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On February 1, Orange County, California, District Attorney Michael R. Capizzi announced the unsealing of nine grand jury indictments against 20 suspects who are alleged to have committed medical insurance fraud and offered illegal kickbacks. The suspects, including seven medical doctors and one chiropractor, operated nine separate medical clinics located throughout central Orange County. Seventeen of the 20 suspects have been arrested and the other three are being sought.
“Insurance fraud is not just a theft against the insurance companies,” said Capizzi. “It has an impact on everyone. The people who are committing these crimes cause insurance rates to increase, leaving some members of our community unable to afford insurance for themselves or their families.”
The grand jury indictments were the culmination of an 18-month undercover investigation conducted by the Insurance Fraud Units of the Orange County District Attorney’s office. This investigation received support and assistance from the National Insurance Crime Bureau (NICB), the Fraud Bureau of the California Department of Insurance, the Santa Ana Police Department, and the insurance companies that supplied investigators with policies and additional support. Fireman’s Fund Insurance Company, Liberty Mutual Insurance Company, Allstate Insurance Company and State Farm Insurance Company all assisted in the investigation.
As part of the undercover operation, letters were mailed to medical clinics announcing the opening of a law office that handled personal injury cases. In reality, the law office was established by the Orange County District Attorney’s office to investigate fraudlent insurance claims in the medical community.
From April 1992 through December 1993, representatives of medical clinics made contact with the undercover law office. Of those contacts, nine medical clinic representatives allegedly offered to return or discount portions of their medical bills to the undercover law office as compensation for referring patients to their medical clinics. The kickbacks reportedly ranged from 25 to 40 percent of the total medical bill.
As part of the operation, undercover investigators were also sent to these medical clinics. They posed as patients referred by the undercover law office and said that they were involved in automobile accidents where they were rearended by insured vehicles. The investigators reported sore backs and necks to the doctors but, in reality, were free of injury.
In six of the medical clinics contacted, all of the physically fit undercover investigators who posed as patients were reportedly diagnosed as having soft tissue injuries. The investigators then allegedly discovered a pattern of fraudulent medical expense billing that included charges for examinations that were never conducted and physical therapy treatments that were never rendered.
The undercover investigators reported that in some instances they were never examined by doctors. It was also reported that the doctors and their employees coached the supposed patients as to what to say if anyone asked about their treatment. Additionally, the investigators reported that the doctors and their employees directed the undercover “patients” to complete fraudulent records to support the doctors’ fraudulent claims.
This undercover investigation resulted in the Orange County Grand Jury returning nine sealed indictments in December 1993 and January 1994, naming a total of 20 defendants who were associated with the nine medical clinics. The defendants are seven medical doctors, one chiropractor, seven medical clinic administrators and five employees of these clinics. They were charged with insurance fraud, conspiracy to commit insurance fraud and grand theft, and offering illegal kickbacks. One defendant was also charged with falsely certifying someone as disabled in order to collect disability benefits. Bail for the defendants ranged from $25,000 to $100,000.
The nine medical clinics involved were: Pat Medical Clinic, David P. Tran Clinic, Trinity Health Center, Southern Physical Therapy Services, Fairview Medical Associates, Clinica Latina, Jefferson Medical Group, Irvine MultiSpeciality Clinic, and Sunil K. S. Gulaya, M.D., Inc.
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