SAN DIEGO – This week in federal court a slew of
conspirators involved in a massive Workers’ Compensation kickback scheme were
ordered to serve prison sentences and pay millions in financial penalties for
their roles in the corrupt payment of millions of dollars to induce doctors and
other medical professionals to refer hundreds of injured workers for medical
treatments and services.
According to court records, dozens of marketers, doctors,
lawyers and medical service providers conspired to bilk the Workers’
Compensation system in California by buying and selling patients -- and their
individual “body parts” -- like commodities. Among the defendants sentenced
this week was an attorney, a chiropractor, two business owners and several
marketers who referred patients for tests (such as MRIs, functional capacity
exams and sleep studies), treatments (such as “shockwave,” x-rays, and
ultrasound), pain medications, and durable medical equipment (DME) based on the
corrupt payments. The conspirators often
subjected patients to uncomfortable and sometimes painful procedures, so the
conspirators could thereafter bill insurance companies for millions of
dollars. As the government argued in its
sentencing papers, the conspirators’ corruption of the doctor-patient relationship
caused physicians to see price tags on every patient’s body parts. Each of the defendants played a critical role
in the corrupt scheme.
The Corrupt Network
Defendant Fermin Iglesias and co-defendant Carlos Arguello
operated a patient-capping enterprise, in which they found individuals who
would file Workers’ Compensation claims against their employers. Iglesias and Arguello then sold, bartered and
exchanged these applicants with others in the Workers’ Compensation industry,
including attorneys, primary care physicians, and providers of medical goods
and services. Each of these entities had
to “pay to play,” and as the patient was referred throughout this corrupt
system, money changed hands at each step.
Arguello operated several patient-recruitment entities, including one
called Centro Legal. Through billboards,
flyers, advertisements and business cards, Centro Legal recruited persons to
seek workers' compensation benefits from their employers or former employers. When the injured worker called the 1-800
number on the billboard or card, he or she reached a call center, which might
be located in another country. From
there, Iglesias’ company, Providence Scheduling, took over brokering the
patient to maximize the profit that could be extracted from him or her.
Centro Legal referred the newly-acquired patient to
complicit Workers' Compensation attorneys, including, in San Diego, attorney
Sean O’Keefe, who had one of the largest Workers’ Comp caseloads in the
region. To get these new clients, the
attorneys in the corrupt network were expected to comply with certain
conditions: first, they had to use Arguello’s copying service to fulfil
document requests for all of the new client’s medical records; second, they had
to agree to designate as their client’s primary treating physician (“PTP”) one
of the complicit physicians within the corrupt network. In exchange, the attorneys received
compensation. For O'Keefe, the compensation
took a variety of forms. One hospital
administrator paid the salaries of two employees of O’Keefe’s law firm, as a
kickback to O’Keefe for referring spinal surgeries to that hospital. In another
variation, the kickback payments were disguised as payments for nonexistent
legal services, for which O’Keefe generated phony “legal invoices” to cover up
those obviously illegal payments.
The corrupt physician could serve as the patients' primary
care physician in the Workers' Comp system.
This was a key gatekeeper role, because the PTP was entrusted with the
authority to determine what additional goods and services the patient
needed. Iglesias required that the
chiropractors prescribe a certain minimum quota of goods and services, on
average, for each patient. If the
chiropractor failed to live up to the quota, Iglesias would cut off the flow of
new patients.
Dr. Steven Rigler was one of the chiropractors involved in
the corrupt referral network. He had
clinics in Calexico, San Diego, and Escondido.
To get patients for his San Diego and Escondido clinics, Rigler agreed
to meet the referral “quota” set by Iglesias and Arguello. Court records
reflect that Iglesias set a “value” for each type of service the physicians
could refer, for example, $30 for each MRI, and $150 for Durable Medical
Equipment (DME), to meet the quota of $600. To get credit, physicians had to
refer their DME orders to Iglesias’ company, Meridian Medical Resources. Many
of the MRIs were referred to Advanced Radiology, a diagnostic imaging company
owned by Dr. Ronald Grusd. In Calexico,
Ruben Martinez ran Rigler’s clinic and managed all of Rigler’s referrals for
ancillary services. Alexander K.
Martinez performed the same service for Rigler’s other clinics.
If the physicians failed to meet the quota, Iglesias cut off
the pipeline of new patients. Iglesias
employed Miguel Morales to ensure that physicians met the quota, and to demand
lump-sum payoffs from them if they failed to do so. And to avoid such problems, and ensure a
smooth referral process, Arguello hired referral managers who worked in
chiropractor offices. For a time, Julian
Garcia was paid by Arguello to manage Rigler's referrals. Garcia had Rigler's
signature stamp, and if Rigler got behind, Garcia would simply increase the
number of MRIs referred for each patient.
Eventually, Garcia himself got licensed as a DME provider, and he
himself paid chiropractors $50 apiece to prescribe “hot/cold packs” for pain
relief, which were then billed to insurance companies for nearly $6,000.
