Health Care & Reproductive Rights

Los Angeles – Attorney General Edmund G. Brown Jr. announced that agents from his office late last night arrested two individuals who bilked Medicare out of $678,000 by submitting phony bills for walkers, wheelchairs, diabetic shoes and even body braces and canes, using the proceeds for luxury goods including a gold-colored Hummer H200.

A third suspect remains at large.

“At a time when government needs every dollar it has, these individuals submitted completely false claims for equipment they never purchased,” Brown said. “Such callous disregard for the public interest is intolerable and warrants swift prosecution.”

In April 2009, agents from the Attorney General’s Bureau of Medi-Cal Fraud and the U.S. Department of Health and Human Services launched a joint investigation into dozens of suspicious Medicare claims for durable medical goods.

The four-month investigation found that, beginning in November 2008, the defendants established dummy medical supply companies, obtained stolen social security numbers and physician providers numbers, made counterfeit state IDs, and used the information to submit false claims totaling $678,000 to Medicare.

After receiving payment from Medicare, the defendants deposited the funds into an account at Center Bank in Los Angeles, using them to pay for luxury goods, including the Hummer that Odonnell purchased.

Brown’s office filed charges Tuesday in LA Superior Court and yesterday arrested the following individuals:

• Monica Odonnell, 44, of Canoga Park, on four counts of misapplication of records, and computer access and fraud. She is being held on $15,000 bail in the Los Angeles County Jail. Odonnell is a Department of Motor Vehicles employee.
• Ekaterina Shlykova, 23, of Los Angeles on one count of perjury. She is being held on $25,000 bail in the Los Angeles County Jail.
• A third individual -- Evgeny Lyadov, 32, of Los Angeles -- was charged with 36 counts of grand theft, making fraudulent claims, identity theft, and perjury. Lyadov remains at large. A search of his office uncovered over $170,000 in cash, fraudulent credit cards and duplicate passports.

Medicare schemes are often uncovered when one business submits an unusually large number of claims for the same device or beneficiaries. To evade detection, these defendants sought to give the impression that doctors were ordering medical equipment for different beneficiaries at different stores.

Ultimately, however, the actual Medicare beneficiaries complained that their monthly statements showed that they had received medical equipment from businesses in Los Angeles, when they had not.

Auditors investigated and discovered a large number of claims for the same devices were being made from a company called “North Hollywood Medical Supply” and referred the suspicious activity for prosecution.

"Medicare fraud is an increasingly serious problem that costs taxpayers billions in lost and wasted dollars,' said Sarah J Allen, Special Agent in Charge for the San Francisco Region of the Office of Inspector General for the Department of Health of Human Services. 'Today’s arrests represent one victory in a bigger battle to stop these fraudulent schemes so that Medicare can better serve those who really need and deserve help.'

If convicted, Odonnell and Shlykova could receive up to three years in state prison. Lyadov could face more than 15 years in prison.

To report fraud or abuse, call the Attorney General's Bureau of Medi-Cal Fraud and Elder Abuse at (800) 722-0432.

Copies of the arrest warrants and criminal complaints are available upon request.

Federal and State authorities this morning arrested 20 defendants accused of being part of ring that defrauded Medi-Cal out of nearly $4.6 million by using unlicensed individuals to provide in-home care to scores of disabled patients, many of them children with cerebral palsy or developmental disabilities.

The 20 defendants arrested this morning are among 42 defendants named in a 41-count indictment that was returned by a federal grand jury on June 25. The indictment is part of an investigation called Operation License Integrity, a two-year investigation conducted by the Federal Bureau of Investigation, the U.S. Department of Health and Human Services Office of Inspector General, and the Office of the California Attorney General-Bureau of Medi-Cal Fraud and Elder Abuse. The indictment alleges that the 42 defendants and two others, one of whom has already pleaded guilty to health care fraud charges, conspired to bill Medi-Cal nearly $4.6 million for in-home licensed nursing services that were actually provided by unlicensed individuals.

The organizer of the ring, Priscilla Villabroza, a registered nurse who ran a Santa Fe Springs-based company called Medcare Plus Home Health Providers, pleaded guilty in federal court last year to five counts of health care fraud. According to court documents, Villabroza and others hired individuals to provide care to disabled Medi-Cal patients, many of whom were children and young adults served under a program called Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) Supplemental Services. The indictment alleges that from August 2004 through the end of 2007, Villabroza and others hired unlicensed individuals to provide services to the disabled Medi-Cal patients and billed Medi-Cal as if they were licensed vocational nurses (LVNs). Some of the unlicensed individuals had foreign training, but never passed a nursing exam here. Some of them had no medical training at all.

'Villabroza and her associates concocted a clever rip-off where they hired untrained and unlicensed nurses to provide care to children with serious health conditions,' California Attorney General Edmund G. Brown Jr. said. 'At a time of budgetary crisis, they cheated California's welfare system and pocketed millions of dollars in unauthorized state reimbursements.'

