SANTA ANA, CALIF.
Three Southern California men were indicted on federal mail fraud charges that allege they solicited homeowners on the verge of foreclosure with bogus promises of loan modifications with interest rates as low as 2 percent, according to authorities.
The three men charged – Michael Paul Paquette, 34, of San Juan Capistrano; Allan Jessie Chance, 34, of Temecula; and Dennis Edward Lake, 59, of Costa Mesa –were arrested last week were named in an eight-count indictment returned by a federal grand jury on Dec. 20.
Paquette, Chance and Lake were arraigned on the indictment yesterday afternoon in United States District Court, where they all entered not guilty pleas and were ordered to stand trial on March 6. All three defendants were released on $15,000 bonds.
According to the indictment, Paquette and Chance operated under aliases and told distressed homeowners that they worked for the Laguna Hills-based HAMP Services – which sounded similar to the Home Affordable Modification Program or HAMP, a legitimate government program which permanently reduced mortgage payments to affordable levels for qualifying buyers.
Paquette and Chance told victims that they were approved for a government-affiliated loan modification, but they needed to make three “trial payments” before the loan would be modified, according to the indictment.
They also falsely told the victims that their money would be held in a trust or escrow account.
Chance falsely claimed that he had experience in getting home loans modified because he had worked at Bank of America.
After victims began making “trial payments,” their files were referred to Lake, who ran a Newport Beach-based business called JD United.
The indictment alleges that Lake and his employees told victims that they were working on loan modifications, furthering hope that the loan modifications promised by Paquette and Chance were coming and that there was no need to contact law enforcement about the “trial payments” that had been paid.
When being pitched on the loan modification service, the victims were never told that $800 of the “trial payments” went to JD United, and that Paquette and Chance received commission payments taken directly from the accounts where the “trial payments” were deposited.
The indictment further alleges that none of the victim money went to the lenders or a government agency for a loan modification.
Investigators believe that over 500 victims nationwide paid at least $2.5 million dollars to the defendants and others in “trial payments.”
The scheme allegedly ran from the beginning of 2014 through April 2015. Paquette and others originally started soliciting victims claiming that they worked for Hope Services. After victims made many complaints about Hope Services, new victims were solicited using the name HAMP Services starting in late 2014.
Two other defendants involved in the scheme have pleaded guilty to federal charges and are pending sentencing.
Paquette, Chance, and Lake are charged with conspiracy to commit mail fraud. Additionally, Paquette is charged in three substantive mail fraud counts, Chance in four mail fraud counts, and Lake in six mail fraud counts.
If they were to be convicted, each defendant is facing up to 30 years in federal prison for each count, according to officials.
The defendants are presumed innocent unless proven guilty.
A clinic office manager plead guilty Friday for his role in a health care fraud scheme that involved the unnecessary prescription of controlled substances and that resulted in a $131 million loss to Medicare, according to officials.
Yasser Mozeb, 35, of Oakland County, Michigan, the office manager of the Tri-County Network, based in Detroit, Michigan, pleaded guilty to one count of conspiracy to commit health care fraud and one count of conspiracy to defraud the federal government and receive health care kickbacks
Sentencing has been scheduled for May 31.
“Prescribing unneeded drugs in exchange for kickbacks are not just crimes of greed, they are crimes that make Michigan’s opioid crisis even worse — and that is why our office will relentlessly pursue these cases,” said U.S. Attorney Matthew Schneider.
It is unconscionable that Mozeb and his co-conspirators would put patients’ health at risk and potentially exacerbate the opioid epidemic,” said HHS-OIG Special Agent in Charge Pugh. “We, along with our law enforcement partners, will work tirelessly to hold these criminals accountable.”
As part of his guilty plea, Mozeb admitted that he conspired with the owner of the Tri-County Network, Mashiyat Rashid, to pay illegal kickbacks and bribes to Medicare beneficiaries, co-conspirator patient recruiters and others, in order to obtain patients for the Tri-County Network.
Mozeb also admitted that he participated in a scheme with Rashid and other co-conspirators to prescribe medically unnecessary controlled substances, which allegedly included oxycodone, hydrocodone and oxymorphone, to Medicare beneficiaries, many of whom were addicted to narcotics.
He admitted that in furtherance of the conspiracy, co-conspirators also directed physicians to require Medicare beneficiaries to undergo medically unnecessary facet joint injections if the beneficiaries wished to obtain prescriptions for controlled substances.
Mozeb admitted that he and Rashid conspired with physicians in the Tri-County Network to refer Medicare beneficiaries to specific third party home health agencies, laboratories and diagnostic providers in exchange for illegal kickbacks and bribes even though those referrals were medically unnecessary.
