Manhattan U.S. Attorney, FBI, and IRS Announce Charges Against Pharmacy Owner in Multi-Million-Dollar Medicare, Medicaid Fraud Scheme

Preet Bharara, the United States Attorney for the Southern District of New York; George Venizelos, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (FBI); and Toni Weirauch, the Special Agent in Charge of the New York Field Office of the Internal Revenue Service-Criminal Investigation (IRS-CI), announced that Purna Chandra Aramalla was arrested yesterday for engaging in a scheme to defraud Medicaid and Medicare through the sale of illegally diverted prescription drugs. Aramalla was also charged with a related money laundering offense. Aramalla was arrested yesterday morning and was presented in Manhattan federal court before U.S. Magistrate Judge Debra Freeman yesterday afternoon. A preliminary hearing is scheduled for January 13, 2014.
Manhattan U.S. Attorney Preet Bharara said, “The illegal diversion of prescription medications threatens the health of those induced to sell their medication rather than take it. It threatens the health of those who unwittingly purchase the repackaged drugs believing them to be factory-fresh. And, as alleged here, Purna Aramalla’s diversion scheme defrauded millions of dollars from Medicare and Medicaid, taxpayer-funded programs established to provide health care assistance for the elderly and indigent. This office is committed not only to punishing and preventing fraud, and safeguarding Medicare and Medicaid, but also to protecting the public.”
FBI Assistant Director in Charge Venizelos said, “As alleged in the complaint, Aramalla conspired to defraud our government health care programs and profit from the illness and misfortune of others. Aramalla treated our American health care system as a vehicle to fuel his greed and line his own pockets. The FBI, in conjunction with our law enforcement partners, will continue to investigate and bring to justice criminals who bilk the system and defraud the American taxpayer.”
IRS-CI Special Agent in Charge Weirauch said, “The illegal sale of prescription drugs by pharmaceutical professionals is an escalating problem. Not only does it put potentially dangerous medications in the wrong hands, but fraudulent Medicare and Medicaid reimbursements divert resources from the government. The money laundering statutes have always been effective tools in the fight against illegal drugs. We are now applying these same laws to the illegal prescription drug business, tracing the lucrative proceeds that the sales of these drugs generate.”
According to the allegations contained in the criminal complaint unsealed today:
Aramalla operates A Fair Deal Pharmacy Inc. in Queens, New York, and Quality Health Drug Inc. in Bronx, New York. Using these pharmacies, Aramalla allegedly carried out a multi-million-dollar scheme to defraud New York State Medicaid and Medicare programs through the sale of diverted pharmaceutical drugs, that is, drugs not obtained from legitimate sources.
As part of the scheme, Aramalla purchased pharmaceuticals, including high-cost medications used to treat HIV, that were obtained from patients who sold the pharmaceuticals rather than use them to treat their illnesses. Aramalla then repackaged and resold those pharmaceuticals to his customers, as if the pharmaceuticals were new drugs obtained from legitimate sources. Aramalla requested and received reimbursement from Medicaid and Medicare in connection with these sales, even though Medicaid and Medicare would not have been willing to reimburse the cost of second-hand drugs. In addition, in some cases, Medicaid or Medicare had already paid for the pharmaceuticals when they were initially dispensed. In order to make the diverted pharmaceuticals appear to be new pharmaceuticals from legitimate sources, Aramalla and his co-conspirators used lighter fluid and other means to dissolve the adhesive on the patient labels on prescription bottles so that they could be removed and replaced with new labels.
Aramalla also sought and obtained reimbursement for pharmaceuticals that were never actually dispensed to patients. Instead, customers with prescriptions for pharmaceuticals essentially “sold” their prescriptions to Aramalla, agreeing not to take delivery of the pharmaceuticals in exchange for a share of the reimbursed proceeds.
From October 2010 to August 2012, Aramalla purchased approximately $1.7 million of certain branded HIV medications from two legitimate, licensed wholesalers that were his primary sources of legitimate drugs. During that same period, he received approximately $4.3 million in reimbursements from Medicare and Medicaid for those same drugs, an amount far in excess of what he would have been entitled to had he only sought reimbursement for the legitimately obtained drugs.