'We believe that this is the largest single case alleging Medi-Cal fraud ever filed in the state,' said United States Attorney Thomas P. O’Brien. 'The nearly four dozen people associated with this fraud ring not only cheated taxpayers, they endangered the lives of young people they promised to protect and care for.'

The unlicensed nurse defendants visited the patients at home and at school and provided nursing services that included administering medications, adjusting ventilators, and feeding through gastronomy tubes. Some parents and patients reported to authorities that the 'nurses' lacked basic skills. In one case, a 'nurse' was unable to replace a tracheotomy tube that had fallen out of a young patient’s neck. In another case, an imposter nurse simply fled a medical situation when she apparently was unable to provide assistance.

Salvador Hernandez, Assistant Director In Charge of the FBI in Los Angeles, stated: 'This case is particularly troubling in that patients received sub-standard care for serious medical conditions when defendants operated without a license and in their own best interest, not their patients’ interests. The FBI and our partners will continue to provide resources to detect and fight health care fraud that affects the stability of government programs and our economy.'
Glenn R. Ferry, Special Agent in Charge for the Los Angeles Region of the Office of Inspector General for the Department of Health of Human Services, commented: 'Today's arrests send a strong message to those who would corruptly take advantage of the Medi-Cal system. Greed, at the expense of our most vulnerable citizens and their quality of care, will not be tolerated. The Office of Inspector General will continue to closely work with our Federal, State and local law enforcement partners to prevent, deter and prosecute health care fraud.'
A key assistant to Villabroza – Susan Bendigo, an RN who ran a Medcare Plus subsidiary – was indicted last year. Bendigo is a fugitive who fled the United States during the investigation into her activities.
Villabroza, Bendigo and supervisors involved in the scheme allegedly directed the unlicensed nurse defendants to lie about their licensing and qualifications by telling the parents or guardians of the disabled Medi-Cal beneficiaries that they were LVNs, according to the indictment. The unlicensed nurse defendants falsely presented themselves as professionals, concealed their unlicensed status from the parents or guardians of the disabled Medi-Cal beneficiaries, and in some cases affirmatively misrepresented themselves as LVNs.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty.
The defendants arrested today are expected to make their initial appearances this afternoon in United States District Court in Los Angeles. The other defendants named in the indictment will be summoned to appear in court for arraignments in the coming weeks.
All of the defendants named in the indictment are charged with conspiracy to commit health care fraud, a felony count that carries a statutory maximum penalty of 10 years in federal prison. All of the defendants are also named in at least one substantive count of health care fraud, a charge that carries a maximum statutory penalty of 10 years in federal prison.
Both the California Department of Registered Nursing, which licenses RNs, and the California Department of Consumer Affairs Bureau of Vocational Nursing, which licenses LVNs, maintain websites where consumers can check the licensing status of any purported professional providing services to them. These can be accessed at http://www2.dca.ca.gov.
Anyone who suspects Medi-Cal fraud related to the use of unlicensed nurses or any other type of Medi-Cal or Medicare fraud may report their concerns to the U. S. Department of Health and Human Services’ Office of Inspector General hotline at 800-HHS-TIPS (800-477 8477) or the California Department of Justice’s Bureau of Medi-Cal Fraud and Elder Abuse hotline at 800-722-0432 or webpage, http://www.dhcs.ca.gov/individuals/Pages/StopMedi-CalFraud.aspx.

Los Angeles – As part of a wide-ranging effort to rein-in Medi-Cal fraud, Attorney General Edmund G. Brown Jr. will today file criminal charges against two dozen in-home healthcare workers who “shamelessly bilked” the program by seeking payment for services to clients who were in fact dead, hospitalized or incarcerated.

“These individuals shamelessly bilked the Medi-Cal program by claiming payment for services never rendered,” Brown said. “In fact, their supposed clients were dead, hospitalized or incarcerated.”

Under Medi-Cal’s In-Home Supportive Services program, workers perform non-medical services for qualified Medi-Cal recipients. This includes housekeeping, grocery shopping and meal preparation. In-home healthcare workers are required to submit timesheets signed and certified by their clients to receive payment. In 2008, more than 400,000 Californians received in-home healthcare services, twice as many as in 1999. State costs for operating the program are approximately $2 billion per year.

After a 2008 audit revealed that hundreds of payment requests had been submitted for in-home services never performed, Brown’s office and the California Department of Health Care Services launched an investigation into the program, leading to the charges filed today and an ongoing investigation into physicians who facilitate this type of fraud.

Today’s charges are part of Brown’s larger effort to investigate and prosecute those who would defraud Medi-Cal, which receives approximately $20 billion in state funding every year. Over the past two years, Brown has filed legal action against 31 pharmaceutical companies, 7 medical laboratories and dozens of healthcare providers and workers, resulting in criminal charges against 204 individuals and the recovery of $225 million to the state.

Today’s Charges
The following defendants, 13 of whom have prior criminal records, will be charged with one count of grand theft and one count of presenting false Medi-Cal claims in Los Angeles County Superior Court today.

