Middle District Of Florida U.S. Attorney’s Office Collects More Than $700 Million In Civil And Criminal Actions For U.S. Taxpayers In Fiscal Year 2017
Tampa, FL - U.S. Attorney Maria Chapa Lopez announced today that the Middle District of Florida (MDFL) collected $700,928,675 in criminal and civil actions in the fiscal year ending September 30, 2017 (FY 2017). This represents the largest aggregate recovery amount in the district’s history. Of this amount, $34,800,537.04 was collected in local civil actions and $15,469,146.50 was collected in criminal actions. The Office’s Civil Division, led by Randy Harwell, also worked jointly with other U.S. Attorney’s Offices and Department of Justice (DOJ) components in nationwide civil cases that addressed fraud schemes and illegal practices extending beyond district boundaries, recovering an additional $650,658,992.01 in these jointly handled cases.
Additionally, the Office’s Asset Forfeiture Division, led by Anita Cream, recovered $18,633,392 in asset forfeiture actions last fiscal year. Forfeited assets deposited into the Department of Justice Assets Forfeiture Fund are used to restore funds to crime victims and for a variety of law enforcement purposes. For instance, in FY 2017, more than $9 million forfeited in the MDFL in prior years was returned to victims of the criminal offenses upon which the forfeitures were based, and more than $6.7 million was shared with federal, state, and local law enforcement agencies.
Overall, the Justice Department collected just over $15 billion in civil and criminal actions in FY 2017.
“Working in conjunction with our federal, state, and local law enforcement partners, our collection efforts have resulted in the recovery of funds from convicted criminals and others who have violated our nation’s laws through fraud and other means,” said U.S. Attorney Chapa Lopez. “These coordinated efforts ensure that criminals and others who commit fraud are held accountable for their offenses and, wherever possible, help victims recover from their losses.”
U.S. Attorneys’ Offices, along with the department’s litigating divisions, are responsible for enforcing and collecting civil and criminal debts owed to the U.S. and criminal debts owed to federal crime victims. The law requires defendants to pay restitution to victims of certain federal crimes who have suffered a physical injury or financial loss. While restitution is paid to the victim, criminal fines and felony assessments are paid to the department’s Crime Victims’ Fund, which distributes the funds to state victim compensation and victim assistance programs.
The largest civil collections were from affirmative civil enforcement cases, in which the United States recovered government money lost to fraud or other misconduct or collected fines imposed on individuals and/or corporations for violations of federal health, safety, civil rights, or environmental laws. In addition, civil debts were collected on behalf of several federal agencies, including the U.S. Department of Housing and Urban Development, Health and Human Services, the Defense Health Agency, the Internal Revenue Service, the Small Business Administration, and the Department of Education. See below for MDFL significant civil case highlights.
FY 2017 Criminal Cases
In FY 2017, the MDFL recovered $15,469,146.50 in criminal collections, primarily restitution owed by criminal defendants. Of those funds, $6,703,417.60 was collected at or before sentencing as a result of our analysis of defendants’ ability to pay. The MDFL began aggressively pursuing prejudgment collection several years ago after recognizing that it was the most effective means of collecting criminal debt. Most defendants have a minimal ability to pay restitution following their release from prison. By notifying defendants prior to sentencing of the assets that the United States believes a defendant has available to pay restitution, we increase the likelihood that restitution will be timely paid to victims and decrease the chances that a defendant will dissipate his assets before being ordered to pay restitution at sentencing.
FY 2017 Civil Cases
Civil Healthcare Fraud
United States ex rel. Vinca v. Advanced Biohealing, Inc.,
Case no. 8:11-civ-176-T-30MAP (M.D. Fla.)
Six qui tam cases led to a nationwide investigation into the kickback practices of a manufacturer of a skin graft product used to promote healing of skin ulcers. The product has been approved by the U.S. Food and Drug Administration for wound healing below diabetic patients’ knees. The relators claimed the defendant’s sales force was systematically instructed by management to pay kickbacks to physicians in the form of meals, entertainment, and other illegal remuneration to induce the purchase of the product. U.S. Department of Veterans Affairs physicians were a particular focus of this illegal behavior. Working with three other U.S. Attorneys’ offices and the DOJ Civil Division, the MDFL Civil Division investigated these claims exhaustively all over the country and corroborated them. In January 2017, we partially intervened in all six cases and settled the kickback allegations for $350,000,000. This is the largest civil settlement in a case involving a medical device in the history of the False Claims Act, and the largest civil settlement of any kind in the history of our district. A number of executives and physicians have also pleaded guilty to health care fraud offenses in a parallel criminal case.
United States ex rel. Martin v. Life Care Centers, Inc.,
Case no. 1:08-cv-251 (M.D. Tenn.)
