Financial Fraud: Dozens of Marketers, Doctors, Lawyers And Medical Service Providers Conspired To Bilk The Workers Compensation System in California

Financial Fraud
Participants in $200 Million Workers’ Comp Scheme Sentenced to Prison and More Than $2 Million in Financial Penalties

Participants in $200 Million Workers’ Comp Scheme Sentenced to Prison and More Than $2 Million in Financial Penalties

Assistant U.S. Attorneys Valerie Chu (619) 546-6750, Caroline Han (619) 546-6968 and Fred Sheppard (619) 546-8237

SAN DIEGO – This week in federal court a slew of conspirators involved in a massive Workers’ Compensation kickback scheme were ordered to serve prison sentences and pay millions in financial penalties for their roles in the corrupt payment of millions of dollars to induce doctors and other medical professionals to refer hundreds of injured workers for medical treatments and services.

According to court records, dozens of marketers, doctors, lawyers and medical service providers conspired to bilk the Workers’ Compensation system in California by buying and selling patients -- and their individual “body parts” -- like commodities. Among the defendants sentenced this week was an attorney, a chiropractor, two business owners and several marketers who referred patients for tests (such as MRIs, functional capacity exams and sleep studies), treatments (such as “shockwave,” x-rays, and ultrasound), pain medications, and durable medical equipment (DME) based on the corrupt payments. The conspirators often subjected patients to uncomfortable and sometimes painful procedures, so the conspirators could thereafter bill insurance companies for millions of dollars. As the government argued in its sentencing papers, the conspirators’ corruption of the doctor-patient relationship caused physicians to see price tags on every patient’s body parts. Each of the defendants played a critical role in the corrupt scheme.

The Corrupt Network

Defendant Fermin Iglesias and co-defendant Carlos Arguello operated a patient-capping enterprise, in which they found individuals who would file Workers’ Compensation claims against their employers. Iglesias and Arguello then sold, bartered and exchanged these applicants with others in the Workers’ Compensation industry, including attorneys, primary care physicians, and providers of medical goods and services. Each of these entities had to “pay to play,” and as the patient was referred throughout this corrupt system, money changed hands at each step. Arguello operated several patient-recruitment entities, including one called Centro Legal. Through billboards, flyers, advertisements and business cards, Centro Legal recruited persons to seek workers' compensation benefits from their employers or former employers. When the injured worker called the 1-800 number on the billboard or card, he or she reached a call center, which might be located in another country. From there, Iglesias’ company, Providence Scheduling, took over brokering the patient to maximize the profit that could be extracted from him or her.

Centro Legal referred the newly-acquired patient to complicit Workers' Compensation attorneys, including, in San Diego, attorney Sean O’Keefe, who had one of the largest Workers’ Comp caseloads in the region. To get these new clients, the attorneys in the corrupt network were expected to comply with certain conditions: first, they had to use Arguello’s copying service to fulfil document requests for all of the new client’s medical records; second, they had to agree to designate as their client’s primary treating physician (“PTP”) one of the complicit physicians within the corrupt network. In exchange, the attorneys received compensation. For O'Keefe, the compensation took a variety of forms. One hospital administrator paid the salaries of two employees of O’Keefe’s law firm, as a kickback to O’Keefe for referring spinal surgeries to that hospital. In another variation, the kickback payments were disguised as payments for nonexistent legal services, for which O’Keefe generated phony “legal invoices” to cover up those obviously illegal payments.

The corrupt physician could serve as the patients' primary care physician in the Workers' Comp system. This was a key gatekeeper role, because the PTP was entrusted with the authority to determine what additional goods and services the patient needed. Iglesias required that the chiropractors prescribe a certain minimum quota of goods and services, on average, for each patient. If the chiropractor failed to live up to the quota, Iglesias would cut off the flow of new patients.

Dr. Steven Rigler was one of the chiropractors involved in the corrupt referral network. He had clinics in Calexico, San Diego, and Escondido. To get patients for his San Diego and Escondido clinics, Rigler agreed to meet the referral “quota” set by Iglesias and Arguello. Court records reflect that Iglesias set a “value” for each type of service the physicians could refer, for example, $30 for each MRI, and $150 for Durable Medical Equipment (DME), to meet the quota of $600. To get credit, physicians had to refer their DME orders to Iglesias’ company, Meridian Medical Resources. Many of the MRIs were referred to Advanced Radiology, a diagnostic imaging company owned by Dr. Ronald Grusd. In Calexico, Ruben Martinez ran Rigler’s clinic and managed all of Rigler’s referrals for ancillary services. Alexander K. Martinez performed the same service for Rigler’s other clinics.