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Aramalla, 65, of Port Washington, New York, is charged with one count of conspiracy to commit health care fraud and wire fraud, which carries a maximum term of 20 years in prison, and one count of money laundering, which also carries a maximum term of 20 years in prison. He was ordered detained pending satisfaction of bail conditions, including a $2 million personal recognizance bond.
Mr. Bharara praised the outstanding investigative work of the FBI and the IRS. He also thanked the U.S. Department of Health and Human Services, Office of Inspector General; the New York State Office of Medicaid Inspector General; and the New York City Human Resources Administration.
The New York FBI Health Care Fraud Task Force was formed in 2007 in an effort to combat health care fraud in the greater New York City area. The task force comprises agents, officers, and investigators from the FBI, NYPD, the New York State Insurance Fraud Bureau, U.S. Department of Labor, U.S. Office of Personnel Management-Inspector General, U.S. Food and Drug Administration, New York State Attorney General’s Office, New York State Office of Medicaid Inspector General, New York State Health and Hospitals Inspector General, and the National Insurance Crime Bureau.
If you think you may have purchased second-hand prescription drugs or were otherwise victimized by this scheme, you can call the FBI Hotline at 212-384-3555.
The case is being prosecuted by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Niketh Velamoor is in charge of the prosecution.
The charges contained in the complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

Two Plead Guilty to Money Laundering Conspiracy in $10.5 Million Medicare Fraud Scheme

WASHINGTON—Two men from Miami have pleaded guilty to laundering millions of dollars obtained through a $10.5 million Medicare fraud scheme using shell companies they controlled.
Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, Acting U.S. Attorney for the Middle District of Florida A. Lee Bentley III, Special Agent in Charge Paul Wysopal of the FBI’s Tampa Field Office, and Special Agent in Charge Christopher B. Dennis of the U.S. Health and Human Services Office of Inspector General (HHS-OIG) region including all of Florida made the announcement.
Rafael Roche, 43, and Alain Remy, 35, pleaded guilty on October 24, 2013, and October 23, 2013, respectively, in the U.S. District Court for the Middle District of Florida to an indictment charging them with conspiracy to commit money laundering involving the proceeds of a health care fraud scheme. Remy is scheduled for sentencing on January 16, 2014; Roche’s sentencing date has yet to be scheduled. They each face a maximum penalty of 20 years in prison.
According to documents filed in the case, Roche, Remy, and others conspired to engage in financial and monetary transactions of health care fraud proceeds from Renew Therapy Center of Port St. Lucie LLC (Renew Therapy), a comprehensive outpatient rehabilitation facility. From November 2007 through August 2009, Renew Therapy submitted approximately $10,549,361 in fraudulent claims for reimbursement to Medicare for therapy services that were not legitimately prescribed and not legitimately provided to Medicare beneficiaries. As a result of those fraudulent claims, Medicare deposited approximately $6,248,056 into a Renew Therapy bank account. The fraud proceeds in that account were subsequently disbursed to various entities, including a combined total of $1,847,222 to Ariguanabo Investment Group Inc. and IRE Diagnostic Center Inc., shell companies that Roche and Remy controlled.
Court records indicate that more than $1.2 million was laundered through Ariguanabo Investment Group between February 5, 2009 and September 22, 2009. The money was subsequently removed from the Ariguanabo Investment Group bank account to various individuals and entities, including to Ibiza Future Planning Inc., a shell company that Remy established and controlled.
More than $600,000 was laundered through IRE Diagnostic Center from August 7, 2008 and January 29, 2009. The money was subsequently removed from the IRE Diagnostic Center bank account to various individuals and entities, including to A&R Medical Services of South Florida Inc., another shell company that Roche and Remy established and controlled.
This case is being investigated by the FBI and HHS-OIG and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and U.S. Attorney’s Office for the Middle District of Florida. This case is being prosecuted by Trial Attorney Christopher J. Hunter of the Criminal Division’s Fraud Section.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,500 defendants who have collectively billed the Medicare program for more than $5 billion. In addition, the HHS Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.
To learn more about the Health Care Fraud Prevention and Enforcement Team (HEAT), go to: www.stopmedicarefraud.gov.