• • Larry Denman, 54, of Compton, who submitted false claims totaling $3,394 for services to his mother who, in fact, was hospitalized and later died.
• Louwanda Hurt, 40, of Los Angeles, who submitted false claims totaling $1,488 for services to her client who, in fact, had died.
• Shirley Byrd, 48, of Long Beach, who submitted false claims totaling $2,953 for services to her mother who, in fact, had died.
• Rufus Jackson, 34, of Los Angeles, who submitted false claims totaling $6,506 for services to his client who, in fact, had died.
• Christopher Thomas, 25, of Long Beach, who submitted false claims totaling $1,467 for services to her client who, in fact, had died.
• Gwendolyn Jackson, 51, of Los Angeles, who submitted false claims totaling $1,557 for services to her mother who, in fact, had died.
• Diane Trujillo, 45, of Los Angeles, who submitted false claims totaling $1,645 for services to her mother who, in fact, had died.
• Pamela Renee Nelson, 48, of Los Angeles, who submitted false claims totaling $1,935 for services to her mother who, in fact, had died.
• Nadia Hoppes, 47, of Long Beach, who submitted false claims totaling $1,634 for services to her client who, in fact, had died.
• Patches Lee Miller, 38, of Long Beach, who submitted false claims totaling $3,510 for services to her client who, in fact, had died.
• Adrianna Prude, 42, of Hawthorne, who submitted false claims totaling $4,000 for services to her client who, in fact, had died.
• Percy Sok, 25, of Long Beach, who submitted false claims totaling $1,921 for services provided to his father who, in fact, had died.
• Chris Dion Jones Sr., 42, of Lakewood, who submitted false claims totaling $4,670 for services provided to his mother who, in fact, had died.
• Brenda Denise Rochelle, 42, of Los Angeles, who submitted false claims totaling $3,386 for services to her son who, in fact, had died.
• Raymond Lee Allen, 50, of Los Angeles, who submitted false claims totaling $2,261 for services to his client who, in fact, had died.
• Melchizedek Colemen, 27, of Los Angeles, who submitted false claims totaling $4,360 for services to his client who, in fact, had died.
• Ana Bertha Pineda, 31, of Bellflower, who submitted false claims totaling $2,065 for services to her grandmother who, in fact, had died.
• Qwa'stosha Spruille, 40, of Torrance, who submitted false claims totaling $1,109 for services to her client who, in fact, had been incarcerated.
• Donna Kaye Tibbs, 52, of Los Angeles, who submitted false claims totaling $5,404 for services to her client who had been placed in a nursing home and later died.
• Roderick Edward Woods, 48, of San Pedro, who submitted false claims totaling $2,007 for services to his client who, in fact, had died.
• Gerald Robert Harris, 51, of Los Angeles, who submitted false claims totaling $6,083 for services to his mother who, in fact, had died.
• Lorraine Lee, 43, of Long Beach, who submitted false claims totaling $6,958 for care provided to her mother who, in fact, had died.
• Ernest James Rogers, Jr., 53, of Los Angeles, who submitted false claims totaling $5,010 for services to his client who, in fact, had died.
• Faith Shelmon, 57, of Los Angeles, who submitted false claims totaling $4,487 for services to her husband who, in fact, had died.

Brown also filed charges against Richard F. Villegas, 38, of Downey, who submitted false claims totaling $13,243. He forged the signature of his deceased father, who was his in-home healthcare worker. He is also facing one count of grand theft and one count of presenting false Medi-Cal claims.

Defendants will be sent a letter ordering them to surrender to the court in June. If they fail to appear, an arrest warrant will be issued. If convicted, the defendants could face one year in county jail to five years in state prison.

An example:
Larry Denman had been paid by In-Home Supportive Services to provide care for his mother, Lillie Denman. On March 4, 2007, she was admitted to St. Francis Medical Center. On March 23, she was transferred to a convalescent home and died the next day.

The investigation found that Denman billed In-Home Supportive Services for providing 385 hours of homecare to his mother while she was hospitalized and for nearly a month after her death. Denman forged his mother’s signature to obtain payment.

"The strong, appropriate actions taken in these IHSS fraud cases are a direct reflection of the team effort among DHCS and the Attorney General's Office to protect those being defrauded and prosecute the offenders to the fullest extent allowed by law,' said DHCS Director David Maxwell-Jolly.
DHCS works closely with the Attorney General's Office to prevent, detect and investigate Medi-Cal provider and beneficiary fraud.

The $40 billion Medi-Cal program receives 50 percent of its funding from the state and 50 percent from the federal government. One in 6 California residents is a Medi-Cal beneficiary.

As part of his effort to combat Medi-Cal fraud over the past few months, Brown has:

• Filed suit against seven private laboratories to recover hundreds of millions of dollars in illegal overcharges for blood tests and other laboratory procedures.

• Filed criminal charges against six individuals who paid healthy seniors to be admitted to a hospice for the terminally ill and then billed state and federal health care programs $9 million for procedures that were never performed.

• Arrested two individuals who filed false claims totaling $1.34 million to Medicare for medical services that were never performed.

To report fraud or abuse, call the Attorney General’s Office (Bureau of Medi-Cal Fraud and Elder Abuse) at (800) 722-0432.

