On Friday, July 16, the Department of Justice (DOJ) and Department of Health and Human Services (HHS) announced that the joint DOJ-HHS Medicare Fraud Strike Force has charged 94 people for alleged participation in Medicare schemes.  The suspects, collectively, submitted more than $251 million in false claims to the Medicare program. 

More than 360 law enforcement agents from federal and state agencies participated in the operation.  According to the DOJ and HHS, the operation is the largest federal health care fraud takedown since the inception of the Strike Force in 2007.  Last Friday, 36 of the 94 individuals were arrested in Miami, New York, Baton Rouge, and Detroit.  The individuals charged are doctors, nurses, health care company owners, and executives.

The 94 individuals involved in this takedown have been accused of various Medicare fraud-related offenses, including conspiracy to defraud the Medicare program, criminal false claims, violations of the anti-kickback statutes and money laundering.  The alleged schemes involve physical and occupational therapy schemes, home health care schemes, HIV infusion fraud schemes, and durable medical equipment (DME) schemes. 

In Miami, 25 defendants have been charged for allegedly participating in fraud schemes leading to approximately $103 million in false billings.  The defendants include a medical biller who allegedly billed approximately $49 million for fraudulent services. 

The Strike Force in Miami, and other cities across the country, is part of the Health Care Fraud Prevention & Enforcement Action Team (HEAT).  HEAT is part of the joint DOJ-HHS initiative to fight fraud and enforce anti-fraud laws around the country.  Phase 1 of the initiative began in South Florida in March 2007 and has expanded north to Tampa, Florida.  Since March 2007 the Strike Force has obtained indictments of more than 810 individuals and organizations that have billed the Medicare program, collectively, for more than $1.85 billion.

For information about Fuerst Ittleman’s experience litigating white collar criminal cases, including health care fraud cases, please contact us at contact@fuerstlaw.com.

A number of high profile white collar criminal prosecutions have included fraud charges based on the “theft of honest services “ fraud statute, 18 U.S.C. Sec. 3146.  This statute provides that the term, “scheme or artifice to defraud” includes not only a scheme to defraud someone of money, but also to deprive another of the intangible right of honest services.  Since its enactment, the “honest services” fraud statute has been a favorite charging statute for federal prosecutors.  For example, it is being used to prosecute former Illinois Governor Ron Blagojevich for his alleged attempt to sell a senate seat.  It has also been used to prosecute college basketball coaches who helped players violate rules to obtain scholarships.  Most notoriously, it was used to prosecute Enron executives for lying to auditors, and to prosecute Conrad Black, the former chair and CEO of Hollinger International, for paying himself illegitimate “noncompetition” fees that he failed to disclose to the board of directors.

A number of appeals courts have expressed concerns that the “honest services” fraud statute violates due process rights by failing to provide fair notice to defendants of what conduct violates the statute. The Supreme Court, in a June 24th decision, has now held that as interpreted in previous prosecutions, the statute is impermissibly vague, thereby violating the Constitution. In Skilling v. United States, the Supreme Court sharply limited the scope of the “honest services” statute, by ruling that it is unconstitutionally vague except in cases involving bribery and kickback schemes. The decision rejected the statute’s constitutionality in cases where public officials or private-sector employees are charged with engaging in self-dealing or having undisclosed conflicts of interest, without a bribery or kickback scheme.  The Supreme Court stated that by limiting the “honest services” fraud statute to bribery or kickback schemes,  it “establishes a uniform national standard, define[s] honest services with clarity, (and) reach[es] only seriously culpable conduct”.

The effect of the Supreme Court’s decision is to remove a tool from the government that was increasingly used to prosecute violations of ethics where there was no victim harm or proof that  a payment or inducement had actually affected any official action.  Now that the “honest services” fraud statute has been narrowed by the Court, it may be of minimal value to prosecutors who already have ample federal bribery and extortion statutes with which to prosecute wrongdoers. What the decision leaves businessmen and public officials alike, is with a more definite awareness of what conduct will be considered a violation of the federal criminal fraud statute.

The owner of Miami, Florida’s La Bamba Check Cashing store, Juan Rene Caro was sentenced in Federal court on June 23, 2009 to serve 216 months in prison, pay a $250,000 penalty, and forfeit $11 million in assets for his conviction on conspiracy and fraud charges in violation of the Bank Secrecy Act.Caro’s now-defunct store offered illegal check-cashing services to construction companies and other business people seeking to mask the identity of the true recipients of the funds. A company would engage La Bamba to cash a check in the name of a shell corporation, but the real company’s owner would take cash. Most of these companies were local construction companies and subcontractors.

Under the Bank Secrecy Act, financial institutions – including check-cashing stores – are required to file currency transaction reports (CTRs), a notification to the U.S. Department of Treasury, disclosing the identity of parties to a transaction when amounts greater than $10,000 are involved. The financial institution must also verify and record the identity, social security number, or taxpayer ID number of the person benefiting from the transaction.

The companies using La Bamba’s services evaded taxation on an amalgamated total of $132 million. La Bamba profited from the filing of false CTRs by taking a fee of between 3% and 5% for performing such transactions.