Operators of Michigan Adult Day Care Centers Convicted in $3.2 Million Medicare Fraud Scheme

WASHINGTON—A federal jury in Detroit today convicted the owner and the program coordinator of two Flint, Michigan adult day care centers for their participation in a $3.2 million Medicare fraud scheme.
Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; U.S. Attorney Barbara L. McQuade of the Eastern District of Michigan; Acting Special Agent in Charge John Robert Shoup of the FBI Detroit Field Office; and Special Agent in Charge Lamont Pugh, III of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), Office of Investigations, Detroit Office made the announcement.
Glenn English, ­53­, was found guilty in U.S. District Court for the Eastern District of Michigan of one count of conspiracy to commit health care fraud and seven counts of health care fraud for directing a psychotherapy fraud scheme through New Century Adult Day Program Services LLC and New Century Adult Day Treatment Inc. (collectively known as New Century).
Richard Hogan, 67, an unlicensed social worker who worked as a program coordinator at New Century, was found guilty of one count of conspiracy to commit health care fraud.
The defendants were charged in a superseding indictment returned December 11, 2012. Another individual charged in the superseding indictment, Donald Berry, awaits trial at a later date.
According to evidence presented at trial, English owned and operated New Century as an adult day care center through which he billed Medicare for individual and group psychotherapy services. As shown at trial, New Century brought in mentally disabled residents of Flint-area adult foster care homes (AFCs), as well as people seeking narcotic drugs, and used their names to bill Medicare for psychotherapy that was not provided. The evidence showed that English and Hogan lured drug seekers to New Century with the promise that they could see a doctor there who would prescribe for them the narcotics they wanted if they signed up for the psychotherapy program. New Century used the signatures and Medicare information of these AFC residents and drug seekers to claim that it was providing them psychotherapy, when in fact it was not.
The evidence also showed that English directed New Century employees to fabricate patient records to give the false impression that psychotherapy was being provided. Social workers and untrained employees wrote fake progress notes for therapy sessions that never occurred. Further, English and New Century employees directed New Century clients to pre-sign sign-in sheets for months at a time, and used these signatures to claim to Medicare they had provided services. On multiple occasions, New Century billed Medicare as if its social workers had provided over 24 hours of care in a single day.
From March 2010 through April 2012, New Century billed approximately $3.2 million and received more than $988,000 from Medicare.
The health care fraud conspiracy count carries a maximum potential penalty of 10 years in prison; each count of health care fraud carries a maximum penalty of 10 years in prison. Sentencing for both defendants is scheduled for February 27, 2014.
The investigation was led by the FBI and HHS-OIG and was brought by the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Michigan.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,500 defendants who have collectively billed the Medicare program for more than $5 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.
To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to www.stopmedicarefraud.gov.

Staten Island Doctor Sentenced to 151 Months in Prison in Connection with $77 Million Medicare Fraud Scheme

