A.G. Schneiderman Announces Arrest of Brooklyn Medical Supply Company Owner and Staff in $3.2 Million Medicaid Fraud

NEW YORK, July 12 -- New York Attorney General issued the following news release:

Attorney General Eric T. Schneiderman today announced the indictment of Nkem Udeh, the owner of Advance Medical Supply, Inc., her brother, Humphrey Ude, the store's manager, two of her employees, Keva Johnson and Yolane Fouche, and the Brooklyn store on top grand larceny charges for fraudulently billing Medicaid over $1.7 million dollars and HealthFirst, a health insurer for Medicaid recipients, another $1.5 million. The company and its employees billed the state Medicaid program, both directly and through managed care, on claims they dispensed nearly a million units of a highly-specialized and expensive liquid pediatric nutritional formula for kids. In fact, the company did not dispense the expensive formula. If it dispensed anything, it dispensed over-the-counter nutritional supplement formulas, such as Pediasure. The defendants face up to 25 years in prison.

"The defendants' formula for fraud was to file inflated claims for medicine designed to help needy children with rare illnesses. The scam drained millions of taxpayer dollars, money the defendants turned around and used for their own personal benefit," Attorney General Schneiderman said. "We will seek to reclaim tax dollars and pursue justice against those who break the law."

The Attorney General's investigation found that, between January 2010 and September 2012, Advanced Medical, a supplier of durable medical goods, such as orthotics and prosthetics, located at 1162 St. John's Place in Crown Heights, fraudulently received $3,178,183 from Medicaid and HealthFirst, a Medicaid managed care organization, for allegedly dispensing 946,874 units of a high-priced liquid pediatric formula to Medicaid recipients. Various types of liquid, or "enteral," nutritional formulas exist and certain types are prescribed by physicians for patients who cannot chew or swallow food and must obtain nutrients via a feeding tube.

These nutritional formulas are also prescribed for children who cannot absorb or metabolize caloric and dietary nutrients from substantive food. Each type of enteral formula, including the expensive ones billed here and over-the counter nutritional supplements, has a unique product code. Pediasure, which can be obtained both by prescription or over-the-counter, is assigned code B4160. Highly-specialized enteral formulas are assigned code B4162 and are meant to be a food source for pediatric patients with certain rare metabolic disorders such as Galacsemia, a condition that prevents a patient from digesting lactose. The reimbursement rate for B4162 formula is substantially higher than that for other pediatric enteral formulas and must be prescribed by a physician. For example, the specialized formula classified as B4162 is reimbursed at $4.58 a unit and Pediasure is reimbursed at $0.60 a unit.

The Attorney General's investigation revealed that Advanced obtained reimbursement for B4162 formula but only dispensed Pediasure or similar over-the-counter nutritional supplements - when they dispensed anything at all.

Working for Advanced, Johnson, 36 of Brooklyn, and Fouche, 34 of Laurelton, N.Y., participated in the scheme by fraudulently obtaining prescriptions from physicians for pediatric formula, which included Pediasure or other similar over-the-counter nutritional supplements. They did so by convincing doctors and their staff to write generic prescriptions for "pediatric formula" rather than specifying the exact type of nutritional supplement required by the patient. To file a claim for reimbursement however, you must specify the precise type of pediatric formula prescribed by the physician. They further tricked doctorsand, more often, their staff into creating false letters of medical necessity stating that patients needed the highly specialized B4162 formula.

Humphrey, the manager of Advanced, armed with generic prescriptions of pediatric formula and false letters of medical necessity, then submitted claims to Medicaid and HealthFirst seeking reimbursement for the highly specialized formula. As a result, Advanced fraudulently received $1,713,726.68 from Medicaid and $1,464,456.32 from HealthFirst for prescription medications they never dispensed. Humphrey, 41, of Baldwin, N.Y., in addition to filing false claims for reimbursement with Medicaid and Healthfirst, instructed staff in what products to order from wholesalers. Udeh, 33, of Brooklyn, enrolled Advanced into the Medicaid program as a provider of durable medical goods.

The case originated with a referral from the Office of the Medicaid Inspector General, whose investigators looked at Advanced Medical's inventory and discovered that the company had none of the formula on hand for which it was charging Medicaid.

New York's Medicaid Inspector General James C. Coxsaid, "Billing for medicine that isn't provided is fraud. OMIG took a look at Advanced Medical's shelves and saw none of the products that Medicaid was paying for. We are pleased that our referral led to arrests by the Attorney General's Office, and we will prevent this company's further participation in the Medicaid program by pursuing an immediate exclusion. We look forward to future collaborations to stop Medicaid fraud in New York State."

All of the defendants were indicted for Grand Larceny in the First degree for stealing from Medicaid, Grand Larceny in the First Degree for stealing from HealthFirst and Scheme to Defraud. Grand Larceny in the First Degree is a class B felony. The defendants were further charged with multiple counts of Offering a False Instrument for Filing in the First Degree as a result of the numerous false claims they submitted to Medicaid. Johnson and Fouche were also charged with Falsifying Business Records in the First Degree for the false letters of medical necessity they created. Johnson alone was indicted for Commercial Bribery in the Second Degree for offering cash to a HealthFirst representative to overlook certain flaws in Advanced re-credentialing paperwork.

In addition to the indictment, the Attorney General also obtained an order freezing the bank accounts and other property held by the indicted individuals and corporation up to $3,178,183, and freezing the bank accounts of other corporations and another individual up to the amount of proceeds they received from the conduct of the indicted criminal defendants. The Attorney General obtained a temporary restraining order prohibiting the indicted defendants, and those who received the proceeds of the criminal activity, from transferring assets. In connection with these civil proceeding, the Attorney General today seized several cars belonging to the defendants. They include a 2006 Lamborghini, a 2013 Mercedes G63, a 2008 Toyota Tundra and a 2012 Porsche Cayenne at Humphrey's home and a 2012 Audi A7 at Yolane Fouche's home.

The Attorney General would like to thank the New York State Department of Health and the New York State Office of the Medicaid Inspector General for assistance during the investigation. The Attorney General, in particular, would like to acknowledge the cooperation and assistance provided by HealthFirst throughout the investigation underlying today's indictment.

This case is being prosecuted by Special Assistant Attorneys General Twan V. Bounds, Diana Elkind and Jacob Bergman of the Medicaid Fraud Control Unit,under the supervision of Regional Director Christopher M. Shaw, Chief of Civil Enforcement Amy Held, Assistant Deputy Attorney General Paul J. Mahoney, Special Deputy Attorney General Monica Hickey-Martin and Executive Deputy Attorney General for Criminal Justice Kelly Donovan. The investigation was conducted by Special Investigator Dominick DiGennaro and Senior Special Investigator David Ryan under the supervision of Deputy Chief Investigator Thaddeus Fisher. Associate Special Auditor Investigator Patricia Iemma conducted the financial analysis under the supervision of Regional Chief Auditor Thomasina Smith.

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