Los Angeles – Continuing his fight to combat Medicare and Medi-Cal fraud, Attorney General Edmund G. Brown Jr. last night filed criminal charges against six individuals who paid healthy seniors to be admitted to a hospice for the terminally ill and then billed state and federal health care programs for “phantom procedures” never performed.

The six defendants – including a mother and her two children – were physicians and staff at “We Care” hospice in Sherman Oaks. One defendant was arrested today. Another four will surrender to authorities later this month. One remains at large.

“We Care obviously didn’t care about doing the right thing or helping sick people,” Brown said. “The owners, physicians, and staff of We Care paid healthy seniors to be admitted to hospice and then billed Medicare and Medi-Cal for phantom procedures. In total, they bilked the public out of $9 million and used the funds to enrich themselves and pay for expensive homes and luxury cars.”

Brown’s Office and the U.S. Department of Health and Human Services launched a joint investigation in 2008 after an audit found that a suspiciously large number of patients admitted to We Care were in good health and the mortality rate was low for a hospice.

Typically, 80% of patients die during their first six months in hospice. At We Care, only 11% of the 362 Medicare beneficiaries and 4% of the 143 Medi-Cal beneficiaries died between 2004 and 2007.

The joint investigation ultimately revealed that the staff of We Care paid “cappers” a finder’s fee for identifying and enrolling relatively healthy Medicare and Medi-Cal beneficiaries into hospice care. Subsequently, the staff billed the government for procedures and services that were not performed or medically necessary – including mental health evaluations and the administration of oxygen. This amounted to $9 million in fraudulent billings.

The defendants operated the scheme between 2004 and 2007, until the hospice’s license was revoked and the facility was closed.

The following defendants were charged in Los Angeles Superior Court:

• Milagros Delmendo, 58, of Northridge, on four counts of grand theft, presenting false Medi-Cal claims, making fraudulent claims to the government, and paying unlawful remuneration. Ms. Delmendo was arrested today by Special Agents from the Attorney General’s Office and the U.S. Department of Health and Human Services and booked in the Los Angeles County Jail. Ms. Delmendo was the owner of We Care.

• Kristina Delmendo Deguzman, 31, of Northridge on three counts of grand theft, presenting false Medi-Cal claims, and making fraudulent claims to the government. She will surrender to authorities Wednesday.

• Mark Delmendo, 28, of Studio City, on three counts of grand theft, presenting false Medi-Cal claims, and making fraudulent claims to the government. A warrant has been issued for his arrest.

• Nolan Jones, M.D., 60, of Los Angeles, on three counts of grand theft, presenting false Medi-Cal claims, and making fraudulent claims to the government. He has agreed to surrender to authorities.

• Anselmo Alliegro, M.D., 78, of Dundalk, Maryland, on three counts of grand theft, presenting false Medi-Cal claims, and making fraudulent claims to the government. He will surrender to authorities later this month.

• Ramon Parayno, 46, of Studio City, on two counts of grand theft and paying unlawful remuneration. He has agreed to surrender to authorities.

Here’s how the scheme worked:

The owner of We Care, Milagros Delmendo, paid Ramon Parayno $500 for each beneficiary admitted, and an additional $500 for each month the patient remained under care. Parayno would split his fee 50/50 with the beneficiary. At one point in 2005, Parayno made in excess of $25,000 in a month.

Once enrolled, physicians Nolan Jones and Anselmo Alliegro falsely diagnosed patients as suffering from a terminal disease, such as end-stage Chronic Obstructive Pulmonary Disease (COPD).

The investigators also found that nursing staff had been directed by Ms. Delmendo and her children -- employees Mark Delmendo and Kristina Delmendo Deguzman -- to falsely note in medical charts that their patients suffered from “shortness of breath,” “generalized weakness,” or “moderate to severe pain.”

Patients with end-stage COPD are not able to walk and require oxygen. The majority of patients diagnosed with COPD at We Care, however, were observed without oxygen or the assistance of a wheelchair. Many of the primary care physicians interviewed by investigators stated that their patients were not terminally ill and should not have received hospice care.

In one case, We Care billed Medicare $39,031 for hospice care for a patient whose medical problems only included arthritis and high blood pressure.

The Delmendo family used the proceeds of the scheme to purchase expensive cars, designer clothing, and luxury homes, including one purchased in cash for $1.7 million.

If convicted on all counts, the defendants could receive up to nine years in prison. To report fraud or abuse, call the Attorney General’s Office (Bureau of Medi-Cal Fraud and Elder Abuse) at (800) 722-0432.

The complaint and affidavit are available upon request.

SAN DIEGO-- Attorney General Edmund G. Brown Jr. today announced that agents from the Bureau of Narcotic Enforcement today arrested five college-age individuals who conspired to fraudulently obtain thousands of “dangerous and potentially lethal” prescription drugs.

From January to March 2009, the co-conspirators illegally obtained 2,500 pills, primarily Oxycontin and Xanax, with a street value in excess of $70,000.

