Health Care Fraud and Money Laundering of $18 Million Leads to Prison Sentence for New York Pharmacy Owners

Two pharmacy owners from New York have been sentenced for using their pharmacies to submit fraudulent claims to Medicare. After receiving payment from Medicare for the claims, they laundered the money through shell pharmacy wholesale companies by sending funds overseas to China and Uzbekistan.

According to court documents, Peter Khaim, 44, and his brother, Arkadiy Khaimov, 41, used 16 New York-area pharmacies, owned and controlled by the brothers and their co-conspirators, to submit false claims for cancer medications, Targretin Gel 1% and Panretin Gel 0.1%. The US Department of Justice (DOJ) alleged that Khaim and Khaimov exploited the COVID-19-related “emergency override” billing codes to submit claims for these expensive medications, which were not prescribed by physicians or dispensed to patients.

The DOJ alleged that Khaim, Khaimov, and their co-conspirators collectively concealed more than $18 million in proceeds by moving the money through shell pharmacy wholesale companies. Under the alleged scheme, the proceeds were typically sent to companies in China for distribution to individuals in Uzbekistan before the money was returned to the shell companies’ bank accounts, minus a commission. At other times, the proceeds were sent directly to Khaim, Khaimov, or their relatives or designees from the shell companies’ accounts in the form of a certified cashier’s check or cash.

Both Khaim and Khaimov pleaded guilty to conspiracy to commit money laundering. At sentencing, Khaim received an eight-year and one-month prison sentence and was further ordered to pay more than $18 million in restitution and forfeit more than $2.7 million. Khaimov was sentenced to six years in prison, as well as ordered to pay $18 million in restitution and forfeit more than $9.6 million.

The DOJ’s press release can be found here.

Chicago Health Care Company and Former Owners Settle False Claims Act (FCA) Claim for Nearly $2 Million

A Chicago health care company, KareFirst Management, and its former owners will pay nearly $2 million to settle a lawsuit alleging that they submitted false claims to Medicare and Medicaid.

The government alleged that the company, an independent nurse practitioner group, developed a proprietary patient charting software that automatically upcoded claims (i.e., changed lower evaluation and management [E&M] treatment codes to higher E&M codes). KareFirst allegedly contracted out nurse practitioners to skilled nursing facilities across the Chicago area and required its nurse practitioners to use KareFirst’s billing software. After the nurse practitioners entered claims into the billing software, the software generated false, upcoded claims that KareFirst then submitted to Medicare and Medicaid for reimbursement.

As part of the settlement, KareFirst and its former owners agreed to pay nearly $2 million to Medicare and Medicaid over the next three years.

The DOJ’s press release can be found here.

Second Trial in NBA Health Care Fraud Case Underway

A trial in the Southern District of New York has started against Dr. William Washington for his involvement in an alleged scheme to submit fraudulent medical claims to the National Basketball Association (NBA) Players’ Health and Welfare Benefit Plan. This is the second trial related to the alleged submission of fraudulent claims to the NBA. We previously covered the sentencing of former Boston Celtics’ forward Glen “Big Baby” Davis for similar conduct involving doctors and professional basketball players.

In her opening statement, Assistant US Attorney Rebecca Delfiner stated that Dr. William Washington of Seattle conspired with former NBA player Terrence Williams to submit fake medical claims and receive fraudulent reimbursements. As part of the alleged conspiracy, Washington and Williams exchanged text messages detailing the plan to submit false claims to the NBA. As part of these communications, the two coordinated drop-off locations for envelopes of cash.

Washington is charged with health care fraud, wire fraud, conspiracy to commit wire fraud and health care fraud, and conspiracy to make false statements. While he originally pleaded guilty to two counts, the court permitted him to withdraw his plea and proceed to trial. Washington is representing himself at trial.

The case is United States v. Williams, No. 1:21-cr-00603 (S.D.N.Y. filed Oct. 4, 2021).

Defense Contractors Agree to Pay $70 Million to Settle FCA Allegations of Improper Markups

Two Lockheed Martin subsidiaries agreed to pay $70 million to settle a lawsuit alleging that they violated the FCA by overcharging the US Navy for parts and materials used to repair and maintain naval training aircraft.

The whistleblower suit, initiated in June 2011 in the US District Court for the Eastern District of Wisconsin, claimed that Lockheed subsidiaries Sikorsky Support Services, Inc. (SSSI) and Derco Aerospace Inc. entered into an improper cost-plus-percentage-of-cost (CPPC) subcontract for the purchase of aircraft parts.

Under the terms of the CPPC subcontract, SSSI agreed to purchase parts from Derco at Derco’s purchase cost, plus a fixed 32% markup. In turn, SSSI submitted cost vouchers to the Navy for reimbursement in the amount SSSI paid to Derco. The government alleged that by failing to disclose that the cost vouchers submitted by SSSI were the result of an illegal CPPC subcontract between the subsidiaries, SSSI and Derco knowingly submitted false cost vouchers to the Navy. The CPPC subcontract was in effect from January 2006 to July 2012. According to the complaint, a high-level SSSI official was aware as early as December 2005 that the CPPC subcontract did not comply with federal law.

The DOJ’s press release can be found here.

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Heather M. Zimmer contributed to this article