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Justice News

Department of Justice
U.S. Attorney’s Office
Central District of California

FOR IMMEDIATE RELEASE
Tuesday, September 6, 2016

Executive Director of Coachella Valley Surgery Center Named in New Indictment that Adds Charges in $50 Million Health Care Fraud Scheme

            SANTA ANA, California – A Rancho Mirage woman who was the executive director of a cosmetic surgery center has been named in a superseding indictment that adds new fraud and identity theft charges to a case in which she is accused of participating in a scheme that billed insurance companies $50 million for cosmetic surgeries that were falsely claimed to be “medically necessary.”

            Linda Morrow, 64, was named in a 31-count superseding indictment that was returned on August 31 by a federal grand jury. Morrow and her husband, who pleaded guilty earlier this year, were initially charged a year ago with participating in a scheme to defraud health insurance companies by submitting bills for more than $50 million for procedures that were claimed as “medically necessary” – but in fact were cosmetic procedures such as “tummy tucks,” “nose jobs,” breast augmentations, and vaginal rejuvenation.

            The superseding indictment adds nine new charges against Morrow – three new mail fraud charges, three counts of identity theft and three counts of aggravated identity theft charges. The new indictment expands on forfeiture allegations in the original indictment that would require Morrow, if she is convicted, to forfeit all of the ill-gotten gains obtained from the scheme, a figure that may exceed $20 million.

            The superseding indictment outlines a scheme in which patients were lured to The Morrow Institute (TMI) in Rancho Mirage, where Morrow was the executive director, with promises that cosmetic procedures would be paid for by their union or PPO health insurance plans. TMI allegedly submitted bills to insurance companies seeking as much as $100,000 for individual surgeries, and as much as $700,000 for multiple surgeries. The indictment further alleges that some patients who underwent multiple surgeries at TMI suffered severe medical complications from the procedures.

            “As part of the scheme charged in this indictment, the defendant allegedly used the names and signatures of patients without their knowledge to obtain payments for procedures that were not covered by insurance,” said United States Attorney Eileen M. Decker. “Health care fraud schemes that defraud insurance companies in this manner victimize both the insurers and the insured who are forced to pay higher premiums.  This case seeks both to punish the defendants and to deprive them of their illegal profits."

            In March, Morrow’s husband – Dr. David M. Morrow, 71, of Rancho Mirage, a cosmetic surgeon and dermatologist who was the owner of TMI – pleaded guilty to conspiracy to commit mail fraud and filing a false tax return. Dr. Morrow agreed to pay more than $1 million in restitution to victims. When he pleaded guilty, Dr. Morrow admitted that he had altered a medical record by handwriting “hernias” over the original text in the document, which had correctly listed the cosmetic procedure of “abdominoplasty” (tummy tuck).

            To obtain reimbursement for cosmetic procedures, the doctors at TMI completely fabricated diagnoses – such as a “hernia” – in the patients’ official medical records, according to the indictment. The doctors also allegedly fabricated test results and symptoms on medical records to cover up the actual medical procedures being performed. For example, “tummy tucks” were fraudulently billed as hernia repair or abdominal reconstruction surgeries, rhinoplasties (“nose jobs”) were fraudulently billed as deviated septum repair surgeries, and breast lifts and augmentations were fraudulently billed as “tuberous breast deformity.”

            The victim health insurance companies included Anthem Blue Cross, Blue Cross/Blue Shield of California, Blue Cross/Blue Shield of Massachusetts, Regional Employer/Employee Partnership for Benefits, formerly known as Riverside Employer/Employee Partnership (REEP) and Cigna.

            “The FBI devotes many resources to hold health care fraud cheats responsible, as demonstrated in the charges against Linda Morrow, regardless of whether they are doctors, business partners or marketers,” said Deirdre Fike, the Assistant Director in Charge of the FBI’s Los Angeles Field Office. “Linda Morrow’s crimes not only victimized insurance companies, but the public entities that ultimately had to foot the bill to pay the outrageous billings, which include the California Highway Patrol and multiple public school districts.”

            When insurance companies refused to pay for the cosmetic procedures for patients who happened to be employed by public entities such as school districts, TMI made formal claims against those public entities, demanding payments totaling more than $15 million from the California Highway Patrol, the Desert Sands Unified School District, the Palm Springs Unified School District and the City of Palm Springs.

            The superseding indictment further alleges that after the FBI executed a federal search warrant at TMI in March 2011, Morrow went to the home of a TMI employee and asked whether the employee had been “the mole” who had reported TMI to the FBI.

            “We are relentless in our pursuit to uncover, investigate, and prosecute those who rip-off of the healthcare system, leaving California consumers to foot the bill through higher premiums,” said Insurance Commissioner Dave Jones. “I congratulate Department of Insurance detectives who worked this case since it began and partnered with the FBI and insurers to uncover Doctor Morrow’s multi-million dollar crimes and his wife Linda’s alleged role.”

            Morrow is scheduled to be arraigned on the superseding indictment in United States District Court in Santa Ana on September 12. United States District Judge Josephine L. Staton previously ordered Morrow to stand trial on January 24, 2017.

            An indictment contains allegations that a defendant has committed a crime. A defendant is presumed to be innocent until and unless proven guilty in court.

            The superseding indictment charges Morrow with 24 mail fraud counts, including conspiracy to commit mail fraud. Each of those 24 charges carries a statutory maximum penalty of 20 years in federal prison.

            Morrow is additionally charged with three identity theft charges, each of which carry a statutory maximum penalty of 15 years in prison. She is also charges with three counts of aggravated identity theft, which carry a mandatory two-year prison term that must run consecutive to any other sentence imposed in the case.

            Count 31 in the superseding indictment is another new count that charges Morrow with misprision of a felony for allegedly failing to report the health care fraud scheme to authorities. This charge carries a statutory maximum penalty of three years in prison.

            Dr. Morrow is scheduled to be sentenced by Judge Staton on December 2, at which time he will face a statutory maximum sentence of 23 years in federal prison.

          The investigation into the Morrows and TMI was conducted by the FBI, IRS Criminal Investigation and the California Department of Insurance.

          The case is being prosecuted by Assistant United States Attorney Charles Pell of the Santa Ana Branch Office.

16-207
Updated September 6, 2016