“These individuals used stolen physician information to obtain thousands of dollars worth of dangerous and potentially lethal prescription pills,” Attorney General Brown said. “This is one more example of how legal medications are being diverted for illicit purposes.”

In February 2009, a San Marcos pharmacist’s suspicions were aroused when a young woman attempted to fill a prescription for 120 Xanax pills. When the pharmacist contacted the doctor’s office to confirm the prescription, he was informed that it was invalid and the woman was not a patient.

The pharmacist subsequently notified the Attorney General’s office, which launched a two-month investigation that culminated in today’s arrests including:

• Sean Christiansen, 24, of Vista for violation of probation, possession of a controlled substance, sale of a controlled substance, and conspiracy;

• Christopher Zenkus, 24, of Poway on 4 counts of commercial burglary, 5 counts of false impersonation, 3 counts of prescription fraud, and 1 count of unlawful possession of a prescription blank;

• Stephen Cleeton, 20, of Poway on 6 counts of commercial burglary, 6 counts of forged narcotic prescription; and 2 counts of unlawful possession of a prescription blank;

• Courtney Morgan, 20, of San Diego on, 11 counts of commercial burglary, 7 counts of forged narcotic prescription; and 4 count of unlawful possession of a prescription blank;

• Erica Peterson, 20, of Del Mar on 4 counts of commercial burglary, 2 counts of forged narcotic prescription; and, 3 counts of unlawful possession of a prescription blank.

Fellow conspirator, Paige Billheimer, 21, of San Diego remains at large. She is expected to be charged with 6 counts of commercial burglary, 1 count of prescription fraud, and 5 counts of forged narcotic prescription.

The investigation revealed that Zenkus had stolen the Drug Enforcement Administration and medical license numbers of a San Diego physician and used this information to order five blank prescription pads that could be used to write 500 prescriptions.

Subsequently, Zenkus, Christansen, and their co-defendants filled fraudulent prescriptions at 11 different pharmacies in the San Diego area, obtaining 1,020 Oxycontin pills with a street value of $55,000; 1,390 Xanax pills with a street value of $7,000; 720 Acetaminophen and Hydrocodone pills with a street value of $5,040; 360 Percocet pills with a street value of $3,600; and 60 Adderall pills with a street value of $180.

In some cases, the defendants would go from pharmacy to pharmacy to fill prescriptions, using their parents’ health insurance to pay for the pills.

Paperwork found in Sean Christiansen’s vehicle detailed indicates that he was earning $31,000 a week through the illegal sale of prescription drugs.

According to the latest Department of Justice “Drug Trends” report, Oxycontin is among the most prevalent medicines obtained fraudulently and is one of the most abused medicines in the United States.

If convicted, defendants face up to 1-5 years in prison.

The Bureau of Narcotic Enforcement’s San Diego Regional Pharmaceutical Narcotic Enforcement Team led the two-month investigation, which also included agents from; California Department of Health Services, California Department of Insurance. The San Diego County Sheriff and San Diego County Probation Department assisted in today’s arrests.

Copies of the arrest warrants are attached.

FOR IMMEDIATE RELEASE
Friday, March 20, 2009
Contact: Office of the Attorney General - Christine Gasparac (916) 324-5500
Cotchett, Pitre & McCarthy - Niall McCarthy (650) 697-6000

Brown Sues to Recover Hundreds of Millions of Dollars Illegally Diverted from Medi-Cal

LOS ANGELES – Responding to a whistleblower’s allegation of “massive Medi-Cal fraud and kickbacks,” Attorney General Edmund G. Brown Jr. joined legal action against seven private laboratories to recover hundreds of millions of dollars in illegal overcharges to the state’s medical program for the poor.

“In the face of declining state revenues, these medical laboratories have siphoned off hundreds of millions of dollars from programs intended for the most vulnerable California families.” Attorney General Brown said. “Such a pattern of massive Medi-Cal fraud and kickbacks cannot be tolerated, and I will take every action the law allows to recover what is owed,” Brown added.

According to whistleblower Chris Riedel, the CEO of Hunter Laboratories, “I confirmed with the California Department of Health Care Services that these practices were illegal. We then had a choice--either join the other labs in violating the law or be unable to compete for business. We choose to suffer the financial consequence, and follow the law.”

The lawsuit, which is pending in San Mateo Superior Court, contends that the 7 medical labs systematically overcharged the Medi-Cal program over the past 15 years.

The defendants include:
• Quest Diagnostics, Inc., based in Madison, NJ; its affiliate Specialty Laboratories, Inc., based in Valencia, CA; and 4 other Quest affiliates.
• Health Line Clinical Laboratories, Inc., now known as Taurus West, Inc., based in Burbank, CA.
• Westcliff Medical Laboratories, Inc., based in Santa Ana, CA.
• Physicians Immunodiagnostic Laboratory, Inc., based in Burbank, CA.
• Whitefield Medical Laboratory, Inc., based in Pomona, CA.
• Seacliff Diagnostics Medical Group, based in Monterey Park, CA.
• Laboratory Corporation of America, based in Burlington, NC.

