On December 8, the United States Attorney’s Office for the Northern District of Georgia announced that Brandon Ridge had been sentenced to two years in prison for fraudulently obtaining PPP loans. Ridge had previously pled guilty to bank fraud in connection with a scheme to fraudulently obtain a $160,000 PPP loan. Among other things, Ridge used the money obtained to purchase a Range Rover SUV.

Initially, Ridge had submitted two PPP loan applications requesting a total of just under $450,000; however, only one of those applications was accepted. Ridge included fabricated bank statements in the applications that falsely represented the income of the business. Rather than use the funds obtained to fund his business during the pandemic, Ridge used the funds for personal use. Along with his two-year prison sentence, Ridge was sentenced to three years supervised release and forfeiture of both the Range Rover and over $100,000 in ill-gotten funds.

Since September 2021, the DOJ has made several announcements related to former NFL players pleading guilty to defrauding healthcare and COVID-19 relief programs.

For example, in September, Chilivis Grubman attorneys discussed former NFL players pleading guilty to defrauding a health care program set up by the NFL to benefit former players. The health care program entitled former NFL players to tax-free reimbursement of up to $350,000 in medical expenses. Weeks later, CG attorneys discussed former NFL player, Kenbrell Thompkins, pleading guilty to identity theft and fraud involving COVID-19 relief funds. According to the government, Mr. Thompkins used the protected personal information of Florida residents to obtain prepaid debit cards from California loaded with funds from California’s unemployment insurance, which included CARES Act funds.

On December 10, 2021, the DOJ issued a press release regarding another former NFL player who has pled guilty to and was recently sentenced for defrauding a COVID-19 relief program. Former NFL player, Joshua J. Bellamy, and a Florida woman, Yashica Bain, were sentenced to federal prison for their involvement in a scheme to defraud the PPP loan program. PPP loans, originally introduced by the CARES Act in April 2020, are government-backed, low-interest private loans for which certain eligible small businesses may apply. PPP loan funds may be used to assist with payroll, rent, utilities, and other eligible expenses.

According to the government, Mr. Bellamy used false information and falsified documents to obtain a PPP loan of $1,246,565 for his company, Drip Entertainment LLC. Mr. Bellamy used the PPP funds on personal items, like jewelry and a stay at the Seminole Hard Rock Hotel and Casino. He also sought to obtain PPP loans for his family members and close associates. As part of the scheme, Mr. Bellamy also admitted to paying more than $300,000 to James Stote, a co-conspirator who assisted in preparing and submitting the fraudulent applications.

Ms. Yashica Bain also pled guilty to conspiracy to commit wire fraud. Similar to Mr. Bellamy, Ms. Bain used falsified documents and false information to obtain over $415,000 in PPP proceeds. While the PPP loan proceeds were for her company, Microblading Brow Studio LLC, the government noted that she used the funds “to enrich herself and others who never worked for her company.” Ms. Bain also admitted to paying Mr. Stote over $28,000 for preparing and submitting the fraudulent loan application.

For his role in the scheme, Mr. Bellamy was sentenced to over 3 years (37 months) in federal prison, followed by three years of supervised release. He must pay $1,246,565 in restitution and forfeiture. Ms. Bain was sentenced to two years in federal prison, followed by three years of supervised release for her role in the scheme. She must pay $415,232 in restitution and forfeiture.

Two Plead Guilty in Scheme to Defraud COVID-19 Relief Programs

On November 8, 2021, the DOJ announced that two men pleaded guilty to PPP loan fraud. According to the government, Siddiq Azeemuddin of Illinois and Raheel Malik of Texas submitted fraudulent PPP loan applications. The scheme also involved laundering approximately $3 million in PPP loan funds through Azeemuddin’s business, Fascare International, Inc.

Besides submitting fraudulent PPP loan applications, Azeemuddin instructed Malik to fill out blank checks from companies that received PPP loan funds. Malik was also instructed to make the checks payable to fake employees and to cash the checks. Once cashed, Malik distributed the cash to other members of the conspiracy. For his participation, the government alleged that Malik received up to 2% of each check cashed.

