Doctors and Associates Indicted in First Wave of Massive Bribery Scheme
……..Defendants Billed $25 Million in Improper Charges to Workers’ Comp Insurers
Eight medical professionals and associates are charged in federal grand jury indictments with buying and selling patients in a bribery scheme involving $25 million in improper claims for medical services and devices which were then billed to California Workers’ Compensation insurance companies.
FBI agents along with investigators from the California Department of Insurance and the San Diego County District Attorney’s Office served five search warrants and three seizure warrants today at locations in San Diego, Chula Vista, National City, Murietta and Los Angeles.
Authorities arrested five people, including a radiologist, a chiropractor, a medical equipment provider, a medical clinic administrator and a so-called medical marketer.
An attorney and a medical service provider were summoned to appear in federal court on Thursday. One indicted defendant, Gonzalo Paredes, remains a fugitive and a warrant has been issued for his arrest.
These defendants, plus six corporations, are charged in three federal grand jury indictments unsealed today with conspiracy and honest services mail fraud.
The indictments allege that these players either paid or received tens of thousands of dollars to buy or sell hundreds of patients, without the patients’ knowledge—therefore depriving those patients of their right to their doctors’ honest services.
“Today’s indictments are only the first wave of charges in what we believe is rampant corruption on the part of some physicians and chiropractors in their dealings with the health care system in general, and California’s Workers’ Compensation System in particular,” said U.S. Attorney Laura Duffy.
“A patient puts his trust, and his very life, into the hands of his physician. A doctor’s decisions should never, under any circumstances, be influenced by anything other than the patient’s best interest.”
“Today’s indictments show how the defendants in this case allowed greed and corruption to influence their patient care decisions and treated their patients as a commodity to be bought and sold,” said FBI Special Agent in Charge Eric S. Birnbaum.
“The FBI will continue to use our intelligence and investigative expertise to identify, disrupt and dismantle sophisticated criminal conspiracies that unlawfully enrich individuals at the expense of patient care. The FBI and our law enforcement partners are committed to rooting out corruption in our health care system.”
“This criminal network bought and sold patients like cattle,” said District Attorney Bonnie Dumanis. “They cashed in on people who trusted them with their health and they conspired to illegally game the system on a level that we’ve not seen before. But, the game is over.”
“Our detectives from the California Department of Insurance worked closely with the FBI, United States Attorney’s Office and San Diego District Attorney’s office to investigate and arrest these medical providers for insurance fraud, which adds crippling costs to California’s workers compensation system,” said Department of Insurance Commissioner Dave Jones.
“These are not victimless crimes. When medical providers defraud insurers, those costs are passed on to California businesses and consumers, who already are struggling to make ends meet.”
This is how the schemes worked:
Patients who said they were injured on the job filed a workers’ compensation claim with the state of California and sought treatment for their injury. In this round of indictments, the workers sought help from a chiropractor.
The chiropractors were the gateway to a wide-array of health care fraud. In these cases alone they prescribed medical equipment, referred the patients for MRIs and X-Rays, and ordered specialized treatments such as Shockwave therapy.
As alleged in one of the indictments, Los Angeles radiologist Ronald Grusd paid bribes to a San Diego chiropractor in exchange for patient referrals. The bribes were funneled to the chiropractor via Grusd’s corporation, Willows Consulting, a shell company. The checks were labeled “professional services,” but this was a sham.
In order to further hide the illegal kickbacks, checks were issued to intermediaries—defendants Alexander Martinez and his father, Ruben—through their front companies, “Line of Sight” and “Desert Blue Moon.” The Martinezes took their “cut” and then, in turn, paid off the chiropractor.
Grusd’s practice, California Imaging Network Medical Group, has clinics in San Diego, Los Angeles, Beverly Hills, Fresno, Rialto, Santa Ana, Studio City, Bakersfield, Calexico, East Los Angeles, Lancaster, Victorville and Visalia.
