Bay Shore Doctor Sentenced To 65 Months In Prison For Pension- Fund Looting, Health Care Fraud, And Tax Evasion
Defendant Billed Insurance Company Almost $730,000 For Phony Procedures, Hid Looting Of Employee Pension Plan, And Evaded $2.8 Million In Federal Taxes
Earlier today, at the federal courthouse in Central Islip, New York, Frank Lobacz, a Bayshore, New York, doctor convicted of health care fraud, tax evasion, and the looting of an employee pension fund, was sentenced to 65 months in prison by United States District Judge Dennis R. Hurley. Judge Hurley also imposed fines, restitution, and penalties on Lobacz of over $3.5 million.
The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York and Toni Weirauch, Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”).
On November 13, 2010, after a month-long trial, a jury convicted Lobacz on all six counts of an indictment charging health care fraud, the filing of false pension fund reports with the U.S. Department of Labor, and tax evasion during the years 2001 to 2003. In addition to his prison sentence, the district court today ordered Lobacz to pay $727,480.63 in restitution to two private insurance plans, as well as $2,886,454.60 in federal income tax.
Lobacz was a licensed New York Doctor of Osteopathic Medicine, or D.O., who maintained offices in Nassau and Suffolk counties. In the 1970’s, he created a retirement pension plan for himself and his staff, and named himself as the plan administrator in filings with the United States Department of Labor. As the administrator, Lobacz was responsible for filing annual reports on the financial health of the plan and was required to notify the IRS if he or any one else borrowed or withdrew money from the plan.
At trial, witnesses testified that in addition to running his medical practice, Lobacz engaged in highly complex and risky stock options trading. Between 2000 and 2002, he transferred over $3.5 million in money and stocks to and from the pension plan and his personal brokerage account to pay for personal expenses, including vacation home improvements, artwork, credit card debt, a home equity loan, and college tuition for a daughter. The defendant never reported this misuse of employee pension funds, and between 2000 and 2003, he failed to report over $1 million in options trading income to the IRS.
Evidence at trial also showed that starting in 2005, to compensate for trading losses, the defendant filed some 1,500 false insurance claims for medical services and procedures purportedly rendered to a retired couple, who were close friends of the defendant, as well as to Lobacz’s younger children, his wife, and himself. The couple testified at trial that although they received routine acupuncture treatments from the defendant, which would not have been covered under their insurance plans, the bulk of the bills submitted in their names were for services that they either did not receive, or for visits on dates when the couple was traveling outside of New York State. Other fraudulent bills claimed that the defendant, his wife, and two children received near daily treatments normally provided to those suffering severe respiratory conditions, among other ailments. However, public school records, as well as patient files from Lobacz’s offices, showed that no such treatments or visits actually occurred. In all, the defendant billed $727,480.62 in false health care claims to GHI and United Healthcare Insurance Company of New York.
Following imposition of the sentence, United States Attorney Lynch stated, “The defendant Lobacz had a medical practice and investment portfolio which generated significant income, but that was not enough for him. Abandoning his fiduciary obligations to his staff, he looted their pension plan to cover his own personal expenses. Continuing his pattern of using other people, the defendant used friends’ and family members’ personal information to defraud private insurance companies. Further, Lobacz also failed to pay taxes on very substantial income. He will now be held to account for these crimes.”
Ms. Lynch expressed her grateful appreciation to the IRS for its investigation and participation in this case.
The government’s case is being prosecuted by Assistant United States Attorney Michael P. Canty and James M. Miskiewicz.