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Press Release

Two Maryland Men Admit Roles in Multi-State Patient Brokering and Bribery Scheme

For Immediate Release
U.S. Attorney's Office, District of New Jersey

TRENTON, N.J. – Two Maryland men today admitted participating in a conspiracy to defraud health insurance companies through a multi-state patient brokering scheme in which they directed recruiters to bribe drug-addicted individuals to enroll in drug rehabilitation in exchange for referral fees from the rehabilitation centers, U.S. Attorney Craig Carpenito announced.

Seth Logan Welsh, 26, of Forest Hill, Maryland, and John C. Devlin, 33, of Baltimore, Maryland, each pleaded guilty by teleconference before U.S. District Judge Peter G. Sheridan to separate informations charging them with one count of conspiracy to commit health care fraud.

Peter Costas, of Red Bank, New Jersey, pleaded guilty to the same charge in May 2020.

According to documents filed in the case and statements made in court:

Welsh, Devlin, and their conspirators owned and operated a marketing company in California. Welsh and Devlin used the marketing company to help orchestrate a scheme in New Jersey, Maryland, California, and other states that involved bribing individuals addicted to heroin and other drugs to enter into drug rehabilitation centers so Welsh, Devlin, and their conspirators could generate referral fees from those facilities.

The marketing company maintained contractual relationships with drug treatment facilities around the country and engaged a nationwide network of recruiters – including Costas in New Jersey – to identify and recruit potential patients, from New Jersey and other states, who were addicted to heroin or other drugs and who had robust private health insurance.

To convince drug-addicted individuals to travel to and enroll in rehabilitation when they otherwise would not have, Costas and other recruiters offered to bribe them – often as much as several thousand dollars – with Welsh’s and Devlin’s approval. Once the patients agreed to enroll in drug rehabilitation in exchange for the offered bribe, Welsh, Devlin, and Costas would arrange and pay for cross-country travel to the drug treatment centers in California and other states. Costas would stay in touch with the New Jersey patients at the facilities and specifically instruct them to stay at the facilities long enough to generate referral payments, and he would pass along information to Welsh and Devlin about the patients’ status at the facilities. Welsh and Devlin would monitor the other patients they brokered by speaking to other recruiters or to the owners and employees of the drug treatment facilities themselves.

Welsh, Devlin, Costas, and their conspirators often directed patients to different rehabilitation facilities month after month to generate multiple referral payments without regard to whether the substance abuse treatment was medically necessary or effective.

Welsh, Devlin, Costas, and their conspirators also sent patients to facilities in California and other states that they knew provided ineffective drug treatment or actually fostered drug use on their premises. After sending one patient to a drug treatment facility in Los Angeles, California, the patient reported to Costas that “everyone’s high” that “it’s a flop,” meaning that it was not a legitimate substance abuse treatment facility providing bona fide drug treatment services. When that information was relayed to Devlin in a text message, he responded “Lol.” A few days later, Welsh texted Devlin and Costas to report that the patient was “smoking meth” at the drug treatment facility. Costas replied, “Yes. [The patient is] freaking out at me. [He] said out of the 10 ppl. [people] in [the drug treatment facility] only 4 are sober. The rest are smoking meth and dope . . . .  [The patient] said everyone’s high and it’s a complete flop and [he] tried to stay sober around it without ‘ratting’ as long as he could.” Costas’s text message meant that the patient was trying to stay in drug rehabilitation long enough to trigger referral payments to Welsh’s and Devlin’s marketing company without relapsing.

The facilities typically paid Welsh’s and Devlin’s marketing company a fee of $5,000 to $10,000 per patient referral. Welsh, Devlin, and their conspirators shared that money among themselves. Costas and other recruiters received approximately half that amount for each patient they brokered. During the scheme, Welsh, Devlin, and their conspirators brokered scores of patients to drug treatment facilities around the country, and the conspiracy caused millions of dollars of losses for health insurers.

Welsh and Devlin face a maximum potential penalty of 10 years in prison and a $250,000 fine, or twice the gross gain or loss from the offense. Sentencing is scheduled for Jan. 11, 2021.

U.S. Attorney Carpenito credited special agents of the FBI, under the direction of Special Agent in Charge George M. Crouch Jr. in Newark, with the investigation leading to today’s guilty pleas.

The government is represented by Senior Trial Counsel Jason S. Gould of the Health Care Fraud Unit in Newark.

Updated September 8, 2020

Health Care Fraud
Press Release Number: 20-282