BROOKLYN, NY—Earlier today, Gustave Drivas, M.D., 58, of Staten Island, New York, was sentenced to 151 months in prison for his role as a “no-show” doctor in a $77 million Medicare fraud scheme. In addition to the prison term, U.S. District Judge Nina Gershon of the Eastern District of New York sentenced Drivas to three years of supervised release with a concurrent exclusion from employment with any federally funded medical treatment program, ordered him to forfeit $511,000, and ordered him to pay restitution in the amount of $50,943,386. The state of New York revoked Dr. Drivas’ medical license earlier this year.
The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; George Venizelos, Assistant Director in Charge, Federal Bureau of Investigation, New York Field Office (FBI); and Special Agent in Charge Thomas O’Donnell of the HHS Office of Inspector General (HHS-OIG).
Drivas was convicted by a jury of health care fraud conspiracy and health care fraud on April 8, 2013, after a seven-week trial. Including Drivas, 13 individuals have been convicted of the massive fraud scheme, either through guilty plea or trial conviction.
“Abandoning the mandate to ‘do no harm,’ Dr. Drivas was instead up to no good. Drivas put personal greed before patient care and was willing to sell his Medicare billing number for cash in his pocket,” stated United States Attorney Lynch. “This office and the Department of Justice will aggressively investigate and prosecute health care fraud. Corrupt doctors like Dr. Drivas are not above the law and will be held accountable for their crimes.”
According to court documents and the evidence at trial, from 2005 to 2010, Drivas was the medical director or a rendering physician of a clinic in Bath Beach, Brooklyn, that billed Medicare under three corporate names: Bay Medical Care PC, SVS Wellcare Medical PLLC, and SZS Medical Care PLLC (Bay Medical clinic). Drivas knowingly authorized his co-conspirators at the clinic to use his Medicare billing number to fraudulently charge Medicare more than $20 million for medical procedures and services that were never performed. In return, he received more than $500,000 for his role in the scheme. The evidence proved that Drivas was a no-show doctor who almost never visited the clinic except to pick up his check. The evidence also showed that the clinic paid cash kickbacks to Medicare beneficiaries and used the beneficiaries’ names to bill Medicare for more than $77 million in services that were medically unnecessary and never provided.
The government’s investigation included the use of a court-ordered audio/video recording device hidden in a room at the clinic in which the conspirators paid cash kickbacks to corrupt Medicare beneficiaries. The conspirators were recorded paying approximately $500,000 in cash kickbacks during a period of approximately six weeks from April to June 2010. This room was marked “Private” and featured a Soviet-era poster of a woman with a finger to her lips and the words “Don’t Gossip” in Russian. The purpose of the kickbacks was to induce the beneficiaries to receive unnecessary medical services or to stay silent when services not provided to the patients were billed to Medicare.
To generate the large amounts of cash needed to pay the patients, Drivas’ business partners and co-conspirators recruited a network of external money launderers who cashed checks for the clinic. Clinic owners wrote clinic checks payable to various shell companies controlled by the money launderers. These checks did not represent payment for any legitimate service at or for the Bay Medical clinic, but rather were written to launder the clinic’s fraudulently obtained health care proceeds. The money launderers cashed these checks and provided the cash back to the clinic. Clinic employees used the cash to pay illegal cash kickbacks to the Bay Medical clinic’s purported patients.
This case is being prosecuted by Trial Attorney Sarah M. Hall of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys William P. Campos and Shannon C. Jones of the Eastern District of New York. The case was investigated by the FBI and HHS.
The case was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of New York. The Medicare Fraud Strike Force operations are part of the Health Care Fraud Prevention and Enforcement Action Team (HEAT), a joint initiative announced in May 2009 between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country. Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,500 defendants who have collectively billed the Medicare program for more than $5 billion. In addition, HHS’s Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.
To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to www.stopmedicarefraud.gov.
Defendant:
Gustave Drivas, M.D.
Staten Island, New York
Age: 58

Mastermind of $11 Million Detroit Medicare Fraud Scheme Sentenced to 50 Months in Prison

WASHINGTON—Muhammad Shahab, the mastermind of an almost $11 million Medicare fraud scheme in Detroit, was sentenced today to 50 months in prison.
Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; U.S. Attorney for the Eastern District of Michigan Barbara L. McQuade; Special Agent in Charge Robert D. Foley, III of the FBI’s Detroit Field Office; and Special Agent in Charge Lamont Pugh, III of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) Chicago Regional Office made the announcement.
Shahab, 53, was sentenced by U.S. District Judge Denise Page Hood in the Eastern District of Michigan. In addition to his prison term, Shahab was sentenced to three years of supervised release and was ordered to pay more than $10.8 million in restitution, jointly and severally with his co-defendants.
Shahab pleaded guilty to one count of health care fraud in February 2010. According to information contained in plea documents, Shahab helped finance and establish two Detroit-area home health agencies, Patient Choice Home Healthcare Inc. (Patient Choice) and All American Home Care Inc. (All American). Shahab admitted that while operating or being associated with both home health agencies, he and his co-conspirators billed Medicare for home health visits that never occurred.
Shahab admitted that he and his co-conspirators recruited and paid cash kickbacks and other inducements to Medicare beneficiaries in exchange for the beneficiaries’ Medicare numbers and signatures on documents falsely indicating that they had visited Patient Choice and All American for the purpose of receiving physical or occupational therapy. Shahab admitted that a large number of the beneficiaries were neither homebound nor in need of any physical therapy services.
Shahab also admitted to securing physician referrals for medically unnecessary home health services through the payment of kickbacks to physicians or individuals associated with physicians. Shahab employed several physical therapists and physical therapy assistants to sign medical documentation needed to begin billing for home health care services, including initial payments and payments for each visit to a Medicare beneficiary. Shahab acknowledged that he knew the physical therapists and physical therapy assistants were not actually conducting a large majority of the visits or treating a large majority of the patients and confessed to billing and receiving payment from Medicare for services not rendered or medically unnecessary services.
Between approximately August 2007 and October 2009, Shahab and his co-conspirators at Patient Choice and All American submitted approximately $10.8 million in claims to the Medicare program for physical and occupational therapy services that were never rendered or were medically unnecessary.
This case was investigated by the FBI, HHS-OIG, and the Internal Revenue Service and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Michigan. This case was prosecuted by Deputy Chief Gejaa Gobena, Assistant Chief Catherine Dick and Trial Attorney Niall O’Donnell of the Criminal Division’s Fraud Section.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,500 defendants who have collectively billed the Medicare program for more than $5 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.
To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to www.stopmedicarefraud.gov.

