Zalma’s Insurance Fraud Letter – April 15, 2022

The April 15, 2022 Issue Available here in Adobe .pdf format here and it Contains stories including the following:

The Examination Under Oath
No-Fault Auto Insurance Lead Fraudster Sentenced To 7 Years for Bribery
Litigant Who Represents Himself Has an Idiot for A Client & Was Unable to Prove That an Insurer Defrauded Him – No Good Deed Goes Unpunished Because Court Refused to Ignore Pro Se Plaintiff
New Book: The Examination Under Oath to Resolve Insurance Claims
New Books: Insurance Fraud – Volume I & Volume II Second Edition
The Insurance Frauds Prevention Act Protects and Cannot be Used to Punish Insurers
Good News from the Coalition Against Insurance Fraud
Health Insurance Fraud Convictions
Louisiana Places Four Insurers Into Receivership
Other Insurance Fraud Convictions
True Crime Stories of Insurance Fraud Videos

Some Health Insurance Fraud Convictions

Guilty of Fraud While Caring for a Relative

Benjamin C. Beckett, 38-years-old, of Pasco, Washington pleaded guilty in February to insurance fraud.

Second District Judge John C. Judge withheld judgment and placed Beckett on supervised probation for two years. The judge ordered Beckett to pay court costs in the amount of $245, restitution of $1,219 to the Idaho Department of Insurance, and $17,000 to Northwestern Long Term Insurance Company. The court also imposed and suspended 48 hours of jail time to be utilized at the discretion of a probation officer.

An investigation revealed that while caring for a disabled relative in Latah County, Beckett formed a company and submitted claims to the relative’s insurance company in order to receive reimbursement for care he provided to the relative. However, under the relative’s long term care insurance policy, family members were not eligible to receive reimbursement for providing care. Beckett admitted to investigators he submitted the claims under the company’s name because he knew he would not be paid if he submitted them under his own name.

Federal Civil and Criminal Investigations Result in Six Convictions and Recovery of Over $8.7 Million In Connection with Compounded Medications Formulated by Delco Pharmacy

Heritage Therapeutics, LLC, a Delaware County pharmacy was found out by an investigation that yielded six criminal convictions and recovered over $8.7 million in criminal forfeitures, criminal restitution, and civil settlement payments.

From 2013 into 2015, Heritage formulated expensive compounded medications such as pain creams, scar creams, and vitamins. These compounded medications were prescribed to, among others, beneficiaries of TRICARE, a federally funded health care program for military members, retirees, and their families. The investigations revealed that Heritage paid commissions to some of its sales representatives for referring Heritage’s compounded medications to medical providers who prescribed them to TRICARE beneficiaries. Some of these sales representatives, in turn, paid kickbacks to the medical providers to induce them to issue those prescriptions. 

A lead sales representative for Heritage was Michael Bemis. Bemis paid kickbacks to a Philadelphia-area physician, Dr. Scott Kurzrok, in exchange for issuing prescriptions to TRICARE beneficiaries that Kurzrok allegedly never examined or treated. In addition, Bemis recruited other sales representatives and encouraged them to also pay kickbacks to medical providers to induce them to prescribe compounded medications to TRICARE beneficiaries through Heritage. Bemis also paid and encouraged other sales representatives to pay TRICARE beneficiaries to allow medically unnecessary prescriptions to be filled in their names. In addition, Bemis encouraged sales representatives to push TRICARE beneficiaries to accept refills of the medically unnecessary medications. Heritage submitted claims for those medications to TRICARE and paid commissions on those prescriptions to Bemis and other sales representatives.

For his involvement in the scheme, Bemis pleaded guilty to conspiracy to commit health care fraud, was sentenced to over two and a half years in prison, and was ordered to pay criminal restitution of more than $3.3 million and to forfeit over $930,000. Bemis and Dr. Kurzrok each entered into settlement agreements to resolve civil claims under the False Claims Act.

Charles Hollister, a Heritage sales representative in North Carolina, was one of Bemis’s recruits. Hollister paid kickbacks to Tanya Dyer, a licensed nurse practitioner in Hickory, North Carolina, in exchange for Dyer prescribing Heritage compounded medications to TRICARE beneficiaries. These TRICARE beneficiaries included individuals whom Dyer allegedly never saw or examined. Hollister pleaded guilty to conspiracy to commit health care fraud, was sentenced to over a year in prison, and was ordered to pay over $1 million of criminal restitution jointly and severally with Bemis. Dyer entered into a settlement agreement to resolve civil claims under the False Claims Act.

Andrew Balick, a Heritage sales representative in Georgia, was another of Bemis’ recruits. Balick convinced a purported physician assistant to write medically unnecessary prescriptions for compounded medications that were filled by Heritage. Balick provided TRICARE beneficiary information to the physician assistant for use in writing the prescriptions and then shared part of his Heritage sales commissions with the beneficiaries, including a man named Andrew Dykstra. In addition to providing his own beneficiary information to Balick, Dykstra became a Heritage sales representative and allegedly recruited other purported sales representatives to provide their TRICARE beneficiary information for use in the scheme. Balick pleaded guilty to conspiracy to commit health care fraud, was sentenced to over a year in prison, and was ordered to pay criminal restitution of over $1.8 million jointly and severally with Bemis. Dykstra entered into a settlement agreement to resolve civil claims under the False Claims Act.

Separately, Benjamin Tewes, the brother of Heritage sales representative Kristine Sewell, paid kickbacks to Thomas Hersch, a physician assistant in Georgia, to induce him to write prescriptions for Heritage compounded medications to TRICARE beneficiaries. Sewell allegedly received sales commissions from Heritage on these prescriptions and shared part of her commissions with Tewes. Tewes pleaded guilty to one count of paying kickbacks in connection with a federal health care program, was sentenced to 3 years of probation, and was ordered to forfeit over $276,000 and to pay a $15,000 fine. Hersch pleaded guilty to one count of receiving kickbacks in connection with a federal health care program. Sewell entered into a monetary settlement agreement to resolve civil claims under the False Claims Act.

In addition, Joseph Fidelie, who was both a Heritage sales representative and a medical assistant at an orthopedic practice in Oklahoma, paid kickbacks to a physician assistant in the same practice to induce the physician assistant to prescribe Heritage’s compounded medications to TRICARE beneficiaries. Fidelie received commissions from Heritage for the claims paid by TRICARE. Fidelie pleaded guilty to one count of paying kickbacks in connection with a federal health care program. 

In addition to the resolutions noted above, Heritage, along with its president, David Raffaele; principals Kevin O’Brien and Stephen Seiner; former pharmacist-in-charge Gary Umland; and sales assistant Michael D’Antonio; entered into a settlement agreement to resolve civil claims against the entity and associated individuals under the False Claims Act. The civil claims resolved through this settlement relate to Heritage’s sales representatives’ alleged payments of kickbacks to medical providers, as described above, as well as to Heritage’s compensation of its sales representatives on a commission basis in the absence of bona fide employee relationships, all in violation of the Anti-Kickback Statute. In addition, this settlement resolved claims that, to avoid TRICARE’s recoupment of amounts previously paid to Heritage for compounded medications prescribed to TRICARE beneficiaries in the absence of any legitimate provider-patient relationship, as described above, Heritage itself made false statements in its responses to a TRICARE audit.

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(c) 2022 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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