Health and Science

$1 billion alleged Medicare fraud, money laundering scheme leads to Florida arrests

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Three Florida residents have been charged in the "largest single criminal health-care fraud case ever brought against individuals" by the U.S. Justice Department — an alleged Medicare fraud and money laundering scheme that netted participants a whopping $1 billion since 2009, prosecutors revealed Friday.

The owner of more than 30 Miami-area skilled nursing and assisted living facilities, as well as a hospital administrator and a physician's assistant were charged in an indictment with conspiracy, money laundering and health-care fraud, the U.S. Attorney's office in Miami said.

An explosive indictment and other court documents filed Friday claim that the massive alleged scam helped wealthy health-care operator Philip Esformes, 47, fund a lifestyle that included private jets, a $600,000 watch, meetings with escorts in hotel rooms, and a private basketball coach for his son.

The indictment claims that Esformes, 47, with his co-conspirators, cycled thousands of Medicare and Medicaid beneficiaries through his Esformes Network facilities despite the fact they didn't qualify for such care.

At those facilities, prosecutors said, they also "received medically unnecessary services that were billed to Medicare and Medicaid," the huge government-run health programs that cover primarily senior citizens and the poor, respectively.

"Furthermore, Defendant [Esformes] and his co-conspirators preyed upon his beneficiaries addictions by providing them with narcotics so that the beneficiaries would remain in Esformes Network facilities, allowing the cycle of fraud [to] continue," prosecutors said in a court filing.

"Esformes is alleged to have been at the top of a complex and profitable health-care fraud scheme that resulted in staggering losses — in excess of $1 billion," said FBI Special Agent in Charge George Piro. Prosecutors say that Esformes operated the Esformes Network for "more than 14 years ... to enrich himself through false and fraudulent billings."

Assistant Attorney General Leslie Caldwell of the Justice Department said: "This is the largest single criminal health-care fraud case ever brought against individuals by the Department of Justice, and this is further evidence of how successful data-driven law enforcement has been as a tool in the ongoing fight against health-care fraud."

South Florida is a hot spot for health-care billing fraud schemes that target the huge federal Medicare program, and the giant joint federal-state Medicaid program. As a result, the region has received special scrutiny from federal health regulators and prosecutors.

Miami U.S. Attorney Wifredo Ferrer said, "Medicare fraud has infected every facet of our health-care system."

Prosecutors said Esformes faces a potential prison term of life imprisonment under federal sentencing guidelines.

In addition to Esformes, 49-year-old Odette Barcha, who had been director of outreach programs at Larkin Community Hospital, and physician's assistant Arnaldo Carmouze, 56, also were charged in the case and arrested early Friday morning. After being presented in federal court Friday afternoon, they were ordered held in jail pending detention hearings, with Carmouze's scheduled for next Wednesday.

Esformes and Barch, who are scheduled to appear at an Aug. 1 detention hearing, were also charged with obstructing justice

"According to the indictment, following the 2014 arrest of co-conspirators Guillermo and Gabriel Delgado" — in a prior case involving their alleged sale of the names of Medicare patients to a corrupt pharmacist — "Esformes attempted to fund Guillermo Delgado's flight from the United States to avoid trial in Miami," the U.S. Attorney's office said.

"The indictment further alleges that Barcha created sham medical director contracts following receipt of a grand jury subpoena in June 20, 2016, in order to conceal and disguise the payment of kickbacks she made in exchange for patient referrals for admission to Esformes Network facilities and another Miami-area hospital," the office said.

Esformes and his co-conspirators are alleged to have further enriched themselves by receiving kickbacks in order to steer Medicare beneficiaries to other health-care providers — including community mental health centers and home health-care providers — who also performed medically unnecessary treatments that were billed to Medicare and Medicaid, the office said.

"In order to hide the kickbacks from law enforcement, these kickbacks were often paid in cash, or were disguised as payments to charitable donations, payments for services and sham lease payments, court documents allege," according to prosecutors.

Payments to escorts and a basketball coach to provide private lessons to Esformes' son also were used to disguise the illicit transactions, authorities said.

The indictment claims that Esformes used money from "bribes and kickbacks he received from co-conspirators" to fund travel and transportation for two escorts, whom he separately "met with" at the Ritz-Carlton Hotel in Orlando, Florida, on different dates in February and March 2014.

Prosecutors indicated Friday that they intend to ask that Esformes be held without bail pending trial. They noted that the Esformes Network's skilled nursing facilities alone obtained about $221 million in allegedly fraudulent claims, and that Esformes himself "also amassed significant personal wealth — self-reported as $78 million in August 2014."

And prosecutors said Esformes "has already demonstrated that he would consider fleeing in the face of the criminal charges."

"Financial analysis to date has revealed that Esformes is significantly funded by his fraudulent Medicare business," prosecutors said in a court filing. "Our analysis has revealed that monies traced directly to Medicare accounts have allowed Esformes to withdraw cash of over $4.8 million, lease private jets in the amount of $2.1 million, lease luxury vehicles in the amount of $2.4 million, purchase watches in the amount of $360,000 and $600,000 respectively, and paid over $8.9 million in credit card bills."

The federal officials noted that in 2006, "Esformes paid $15.4 million to resolve civil federal health-care fraud claims for essentially identical conduct, namely unnecessarily admitting patients from his assisted living facilities into a Miami-area hospital." A press release issued at the time by the Justice Department indicates that Esformes settled that fine with two doctors who had owned the hospital, as he did, along with Philip's father, a rabbi named Morris Esformes.

"However, [Philip] Esformes and his co-conspirators allegedly continued this criminal activity — adapting their scheme to prevent detection and continue their fraud after the civil settlement," said the U.S. attorney's office on Friday.

The Chicago Tribune, in a August 2013 article, reported that Philip and Morris Esformes agreed in principle to pay the U.S. government $5 million to settle claims that they "took kickbacks related to the sale" for $32 million of a pharmacy partially owned by Philip to pharmaceutical giant Omnicare. Earlier that same year, the Tribune reported, Ominicare had agreed to pay $17.2 million to the government to settle its part of a lawsuit filed by a whistleblower related to the alleged kickbacks.

Esformes' lawyer Marissel Descalzo could not be immediately reached for comment.

But in an email statement to the Bloomberg news service, Descalzo said that Esformes "adamantly denies these allegations and will fight hard to clear his name."

"Mr. Esformes is a respected and well regarded businessman," said Descalzo in the email to Bloomberg. "He is devoted to his family and his religion. The government allegations appear to come from people who were caught breaking the law and are now hoping to gain reduced sentences."

Descalzo's reference to such law-breakers apparently refers to the brothers Guillermo and Gabriel Delgado, who, while not being charged in the indictment, are accused in it of conspiring with Esformes to defraud Medicare.

The Delgado brothers, in their own prior criminal case in 2014, were charged with selling the names of Medicare patients to a crooked pharmacist, the Miami Herald previously reported in 2015.

After agreeing to plead guilty in 2015, Guillermo Delagado was sentenced to nine years in prison for conspiring to distribute Oxycodone and other narcotics, while Gabriel was sentenced to 4-and-1/2 years after pleading guilty to conspiring to commit money laundering, the Herald reported.

The newspaper noted at the time that the brothers' lawyer had said in court papers that "they have turned over numerous financial and legal documents of significant value to the government" and also that they "have participated in undercover operations."