Weekly Fraud Blotter – September 28, 2009

Each week, with the assistance of our long-time resident fraud expert Barry Zalma, the Insurance Law Center will be surveying what the media, state agencies, insurance companies, and others report in terms of insurance fraud. Just like a police blotter, our insurance fraud blotter lists recent arrests, charges, and convictions.
Steal $2 Million Get Work Release
Kimberly Whittenburg, 51, accused of stealing about $2 million from an insurance company while she worked there has been sentenced to four years on work release. Her plea agreement with prosecutors specified that she would spend half of an eight-year sentence in community corrections and the rest on probation.
Whittenburg was charged in March with multiple counts of insurance fraud and accused of stealing from her employer, MultiNational Underwriters in Downtown Indianapolis, by sending checks for false medical claims to a friend in Texas. Her sentence includes paying $87,921.78 in restitution during her sentence, with the remainder of the stolen sum to be made a civil judgment that will probably be uncollectible as will the restitution order.
Whittenburg’s daughter, Kristina, was a deputy prosecutor. Officials fired her in March, a spokesman said, because she withheld information during questioning about her mother’s case.
Insurance Fraud Only Gets Probation
North Carolina Insurance Commissioner Wayne Goodwin announced in August 2009 the conviction of Vonna Johnson, 45, on seven counts of insurance fraud and seven counts of obtaining property by false pretense. Johnson was ordered to pay nearly $41,000 in restitution to Colonial Life Insurance Co. and just over $6,000 to Allstate Insurance Co. Johnson was also sentenced to 48 months supervised probation.
According to the investigation, Johnson, a former billing department employee at Frye Regional Medical Center in Hickory, changed patient names on medical bills to her own name or her children’s names. Investigators say Johnson then submitted those false bills to Colonial Life and Accident Insurance Company. Also according to the investigation, Johnson gave false and misleading information to Allstate Insurance Co. for medical bills following an auto accident.
Johnson was convicted in Catawba County Superior Court in Newton. A tip from a family member led police in Hickory to open the case against Johnson. Officials at Frye Regional Medical Center cooperated in the investigation were proactive in helping to bring Johnson to justice.
On the Other Hand – Ten Years for Capping Medical Insurance Fraud
Sue Nanda, 40, pleaded guilty in February to 22 felonies related to her work as a “capper,” or marketer, for the now-closed Unity Outpatient Surgery Center in Buena Park. Nanda was sentenced August 7, 2009 to 10 years in prison for her role in recruiting 310 patients to undergo unnecessary surgeries as part of a $154 million medical insurance fraud scam.
Nanda recruited the “patients” to undergo unnecessary surgical procedures in exchange for money or low-cost cosmetic surgeries, prosecutors said. She pocketed $2.35 million between Nov. 14, 2001, and May 27, 2004, for her work, according to a prosecution sentencing brief in the case.
During the sentencing the prosecutor explained that the scheme was the largest medical fraud prosecution in the nation. It resulted in charges against three doctors, a lawyer and eight other alleged “cappers” besides Nanda. One doctor, William W. Hampton Jr., was sentenced to 16 years in prison. Most other defendants, including doctors Michael C. Chan and Mario Z. Rosenberg, await either sentencing or trial.
In a separate hearing Maria DeJesus Licea Rosales, 42, of Orange, pleaded guilty to 96 felony counts including conspiracy, “capping,” insurance fraud, grand theft and filing fraudulent tax returns, plus sentencing enhancements for white collar crime and for a loss over $2.5 million was sentenced to eight years in state prison.
In a similar case in Florida, Dr. Keith Russell, 65, and Jorge Luis Pacheco, 50, a doctor and a physician’s assistant were sentenced to eight years for their roles in a Miami-Dade racket that billed Medicare $11 million in false claims for obsolete HIV services that were not provided to patients. They were also ordered to pay back $3.1 million and $2.6 million, respectively, to the federal healthcare program. Hopefully no one is holding their breath waiting for the payments to be received.
Eda Marietta Milanes, 43, a physician’s assistant was sentenced to five years’ imprisonment and to pay back $3.1 million.
All three – along with another Miami physician, David Rothman, 67 – were convicted in March of conspiring to defraud Medicare and other charges in a case that stood out because Pacheco tried to flee the country near the end of the trial. Four others charged in the case – investigated by the Department of Health and Human Services’ Office of Inspector General and the FBI – pleaded guilty before trial.
Rothman, whose sentencing is pending, and Russell are part of a growing list of South Florida doctors and assistants convicted of billing Medicare for hundreds of millions of dollars in fraudulent claims for outdated HIV infusion therapy administered intravenously. That therapy was replaced about 15 years ago by more effective antiretroviral drugs taken orally, experts say, yet Medicare continues to pay for the infusion therapy because the agency still considers it "medically reasonable and necessary.” Medicare officials say the agency has stopped about $2 billion in “improper payments” for bogus HIV infusion services in South Florida over the past five years, but the agency and its Florida claims contractor, First Coast Service Options, continue to pay out hundreds of millions of dollars a year.