U.S. Department of Justice enforcement of CTR requirements has ramped up recently with charges against small and big-time players alike. For example, Newport Beach, California, financier Danny Pang was accused this Spring of structuring transactions to avoid filing CTRs, as were the owners of a small machine shop in Rhode Island who similarly avoided CTRs in order to conceal business receipts and thereby evade taxation.

Although Caro’s attorney called the sentence unfair, comments from the Department of Justice and the Judge Joan Lenard’s hefty sentence indicate broad acceptance of a zero-tolerance attitude towards fraud and financial crimes that harm the American taxpayer. It should also be noted that the prosecution sought a longer prison term and more assets than those ordered to be forfeited by Judge Lenard.

Read the Department of Justice’s posting of the indictment against Mr. Caro for a detailed description of the mechanics of Caro’s crime as well as a list of the assets sought by the government.

For insight and strategies on maintaining compliance with state and federal regulation of financial services, please contact Fuerst Ittleman at 305-350-5690 or contact@fuerstlaw.com.

On June 24, 2009, Federal agents descended on Miami, Detroit and Denver, as well as other major cities, in a new round of arrests targeting Medicare fraud in those cities. Fifty-three Federal indictments were handed down early in the day by a grand jury in Detroit, and a wave of arrests soon followed. All tolled, the newly indicted suspects are charged with conspiring to defraud Medicare of over $56 million.

The indictments involve fake prescriptions, cash bribes, and stolen Medicare information, including physician identification numbers. As reported in our earlier blog posting, Federal and state government authorities under the Health Care Fraud Prevention & Enforcement Action Team (HEAT) taskforce have recognized the severity of healthcare fraud in South Florida and have been cracking down on these fraudulent schemes. Heightened enforcement in South Florida forced the group to extend their scheme to Detroit, which has become the latest site for Medicare fraud, and other cities to take advantage of Medicare funds.

According to the indictments, the defendants – including doctors, clinic owners, assistants, and patients – submitted millions of dollars in false claims to Medicare for infusion therapy, injection therapy, and other high-priced medical treatments that are designed to treat patients suffering from illnesses such as HIV, AIDS, and cancer.

“As demonstrated by today’s charges and arrests, we will strike back against those whose fraudulent schemes not only undermine a program upon which 45 million aged and disabled Americans depend, but which also contribute directly to rising healthcare costs that all Americans must bear,” U.S. Attorney General Eric Holder said at the press conference announcing the indictments and arrests.

The suspects identified in the Detroit indictments have clear connections to Miami, Florida. In 2008, it is estimated that that city’s prosecutions account for more than one-third of all Medicare fraud cases nationwide. “In fact, ten of the defendants named in the indictments unsealed today are alleged to have brought their fraud schemes from Miami to Detroit,” reported Holder. “Strike force operations in Miami have seen instances of fraud spread quickly through communities in that area. After we arrested and charged criminals in Miami, their cohorts simply moved their schemes to Detroit.”

All together, strikes forces in Miami, Los Angeles and Detroit have charged 249 defendants for Medicare fraud involving about $600 million in false claims for mostly HIV infusion services and medical equipment.

For the U.S. Attorney General’s press release on the indictments and arrests, click here.

For more information about how Fuerst Ittleman can assist your Medicare and health care regulatory compliance and protect against fraud, please contact us at 305-350-5690 or contact@fuerstlaw.com.

Efforts to crack down on Medicare and Medicaid fraud has focused the radars of federal and state law enforcement onto the Miami-Dade county area. On June 19, 2009, state investigators from the Florida Agency for Health Care Administration (“AHCA”) revealed more Medicaid fraud in Miami-Dade: the state paid for unnecessary or unaccounted oxygen equipment.

Recent government studies have estimated Medicare and Medicaid fraud to be at least $60 billion a year nationwide. According to the FBI and the Department of Justice, Medicare and Medicaid fraud is big business in Miami Dade County reaching at least $2.5 billion a year.

Fraudulent billing for medical equipment is the latest scam plaguing Medicaid which, according to the AHCA, spent over $90 million on medical equipment last year alone. When over $1.4 million was spent on oxygen equipment in Miami-Dade County last year, this raised the suspicions of the AHCA.

Attempts to curb Medicaid and Medicare fraud in South Florida are nothing new. In March, Medicaid investigators commenced similar investigations of Miami-Dade’s home health industry. On June 15th, Governor Charlie Christ signed into law a bill that declared Miami-Dade a “crisis area for healthcare fraud” and tightened regulations on home health agencies, home medical equipment providers, and health care clinics.

These recent efforts by the state come on top of increased efforts by the federal government to stem the tide of fraud and wasteful government spending in Medicare and Medicaid. The first of these efforts, the Medicare Strike Force, was started in 2007. In two years, federal prosecutors have filed 87 indictments charging 159 defendants with fraud offenses. This past May, the federal government announced a new task force – the Health Care Fraud Prevention and Enforcement Team, or HEAT – which will increase healthcare fraud enforcement in Miami-Dade County.

