Healthcare Fraud: Kerri L. Kaley Convicted For Medical Device Theft, Money Laundering and Home Mortgage Scam

Financial Fraud
Convicted For Medical Device Theft, Money Laundering and Home Mortgage Scam

Medical Device Saleswoman Convicted on Charges of Conspiring to Transport Stolen Medical Devices in Interstate Commerce, Money Laundering and Other Charges

A medical device saleswoman was convicted yesterday on charges of conspiring to transport stolen medical devices in interstate commerce, money laundering and other charges.

Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, and Robert J. West, Special Agent in Charge, United States Food and Drug Administration (FDA), Office of Criminal Investigations, Miami Field Office, made the announcement.

Kerri L. Kaley, 50, of Cold Spring Harbor, New York, was convicted by a jury in Miami on seven felony counts in a criminal case arising out of a Miami-based FDA investigation. Operation Miami Device has led to convictions in over twenty cases of medical device theft and has resulted in forfeitures, fines, and restitution totaling more than $5 million.

Kaley was adjudicated guilty by the U.S. District Judge Darrin P. Gayles for her role in a conspiracy to transport and sell in interstate commerce various stolen prescription medical devices, the actual transport and sale of stolen medical devices, and money laundering associated with that activity.  Kaley is scheduled for sentencing on December 2, 2016 at 9:30 a.m.  She faces a term of imprisonment of up to 5 years on the conspiracy charge, a maximum sentence of up to 10 years on each of the 5 substantive counts of transporting stolen property, and up to 20 years on the money laundering conviction.  In addition to the period of incarceration, Kaley is also subject to fines on each of the 7 counts of up to $250,000 per count, or twice the intended gain or loss caused by the relevant conduct.  In lieu of facing a forfeiture hearing before the same jury, Kaley agreed to forfeit $500,000 to the United States, payable before her sentencing date.  Kaley also faces sentencing based on a November 2014 conviction arising in the same matter for obstruction of justice, which carries a potential sentence of 10 years’ imprisonment and a fine of $250,000.

According to court records and testimony presented at trial, from approximately 1995 through February 2005, Kaley participated in a conspiracy with a group of individuals based in Long Island, New York.  The entire group, including Kaley, were medical device sales representatives for subsidiaries of Johnson & Johnson. The Miami-based conspirator solicited sales representatives and other employees of medical device manufacturers, seeking to purchase medical devices for re-sale.  According to evidence presented in court, it was part of the conspiracy for Kaley and others working with her, to secure possession of significant quantities of prescription medical devices from hospitals they serviced for their employer, which were then forwarded to a conspirator in Delray Beach, Florida.  These devices were often state-of-the-art equipment used for minimally invasive surgery and the suture materials used throughout hospitals. According to three of Kaley’s co-conspirators who testified at trial, the devices were acquired by theft and fraud from their customer medical facilities, which were all New York non-profit hospitals. In the course of the illegal activity, Kaley laundered over $2.2 million in payments through two sham construction corporations and used the funds to pay the co-conspirators, a home , home-renovation expenses, and child care.

Charges remain pending against Brian K. Kaley, but no trial date has been set.

Mr. Ferrer commended the investigative efforts of FDA- Office of Criminal Investigations.  The current case is being prosecuted by Assistant United States Attorneys Thomas Watts-FitzGerald, Brooke Watson, and Alison Lehr.  At the November 2014 trial, the United States was represented by Assistant United States Attorneys Thomas Watts-FitzGerald, Jerrob Duffy, and Alison Lehr.

In the lengthy period between the Superseding Indictment and the most recent trial, this matter was taken to the Eleventh Circuit Court of Appeals twice and later to the Supreme Court of the United States over issues relating to the pre-trial restraint of assets that the Grand Jury had included in the forfeiture allegation of the Indictment.  The government prevailed in that case by a 6 – 3 margin.  The United States was represented before the Eleventh Circuit by Assistant U. S. Attorney Madeleine Shirley of the Appellate Division of the U.S. Attorney’s Office.

Related court documents and information may be found on the website of the District Court for the Southern District of Florida at www.flsd.uscourts.gov or on http://pacer.flsd.uscourts.gov

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