FOUR GUILTY IN $24 MILLION MEDICARE BILLING SCAM

Four people have been convicted on federal charges of billing Medicare more than $24 million for durable medical equipment (DME) – specifically, nutrition products and motorized wheelchairs – that were not medically necessary and, in many cases, were never provided.

        Following a three-week trial in United States District Court in Santa Ana, a federal jury Thursday afternoon convicted each of the four defendants of 35 counts of health care fraud. Those found guilty are:

• Phu Luong, 51, a Huntington Beach resident, who operated United Medical Supply (United) in Huntington Beach, and who was additionally convicted of five counts of money laundering;
• Sareth Tath, 56, of Long Beach, Luong’s partner, who recruited physicians to provide fraudulent prescriptions to United;
• Mo Thi Pham, 50, of Westminster, a Tath employee who recruited Medicare beneficiaries to receive DME that was not medically necessary; and
• Peter Kim, 82, of Los Angeles (90022), another Tath employee who recruited and drove Medicare beneficiaries to the doctors.

Following the verdict, United States District Judge Cormac J. Carney remanded Luong, Tath and Pham into custody.
        At trial, the government proved that Luong used United to fraudulently bill Medicare for motorized wheelchairs and enteral nutrition, which is liquid nutrition such as Ensure and is only covered by Medicare if a patient requires tube-feeding.  Motorized wheelchairs are covered by Medicare only if a patient is confined to a bed or chair and is unable to use a manual wheelchair. In this case, none of the beneficiaries billed by United had feeding tubes or required motorized wheelchairs.

        The four convicted yesterday were among 10 defendants indicted in March 2005. Previously, four of the 10 defendants pleaded guilty to health care fraud.  They are:

• Vu Nguyen, 34, of Santa Ana, a United employee who submitted the fraudulent claims to Medicare;
• Truc Duong, 38, of Garden Grove, an employee of the physicians recruited by Tath;
• Khanh Duong, 32, of Garden Grove, who along with his wife, Truc Duong, recruited beneficiaries and drove beneficiaries to the doctors; and
• Vu Nghi, 48, of Garden Grove, who also recruited and drove beneficiaries to the doctors.

The two remaining defendants accused in the scheme are medical doctors:

• Derrick Hubbard, 46, formerly of Los Angeles and Atlanta, who fled to South Africa after he was indicted; and
• Matthew Khatibloo, 72, of Fullerton, who fled to Iran after the indictment was issued.

Both doctors operated medical offices in a building in Fountain Valley. Hubbard was captured in South Africa and is scheduled to go on trial on July 11. Khatibloo remains a fugitive.

        According to the indictment and the evidence presented at trial, Tath recruited physicians – allegedly Hubbard and Khatibloo – to prescribe enteral nutrition and motorized wheelchairs that were not medically necessary. Pham assisted Tath in running the doctors’ offices and also acted as a marketer, recruiting Medicare beneficiaries to see Hubbard and Khatibloo by promising the beneficiaries free “milk” (enteral nutrition) and other medical supplies. Kim also recruited beneficiaries, and he drove the recruited beneficiaries from Los Angeles County to Orange County to see Hubbard and Khatibloo.

        Once they saw the Medicare beneficiaries, Hubbard and Khatibloo allegedly would do only cursory examinations on the recruited beneficiaries and, without fail, prescribe enteral nutrition and sometimes motorized wheelchairs. 

        United not only billed for supplies that were not medically necessary, but also routinely overbilled Medicare for the amount of supplies that were delivered, and would often bill for supplies that were never delivered.

        The money laundering charges against Luong were based on his purchases of luxury items with the proceeds of the Medicare fraud, such as a $185,575 yacht, a $118,000 Rolls-Royce automobile, a $1.7 million down payment on a mansion in Huntington Beach; a $170,395 Lamborghini, and $120,000 in gambling bills at the Bellagio Hotel & Casino in Las Vegas.

        The investigation into United’s activities began when Medicare noticed that United was submitting an exorbitant number of claims for enteral nutrition and that the referring physician on almost all of the claims was either Hubbard or Khatibloo.  Furthermore, Medicare received 363 complaints against United, which generally alleged that the beneficiaries did not need or did not receive the items billed by United to Medicare.

        Of $24 million in fraudulent claims submitted by United, Medicare paid approximately $15 million.
        The four defendants convicted yesterday are scheduled to be sentenced by Judge Carney on July 10. The health care fraud and money laundering counts each carry a statutory maximum sentence of 10 years in federal prison.

        The case was investigated by the United States Department of Health and Human Services, Office of Inspector General; the Federal Bureau of Investigation; and IRS-Criminal Investigation Division.