An Insurance Fraud Year in Review

Lawyers, accountants, other professionals, business people, and consumers who are not directly involved in discovering, challenging, and litigating insurance fraud matters likely would be shocked to learn about the breadth and prevalence of these schemes.

By the same token, one might think that the number and range of insurance fraud-related indictments, convictions, and sentencings in just the Southern District of New York alone over the past year would be enough to warn potential fraudsters to think twice before acting. Yet if history is any guide, we can expect the volume and range of fraud schemes to continue to multiply, along with a steady stream of eye-opening fraud charges being filed throughout the next year in New York and across the country.

This column surveys a variety of Southern District of New York cases from the past 12 months, highlighting the key features of these demonstrated (or alleged) insurance frauds.

No-Fault Insurance

No-fault insurance fraud continues to be a major problem for insurance carriers and, because of the cost and the impact on premiums, for policyholders. Consider the case brought last January that U.S. Attorney Damian Williams referred to as a “$100 million automobile insurance fraud scheme” and one of the “largest no-fault insurance frauds in history.”

According to the charges, the defendants illegally owned and controlled more than a dozen medical professional corporations – including medical, acupuncture, and chiropractic practices – by paying licensed medical professionals to use their licenses to incorporate the professional corporations. The defendants allegedly bribed 911 operators, hospital employees, and others for confidential motor vehicle accident victim information. With this information, they then allegedly endangered victims by subjecting them to unnecessary and often painful medical procedures, in order to fraudulently overbill insurance companies. See https://www.justice.gov/usao-sdny/pr/us-attorney-announces-arrest-13-individuals-100-million-healthcare-fraud-money.

Then, in early April in a different case, Jelani Wray was sentenced to 84 months in prison by U.S. District Judge Paul G. Gardephe. Prosecutors asserted that Wray was a senior leader of a no-fault insurance fraud conspiracy spanning New York and New Jersey from at least in or about 2013 through in or about 2019 in which he and his co-conspirators bribed 911 operators, medical personnel, and police officers for the confidential information of tens of thousands of motor vehicle accident victims. Using this information, prosecutors said, Wray and others contacted victims, lied to them, and steered them to clinics and to lawyers they handpicked. These clinics and lawyers then paid Wray and his associates kickbacks for these referrals, which they distributed to coconspirators as payments and bribes, according to the government. See https://www.justice.gov/usao-sdny/pr/senior-leader-massive-no-fault-automobile-insurance-bribery-scheme-sentenced-7-years.

Licensed Professionals

One can only speculate as to what would make a licensed professional risk his or her license, as well as prison time, by participating in egregious insurance fraud schemes. Yet it happens more often than one might expect.

Consider the case of Dr. Sady Ribeiro, a New York-licensed pain management doctor and surgeon, who pleaded guilty in late September, before U.S. District Judge Sidney H. Stein, to one count of conspiracy to commit mail fraud and one count of conspiracy to commit wire fraud.

As prosecutors explained, Ribeiro and others defrauded insurance companies and businesses by staging trip-and-fall accidents and then filing fraudulent lawsuits arising from those staged trip-and-fall accidents.

Prosecutors asserted that the participants in the fraud recruited more than 400 individuals (patients) to stage or falsely claim to have suffered trip-and-fall accidents at particular locations throughout the New York City area. As alleged, in the beginning, the participants in the fraud would instruct patients to claim they had tripped and fallen at a particular location, when in fact, the patients had suffered no such accidents. Prosecutors alleged that, eventually, at the direction of the lawyers who filed fraudulent lawsuits on behalf of the patients, patients began to be instructed to stage trip-and-fall accidents, i.e., to go to a location and deliberately fall. Common accident sites used during the fraud scheme included cellar doors, cracks in concrete sidewalks, and purported “potholes,” according to the authorities.

As alleged, after the staged trip-and-fall accidents, patients were referred to specific attorneys who would file personal injury lawsuits against the owners of the accident sites and/or the insurance companies for the owners of the accident sites. The government asserted that these lawsuits did not disclose that the patients had deliberately fallen at the accident sites or, in some cases, had not fallen at all. According to the authorities, during the course of the fraud, the defendants and others attempted to defraud insurers or property owners of more than $31 million.

The government asserted that patients also were instructed to receive ongoing chiropractic and medical treatment from certain chiropractors and doctors, including Ribeiro. The participants in the fraud allegedly advised patients that if they intended to continue with their lawsuits, they had to undergo surgery. As an incentive to getting surgery, the recruited patients were offered a payment of typically between $1,000 and $1,500 after they completed surgery, the government said. As alleged, patients generally were told to undergo two surgeries.

The government asserted that doctors participating in the fraud, including Ribeiro, “were expected to, and in fact did, conduct these surgeries regardless of the legitimate medical needs of the [p]atients.” According to the charges, Ribeiro performed back surgeries, among other medical procedures, on nearly 200 patients – and, to maximize his patient base, he paid participants cash kickbacks in exchange for patient referrals. See https://www.justice.gov/usao-sdny/pr/new-york-doctor-who-performed-unnecessary-back-surgeries-pleads-guilty-participating; see also https://www.justice.gov/usao-sdny/pr/new-york-attorney-and-doctor-convicted-defrauding-new-york-city-area-businesses-and (New York attorney and doctor convicted of defrauding New York City-area businesses and their insurance companies through massive trip-and-fall fraud).

Another doctor, Ameet Goyal, an ophthalmologist and oculoplastic surgeon in Rye, New York, was sentenced in early March to 96 months in prison for, among other things, orchestrating a seven-year health care fraud. Goyal, who surrendered his medical license, previously pleaded guilty before U.S. District Judge Cathy Seibel to all charges in a six-count superseding indictment, including health care fraud, wire fraud, and making false statements relating to health care matters.