Medical Supply Company Officer and Southern California Physician Sentenced in $1.5 Million Medicare Fraud Scheme

WASHINGTON—A former officer of Fendih Medical Supply Inc. was sentenced to serve 51 months in prison yesterday in Los Angeles for his role in a fraud scheme that resulted in $1.5 million in fraudulent claims to Medicare. In addition, a physician was sentenced to 27 months in prison for his role in the scheme.
Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney André Birotte, Jr. of the Central District of California, Special Agent in Charge Glenn R. Ferry of the Los Angeles Region of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), and Assistant Director in Charge Bill L. Lewis of the FBI’s Los Angeles Field Office made the announcement.
Godwin Onyeabor, 49, of San Bernandino, California, was sentenced on September 9, 2013, by U.S. District Judge Manuel L. Real in the Central District of California to 51 months in prison. In addition to his prison term, Onyeabor was sentenced to three years of supervised release. Restitution will be determined at a later date. Dr. Sri J. Wijegunaratne, 58, of Anaheim, California, was sentenced to 27 months in prison by Judge Real. In addition to his prison term, Wijegunaratne was sentenced to three years of supervised release and ordered to pay restitution in the amount of $87,846.
On April 24, 2013, a jury in Los Angeles federal court found Wijegunaratne, Onyeabor, and Heidi Morishita, 48, guilty of one count of conspiracy to pay and receive kickbacks. In addition, Wijegunaratne and Onyeabor were found guilty of conspiracy to commit health care fraud. Wijegunaratne was found guilty of seven counts of health care fraud, and Onyeabor was found guilty of 11 counts of health care fraud.
During trial, the evidence showed that Onyeabor, as the former officer of a durable medical equipment (DME) supply company, fraudulently billed more than $1 million to Medicare for DME that was either never provided to its Medicare beneficiaries or was not medically necessary. Wijegunaratne provided Onyeabor and others with medically unnecessary power wheelchair prescriptions, and both Wijegunaratne and Morishita sold power wheelchair prescriptions to Onyeabor and others.
The evidence showed that Onyeabor and others paid Wijegunaratne and Morishita cash kickbacks for fraudulent prescriptions for DME, and Onyeabor and others used these prescriptions to bill Medicare for the power wheelchairs and other DME. Several Medicare beneficiaries testified that they were lured to medical clinics with the promise of free items such as vitamins and juice, only to receive power wheelchairs that they did not need and did not want, and were unsuccessful in their attempts to reject delivery of the power wheelchairs from Onyeabor’s supply company.
As a result of this fraud scheme, Onyeabor, Wijegunaratne, and others submitted and caused the submission of approximately $1.5 million in false and fraudulent claims to Medicare and received almost $1 million on those claims.
Morishita’s sentencing is scheduled for September 30, 2013.
The case is being investigated by the FBI and the Los Angeles Region of the HHS-Office of Inspector General (HHS-OIG) and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Central District of California. The case is being prosecuted by Assistant Chief Benton Curtis and Trial Attorneys Fred Medick and Alexander Porter of the Criminal Division’s Fraud Section.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,500 defendants who have collectively billed the Medicare program for more than $5 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers. To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to www.stopmedicarefraud.gov.