The owner of two pharmacies and a management company in Florida pleaded guilty Jan. 25 to his role in a $931 million healthcare fraud scheme. He is the seventh defendant to plead guilty in the scheme, according to the U.S. Justice Department.
Larry Smith pleaded guilty to conspiracy to commit healthcare fraud, and his sentencing is set for Oct. 25. In his written plea agreement, Mr. Smith admitted to conspiring with others to defraud pharmacy benefit managers into paying for fraudulent prescriptions. As part of the plea agreement, Mr. Smith agreed to pay restitution of $24.9 million and forfeit approximately $3.1 million.
An indictment charged Mr. Smith and others with a nationwide conspiracy to defraud pharmacy benefit managers by submitting $931.4 million in bills for fraudulent prescriptions purchased from a telemarketing company. After improperly soliciting patient information, the marketing companies received approvals through telemedicine prescribers then sold the prescriptions to pharmacies in exchange for kickbacks, said Derrick Jackson, special agent in charge at HHS’ Office of Inspector General in Atlanta.
In September 2018, HealthRight, a telemedicine company, and its CEO Scott Roix pleaded guilty to conspiracy to commit healthcare fraud for their roles in the scheme. They agreed to pay $5 million in restitution. Mr. Roix’s sentencing is scheduled for Oct. 25.
Mihir Taneja, Arun Kapoor, Maikel Bolos and Sterling-Knight Pharmaceuticals also pleaded guilty in December 2020, according to the Justice Department.
The indictment describes an inside job involving Beaumont employees who sold stolen sponges, adhesives and instruments used to inspect eyes and ears. The equipment included cystoscopes, a thin tube with a camera that is inserted through the urethra and into the bladder.
“Some of the medical devices stolen and re-sold over the Internet were possibly contaminated devices that were previously used in various surgical and other medical procedures on patients,” according to the indictment.
The three individuals charged in the indictment are:
Paul Purdy, 49, of Bellbrook, Ohio
Valdet Seferovic, 32, of Auburn Hills
Zafar Khan, 40, of Fenton
Purdy and Seferovic not respond to messages seeking comment Thursday while Harold Gurewitz, a lawyer for Khan, declined comment. The three defendants are scheduled to make initial appearances Jan. 21 in federal court.
“These defendants used their employment status to circumvent the safety protocols established by Beaumont Hospital to profit from the theft of medical devices and put the health and safety of the general public at risk in doing so,” U.S. Attorney Matthew Schneider said in a statement.
The wire fraud and conspiracy charges listed in the 18-count indictment are punishable by up to 20 years in federal prison.
Beaumont officials have cooperated fully with the investigation, health system spokesman Mark Geary wrote in an email to The Detroit News.
“This kind of theft does a disservice to more than just Beaumont — it does a disservice to the community,” Geary wrote. “We have confidence in the legal process and trust a just result will be achieved.”
Purdy and Seferovic were friends who worked at Beaumont and had access to storage areas inside one of the system’s hospitals, prosecutors alleged. The duo gained access to medical supplies and devices, according to the government, and devised a plan to steal the equipment and sell the items throughout the U.S.
Purdy, who worked for Beaumont until resigning in 2017, never told buyers the items were stolen, prosecutors said. After he quit, Purdy recruited Seferovic to continue stealing items from the medical supply, cleaning and disinfecting rooms, according to prosecutors.
“Medical devices that are removed from their rightful place in a hospital or other medical setting put patients’ health at risk by denying them access to needed diagnostic imaging and treatment,” Lynda Burdelik, special agent in charge of the U.S. Food and Drug Administration’s Criminal Investigations field office in Chicago, said in a statement.
Purdy paid Seferovic for stolen items via PayPal and resold the devices on eBay and Amazon, according to the government. On March 28, 2018, the indictment alleges Purdy received a $4,800 wire payment from the sale of two cystoscopes.
That same day, Seferovic received a $2,550 payment via PayPal, according to the government.
In fall 2017, Seferovic also agreed to steal and sell medical devices and supplies to Khan, who owns Wholesale Medical & Surgical Suppliers of America, LLC in Flint, according to the indictment.
Seferovic would transfer stolen supplies to Khan during meetings in metro Detroit, including at a Walmart parking lot, according to the indictment. Khan, in turn, would sell the supplies and devices online at below retail price.
Seferovic’s job duties and status was unclear Thursday.
The investigation and alleged crimes have prompted internal changes at Beaumont.
“…Beaumont has enhanced security protocols and implemented additional checks and balances across the organization to reduce the chances of something like this happening again,” Geary said.
The owners of more than a dozen pharmacies in New York City and Long Island have been arrested and charged for their roles in an alleged $30 million healthcare fraud and money laundering scheme, the Department of Justice announced Dec. 21.