Malik and Azeemuddin each pleaded guilty to one count of conspiracy to commit wire fraud and one count of money laundering. Malik faces up to 5 years in prison, while Azeemuddin faces up to 40 years in prison. The press release did not explain the reason for the sentencing difference. However, the judge will consider the federal sentencing guidelines and other factors when sentencing Azeemuddin and Malik. Both Azeemuddin and Malik are scheduled to be sentenced on March 7, 2022.

The scheme was investigated by several government agencies, including the new COVID-19 Fraud Enforcement Task Force.

On November 30, 2021, the U.S. Department of Justice (“DOJ”) announced that Thomas Wilburn Shoemaker was sentenced in the Southern District of Mississippi to 30 months in prison and ordered to pay restitution and forfeit assets traced to gains from his role in a health care fraud scheme.

According to the government, Mr. Shoemaker was involved in a scheme to defraud TRICARE, a federal health care program for uniformed service members, retirees, and their families. Mr. Shoemaker’s participation in the scheme resulted in TRICARE and private insurance companies paying over $50 million. His participation also resulted in more than $180 million in fraudulent billings.

According to the press release, Mr. Shoemaker was a marketer for a network of pharmacies owned and operated by co-conspirators. Mr. Shoemaker worked with the pharmacies to adjust prescription formulas to obtain the highest reimbursement without regard to efficacy. According to the government, he recruited doctors to obtain prescriptions for compounded medications with high margins. He also paid kickbacks to distributors for the referral of medically unnecessary prescriptions.

Mr. Shoemaker’s 30-month prison sentence followed his guilty plea on August 12, 2021. He pled guilty “to conspiracy to defraud the United States and solicit, receive, offer, and pay illegal kickbacks.”

On December 3, 2021, the U.S. Department of Justice (“DOJ”) announced that a federal jury convicted Peter Bolos for his role in a telemedicine pharmacy fraud scheme. After a month-long trial, Mr. Bolos was convicted of “22 counts of mail fraud, conspiracy to commit health care fraud and introduction of a misbranded drug into interstate commerce,” according to the press release.

According to DOJ, citing court documents and trial evidence, Mr. Bolos, and his co-conspirators deceived and defrauded pharmacy benefit managers (“PBMs”), who processed and approved claims for prescription drugs on behalf of insurance companies, into approving claims valued at more than $174 million. Mr. Bolos and several co-conspirators owned Synergy Pharmacy in Florida. Synergy worked with a Florida telemarketer to generate prescriptions for several pharmacies involved in the scheme, including Synergy. To obtain the prescriptions, the telemarketer used its platform to deceive consumers to accept the drugs and to provide personal insurance information. The telemarketing service also paid doctors to authorize the prescriptions. The doctors working with the telemarketing company are accused of authorizing the prescriptions despite not communicating directly with the patient and relying only on the telemarketers’ screening process.

According to the government, “[b]ecause this faulty and fraudulent process made the prescriptions invalid, the drugs were misbranded under the Food, Drug and Cosmetic Act.” Despite the misbranding, the pharmacies in the scheme dispensed the drugs so Mr. Bolos could submit fraudulent reimbursement claims. The trial evidence established that the conspiracy lasted from May 2015 to April 2018. During this period, Mr. Bolos paid more than $30 million to buy over 60,000 invalid prescriptions and selected medications that would cause highly profitable reimbursements. While the conspiracy resulted in $174 million in fraudulently paid billings, Mr. Bolos caused at least $89 million in fraudulently paid billings, according to the government.

Several co-conspirators and associated business entities previously pleaded guilty. According to Special Agent in Charge Derrick L. Jackson of the U.S. Department of Health and Human Services, Office of Inspector General: “[t]his conviction should serve as a warning to individuals who wish to deceive the government and steal from taxpayers. Alongside our law enforcement partners, we will continue to pursue medical professionals who engage in fraudulent activity.”

