DOJ charges 15 for $2 billion in fraudulent health care claims in California

The U.S. Department of Justice on Thursday announced charges against 15 people, including six medical professionals, for allegedly participating in schemes that collectively submitted $2 billion in fraudulent health care claims to private and public insurers.

The largest of the cases involved $1.6 billion in billings for what the DOJ described as “sham substance abuse treatment” that brought patients from around the country to Southern California with offers of free flights, apartments, cars, marijuana, illegal drugs and access to prescription medications.

Once they arrived, those with “premium” insurance policies received luxurious accommodations, but those deemed “non-premium” were put in cramped, unsanitary and often derelict houses, according to the DOJ.

The Southern California News Group has been reporting on the same residential rehab programs for years now.

Other cases highlighted by prosecutors involved $134 million in unnecessary arterial procedures that resulted in injury to patients and $138 million in fraudulent billings to Medicare from hospices where patients were not terminally ill.

“It is especially egregious when doctors and other health care professionals, who pledged to do no harm, resort to petty greed and criminality,” said Bill Essayli, the first assistant U.S. attorney in California. “The cases announced today represent billions of dollars in intended losses. Every dollar drained out of our private and public health insurance systems is one less dollar available to those who truly need it.”

Substance abuse ‘pipeline’

Essayli alleged the $1.6 billion substance abuse scheme created a pipeline that brought individuals addicted to drugs to Southern California from across the country.

Patients were allegedly shifted around and recycled through various substance abuse treatment facilities run by Nathan Young, 39, and his father, David Young, 71, both of Los Angeles, regardless of whether treatment was necessary or even provided. The Youngs allegedly directed staff to “knock the client out” with medication if they tried to leave. Others were encouraged to use drugs or alcohol to become eligible for treatment.

Once patients left detox, the substance abuse therapy they received consisted of Zoom sessions with more than 100 attendees. Patients did not need to participate beyond appearing on camera and some were told they could lay on the beach instead while their insurance continued to be billed.

The indictment alleges Honey Phipps, 42, and Cody Phipps, 36, both of Greenville, Texas, assisted the Youngs by acting as “body brokers” that sought out prospective patients among the homeless and at substance abuse support groups.

All four were charged with conspiracy to commit health care fraud and wire fraud, conspiracy to violate the Eliminating Kickbacks in Recovery Act (EKRA), three counts of health care fraud and two counts of violating EKRA, according to the DOJ.

The Youngs also face five additional counts of health care fraud and four additional counts of violating EKRA.

Nicholas Moore, 33, of North Carolina has pleaded guilty to conspiracy to commit health fraud and wire fraud in connection with the case. Moore, who served as director at some of the facilities, admitted to assisting the Youngs in submitting $199 million in fraudulent claims, according to the DOJ.

Unnecessary atherectomies

Harold Tabaie, 78, a cardiothoracic surgeon from Anaheim, and Hany Malek, 61, a chiropractor from Tarzana, were indicted for performing unnecessary atherectromies — a procedure that scrapes plaque from arteries — at two Los Angeles-based clinics, West Regional Cardio Thoracic and Vascular Surgeons and Angelus Medical Clinic Multi Specialty Group. The scheme allegedly billed $135 million to Medicare.

Malek, the chiropractor, allegedly posed as a doctor and diagnosed patients with arterial disease and recommended the treatments that Tabaie would then perform, even though the patients did not need the procedure. Tabaie allegedly performed repeat atherectomies and some resulted in patients experiencing extreme pain and discomfort, according to the DOJ.

To conceal the volume of treatments, insurance providers were billed under the names of other medical providers. The pair allegedly offered groceries, household goods, gift cards and utility bill payments as kickbacks to Medicare beneficiaries.

Tabaie and Malek are charged with four counts of health care fraud. Malek also faces two additional counts of bank fraud.

Malek is alleged to have fraudulently submitted a Paycheck Protection Program loan application and then used the proceeds to pay for other business ventures, personal credit card payments and the purchase of coins.

Federal authorities raided a Tarzana home owned by Malek in the early morning of Oct. 22.