California law states that 'no provider shall charge [Medi-Cal] for any service…more than would have been charged for the same service…to other purchasers of comparable services…under comparable circumstances.' Yet, these medical laboratories charged Medi-Cal up to six times as much as they charged some of their other customers for the very same tests. For instance,

• Quest Diagnostics, Inc. charged Medi-Cal $8.59 to perform a complete blood count test (CBC), while it charged some of its other customers $1.43 for the exact same test. This is one of the most frequently requested blood tests.

• Laboratory Corporation of America charged Medi-Cal $30.09 to perform a Hepatitis C Antibody screening, while it charged some of its other customers only $6.44 for the test.

• Health Line Clinical Laboratories charged Medi-Cal $12.65 to perform an HIV Antibody screening, while charging some of its other customers $1.75 for the test.

These are not isolated examples. They are part of a pattern of fraudulent overcharging and kickbacks that developed over the past decade. Here’s how it worked:

• The defendant labs provided deep discounts when they were being paid directly by doctors, patients, or hospitals. Prices were often below the lab’s cost and sometimes free.

• In exchange for these steep discounts, the defendants expected its customers to refer all of their other patients (where the lab was paid by an insurance company, Medicare, and Medi-Cal) to its lab. Under California law, this amounted to providing an illegal kickback.

• These sharply reduced prices, however, were not made available to Medi-Cal. Instead of charging the discounted prices, the defendants charged Medi-Cal up to 6 times more than the defendant charged others for the same tests. In effect, defendants shifted the costs of doing business from the private sector to Medi-Cal.

• Additionally, defendants offered their clients who paid them directly (not through Medi-Cal or other insurance) deeper and deeper discounts in order to get a larger share of the lab testing business. This created an unfair playing field, and laboratories that followed the law could not effectively compete. These law-abiding companies were sometimes forced to sell or go out of business completely.

The case was filed under seal in San Mateo Superior Court under California's False Claims Act by a whistleblower and qui tam plaintiff Hunter Laboratories, which processes blood tests. Hunter Laboratories had found that it could not compete in a significant segment of the marketplace where many of the major players were offering referring doctors, hospitals, and clinics far lower rates than they were charging Medi-Cal.

After the whistleblowers filed the complaint, the Attorney General’s Bureau of Medi-Cal Fraud and Elder Abuse investigated the allegations and Attorney General Brown intervened under seal. The case became public this week.

Hunter Laboratories' attorney, Niall P. McCarthy of Cotchett, Pitre & McCarthy, commented that “At a time when California is laying off teachers and firefighters and is in a massive budget crisis, it is unconscionable that these defendants would bilk the system to the tune of hundreds of millions of dollars.”

Under California's False Claims Act, anyone who has previously undisclosed information about a fraud, overcharge, or other false claim against the state, can file a sealed lawsuit on behalf of California to recover the losses. They must notify the Attorney General as well.

Such a case is called a 'qui tam' case. If there is money recovery, the law provides that the qui tam plaintiff receives a share of the amount recovered if the requirements of the statute are met.

The lawsuit asks for relief in the amount of triple the amount of California’s damages, civil penalties of $10,000 for each false claim; and recovery of costs, attorneys’ fees and expenses. It is estimated that damages could amount to hundreds of millions of dollars.

The clinical testing field is a $50 billion industry nationwide. The defendants named in the lawsuit include some of the largest clinical laboratories in the country.

Quest Diagnostics is the leading provider of diagnostic testing, information and services in the United States, with more than 500 patient service centers in California.

Laboratory Corporation of America performs more than one million tests on approximately 400,000 samples each day and has more than a dozen patient centers in Los Angeles.

To report fraud or abuse, call the Bureau of Medi-Cal Fraud and Elder Abuse's hotline at (800) 722-0432.

FOR IMMEDIATE RELEASE
February 18, 2009
Contact: Christine Gasparac (916) 324-5500

Brown Announces Arrests of Nursing Home Employees Who Drugged Patients for Staff’s Convenience

BAKERSFIELD –Attorney General Edmund G. Brown Jr. today announced the arrests of a nurse, physician, and a pharmacist of a nursing home for “forcibly administering” psychotropic medications for their own convenience, rather than for their patients’ therapeutic interests, actions that are alleged to have resulted in the deaths of three residents.

“These people maliciously violated the trust of their patients, by holding them down and forcibly administering psychotropic medications if they dared to question their care,” Attorney General Brown said. “This is appalling behavior, which amounts to assault with a deadly weapon.”

Earlier today, California Department of Justice special agents arrested three individuals:

• Gwen Hughes, the former Director of Nursing at the skilled nursing facility of the Kern Valley Healthcare District in Lake Isabella, Kern County on charges of elder abuse and assault with a deadly weapon.

• Debbi Hayes, the former pharmacist at the Valley Healthcare District, on charges of elder abuse and assault with a deadly weapon.

• Dr. Hoshang Pormir, a staff physician at Kern Valley Healthcare District, who was serving as the medical director of the skilled nursing facility, on charges of elder abuse.