QUOTE OF THE MONTH

On November 22, 2021, the U.S. Department of Justice (“DOJ”) announced a $9 million civil consent judgment related to False Claims Act violations (“FCA”) involving Dr. Daniel McCollum, who also entered a guilty plea related to healthcare fraud conspiracies.

Dr. McCollum is a South Carolina chiropractor and businessman who owned and operated pain management clinics, laboratories, and a pharmacy in South Carolina. Dr. McCollum also operated pain management clinics in North Carolina and Tennessee. He was accused of violating the federal Anti-Kickback statute, Stark Law, and FCA. The federal Anti-Kickback Statute (“AKS”) prohibits, among other things, knowingly and willfully paying or receiving remuneration in exchange for federal healthcare program referrals. Remuneration includes anything of value. The Stark Law prohibits physicians from making referrals for certain designated healthcare services payable by Medicare or Medicaid to entities with which the physician (or an immediate family member of the physician) has a “financial relationship,” which includes ownership interests and compensation arrangements. And the FCA prohibits any person from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment to the federal government.

In April 2015, three former employees sued Dr. McCollum under the qui tam provisions of the FCA. The FCA allows whistleblowers (also known as relators) to bring cases on behalf of the government, who may takeover, or intervene, in the case. In May 2017, another former employee sued Dr. McCollum under the qui tam provisions of the FCA. In May 2019, the United States intervened in several claims against certain defendants.

In resolving the civil and criminal matter, Dr. McCollum admitted to (1) violating the AKS by paying illegal kickbacks for UDT referrals, (2) causing the submission of claims to Medicare for UDT services based on illegal referrals from physicians with whom McCollum had financial relationships, in violation of the Stark Law, and (3) causing claims to be submitted for medically unnecessary services and medications. According to the government, Dr. McCollum admitted that his conduct “constituted misrepresentations, fraudulent omissions and/or deceptive conduct, and that he engaged in this conduct with an intent to deceive the United States and cause the United States to pay false or fraudulent federal healthcare program claims.” Besides agreeing to a $9 million consent judgment, Dr. McCollum pled guilty to conspiracy to pay illegal kickbacks and to defraud healthcare programs. He faces up to five years in prison and a fine of up to $250,000.

The DOJ’s November announcement is the second press release related to companies owned or partially owned by Dr. McCollum. In September 2021, the DOJ announced that the U.S. District Court for the District of South Carolina entered default judgments against several businesses owned by Dr. McCollum. As noted in the press release, the court entered a default judgment in July 2020 for $4.2 million against ProLab, LLC and ProCare Counseling Center, LLC. Then in September 2021, the court entered a default judgment for over $136 million against Oaktree Medical Centre P.C., FirstChoice Healthcare P.C., Labsource LLC, Pain Management Associates of the Carolinas LLC, and Pain Management Associates of North Carolina P.C.

The DOJ noted that the $9 million civil judgment and the guilty criminal plea were obtained because of the coordinated efforts of DOJ’s civil division, several sections of the U.S. Attorney’s Office for the District of South Carolina, the FBI, the state attorney general’s office, HHS-OIG, and the Defense Criminal Investigative Service (DCIS). The related cases are captioned United States ex rel. Rauch, et al. v. Oaktree Medical Centre, P.C., et al., No. 6:15-cv-01589-DCC (D.S.C.); United States ex rel. Mathewson v. Dr. Daniel A. McCollum, et al., No. 6:17-CV-01190-DCC (D.S.C.); and United States ex rel. Hawkins v. Pain Management Associates of the Carolinas, LLC, et al., No. 8:18-cv-02952-DCC (D.S.C.). The stipulation of settlement can be read here.