At a news conference Thursday, Essayli said such raids set an example that medical professionals who assist with fraud will “get treated the same as any other criminal.”

“They are just as much a criminal as a bank robber, in fact they’re worse,” Essayli said.

Hospice fraud

Three others, including a physician, face charges for their roles in alleged hospice fraud.

Geoffrey Jimenez, 60, of Los Angeles allegedly enrolled Medicare beneficiaries into hospice that were not dying and billed for unprovided services. He is alleged to have controlled more than a dozen hospices that collectively billed more than $107 million.

Transitions Hospice Inc., one company operated by Jimenez, had an 85% nondeath discharge rate, more than four times the national average. He allegedly recruited seniors at community centers, took photographs of their identification and completed the paperwork outside their presence.

Beneficiaries reported they had never been diagnosed with the terminal conditions listed on claims, had received little to no care despite the billings and only discovered their enrollment when contacted later by Medicare or their primary care providers.

Dr. Richard Keech, 83, of Torrance is alleged to have assisted in $10 million in fraudulent claims by referring Medicare patients to hospice and falsely certified that they were terminally ill with a life expectancy of six months or less. The patients were not aware.

The DOJ alleges Keech knew the two hospices, Blue Cross Hospice and Atlantica Management, would submit claims for reimbursements based on his false certifications.

Armani Raffi, 59, of Van Nuys, faces charges of health care fraud for allegedly using four Sherman Oaks-based hospices to submit claims of more than $21 million.

Raffi is alleged to have used falsified certifications and illegal kickbacks to recruit and bill for unnecessary or nonexistent services. Raffi allegedly fabricated clinical records to justify hospice eligibility and cycled Medicare beneficiaries through multiple agencies to prolong billing.

Marketers were paid $1,500 to $1,800 per referral. Raffi used the proceeds from the scheme to pay for personal expenses, including mortgage payments on a Temecula property now subject to forfeiture, according to the DOJ.

Doctor kickbacks alleged

Two doctors, Hassan Badday, 48, of Los Angeles and Robby Ayoub, 52, of Huntington Beach, were charged with conspiracy to defraud and to pay and receive health care kickbacks.

The doctors allegedly received cash and wire transfers on a per-patient basis from a marketer representing a laboratory based in Houston. The marketer submitted DNA samples from the doctors’ patients to the lab to bill for genetic tests that were medically unnecessary.

Collectively, more than $5.5 million in fraudulent billings were submitted as a result.

Another doctor, Thomas Mladinich, 38, of Newport Beach, is charged with allegedly receiving up to $250,000 in kickbacks, including a $33,,000 check, in exchange for referring drug-addicted patients to a licensed rehabilitation facility. The patients were offered a share of the money to stay for 21 days, the minimum amount needed for Mladinick to get paid, according to the DOJ.

Prescription drug fraud

Christina Mareik, 61, of Whittier, was indicted on charges of conspiracy to commit health care fraud and wire fraud and four counts of health care fraud for a $270 million scheme to default Medi-Cal. Mareik is alleged to have worked with co-conspirators to submit thousands of fraudulent prescriptions and received at least $279,000 in payments as a result.

Another physician, Dejun Wang, 62, of Walnut, was indicted for the prohibited sale of prescription drug samples.

Wang allegedly sold the samples — including Rybelsus, Ozempic and Mounjara — to pharmacies in the San Gabriel Valley that repackaged the samples to sell to customers.

One of largest ‘takedowns’ yet

At the news conference Thursday, federal prosecutors said the arrests related to the collective $2 billion in fraudulent billings constitutes one of the largest takedowns in California’s recent history.

Eight defendants were arrested Thursday. Seven were expected to make initial court appearances in downtown Los Angeles, Texas and Illinois on the same day.

“These charges include the largest sober home fraud scheme the Department has ever prosecuted, and a scheme involving unnecessary invasive procedures that was detected through data analytics,” said Colin M. McDonald, assistant attorney general with the Justice Department’s National Fraud Enforcement Division, in a statement.

“Our message is simple: if you steal health care dollars from the American taxpayer or abuse your position to harm patients, we are coming for you — and the data will lead us to you.”

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