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Release No. 08-108
August 6, 2008
TWO MEN ARRESTED IN SCHEME THAT RECRUITED HOMELESS FROM ‘SKID ROW’ AND FRAUDULENTLY BILLED GOVERNMENT HEALTH PROGRAMS FOR UNNECESSARY SERVICES
Two Los Angeles men – the owner of a Los Angeles-area hospital and a man who acted as a recruiter – were arrested this morning on federal charges of defrauding Medicare and Medi-Cal by providing unnecessary health services to homeless people who were recruited from “Skid Row” with promises of payments.
Rudra Sabaratnam, 64, of Brentwood, an owner and top executive of a hospital; and Estill Mitts, 64, who resides near the Miracle Mile section of Los Angeles, the operator of a Skid Row “Assessment Center,” were arrested without incident this morning by federal authorities. Both men are expected to make their initial court appearances this afternoon in United States District court in Los Angeles.
Sabaratnam and Mitts were indicted under seal by a federal grand jury last week. The 21-count indictment, which was unsealed this morning following their arrests, alleges that Sabaratnam and Mills conspired to recruit homeless people to receive unnecessary health services for the purpose of committing health care fraud.
Mitts set up the Assessment Center in 2004 and hired a co-conspirator who is now cooperating with the government, as well as “stringers,” to recruit homeless people, according to the indictment. The recruited homeless Medicare and Medi-Cal beneficiaries were referred to Sabaratnam’s hospital and were transported to the hospital by people associated with Mitt. After being admitted to the hospital by a medical doctor, Sabaratnam and others associated with him paid Mitts illegal referral fees by writing checks to two Wilshire Boulevard companies Mitts had established, Metropolitan Healthcare LLC and Wilshire Healthcare Holdings LLC. The indictment alleges that Mitts attempted to conceal the illegal kickbacks by executing sham consultant contracts between his companies and Sabaratnam’s hospital.
The hospital and the admitting physician, “with the knowledge and approval of defendant Sabaratnam,” submitted claims to Medicare and Medi-Cal for services that were not needed and, in some case, were never performed, according to the indictment.
“The indictment alleges a sophisticated scheme to defraud important taxpayer-financed healthcare programs, a scheme that ranged from street-level operatives to the chief executive of a hospital,” said United States Attorney Thomas P. O’Brien. “There is too much money being stripped from public healthcare programs, and the potential impact to those with legitimate needs is too great to let those orchestrating such frauds escape prosecution.”
Sabaratnam and Mitts are jointly charged with conspiring to receive and pay kickbacks for patient referrals and to commit health care fraud. Sabaratnam is charged with eight counts of paying kickbacks for patient referrals. Mitts is charged with four counts of receiving kickbacks for patient referrals. Mitts is additionally charged with six counts of money laundering and two counts of tax evasion for allegedly failing to report more than $479,000 in income in 2005 and more than $620,000 in income in 2006.
If convicted of all counts, Sabaratnam faces a statutory maximum penalty of 50 years in federal prison, and Mitts faces a maximum possible sentence of 140 years in prison.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty.
“The subjects of this investigation went to great lengths to develop an elaborate scheme to recruit some of the most vulnerable citizens and transport them to area hospitals for unnecessary health care services,” said Glenn R. Ferry, Special Agent in Charge for the Los Angeles Region of the Office of Inspector General for the Department of Health of Human Services. The Office of Inspector General will continue to aggressively investigate those who prey upon these citizens and defraud the Medicare and MediCal programs.”
Salvador Hernandez, Assistant Director in Charge of the FBI in Los Angeles, stated: "The allegations listed in the indictment detail criminal activity which defrauded U.S. government programs, and in the end, victimized the American taxpayer. The depravity with which the scheme was carried out is startling in that the defendants are accused of preying on the homeless and exploiting their desperate conditions for personal gain."
In conjunction with today’s federal arrests, the Los Angeles City Attorney’s Office filed has filed a civil lawsuit action against three Southern California Hospitals, their executive officers and several co-conspirators in a conspiracy to recruit homeless individuals for unnecessary hospitals treatments.
“‘Pay-for-patient’ schemes involve many players – recruiters, doctors, ambulance and transport companies, nursing facilities, and hospitals,” said Ellon Lindsey, Acting Special Agent in Charge, IRS-Criminal Investigation, Los Angeles Field Office. “IRS-Criminal Investigation provides the financial expertise in following the money and exposing those individuals, at every level, who financially benefit from this type of fraud.”
The case against Sabaratnam and Mitts is part of an ongoing investigation being conducted by the U.S. Department of Health and Human Services, Office of Inspector General; the Federal Bureau of Investigation; IRS-Criminal Investigation; the California Department of Justice’s Bureau of Medi-Cal Fraud and Elder Abuse; and Health and Law Enforcement Team (HALT), a multi-agency task force which is operated by the Los Angeles County Health Department.
Anyone with information that could assist the ongoing investigation is encouraged to contact investigators with the Department of Health and Human Services by calling 1-800-HHS-TIPS, emailing HHSTips@oig.hhs.gov, or writing to:
Office of Inspector General
Department of Health and Human Services
P.O. Box 23489
Washington, DC 20026
Anyone with information about fraud in relation to the Medi-Cal program is encouraged to call the California Department of Justice’s Bureau of Medi-Cal Fraud and Elder Abuse Hotline at (800) 722-0432.
Release No. 08-108
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