Upon taking over as Director of Nursing in September 2006, Gwen Hughes ordered that Alzheimer’s and other dementia patients be given high doses of psychotropic medications to make them more tranquil and easy to control. She ordered the administration of these medications to patients who argued with her, were noisy, or who were otherwise disruptive. Two patients who resisted were held down and forcibly given injections.

Ms. Hughes is also alleged to have directed Debbi Hayes, the hospital pharmacist, to fill prescriptions for these psychotropic medications. Hayes wrote and filled these prescriptions without first obtaining a doctor’s approval.

Dr. Hoshang Pormir approved these psychotropic medications only some time after they had been administered and without examining the patients first and determining whether these psychotropic medications were medically necessary.

Several of these patients are alleged to have had medical complications as a result of being given these psychotropic medications, including lethargy and the inability to eat or drink properly. It is believed that that three patients died and one patient suffered great bodily injury as a result.

The investigation

Kern Valley Healthcare District operates a small community hospital and skilled nursing facility in Lake Isabella. The case came to the attention of authorities in January 2007, when an ombudsman reported to the Bakersfield office of the California Department of Public Health that a patient in the skilled nursing facility had been held down and given an injection of psychotropic medication by force.

The Department of Public Health immediately sent an investigative team with a doctor, a nurse, and a doctor of pharmacology. They determined that 22 patients, including some who were suffering from Alzheimer’s at the skilled nursing facility, were being given high doses of psychotropic medication not for therapeutic reasons, but to simply control and quiet them for the convenience of the staff.

The Department of Public Health issued a Certificate of Immediate Jeopardy which resulted in the immediate dismissal of the Ms. Hughes. The matter was then turned over to the California Department of Justice, Bureau of Medi-Cal Fraud and Elder Abuse.

Special Agents from the Bureau of Medi-Cal Fraud and Elder Abuse began a year-long investigation, with the co-operation and assistance of the Department of Public Health and the administration of the Kern Valley Healthcare District.

A search warrant was served on the facility in August 2008, resulting in the seizure of numerous medical files and records.

Criminal charges were filed in Kern County Superior Court. The defendants are being held in Kern County Jail in Bakersfield. They will be arraigned on Friday. If convicted, the defendants could face up to 11 years in prison.

The case is being prosecuted by the Attorney General’s Bureau of Medi-Cal Fraud and Elder Abuse, with the co-operation and assistance of the Kern County District Attorney’s Office.

To report elder abuse or Medi-Cal fraud, call the Bureau of Medi-Cal Fraud and Elder Abuse’s hotline at (800) 722-0432.

The complaints are attached.

Attorney General Brown Announces Two Arrests in $1.34 Million Medicare Fraud Case

SAN DIEGO —Attorney General Edmund G. Brown Jr. today announced the arrests of two individuals who “hatched a scheme” to file false claims under Medicare for medical services that were never performed.

“The defendants hatched a scheme to bilk Medicare out of more than a million dollars,” Attorney General Brown said. “They stole the identities of people on Medicare and made claims for procedures that were never performed.”

The two defendants -- a husband and wife -- owned and operated Balboa Therapy Center in San Diego. From July 2005 to June 2006, they, along with an accomplice, paid unsuspecting seniors at retirement homes $100 to obtain their insurance information and sign their names on blank medical forms.

The couple then paired the seniors’ signatures and Medicare insurance numbers with provider ID numbers from licensed physicians to submit fake claims. None of the claimed procedures were performed, and the physicians listed on the claims had no idea their names were being used to perpetrate the scheme.

Balboa Therapy Center functioned primarily as a front. Some of the staff at Balboa reported going days without seeing a single patient. The defendants hired licensed physicians as “directors” at the clinic to gain access to their Medicare provider ID number in order to submit the false claims to Medicare. The physicians were unaware that their provider ID numbers were being used to file the claims.

When some senior citizens began to receive receipts and other forms from Medicare indicating that they had been treated at Balboa Therapy Center, they contacted the California Department of Justice (DOJ). The DOJ’s Bureau of Medi-Cal Fraud and Elder Abuse began an investigation that led to criminal charges against the following defendants in San Diego Superior Court:

• Sanjay Patel, 41. Patel and his wife, Leena Patel, owned Balboa Therapy Center. They were arrested in Connecticut just before they attempted to flee the country for India.
• Leena Patel, 36.

The defendants, who are being held at Hartford County Jail in Connecticut, are being charged with thirteen criminal counts including grand theft, identity theft, health benefits fraud, receiving stolen property and money laundering. If convicted, they could face over twelve years in prison.

The Department of Justice’s Bureau of Medi-Cal Fraud and Elder Abuse investigates and prosecutes those who file fraudulent claims for medical services, medical equipment and drugs.

In the 2007/2008 fiscal year, Attorney General Brown was able to recover over $161 million in government funds that had been lost due to fraud and obtained 70 convictions.

To report fraud or abuse, call the Bureau of Medi-Cal Fraud and Elder Abuse’s hotline at (800) 722-0432.

The complaint and affidavit are available upon request.