Mr. Tiyari Collins and Mrs. Farah Collins, a married couple, had pled guilty to tax fraud and fraud against COVID relief programs in an amount of at least $5.7 million in total. The fraud against the COVID relief programs was the result of fraudulent applications for loans from the Paycheck Protection Program (“PPP”) and the Economic Impact Disaster Loan (“EIDL”) program. Mr. Collins pled guilty to one count of conspiracy to commit wire fraud and one count of aiding and assisting in the preparation of a false tax return. His wife has pled guilty to one count of conspiracy to commit wire fraud.

The government alleges that Mr. Collins submitted six fraudulent PPP loan applications and five fraudulent EIDL loan applications totaling north of $1.9 million. Mr. Collins allegedly falsified average monthly payrolls, revenues, and employee counts. These applications also allegedly included falsified tax returns and payroll reports that were prepared by a third, unnamed individual. The funds obtained from the COVID relief programs were allegedly used to purchase luxury goods, pay off personal credit cards, and for furniture.

During the course of the investigation, it was discovered that Mr. Collins had filed fraudulent federal tax returns dating back to January 2015 through his tax preparation business. These fraudulent returns cost the government over $3.8 million in revenue. On behalf of clients, Mr. Collins allegedly claimed business credits to which his clients were not entitled and filed fraudulent Schedule C’s to reduce the clients’ taxable income. That fraud followed a suspicious pattern that was detected by the IRS’s Scheme Detection Center.

On November 8, 2021, the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) updated and renamed the Provider Self-Disclosure Protocol, which established a process for individuals to voluntarily disclose potential fraud involving federal health care programs. The OIG’s Provider Self-Disclosure Protocol is now the Health Care Fraud Self-Disclosure Protocol (“SDP”).

The SDP includes an increase to the minimum settlement amounts to align with legislative adjustments to penalty amounts and clarifications to requirements and procedures. The SDP also includes guidance on investigating conduct, quantifying potential damages, and the method of reporting the conduct to OIG. According to the OIG, using the SDP has several benefits, including (1) a “presumption against requiring integrity agreement obligations in exchange for a release of OIG’s permissive exclusion authorities in resolving an SDP matter;” (2) paying a lower multiplier on single damages; and (3) mitigation of potential exposure to liability under the Civil Monetary Penalties Law and the False Claims Act, as CMS agreed to suspend the obligation to report overpayments upon OIG acknowledgment of receipt of a timely SDP submission.

In the SDP, the OIG clarified that any person or entity subject to the OIG’s civil monetary penalty authorities (at 42 C.F.R. Part 1003) is eligible to use the SDP, including health care providers and suppliers. The SDP may be used for matters that potentially violate federal criminal, civil, or administrative laws where civil monetary penalties may be levied, including violations of the federal Anti-Kickback Statute (“AKS”), employing or contracting with individuals on the OIG’s exclusion list, and violation of the physician self-referral law (“Stark law”).

The SDP also includes clarifications regarding matters for which SDP is inappropriate or unavailable. For example, the SDP is not available for acts exclusively involving overpayments. The SDP is not available to disclose an arrangement that involves only potential liability under the Stark Law without accompanying potential liability under the AKS for the same arrangement. If the conduct only involves the Stark law, then disclosure can be made through CMS’ Self-referral Disclosure Protocol. The SDP is also not available to disclose improper acts associated with an HHS grant or contract. Disclosures related to grants can be made through the OIG’s Grant Self-Disclosure Program. And disclosures related to contracts can be made through the OIG’s Contractor Self-Disclosure Program.