Jennifer Louise White represented providers of other types
of services, namely, Autonomic Nervous System (“ANS”) studies and sleep
studies. She worked with Alex Martinez
and with providers of the ANS and sleep studies to pay nearly $200,000 in
kickbacks to Rigler to refer patients for these services.
Sentencing Hearings
In sentencing hearings held on February 20 and 21, 2019,
U.S. District Judge Cynthia A. Bashant sentenced each defendant to custodial
time. For his crimes, Iglesias was sentenced to 60 months in custody, and
required to forfeit $1,005,000 in ill-gotten gains. Judge Bashant imposed five years’ probation
on Igelsias’ corporations, MedEx and Meridian, and imposed a $500,000 joint and
several fine. Miguel Morales was
sentenced to 12 months and 1 day in custody, and was required to forfeit
$140,000.
Alexander and Ruben Martinez were each sentenced to 33
months in custody and three years of supervised release. Their companies, Line of Sight and Desert
Blue Moon, were sentenced to five years’ probation and fines of $45,000 and
$20,000 respectively. Jennifer Louise White was sentenced to 24 months in
custody, and ordered to pay fine of $25,000.
Onetime Workers’ Compensation applicant attorney Sean E.
O’Keefe received a sentenced of 13 months in custody, and was required to
forfeit $300,000 in ill-gotten gains. San Diego chiropractor Steven J. Rigler
was sentenced to six months in custody, and was ordered to forfeit $150,000.
The court substantially reduced both defendants’ sentences because they
cooperated with authorities soon after being confronted by agents, and played
critical roles in revealing the scope of the corrupt network.
Throughout the sentencing hearings, Judge Bashant expressed
dismay that the defendants scammed a system “that’s set up to help people that
really need the help.” She further
expressed concern that these crimes would undermine public support for social
safety-nets, such as the Workers’ Compensation system for injured workers. She
expressed particular disappointment that licensed professionals like attorney
O’Keefe and Dr. Rigler would engage in the fraud: “You are the most educated.
You should know better,” she reproached them.
This week’s sentencing hearings, along with the conviction
and sentence of Beverly Hills Radiologist Dr. Ronald Grusd, bring to a
successful close the first wave of cases brought by the U.S. Attorney’s Office
and its law enforcement partners to combat fraud in the California Workers’
Compensation System.
“It is unfortunate that some individuals see only an
opportunity to profit in a system designed to aid injured workers,” said U.S.
Attorney Robert S. Brewer, Jr. “What’s
more, this crime corrupted the doctor-patient relationship. A doctor’s medical decisions should be based
on the best interest of the patient, not the highest bidder.”
“Health care fraud betrays vulnerable patients and steals
funds meant to care for injured workers,” said FBI Special Agent in Charge John
Brown. “The cases in 'Operation Back
Lash' have shown that these medical professionals, doctors, and attorneys who
took bribes chose profit over their patients. This massive investigation, with
over 30 convictions to date,
demonstrates the FBI's commitment to finding those who commit fraud and
bringing them to justice.”
Anyone with information about healthcare fraud may call the
FBI at 1-800-CALL-FBI, or 1-800-225-5324 or the California Department of
Insurance’s toll-free fraud hotline, 800-927-4357.
DEFENDANTS
United States v. Grusd, et al., 15cr2821-BAS Sentence
Ronald Grusd, Los Angeles, CA
10 years, $1.3 million forfeiture, $250,000 fine
California Imaging Network Medical Group 5 years’ Probation,
$500,000 fine
Willows Consulting Company
5 years’ Probation, $500,000 fine
Alex Martinez, El Centro, CA 37 months’
custody
Ruben Martinez, Murietta, CA
33 months’ custody
Line of Sight, Inc.
5 years’ Probation, $45,000 fine
Desert Blue Moon, Inc.
5 years’ Probation, $20,000 fine
United States v. Iglesias et al, 16CR0131-BAS
Fermin Iglesias
60 months’ custody, $1,005,000 forfeiture
MedEx Solutions
5 years’ Probation, $500,000 fine
Meridian Medical Resources
5 years’ Probation, $500,000 fine
Miguel Morales
12 months 1 day custody, $140,000 forfeiture
United States v. Garcia, 15CR2820-BAS
Julian K. Garcia, National City, CA 33
months’ custody, $10,000 fine
United States v. White, 16CR2905-BAS
Jennifer Louise White, Glendale, CA 24 months,
$25,000 fine
United States v. O’Keefe, 14CR2343-BAS
Sean Enrique O’Keefe
13 months, $300,000 forfeiture
United States v. Rigler, 15CR2773-BAS
Steven J. Rigler
6 months,
$150,000 forfeiture
INVESTIGATING AGENCIES
Federal Bureau of Investigation
San Diego County District Attorney’s Office
California Department of Insurance
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