Peter Khaim and Arkadiy Khaimov are accused of submitting fraudulent claims for expensive cancer drugs by exploiting emergency codes and edits in the Medicare system that went into effect due to the COVID-19 pandemic. The drugs were allegedly never provided, ordered or authorized by a medical professional.
Mr. Khaim and Mr. Khaimov allegedly used COVID-19 emergency override billing codes to submit fraudulent claims to Medicare for cancer medication Targretin Gel 1%. The medication has an average wholesale price of about $34,000 for each 60 gram tube, according to the Justice Department.
Prosecutors charged Mr. Khaim and Mr. Khaimov with conspiracy to commit healthcare fraud and wire fraud, conspiracy to commit money laundering and aggravated identity theft, according to the Justice Department. Mr. Khaimov was separately charged with concealment of money laundering.
Moses D. deGraft-Johnson, MD, pleaded guilty Dec. 18 to 56 counts of healthcare fraud, conspiracy to commit healthcare fraud and aggravated identity theft, according to the Department of Justice.
Between late 2015 and his arrest in February of this year, Dr. deGraft-Johnson, who owned and operated the Heart and Vascular Institute of North Florida in Tallahassee, performed invasive surgical procedures on patients who didn’t need them or altered patients’ medical records to reflect procedures he didn’t perform.
As part of his plea deal, Dr. deGraft-Johnson acknowledged consistently performing two invasive diagnostic angiography procedures on hundreds of patients, whether medically necessary or not. When the patients returned for follow-up office visits, Dr. deGraft-Johnson submitted fraudulent claims to their insurance companies stating he performed atherectomies during the appointments. Using this scheme, the physician admitted he claimed to have performed more than 3,000 of these surgical procedures to clear blockages in arteries in as many as 845 of his patients’ legs.
In court documents released in February, prosecutors provided several examples of Dr. deGraft-Johnson’s fraud. In one case, he claimed to have done 14 procedures during a seven-hour period. Prosecutors said the procedures would have taken roughly 28 hours, according to The New York Times. In another example, he allegedly claimed to have performed 13 atherectomies on patients in Florida when he was traveling abroad.
Dr. deGraft-Johnson submitted false claims to insurers for the surgeries he didn’t perform and for the unnecessary procedures. As of Dec. 18, the investigation revealed he received at least $29 million through the fraud scheme.
An orthopedic surgeon was sentenced to 30 months in federal prison Nov. 22 for his role in a healthcare fraud scheme that resulted in the submission of more than $580 million in fraudulent claims, mostly to California’s worker compensation system, according to the Department of Justice.
Daniel Capen, MD, was sentenced more than a year after pleading guilty to conspiracy to commit honest services fraud and soliciting and receiving kickbacks for healthcare referrals. He was one of 17 defendants charged in relation to the government’s investigation into kickbacks physicians received for patient referrals for spinal surgeries performed at Pacific Hospital in Long Beach, Calif.
Dr. Capen received at least $5 million in kickbacks for referring surgeries to Pacific Hospital and for referring services to organizations affiliated with the hospital. He allegedly accounted for $142 million of Pacific Hospital’s claims to insurers between 1998 and 2013, according to the Justice Department.
In addition to the prison term, Dr. Capen was ordered to forfeit $5 million to the federal government and pay a $500,000 fine.
Former Baltimore Mayor Catherine Pugh, who served on the board of University of Maryland Medical System for 18 years, was indicted on charges of wire fraud and tax evasion related to a children’s book scandal that involved the Baltimore-based health system and Oakland, Calif.-based Kaiser Permanente, a local CBS affiliate reports.
The indictment was unsealed Nov. 20, ahead of Ms. Pugh’s scheduled hearing on Nov. 21. If convicted, Ms. Pugh could face up to 100 years in prison and be required to forfeit her home and repay more than $769,000 allegedly obtained through the scheme.
The indictment alleges Ms. Pugh conspired with city employees to defraud buyers of her Healthy Holly children’s books, according to CBS, which published the indictment in full. It alleges Ms. Pugh arranged five $100,000 deals with UMMS to donate a total of 100,000 books to Baltimore public schools. The books were allegedly never delivered, and instead rerouted to alternate storage facilities around the city, distributed at campaign events and double-sold to other customers.
The indictment also alleges Ms. Pugh used Healthy Holly profits to fund straw donations to her mayoral campaign and to buy a house in Baltimore. She also faces allegations of tax evasion related to Healthy Holly sales, according to the report.
CBS notes Kaiser Permanente also disclosed buying $114,000 of the books at a time that overlaps with winning a $48 million contract from the city, according to the report.
The two city officials connected to the scheme pleaded guilty to conspiracy and tax evasion, according to the report.
Read the full story and access the full indictment here.