In another indictment, a second San Diego chiropractor, Dr. George Reese, with offices on El Cajon Boulevard, referred patients to a Los Angeles area medical service provider (controlled by attorney Lee Mathis and Fernando Valdes, president of Foremost Shockwave Solutions ) in return for bribes.
The bribes were set by the conspirators at $100 per patient and paid through an intermediary. After taking a cut amounting to $25 per patient, the intermediary would pay the remaining $75 per patient to Reese.
Although disguised as “office rent” payments, the illegal bribes were paid in cash during clandestine exchanges in restaurants and parking lots.
For example, $6,000 in cash was delivered to Reese in the parking lot of the Jolly Roger in Oceanside, hidden in a gift bag. Other times, it was passed in envelopes or stashed inside newspapers.
According to the indictment, Reese and his codefendants generated and submitted bills to insurers totaling in the tens of millions of dollars.
Most of these treatments involved the providing of “Shockwave therapy,” which uses low energy sound waves to initiate tissue repair. Proceeds from the insurance claims generated through this scheme were paid to Mathis and Valdes.
In the final indictment, a San Diego chiropractor referred patients to a licensed provider of durable medical equipment, Julian Garcia. In return Garcia paid the chiropractor $50 for each patient—in cash, to disguise the kickbacks. Garcia then improperly billed Workers Comp insurers millions for hot and cold packs for patients who had been secured by bribes.
Anyone with information about healthcare fraud may call the FBI at 1-800-CALL-FBI, or 1-800-225-5324 or the California Department of Insurance’s toll-free fraud hotline, 800-927-4357.
An arrest itself is not evidence that the defendant committed crimes charged. The defendant is presumed innocent until the government meets its burden in court of proving guilt beyond a reasonable doubt.
DEFENDANTS
Case Number: 15cr2821-BAS
Ronald Grusd
◾Age 69
◾Los Angeles, CA
**Gonzalo Ernesto Paredes
◾Age 59
◾LaVerne, CA
Alexander Martinez
◾Age 37
◾Calexico, CA
Ruben Martinez
◾Age 59
◾Murietta, CA
California Imaging Network
◾Incorporated in 2007
◾Beverly Hills, CA
Willows Consulting Company
◾Incorporated in 2011
◾Beverly Hills, CA
Line of Sight, Inc.
◾Incorporated in 2002
◾Calexico, CA
Desert Blue Moon
◾Incorporated in 2001
◾Las Vegas, NV
DEFENDANTS
Case Number: 15cr2822-CAB
George K. Reese
◾Age 50
◾San Diego, CA
*Lee Mathis
◾Age 70
◾San Clemente, CA
*Fernando Valdes
◾Age 50
◾Westminster, CA
George K. Reese Chiropractic Corp.
◾Incorporated in 2001
◾San Diego, CA
Foremost Shockwave Solutions
◾Incorporated in 2005
◾Garden Grove, CA
DEFENDANT
Case Number: 15cr2820-BAS
Julian Garcia
◾Age 32
◾National City, CA
*Not arrested, but were summoned to appear before a judge on Thursday.
**Still at large
SUMMARY OF CHARGES
◾Conspiracy to Commit Honest Services Mail Fraud, in violation 18 U.S.C. 371
◾Maximum Penalty: Five years in custody; $250,000 fine and three years’ supervised release
◾Honest Services Mail Fraud, in violation of 18 U.S.C. Secs. 1341 and 1346
◾Maximum Penalty: Twenty years in custody; $250,000 fine or twice the pecuniary gain or loss, whichever is greater, and three years’ supervised release
◾Travel Act, in violation of U.S.C. 1952
◾Maximum Penalty: Five years in custody; $250,000 fine and three years’ supervised release
INVESTIGATING AGENCIES
◾Federal Bureau of Investigation
◾San Diego County District Attorney’s Office
◾California Department of Insurance