According to prosecutors, between 2010 and 2017, Goyal engaged in widespread health care fraud by consistently “upcoding” simpler, lower-paying surgical procedures and examinations as complex, higher-paying major operations in fraudulent billings submitted to Medicare, private insurance companies, and patients. As a result, the authorities asserted, Goyal fraudulently obtained at least $3.6 million in payments for procedures he did not perform and he was the highest-billing doctor in the tri-state area for several of his fraudulently billed codes, one of which he billed seven times more frequently than all doctors in the tri-state area combined. See https://www.justice.gov/usao-sdny/pr/rye-ophthalmologist-sentenced-96-months-prison-prolific-seven-year-healthcare-fraud; see also https://www.justice.gov/usao-sdny/pr/former-physician-sentenced-second-health-care-fraud-conviction (former physician sentenced to 11 months in prison for health care fraud).

Insurance Plans Targeted

All kinds of private insurance plans and federal health insurance plans such as Medicare and Medicaid are the targets of fraud schemes. But other insurance plans also often face fraud.

For instance, in August, Terrence Williams, a former professional basketball player, pleaded guilty before U.S. District Judge Valerie E. Caproni to defrauding the National Basketball Association (NBA) Players’ Health and Welfare Benefit Plan. The plan is a health care plan providing benefits to eligible active and former players of the NBA and their family members.

According to the indictment, from at least 2017 through at least 2021, Williams and more than a dozen others engaged in a widespread scheme to defraud the plan by submitting and causing to be submitted approximately $5 million worth of fraudulent claims for reimbursement of medical and dental services that were not actually rendered.

Prosecutors asserted that Williams orchestrated the scheme to defraud the plan and that he recruited other plan participants to defraud the plan by offering to provide them with false invoices to support their fraudulent claims. As alleged, other defendants, including a dentist in California and a doctor in the state of Washington, provided Williams with fraudulent invoices that Williams sent to other co-conspirators. Williams also recruited non-medical professionals to copy invoices made by medical offices, which Williams provided to co-conspirators and which were used to defraud the plan, according to the authorities. See https://www.justice.gov/usao-sdny/pr/former-nba-player-terrence-williams-pleads-guilty-defrauding-nba-players-health-and.

Services and Products

Insurance fraud charges can arise in a multitude of different situations involving different services and products. For instance, in May, online retail pharmacy PillPack, LLC, a wholly-owned subsidiary of Amazon.com, Inc., settled allegations that it improperly billed government health care programs, including Medicare and Medicaid, for more insulin pens than patients needed according to their prescriptions and falsely under-reported the days-of-supply of insulin dispensed. See https://www.justice.gov/usao-sdny/pr/us-attorney-announces-settlement-fraud-lawsuit-against-online-pharmacy-overdispensing. Then, in July, the U.S. Attorney’s Office charged a man with Medicare fraud in connection with allegedly false claims for durable medical equipment. See https://www.justice.gov/usao-sdny/pr/man-charged-multi-million-dollar-medicare-fraud-connection-false-claims-durable-medical.

More recently, in early December, two New York diagnostic testing facility owners were sentenced to three years in prison for their roles in a greater than $18 million health care fraud scheme.

This case involved a married couple who co-owned several diagnostic testing facilities in Brooklyn. According to court documents, the couple paid over $18 million in kickbacks for the referral of beneficiaries who submitted themselves to diagnostic testing and other purported medical services. The government asserted that the couple also falsely reported to the Internal Revenue Service that the illegal kickback payments were legitimate business expenses and therefore submitted tax forms that under-reported business income and claimed deductions to which they were not entitled. See https://www.justice.gov/opa/pr/new-york-diagnostic-testing-facility-owners-sentenced-health-care-fraud-scheme.

COVID-19 Fraud

Fraud related to the COVID-19 pandemic, like the virus itself, has persisted. Recently, for example, a Brooklyn woman pleaded guilty to conspiracy to commit wire fraud before U.S. Magistrate Judge Ona T. Wang in a case assigned to U.S. District Judge Lewis A. Kaplan. According to prosecutors, the defendant participated in a scheme to commit COVID-19 pandemic fraud by (1) committing unemployment insurance fraud; (2) defrauding New York City’s COVID-19 Hotel Room Isolation Program; (3) selling fabricated COVID-19 test results, both positive and negative; and (4) obtaining fraudulent COVID-19 loans from both the U.S. Small Business Administration’s Paycheck Protection Program and its Economic Injury Disaster Loan Program.

Conclusion

The Coalition Against Insurance Fraud estimates that insurance fraud steals at least $308.6 billion every rear from American consumers. See https://insurancefraud.org/fraud-stats/.  Insurance frauds, leading to criminal prosecutions and civil cases (see, e.g., https://www.justice.gov/usao-sdny/pr/us-attorney-settles-fraud-lawsuit-against-non-profit-inflating-medicaid-reimbursements (settlement of civil fraud lawsuit against non-profit for allegedly inflating Medicaid reimbursements)) will no doubt continue this year and for years to come. The prosecutions and convictions, however, often lag years behind the commission of the frauds and in most cases touch only upon the proverbial “tip of the iceberg.” Insurance carriers’ fraud departments and federal, state, and local authorities will need to keep a keen focus on fighting fraud and the evolving schemes to limit the damage to insurers, policyholders, businesses, and consumers alike.

Reprinted with permission from the January 5, 2023, issue of the New York Law Journal^©, ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.