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

Energy broker pleads guilty to insider trading scheme

Mathew Webb, of Tiki Island (near Galveston) has pleaded guilty for his role in an insider trading and kickback scheme. Back in February, I wrote about energy trader John Ed James who pleaded guilty for his role in the same scheme.

Webb paid kickbacks to James and co-conspirator Marcus Schultz (who pleaded guilty in July 2020) using commission fees paid by Schultz’s employer, Shell.



Instead of trading futures contracts openly and competitively, Schultz disclosed to James and Webb material non-public information that he would be willing to accept on behalf of Shell. Webb would arrange offsetting trades with James and another unnamed co-conspirator. The group would net the difference between the price of these trades and the price that would have been obtained in arms-length transactions. Illicit gains totaling $966,403 were split among the group. Webb received $585,000.

The scheme ran from 2013 to 2016.

In June 2019, the National Futures Association suspended Webb through January 2022 and fined his company $200,000. They found that Webb “failed to uphold high standards of commercial honor and just and equitable principles of trade.”

The hearing panel also found that the company failed to maintain adequate and complete records. The panel had heard evidence that three years’ worth of telephone recordings were missing due to a malfunction. Mary Webb, the wife of Mathew, was the Associated Person for the business (someone who is meant to ensure the business follows the rules of the regulatory bodies).

Webb is scheduled to be sentenced in September. Schultz and James also awaiting sentencing.

https://www.justice.gov/opa/pr/former-energy-broker-pleads-guilty-insider-trading-and-kickback-scheme

 

IT consulting company admits to H-1B visa fraud

Cloudgen LLC has pleaded guilty to commit H-1B visa fraud.

The company is an IT consulting firm that has its US headquarters in west Houston. However, many of its employees are based in Hyderabad, India.



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Between March 2013 and December 2020, the company admitted to recruiting IT workers from India under H-1B visas. An H-1B visa is used to hire foreign workers to fill specialized jobs in the US where resident workers cannot be found. In that time, the company applied for 94 visas.

In Cloudgen’s case, the company submitted forged contracts stating 3rd parties had jobs available for individual Indian nationals. Having then obtained H-1B visas, the company would bring over the Indian nationals to the US, and start looking for other work for them.

Once Cloudgen found work for them, the company would switch the visas to the new employer. Cloudgen took a percentage of the worker’s salary as their fees. It earned approximately $493,516.28 in profits during the course of the conspiracy.

Sentencing is set for September 16. At that time, the company could have to pay up to $500,000 or the greater of twice the gross gain or twice the gross loss as well as a maximum five years of probation.

https://www.justice.gov/usao-sdtx/pr/houston-consulting-company-admits-h-1b-visa-fraud-conspiracy

 

Houston woman charged for her role in issuing 580,000 fake Texas paper tags

Leidy Areli Hernandez Lopez has been charged in relation to a scheme that issued over 580,000 fake vehicle paper tags.

Also charged are Octavian Ocasio of New York and Emmanuel Padilla Reyes aka Christian Hernandez Bonilla, city unknown. Both men are fugitives and warrants remain outstanding for their arrests.



A quick google search shows that, in February 2016, Ocasio was accused of offering fake New York inspection stickers. It’s not clear whether he was found guilty in that case.

A federal grand jury returned a 15-count indictment on May 20. The fraud mostly operated in 2020 though one count relates to July 2019. The fake tags were generally sold for between $150 and $175 each.

Most residents of Texas are aware that there has been a large problem with fake temporary dealer tags. There have been plenty of stories in recent years on local news and in newspapers. Police in Harris County have estimated that half of the paper tags on Texas roads are fake.

Fake tags are often used by drivers who don’t have insurance or are driving a car that wouldn’t pass inspection.

GDN license – no controls!

In the case of the defendants, it appears that Lopez was acting as a used car dealer. Dealers in Texas must obtain a GDN (general distinguishing number) license to buy or sell vehicles. 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 are 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.

The defendants advertised the sale of Texas paper tags on Facebook and Instagram to buyers from all over the US.

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

TX Dept of Motor Vehicles

The body that oversees title registration is the Texas Department of Motor Vehicles. It was only created in 2009. In 2017 it issued 8.6 million vehicle titles.

According to a report by the Texas Legislature issued in 2019,  the department only began investigating title fraud in 2014 with the hire of ONE fraud inspector. For 2018-2019, the department was authorized to hire 13 additional investigators.

The department is also hampered by weak IT systems. For example, the same report stated that the department has no fraud reporting tools. Part of the problem is that most of the day-to-day title transactions are carried out by the 254 county tax assessor-collector offices. In turn these offices often sub-contract out such services to private companies.

https://www.justice.gov/usao-sdtx/pr/three-charged-nationwide-scheme-sell-hundreds-thousands-fraudulent-texas-paper-tags