Pacheco, a former physician in Cuba, tried to flee the United States before the jury began its deliberations in mid-March. He was arrested in the Homestead area with $12,600 in cash and a false Florida driver’s license in the name of “Jose Luis Falcon,” authorities said. Before his arrest, Pacheco cut off his ankle monitor in violation of the terms of his bond, and documents seized from him contained multiple contacts in the Dominican Republic, according to prosecutors Kirk Ogrosky and Jay Darden. Pacheco told police that he was “going fishing.”
These two cases are the tip of an iceberg of insurance fraud perpetrated on government agencies without the knowledge or experience of insurers whose fraud units would never have allowed them to be as successful, and greedy, as they were until the US Attorney and FBI could ignore their crimes no longer. It took years to put together the case, obtain the indictments and try those who are on the way to jail. Add 40 million insureds to this open bank vault and more will be stolen than can even be imagined today. As Willy Sutton once said when asked why he robbed banks: “That’s where the money is.” Today, a gun is not needed to get billions more than Sutton ever stole – all that is needed is a computer and a vendor number. Bills are sent to the Medicare and Medicaid program and money is wired into the crooks account without any person receiving medical services.
In addition, Jeffrey H. Sloman, Acting United States Attorney for the Southern District of Florida, and Michael J. Folmar, Acting Special Agent in Charge, Federal Bureau of Investigation, Miami Field Office, announced that on Friday, August 7, 2009, a federal jury in Miami convicted defendant Ramon Santos, of Hialeah, FL, of conspiracy to commit health care fraud, health care fraud and obstruction of justice following a trial before Senior U.S. District Judge James Lawrence King. Sentencing has been scheduled for October 29, 2009. Santos faces a statutory maximum penalty of 10 years’ imprisonment.
According to evidence presented at trial, Santos was employed by two separate HIV-infusion clinics, The Better Health Consulting Clinic and Mitto Health Center Inc, which purportedly provided infusion treatments to HIV-positive Medicare beneficiaries. From 2004 through June 2006, both Mitto and Better Health submitted claims to Medicare in which they claimed that they were providing expensive HIV-infusion therapies when, in fact, they were providing the patients with nothing more than injections or infusions of Vitamins B-6 and B-12. During the course of the conspiracy, the two clinics submitted more than $12 million in false claims to Medicare.
According to the trial evidence, defendant Santos, who was not a licensed physician’s assistant, purported to be a physician’s assistant and examined patients, prepared treatment plans, and prepared false medical paperwork, which paperwork was ultimately used to submit false claims to Medicare. In addition, after Better Health received a grand jury subpoena in June of 2006, Santos created false medical records and placed phony test results inside patient files which were ultimately returned to the grand jury.
15 Days for Insurance Fraud in Nebraska
Sherri Smith pleaded guilty to misdemeanor theft and insurance fraud charges in Lincoln County Court.
She was sentenced to 18 months probation and 15 days in the Lincoln county jail. If she fails to successfully complete probation, she will receive another 180 days in jail.
Authorities say Smith took $8,500 from the Hoover Chiropractic Center and bilked an insurance company out of $68,000 by making reimbursement claims for chiropractic services she and her family received for free. Investigators found other insurance transactions sent through Smith's bank account for more than $11,000.
Smith has reimbursed the chiropractor but apparently has not reimbursed the insurer.
Fake Truck Theft – Probation & Community Service
Thomas Bowie, 34, of Pennsylvania, plead guilty Tuesday to a felony fraud charge after he admitted that, behind on his truck payments, he lied to police about it being stolen in order to collect insurance money on it. Bowie was sentenced by Montgomery County President Judge Richard J. Hodgson as part of a plea agreement to three years of probation and 72 hours of community service.
Bowie reported the alleged theft of his 2001 Ford F250 pickup truck from the parking lot at the Montgomery Mall to township police August 22, 2009. Authorities learned that Bowie was behind $2,877 in payments, according to the criminal complaint. Police also learned that a collection agency had been trying to locate the truck for several months and that Bowie was aware of this, the complaint said.
Bowie on Aug. 28, 2008, filed an insurance claim for the alleged missing truck. Police subsequently re-interviewed a neighbor who was with Bowie at the mall and initially supported his story. That neighbor during this interview admitted the story was false and that she had driven Bowie to the mall.
Insurers Fined for Poor Claims Practices
Illinois insurance regulators have fined Universal Casualty Co. $200,000 and ordered it to immediately correct its claims processes after the company failed to adopt and maintain procedures for prompt investigations and settlements of consumer claims. The automobile insurer, based in Elk Grove Village, Ill., does business in Illinois, Indiana and Missouri. The order entered August 11 imposes a fine of $200,000 on UCC - $100,000 of which is payable in the event that the department's current examination finds that UCC's corrective measures are unsatisfactory. It also requires that UCC must re-visit and satisfactorily resolve several hundred previous consumer complaints.