This case was one of two overlapping qui tam cases consolidated in the Middle District of Tennessee that alleged violations of the False Claims Act by a nationwide provider of rehabilitation therapy services. The relators alleged that the provider had upcoded its services and provided medically unnecessary rehabilitation to patients at its facilities all over the country, including in the MDFL. Our district joined a number of other United States Attorneys’ Offices to assist the Department of Justice Civil Frauds Section in the litigation that ensued after DOJ intervened in the case in 2012. After five years of litigation, we finalized a settlement of all claims against the provider and its principal, Forrest Preston, for $145,000,000.
United States ex rel. Sewall v. Freedom Health, Inc.,
Case no. 8:09-cv-1625-T-35AEP (M.D. Fla.)
A former management level employee of an affiliated company of the defendant Part C managed care plan filed this qui tam complaint in August 2009, alleging that the defendants had illegally dis-enrolled the plan’s most costly beneficiaries, and kept healthy beneficiaries enrolled, in violation of the federal regulations governing the plan. Moreover, he contended that Freedom Health had fraudulently induced the government to authorize an expansion of the plan’s service area by representing to Medicare that it had contracted with a costly network of medical providers that it had no intention of using. Finally, the defendants allegedly used fraud to manipulate risk adjustment data given to Medicare to determine the level of payments to the plan.
After pursuing an investigation into the relator’s allegations in parallel proceedings for seven years, we intervened in the qui tam case and settled the risk adjustment claims and claims associated with service area expansion for $31,695,000. An individual defendant, Sidd Pagidipati, who oversaw the plan’s service area expansion application paid an additional $750,000 to resolve personal claims against him for his role in the service area expansion allegations. This case features the largest settlement of a Medicare Advantage risk adjustment claim on record.
United States ex rel. Barnes v. 21st Century Oncology, Inc., et al.,
Case no. 2:13-civ-228-FtM-99DNF (M.D. Fla.)
A former medical assistant of a nationwide oncology provider alleged in a qui tam complaint that the defendants had fraudulently billed Medicare and TriCare for fluorescence in situ-hybridization cytology (FISH) tests used to identify genetic abnormalities too small to be seen microscopically. The relator alleged that employee physicians of the defendant systematically ordered FISH tests that were not medically necessary, and would alter medical records in order to justify ordering FISH tests. Defendant 21st Century allegedly encouraged these fraudulent practices by offering bonuses to physicians based on the number of FISH tests ordered.
In 2016, we announced settlements of our claims against 21st Century Oncology for $19.75 million and our claims against two individual physicians, Dr. Robert Scapa and Dr. David Spellberg, for $250,000 and $1.5 million, respectively. In 2017, we finalized a settlement with the last remaining individual physician in the case, Dr. Meir Daller, for $3,810,000, representing a recovery of treble damages.
Southeast Orthopedics Specialists (pre-lawsuit)
A Jacksonville orthopedics practice was investigated in response to a direct program referral, and was determined to have engaged in a number of improper billing practices that defrauded federal health programs, including the abusive use of billing modifiers, submitting claims for medically unnecessary ultrasound guided injections, and other illicit practices. The physicians’ practice agreed to settle the government’s claims through a settlement that paid $4,488,000.
United States ex rel. Gross v. Norman, Case no. 8:14-civ-978-T-33EAJ (M.D. Fla.)
A patient of a Tampa thyroid surgeon filed a qui tam lawsuit alleging that the surgeon had defrauded federal health programs through improper practices such as performing pre-operative examinations on the day before or the day of surgery procedures, and charging extra fees from federal health care beneficiaries for services for which he had already received payment from the government. Following a comprehensive investigation, we settled these civil fraud claims for $4,000,000.
Civil Mortgage Fraud
Freedom Financial Acquisitions (pre-lawsuit)
A whistleblower alerted the Department of Housing and Urban Development (HUD) to allegations that this underwriter had submitted false claims to HUD’s Federal Housing Administration (FHA) insurance program by failing to meet regulatory requirements in connection with its participation in a federally insured Home Equity Conversion Mortgages (HECM) or “reverse mortgage” program. Specifically, the defendant had failed to obtain appraisals within 30 days of reverse mortgage loans becoming due and payable, and failed to pursue foreclosure in a manner consistent with HUD regulations. Witness interviews and document review revealed other defects in Freedom Financial’s servicing of these loans, including failure to notify HUD that it was pursuing foreclosure in a timely fashion, failure to employ reasonable diligence in servicing a HECM loan after it had become due and payable, and failure to submit HECM insurance claims in a timely fashion. Freedom Financial ultimately agreed to settle claims under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) and the False Claims Act arising from these shortcomings for $89,274,944, which included credit for a voluntary disclosure that the defendant had earlier made to the FHA program in the amount of $21,000,000.