With increased efforts of law enforcement cracking down on the industry, let FHI help your health care business with its regulatory compliance. Contact us at 305-350-5690 or contact@fuerstlaw.com.

Bio-Nucleonics, Inc., a leading Florida company specializing in radiopharmaceuticals, medical devices and imaging agents, gave a hearty “Thanks” to Fuerst Ittleman in its most recent issue of BioBulletin, the company’s newsletter.

Fuerst Ittleman recently assisted Bio-Nucleonics with gaining FDA approval for the company’s new Doral, Florida product manufacturing facility. The FDA’s approval certifies that Bio-Nucleonics uses “current Good Manufacturing Practice” (cGMP) in all its production at this state-of-the art facility.

The FDA also gave approval to Bio-Nucleonics for its proposed release criteria and timeframes for specific lot release tests to be completed prior to shipment of finished drug products. The importance of this ruling is that no material is lost to radioactive decay and each dose can be shipped immediately to the customer.

FHI assisted Bio-Nucleonics with both of these efforts. We found it such a pleasure to work with clients who were as knowledgeable, dedicated, and thorough as the team at Bio-Nucleonics, and we’re glad that they liked working with us, too. To see the entire BioBulletin newsletter, click here.

Let Fuerst Ittleman help guide your company to its next success. For more information, contact us today at 305.350.5690 or contact@fuerstlaw.com

Original Article: Mitchell S. Fuerst: Foreign Bank Accounts and the IRS [pdf]

Voluntary Disclosure Guidelines Give Taxpayers Until September 23rd to Reveal Offshore Assets

According to a statement on Offshore Income given by IRS Commissioner Doug Shulman, U.S. Taxpayers and entities that are currently hiding assets in offshore accounts have a limited voluntary disclosure period until September 23rd , of 2009 to reveal those accounts before the IRS takes the offensive. After the voluntary disclosure period, the IRS plans to aggressively pursue both civil and criminal penalties for taxpayers that fail to take advantage of the voluntary disclosure initiative. Furthermore, the IRS revealed that they are actively tracking entities and individuals attempting to clean up their act through “quiet disclosures,” the practice of Taxpayers declaring a prior increase of income through amended tax returns.

The IRS stated, “Those taxpayers making ‘quiet’ disclosures should be aware of the risk of being examined and potentially criminally prosecuted for all applicable years.”

It seems that the IRS has decided to take an aggressive position here. In a statement given by the IRS regarding the penalties for the 52,000 holders of undeclared UBS bank accounts, the IRS only mentioned a “reduction of penalties,” for those that took advantage of the voluntary disclosure practice.

Under the new IRS guidance, the quiet disclosure practice is no longer a safe measure to make amends to the IRS. President Obama recently mentioned the appointment of congressional authority to hire an additional 800 IRS agents assigned to track down and pursue illegal tax evasion and the use of undeclared offshore accounts. Though it is legal for Americans to have offshore accounts, the U.S. Treasury Department requires any account containing more than $10,000 to report the existence of the account, and taxes paid on the income as well.

Madoff Ponzi Scheme Victims may be able to receive tax relief and refunds by the new IRS guidelines.

Douglas Shulman, Commissioner of the IRS, announced to Congress that the relief is intended for those who incurred losses by Ponzi Schemes such as the one at issue in the Madoff Ponzi Scandal.

If Madoff investors reported and paid taxes on the earnings from their Madoff investment, they may be due a refund on those taxes because the profits reported were never actually realized.

At a Senate Finance Committee hearing, Shulman stated that the investors in some of the cases were actually entitled to a theft loss deduction which is not subject to limits placed on traditional capital losses.

Mr. Shulman continued to state that theft loss deductions may be taken for the year in which the fraud was discovered, except when the investor may have a “reasonable prospect” in recovering the capital loss.

Shulman went on to say that identifying the actual amounts and times of the losses from Ponzi schemes may be “factually difficult” and could take a considerable amount of time to identify the prospects of the lost money.

Shulman, in his testimony to the Senate, continued:

“Some taxpayers have argued that they should be permitted to amend tax returns for years prior to the discovery of the theft to exclude the phantom income and receive a refund of tax in those years … The new IRS guidelines do not address that argument.”

From the time that the Madoff scandal was made public, roughly $1 billion in assets have been identified for Madoff’s victims. That figure, however, is only a fraction of the $65 billion that Madoff claimed he had possession of. Some have estimated that the Madoff Ponzi Scheme may have cost the IRS as much as $17 billion in lost tax revenues from investors that had earned fictitious profits.

Securities Investor Protection Corp., an organization that backs failed brokerage firms, has already started sending out checks to the victims of the Madoff Ponzi Scheme. Madoff’s victims are eligible for up to $500,000 up until July of 09’ from the SIPC. Furthermore, Mr. Shulman stated that investors should be aware that they need to deduct the amount they receive from the SIPC from their Madoff investment based “theft loss” deduction.

According to Shulman, the financial statements which were provided to Madoff Ponzi Scheme investors, should be sufficient documentation enough to establish losses for filing tax claims.

Do you need to speak with an attorney about IRS tax relief?
Contact us for a consultation about fraud-related tax losses.