According to the Illinois Department of Insurance, regulators ordered UCC to create and maintain improved claims investigation and resolution procedures in January 2008. Consumer complaints alleging the insurer was not addressing or resolving property damage and liability claims continued, however. The department initiated a new investigation on July 27, 2009.
Both Indiana and Missouri have imposed sanctions against the company, mostly due to UCC's claims practices. In June, the Indiana Department of Insurance imposed a $200,000 fine against UCC and ordered it to cease writing new business in that state. Missouri has also barred UCC from writing new business there. The Missouri Department of Insurance indicated in its June 11 order that it has received more than 13 times the number of consumer complaints about UCC than it typically does for a company its size.
The new order also requires that UCC “satisfactorily resolve” hundreds of previous consumer complaints. The department said it will undertake additional disciplinary measures if the insurer does not comply. The company has notified regulators that new management is working to institute corrective measures.
Similarly, in New York the American Medical and Life Insurance Co., a health insurer whose TV commercials promised “peace of mind” for just $5 a day, was ordered to stop running the national ads and pay a fine of $700,000 after New York officials accused it of leaving patients only with huge hospital bills.
In one ad, the narrator said the insurance is available “regardless of any pre-existing conditions,” while the print on the screen stated “most pre-existing conditions accepted” and the fine print stated there is a six-month waiting period.
New York's two-year investigation revealed that a Rochester woman who had $419 a month charged to her credit card for the insurance, only to have the company cover just $1,164 of her $28,000 hospitalization. A 36-year-old New Yorker who had a stroke found his policy covered just $250, leaving him with a bill for $29,917. In both cases, the company paid off the balances after the state intervened.
The New York City-based company sells policies in 38 other states and the District of Columbia. It sold about 12,000 policies in New York, about 5,000 of which have lapsed, and about 38,000 nationwide. The state is also prohibiting the company from selling its partial coverage policies in New York, in part because state officials said the company failed to fully disclose the extent of coverage or use licensed agents as required. A second unidentified company has agreed to suspend sales of its nationally marketed policies while the state investigates its practices.
Missouri Pharmacist fined $3.9 Million for Medicaid Fraud
Showing how easy it is to steal from government health insurance plans pharmacist Noel Botsch, owner of Special Design Healthcare, agreed to pay $3.9 million to the government rather than go to trial when he was prosecuted by the U.S. and states of Missouri and Illinois. I can only assume, since the pharmacist apparently has the money to pay the fine, that he was able to garner more than $3.9 Million from the scheme where the prosecutors claimed the Cape Girardeau pharmacy committed Medicaid fraud. Acting U.S. Attorney Michael Reap said the settlement was reached to resolve claims that Botsch submitted false and fraudulent claims to the Missouri and Illinois Medicaid Programs for various drugs sold to customers. He agreed to the settlement to avoid trial.
The alleged offenses occurred from October 2002 to June 2006. Prosecutors allege the pharmacy billed Missouri and Illinois Medicaid for more drugs than it purchased, charged for brand name medicine when it dispensed generic, and billed without proper medical authorization. The prosecutors did not report the amount they believed Botsch obtained illegally from the Medicaid and Medicare programs.
Prosecutors say Botsch and the pharmacy will be monitored for five years.
Probation Only For Major Medical Fraud
As ZIFL readers will recall, Dr. Raul Villalobos and Elizabeth Villalobos, a prominent El Paso-Juárez dentist and his wife who pleaded guilty to money-laundering charges earlier this year have been sentenced to five years of probation and ordered to pay $1.3 million in restitution, according to court records. The case proves that even US Courts fail to understand the seriousness of insurance fraud and allow prominent persons to get away with the crime. If they were caught in provable $1.3 million in fraud to support an order of restitution there is a high probability that the criminal activities resulted in much more taken from the defrauded insurers.
Dr. Raul Villalobos and Elizabeth Villalobos were sentenced Tuesday by U.S. District Court Judge Frank Montalvo. Each was also ordered to pay a $217,000 fine. Mrs. Villalobos pleaded guilty to money laundering and tax fraud. In exchange, nine charges against her were dropped. They were arrested in 2007 by the FBI.
According to court records, the $1.3 million in restitution will go to the U.S. insurance companies they were accused of overbilling and double-billing for work done by them on U.S. patients at a Juárez clinic. As part of the plea agreement, the couple agreed to sell their Tarahumara Polo Field in La Union, N.M., where the charity matches Polo with a Purpose used to be held. According to property records, the polo field was sold last month to a company called Franklin Mountain Polo.