If the physicians failed to meet the quota, Iglesias cut off the pipeline of new patients. Iglesias employed Miguel Morales to ensure that physicians met the quota, and to demand lump-sum payoffs from them if they failed to do so. And to avoid such problems, and ensure a smooth referral process, Arguello hired referral managers who worked in chiropractor offices. For a time, Julian Garcia was paid by Arguello to manage Rigler's referrals. Garcia had Rigler's signature stamp, and if Rigler got behind, Garcia would simply increase the number of MRIs referred for each patient. Eventually, Garcia himself got licensed as a DME provider, and he himself paid chiropractors $50 apiece to prescribe “hot/cold packs” for pain relief, which were then billed to insurance companies for nearly $6,000.

Jennifer Louise White represented providers of other types of services, namely, Autonomic Nervous System (“ANS”) studies and sleep studies. She worked with Alex Martinez and with providers of the ANS and sleep studies to pay nearly $200,000 in kickbacks to Rigler to refer patients for these services.

Sentencing Hearings

In sentencing hearings held on February 20 and 21, 2019, U.S. District Judge Cynthia A. Bashant sentenced each defendant to custodial time. For his crimes, Iglesias was sentenced to 60 months in custody, and required to forfeit $1,005,000 in ill-gotten gains. Judge Bashant imposed five years’ probation on Igelsias’ corporations, MedEx and Meridian, and imposed a $500,000 joint and several fine. Miguel Morales was sentenced to 12 months and 1 day in custody, and was required to forfeit $140,000.

Alexander and Ruben Martinez were each sentenced to 33 months in custody and three years of supervised release. Their companies, Line of Sight and Desert Blue Moon, were sentenced to five years’ probation and fines of $45,000 and $20,000 respectively. Jennifer Louise White was sentenced to 24 months in custody, and ordered to pay fine of $25,000.

Onetime Workers’ Compensation applicant attorney Sean E. O’Keefe received a sentenced of 13 months in custody, and was required to forfeit $300,000 in ill-gotten gains. San Diego chiropractor Steven J. Rigler was sentenced to six months in custody, and was ordered to forfeit $150,000. The court substantially reduced both defendants’ sentences because they cooperated with authorities soon after being confronted by agents, and played critical roles in revealing the scope of the corrupt network.

Throughout the sentencing hearings, Judge Bashant expressed dismay that the defendants scammed a system “that’s set up to help people that really need the help.” She further expressed concern that these crimes would undermine public support for social safety-nets, such as the Workers’ Compensation system for injured workers. She expressed particular disappointment that licensed professionals like attorney O’Keefe and Dr. Rigler would engage in the fraud: “You are the most educated. You should know better,” she reproached them.

This week’s sentencing hearings, along with the conviction and sentence of Beverly Hills Radiologist Dr. Ronald Grusd, bring to a successful close the first wave of cases brought by the U.S. Attorney’s Office and its law enforcement partners to combat fraud in the California Workers’ Compensation System.

“It is unfortunate that some individuals see only an opportunity to profit in a system designed to aid injured workers,” said U.S. Attorney Robert S. Brewer, Jr. “What’s more, this crime corrupted the doctor-patient relationship. A doctor’s medical decisions should be based on the best interest of the patient, not the highest bidder.”

“Health care fraud betrays vulnerable patients and steals funds meant to care for injured workers,” said FBI Special Agent in Charge John Brown. “The cases in 'Operation Back Lash' have shown that these medical professionals, doctors, and attorneys who took bribes chose profit over their patients. This massive investigation, with over 30 convictions to date, demonstrates the FBI's commitment to finding those who commit fraud and bringing them to justice.”

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.

DEFENDANTS

United States v. Grusd, et al., 15cr2821-BAS Sentence

Ronald Grusd, Los Angeles, CA 10 years, $1.3 million forfeiture, $250,000 fine

California Imaging Network Medical Group 5 years’ Probation, $500,000 fine

Willows Consulting Company 5 years’ Probation, $500,000 fine

Alex Martinez, El Centro, CA 37 months’ custody

Ruben Martinez, Murietta, CA 33 months’ custody

Line of Sight, Inc. 5 years’ Probation, $45,000 fine

Desert Blue Moon, Inc. 5 years’ Probation, $20,000 fine

United States v. Iglesias et al, 16CR0131-BAS

Fermin Iglesias 60 months’ custody, $1,005,000 forfeiture

MedEx Solutions 5 years’ Probation, $500,000 fine

Meridian Medical Resources 5 years’ Probation, $500,000 fine

Miguel Morales 12 months 1 day custody, $140,000 forfeiture

United States v. Garcia, 15CR2820-BAS

Julian K. Garcia, National City, CA 33 months’ custody, $10,000 fine

United States v. White, 16CR2905-BAS

Jennifer Louise White, Glendale, CA 24 months, $25,000 fine

United States v. O’Keefe, 14CR2343-BAS

Sean Enrique O’Keefe 13 months, $300,000 forfeiture

United States v. Rigler, 15CR2773-BAS

Steven J. Rigler 6 months, $150,000 forfeiture

INVESTIGATING AGENCIES

Federal Bureau of Investigation

San Diego County District Attorney’s Office

California Department of Insurance

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