Olympus Zarris (pre-lawsuit)
The reverse mortgage practices of a Tarpon Springs condominium developer, Olympus Zarris, were investigated and were found to have violated the requirements of HUD’s regulations that govern the agency’s reverse mortgage lending program. Zarris was found to have engaged in fraudulent sales practices wherein he concealed the amounts paid to the buyers in order to artificially inflate the appraised values of condominium complex units. He recruited elderly buyers to purchase units at the inflated values and required them to immediately apply for reverse mortgages in the maximum amount possible. Zarris and his associates assisted the elderly buyers in applying for reverse mortgages, including filling out their loan applications. The proceeds of the reverse mortgages obtained through these misleading applications were then wired to a company Zarris owned at the reverse mortgage closing. Zarris agreed to resolve the government’s claims under the False Claims Act through a settlement that paid $475,000.
This was a coordinated, multi-district investigation by twelve United States Attorneys’ Offices into the conduct of one of the largest distributors of class II narcotics in the country. The Drug Enforcement Administration (DEA) referred the matter for pursuit of civil penalties under the Controlled Substances Act, alleging that McKesson had failed to report suspicious orders of opiate medications at a number of its distribution centers. The Florida investigation centered upon the defendant’s activities at its Lakeland distribution center, which was found to have failed to report suspicious orders of hydromorphone to at least two Florida pharmacies. The government presented its findings concerning the nationwide conduct to McKesson, and ultimately negotiated a settlement that paid $150,000,000 in civil penalties and that will suspend McKesson’s DEA registrations for a period of two years at a number of its distribution centers. In a landmark feature of the settlement, McKesson also agreed to independent oversight of its suspicious orders reporting program by a third-party monitor.
Cardinal Health (pre-lawsuit)
The DEA referred a civil penalty case against a major distributor of Class II narcotics, Cardinal Health, over its failure to report suspicious orders of opiate medications made by pharmacies in the central Florida area. The conduct, which was rampant during the time period running from 2009 to May 2012, gave rise to exposure to civil penalties under the Controlled Substances Act. The District of Maryland joined forces with the effort to address Cardinal Health’s failure to report suspicious orders of a similar nature in the Baltimore area, and the Southern District of New York opened an investigation into the failure by a Cardinal subsidiary, Kinray, to maintain sufficient controls over deliveries of Class II narcotics in the Manhattan area.
After several years of investigation, we negotiated an agreement to settle the Florida and Maryland claims for $34,000,000. The Southern District of New York settled claims against the Kinray subsidiary for an additional $10,000,000.
FY 2017 Asset Forfeiture Cases
United States v. Davanzo et al.
Case no. 2:15-cr-141-FtM-38MRM (M.D. Fla.)
Defendants Thomas Davanzo and Robert Fedyna pleaded guilty to wire fraud and money laundering conspiracies arising out of a scheme that took advantage of regulations implemented by the EPA that were intended to induce traditional petroleum producers to use renewable fuels in their products by requiring producers to purchase “Renewable Identification Numbers” from renewable fuel producers. In October 2016, the Court entered Forfeiture Money Judgments against them in the amount of $46,360,724.50. The Court also entered preliminary orders of forfeiture for assets they had purchased with proceeds from the scheme. Collectively, this included the forfeiture of 27 bank accounts, a 43-foot Motor Yacht, 4 high end vehicles, 4 thoroughbred horses, 2 pieces of real property, gold coins, jewelry, and cash. Final Orders of Forfeiture were entered for these assets in February and March 2017. To date, we have liquidated/collected approximately $4,315,991.63 as a result of these forfeitures. Some of the assets are still for sale.
United States v. Idhedoise et al.
Case no. 8:15-cr-320-T-23TGW (M.D. Fla.)
Priscilla Ellis, Perry Cortese, and Kenietta Johnson were involved in a sophisticated fraud and money laundering network that preyed on victims throughout the world. They helped members of that network defraud victims across the United States and then laundered the funds, transferring much of it overseas.
In August 2015, we obtained seizure warrants to seize numerous bank accounts involved in the scheme. Ellis, Cortese, and Johnson were indicted in September 2015 and proceeded to trial in October 2016. All three defendants were ultimately convicted of conspiracy to commit mail and wire fraud and conspiracy to commit money laundering. Following briefing and a hearing, the Court entered forfeiture money judgments against the defendants in the amount of $9,288,241.36 and preliminary orders of forfeiture forfeiting jewelry, 14 bank accounts, 3 Mercedes-Benz vehicles, and 4 pieces of real property to the United States. The net proceeds obtained from the sale of the forfeited assets will be applied to the forfeiture money judgment. The MDFL intends to seek authorization from DOJ to use the forfeited funds to pay victims.
United States v. Pinon et al.
Case no. 5:14-cr-41-Oc-10PRL (M.D. Fla.)
Rolando Pinon and his codefendants were prosecuted for their participation in a cocaine trafficking conspiracy that lasted more than seven years and involved the distribution of well over 50 kilograms of cocaine. Pinon, the lead defendant, was a resident of San Benito, Texas, who regularly distributed cocaine to Swoll, an Ocala resident. As part of his sentence, the Court forfeited four pieces of real property, and $84,000 cash in lieu of another property from Pinon in FY 2017, for a total forfeiture amount of $752,000 (with the additional $130,500 in vehicles sold in FY 2016).