Mozeb was part of a conspiracy that submitted or caused the submission of false and fraudulent claims to Medicare in excess of $131 million, he admitted.
Mozeb is the fifth defendant who has pleaded guilty in connection with the Tri-County investigation. Mozeb was charged along with Mashiyat Rashid, 37, of West Bloomfield, Michigan; Spilios Pappas, 61, of Monclova, Ohio; Abdul Haq, 72, of Ypsilanti, Michigan; Joseph Betro, 57, of Novi, Michigan; Tariq Omar, 61, of West Bloomfield, Michigan; and Mohammed Zahoor, 51 of Novi, Michigan, in an indictment unsealed on July 6, 2017. Rashid, Pappas, Betro, Omar and Zahoor are awaiting trial.
The defendants are presumed innocent unless proven guilty.
SANTA ANA, CALIFORNIA
A federal judge on Friday sentenced the former owner of Pacific Hospital in Long Beach to five years and four months in prison for overseeing a 15-year-long health care fraud scheme that involved more than $40 million in illegal kickbacks paid to doctors and other medical professionals in exchange for referring thousands of patients who received spinal surgeries, officials said.
The scheme operated by Michael D. Drobot led to more than $500 million in fraudulent bills being submitted during last five years of the scheme – much of which was paid by the California worker’s compensation system.
U.S. District Judge Josephine L. Staton sentenced Drobot, 73, of Corona Del Mar, and noted that Drobot “introduced greed into the doctor-patient relationship.”
Drobot pleaded guilty in 2014 to charges of conspiracy and paying illegal kickbacks, admitting that he orchestrated a wide-ranging fraud scheme in which “[t]housands of patients received surgeries at Pacific Hospital not knowing that [Drobot] bribed their physician to perform their surgery at Pacific Hospital,” prosecutors wrote in a sentencing memorandum filed with the court. Drobot “was motivated by greed and ultimately profited millions of dollars through the scheme.”
From at least 1997 through 2013, Drobot, who owned and/or operated Pacific Hospital during this time, ran a scheme in which he billed workers’ compensation insurers hundreds of millions of dollars for spinal surgeries performed on patients who had been referred by dozens of doctors, chiropractors and others who were paid illegal kickbacks.
“The patients believed that they were receiving conflict-free medical advice when, in fact, [Drobot] illegally incentivized their physician to perform the surgery at Pacific Hospital,” prosecutors said in court documents.
The kickbacks were financed largely by money generated from Drobot’s sale of medical devices implanted into state workers’ comp patients during spinal surgeries.
Drobot set up a scheme that exploited a now-repealed California law known as the spinal “pass-through” legislation, which permitted hospitals to pass on to workers’ comp insurers the full cost of medical devices implanted in spinal surgery patients.
Drobot generated the kickback money through his own medical hardware company – the Newport Beach-based International Implants (I2) – to sell hardware used in spinal surgeries performed at Pacific Hospital. I2 submitted bills to Drobot’s Hospital and tacked on an additional $250 per device knowing that the “pass-through” law required to state to pay the full amount of the invoices.
“Through the operation of I2, [Drobot] generated substantial profits that he used to pay at least $40 million dollars in kickbacks,” prosecutors wrote in court papers. “
According to the former CFO of Pacific Hospital, his income, bonuses, and other compensation at the hospital was in excess of $20,000,000.”
As part of the health care fraud scheme, Drobot paid bribes to California State Senator Ronald Calderon in exchange for Calderon performing official acts to keep the spinal pass-through law on the books.
Calderon is currently serving a 3½-year sentence in federal prison after admitting that he took bribes from Drobot and undercover FBI agents.
Drobot typically paid a kickback of $15,000 per lumbar fusion surgery and $10,000 per cervical fusion surgery.
Some of the patients lived as much as hundreds of miles away from Pacific Hospital, and closer to other qualified medical facilities, according to officials.
Drobot and his co-conspirators concealed the kickback payments by entering into bogus contracts with the doctors, chiropractors, and others who received kickbacks.
In reality, the contracts merely provided a cover story for the kickback payments.
In addition to the prison term, which Drobot will begin serving on June 4, Judge Staton imposed a $500,000 criminal fine and issued an order directing Drobot to forfeit $10 million to the government.
As part of the forfeiture judgment, which Judge Staton signed on Wednesday, Drobot was ordered to liquidate assets that include real estate and a 1965 Aston Martin, a 1958 Porsche, and a 1971 Mercedes Benz.
Judge Staton has scheduled a restitution hearing for May 11.
In addition to Drobot, prosecutors have charged seven other defendants in relation to the kickback scheme.
The seven additional defendants – which include Drobot’s son, Michael R. Drobot – have pleaded guilty and are scheduled to be sentenced by Judge Staton over the next two months.