# # #

SACRAMENTO- Attorney General Edmund G. Brown Jr. today announced an agreement requiring Bayer Corporation to stop a “deceptive ad campaign” regarding an oral contraceptive, “Yaz,” and obligating the company to spend $20 million publicly correcting misleading assertions about the product.

“Bayer’s deceptive ad campaign led young women to believe that its oral contraceptive would cure symptoms for which it was not approved for use,” Attorney General Brown said. “This judgment modification forces the company to stop making those claims and spend $20 million correcting misleading assertions about the product.”

Bayer claimed the drug could treat symptoms related to premenstrual syndrome (PMS), and acne, in addition to anxiety, tension, irritability, moodiness, fatigue, headaches, and muscle aches. None of these claims have been approved by the Food and Drug Administration (FDA).

In a television ad, for instance, Bayer claimed that Yaz “can help keep your skin clear,” despite the fact that clinical studies have not concluded that taking Yaz results in acne-free skin.

The Attorney General’s Office contends that the advertisements for Yaz violated a 2007 agreement with Bayer after the company failed to adequately disclose safety risks associated with the use of Baycol, a drug used to lower cholesterol, which was pulled from the market in August 2001. The agreement required future marketing, sale, and promotion of pharmaceutical and biological products to comply with all legal requirements, and prohibited Bayer from making false or misleading claims relating to any products sold in the United States.

In addition to adhering to the 2007 judgment, the company agreed to:
• Conduct a $20 million corrective advertising campaign consisting of a television advertisement and a print advertisement that have been approved by the FDA’s Division of Drug Marketing, Advertising, and Communications (DDMAC) and reviewed by the Attorneys General involved in the suit.
• The television ad must be broadcast on national cable and network television.
• The print ad must be published in magazines with national distribution.
• Submit all new Direct to Consumer television ad campaigns for Yaz to FDA for pre-review.
• Cease any and all claims about the drug that are not FDA-approved.
• Submit an annual report to each participating attorney general’s office.

The States joining California’s agreement are; Arizona, Arkansas, Connecticut, Delaware, Florida, Idaho, Illinois, Iowa, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Mississippi, Montana, Nevada, North Carolina, Ohio, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, Washington, and Wisconsin.

The Modification of Judgment and the October 2008 Warning Letter are attached.

FOR IMMEDIATE RELEASE
Wednesday, February 2, 2009
Contact: Christine Gasparac (916) 324-5500

Brown Sues Drug Makers that Conspired to
Keep Generic Testosterone Supplements off Shelves

LOS ANGELES – California Attorney General Edmund G. Brown Jr. and the Federal Trade Commission today filed an antitrust lawsuit against four pharmaceutical companies that conspired to monopolize the sale of a testosterone supplement in a “predatory move” to reap huge profits at the expense of consumers.

“The companies plotted to keep cheap generic drugs off the market, costing consumers millions,” Attorney General Brown said. “This was a predatory move pure and simple, increasing drug company profits at the expense of critically ill patients.”

Testosterone supplements like AndroGel can prevent muscle loss, fatigue or erectile dysfunction in critically ill patients suffering from HIV/AIDS, diabetes, and advanced age.

The lawsuit contends that Solvay Pharmaceuticals illegally colluded with three other pharmaceutical companies -- Watson, Par and Paddock Laboratories -- to keep the three companies from producing generic alternatives to its testosterone supplement.

In return, Solvay agreed to pay Watson and the other drug manufacturers millions of dollars over several years. With this agreement, the drug companies sought to protect the monopoly position of AndroGel, forcing consumers to pay artificially high prices for the drug while the companies shared the extraordinary profits. Solvay Pharmaceuticals manufactures and distributes a testosterone supplement called AndroGel with annual sales exceeding $400 million in 2007.

Background
In 2003, Watson Pharmaceuticals and Par Pharmaceutical Companies, Solvay’s competitors, sought approval from the Food and Drug Administration to make and sell generic versions of AndroGel. These companies received final approval from the FDA. If they had begun to sell generic alternatives, Solvay would have seen a significant reduction in its profits from AndroGel sales. Typically, when generic alternatives are introduced in the market, the prices of brand name drugs are reduced by 50% to 80%. The price for AndroGel is $225.01 for a box of 150 individual units.

Without generics on the market, consumers and health insurance programs must pay more for branded medications. Pharmaceutical monopolies cost the state, its citizens and private insurers millions of dollars each year.

Attorney General Brown and the Federal Trade Commission filed a lawsuit in the U.S. District Court for the Central District of California in Los Angeles against the following pharmaceutical companies:

• Solvay Pharmaceuticals, Inc.
• Paddock Laboratories, Inc.
• Par Pharmaceutical Companies, Inc.
• Watson Pharmaceuticals, Inc.

Today’s lawsuit alleges that Solvay and the three pharmaceutical companies violated U.S. and California antitrust laws and laws banning unfair competition. The lawsuit seeks to:

• Declare the agreements between Solvay, Paddock, Par and Watson illegal and void.
• Permanently enjoin the defendants from similar and related conduct in the future.
• Fine the defendants $2500 for each prescription and user of AndroGel in California under the California Unfair Competition Act.

The lawsuit is attached.