Fifteen defendants sentenced in $40M California health insurance scam
As part of the negotiated settlement, the defendants paid more than $8.3 million in restitution.
The Santa Clara County (Calif.) Superior Court this week sentenced the last of 15 defendants convicted of running a massive statewide insurance scam in which they set up a telemarketing company to push overpriced and unneeded prescriptions and medical devices to thousands of Californians. Seven were sentenced on felonies and eight on misdemeanors, with punishments including county jail.
“This group used people’s pain and illnesses to criminally enrich themselves,” District Attorney Jeff Rosen said. “They tried to hide behind a maze of dozens of shell corporations and straw owners. We found them anyway, and now they will pay back their victims and be held accountable.”
The defendants, mostly Los Angeles residents, scammed about $40 million from insurance companies in the largest medical fraud case ever prosecuted in the county. Between 2015 to 2020, they operated an illicit call center, a durable medical device company and six pharmacies located in Southern California. They targeted unwitting patients throughout the state, filing and billing thousands of fraudulent prescriptions for such items as neck braces and pain creams.
The scheme involved purchasing and turning small pharmacies into pain cream and medical device mills that fulfilled only prescriptions signed by doctors who received thousands of dollars in kickbacks. The prescribing doctors rarely met with or spoke to patients. The defendants selected these items because of their high reimbursement rates. For example, defendants billed insurance companies $4,000 or more for medication that could be purchased for a few hundred dollars.
As part of the negotiated settlement, the defendants paid more than $8.3 million in restitution, making this the largest lump sum restitution recovery for victims in an insurance fraud case prosecuted by the Santa Clara County’s District Attorney’s Office. The money will be used for victim restitution.
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The investigation was spearheaded by the District Attorney’s Office Bureau of Investigation in collaboration with the California Department of Insurance, and with assistance from California State Board of Pharmacy and the San Mateo, Monterey and Los Angeles County district attorneys’ offices.