The SDP also clarifies requirements where the reporting entity is under a Corporate Integrity Agreement. The SDP now notes that while disclosing parties are not precluded from using the SDP while under a Corporate Integrity Agreement, the “disclosure must reference the fact that the disclosing party is subject to a [Corporate Integrity Agreement].” A copy of the disclosure must also be provided to the disclosing party’s OIG monitor. Also, reportable events (as defined by the corporate integrity agreement) must be disclosed a reportable event to the OIG, as required by the corporate integrity agreement. The SDP maintains the requirement that disclosing parties “explicitly identify the laws that were potentially violated…”

There are three additional important updates to the SDP. First, the OIG explained that it will not only coordinate with the U.S. Department of Justice in resolving SDP matters, but sometimes, the DOJ may participate in the settlement of SDP cases. Where the DOJ participates in the settlement, “the matter will be resolved as DOJ determines is appropriate consistent with its resolution of [False Claims Act] cases …” While the SDP indicates that the OIG will advocate that the disclosing party should receive a benefit from disclosure, the DOJ makes the ultimate determination where it is involved. Second, while disclosers can provide an estimate of damages, under the updated SDP, the discloser “should identify the total estimated damages amount for each affected Federal health care program and the sum of estimated damages for all affected Federal health care programs.” Finally, the minimum settle amounts increased in the updated SDP to match updated minimum penalty amounts. For disclosures involving AKS violations, the minimum settlement amount is $100,000. “For all other matters … [the] OIG will require a minimum $20,000 settlement amount to resolve the matter.”

Self-disclosure is a significant event that should be undertaken with careful consideration of the costs and benefits of such disclosure.

On November 10, the Department of Justice announced that a former Army civilian employee had pled guilty and been sentenced in connection with a kickback scheme involving contracts for work to be performed at an Army base in Kuwait. Ephraim Garcia was employed by the U.S. Army’s Directorate of Public Works and was involved in the contracting for work at Camp Arifjan. Garcia admitted to conspiring with the former general manager and co-owner of Gulf Link Venture Co., a contracting company based in Kuwait.

Specifically, Garcia admitted that the two conspired to steer Army contracts to Gulf Link. Olive Garden apparently played a starring role in the scheme. During a 2015 meeting at an Olive Garden in Kuwait, Garcia and his co-conspirator offered an employee of the primary contractor for services on the Army base cash in exchange for his help getting subcontracts awarded to Gulf Link. The employee of the primary contractor immediately reported the scheme to authorities. While Garcia was indicted and charged, his co-conspirator remains at large.

The investigation was conducted by the Department of Justice, U.S. Army Criminal Investigation Command Major Procurement Fraud Unit, and the Department of Defense Office of Inspector General, Defense Criminal Investigative Service. This demonstrates the variety of government agencies that investigate and prosecute claims of fraud against the federal government. This is the second high-profile prosecution involving defense contracting in the past month following the October indictment of the CEO of a Navy contractor for alleged bribery, fraud, and money laundering.

On November 15, the U.S. Department of Justice (“DOJ”) announced that the Roman Catholic Archdiocese of New Orleans (“Archdiocese of New Orleans”) has agreed to pay more than $1 million to resolve allegations that it violated the False Claims Act.

Archdiocese of New Orleans allegedly submitted false claims for payment to the Federal Emergency Management Agency (“FEMA”) for the repair or replacement of facilities damaged by Hurricane Katrina. The DOJ alleged that it did this by knowingly signing certifications for FEMA funding that contained deceptive damage descriptions and repair estimates.

According to the DOJ’s news release, the false claims were made between 2007 and 2013 and were prepared for the Archdiocese of New Orleans by AECOM, A Los Angeles-based engineering company.

Robert Romero, an AECOM Project Specialist, originally filed the lawsuit under the qui tam or whistleblower provisions of the False Claims Act. These provisions permit private parties to file suit on behalf of the United States for false claims. Private Parties are incentivized by a share in any recovery. The False Claims Act also permits the United States to intervene in such an action, as it did in this case. Litigation against AECOM is ongoing. Archdiocese of New Orleans has agreed to cooperate in that litigation as a term of its settlement.

“Federal disaster funds are an instrumental component in the effort to assist disaster victims with their recovery,” said the U.S. Attorney’s Office for the Eastern District of Louisiana. “The favorable resolution of this False Claims Act matter illustrates the collaborative efforts and firm commitment by our federal partners to use all available remedies to address signs of fraud, waste and abuse.”