Two Former New Jersey Public Education Employees Sentenced in Connection with Health Care Fraud Conspiracy Targeting State Health Benefits Programs
CAMDEN, N.J. – Two former New Jersey state public education system employees were sentenced today to prison terms for defrauding New Jersey state health benefits programs by submitting fraudulent claims for medically unnecessary compounded prescriptions, U.S. Attorney Craig Carpenito announced.
Richard McAllister, 45, a former schoolteacher, and James Wildman, 46, a former maintenance worker for the public school system, both of Marmora, New Jersey, were sentenced to 37 months and 46 months in prison, respectively. Both McAllister and Wildman previously pleaded guilty before U.S. District Judge Robert B. Kugler to separate criminal informations charging them with conspiring to commit health care fraud. Judge Kugler imposed the sentences today in Camden federal court.
According to documents filed in this case and statements made in court:
Compounded medications are specialty medications mixed by a pharmacist to meet the specific medical needs of an individual patient. Although compounded drugs are not approved by the Food and Drug Administration (FDA), they are properly prescribed when a physician determines that an FDA-approved medication does not meet the health needs of a particular patient, such as if a patient is allergic to a dye or other ingredient.
In 2015 and 2016, McAllister and Wildman served as recruiters in the conspiracy and persuaded individuals in New Jersey to obtain very expensive and medically unnecessary compounded medications from a Louisiana pharmacy, Central Rexall Drugs Inc. (Central Rexall). The chief executive officer of Central Rexall, Hayley Taff, pleaded guilty on Aug. 12, 2020, to health care fraud conspiracy, and Central Rexall executives Christopher Kyle Johnston, Trent Brockmeier, and Christopher Casseri were indicted on Sept. 16, 2020 for conspiracy to commit health care and wire fraud, conspiracy to commit identity theft, and money laundering charges.
The members of the conspiracy, including McAllister and Wildman, learned that certain compound medication prescriptions – including pain, scar, antifungal, and libido creams, as well as vitamin combinations – were reimbursed for up to thousands of dollars for a one-month supply. The conspirators also learned that some New Jersey state and local government and education employees, including teachers, firefighters, and state troopers, had insurance coverage for these particular compound medications. An entity referred to in the information as the “Pharmacy Benefits Administrator” provided pharmacy benefit management services for the State Health Benefits Program, which covers qualified state and local government employees, retirees, and eligible dependents, and the School Employees’ Health Benefits Program, which covers qualified local education employees, retirees, and eligible dependents.
McAllister, Wildman, and their conspirators recruited public employees and other individuals covered by the Pharmacy Benefits Administrator to fraudulently obtain compounded medications from Central Rexall without regard as to their medical necessity. Given that McAllister and Wildman were employees of the State’s public education system, they had access to and recruited others in the public education system to participate in the scheme. The prescriptions were faxed to Central Rexall, which filled the prescriptions and billed the Pharmacy Benefits Administrator. In return for the obtaining the prescriptions, the pharmacy paid certain conspirators a percentage of each prescription filled and paid by the Pharmacy Benefits Administrator, which was then distributed to McAllister, Wildman, and other members of the conspiracy.
The conspiracy resulted in over $50 million in fraudulent insurance claims for compounded medications that were not medically necessary, including over $3.4 million for prescriptions submitted by McAllister and his cohorts and over $4.8 million for prescriptions submitted by Wildman and his cohorts. McAllister received over $450,000 and Wildman received over $650,000 in illicit profits from the scheme.
In addition to the prison terms, Judge Kugler sentenced McAllister to three years of supervised release and ordered him to pay $3.4 million in restitution and to forfeit $456,806. Judge Kugler also sentenced Wildman to three years of supervised release and ordered him to pay $4.86 million in restitution and to forfeit $657,040.
U.S. Attorney Carpenito credited agents of the FBI’s Atlantic City Resident Agency, under the direction of Special Agent in Charge George M. Crouch Jr. in Newark; IRS – Criminal Investigation, under the direction of Special Agent in Charge Michael Montanez in Newark, and the U.S. Department of Labor, Office of Inspector General, New York Region, under the direction of Special Agent in Charge Michael C. Mikulka. He also thanked the Division of Pensions and Financial Transactions in the State Attorney General’s Office, under the direction of Attorney General Gurbir S. Grewal and Division Chief Aimee Nason, for its assistance in the investigation.
The government is represented by Assistant U.S. Attorneys R. David Walk Jr. and Christina O. Hud of the U.S. Attorney’s Office in Camden.