The alleged fraud took place in California and involved at least six doctors. Today, arrests of eight people took place in the early morning.
Feds busted Los Angeles medical fraudsters accused of stealing $2 billion Thursday, cuffing white-collar thieves for unneeded surgeries, hunting the homeless for rehabs and billing the government for phony hospice care.
Department of Justice officials charged 15 defendants in all, including medical professionals, for making fraudulent claims to government and private health care programs – including $1.6 billion sham rehab case, the largest of its type ever.
The California Post was there as Federal SWAT teams sought their suspects in a series of predawn raids, targeting high-class criminals such as Dr. Hany Malek, 61, an allegedly armed-and-dangerous chiropractor accused of keeping an arsenal in his $2 million Tarzana mansion.
After the arrests, the DOJ announced charges against 15 people. U.S. Attorney Bill Essayli blamed California officials for allowing the fraud to happen, calling the state the place that did fraud the best.
“California has a fraud problem,” Essayli said at the 9:30 a.m. news conference, where he and a phalanx of federal investigators announced a sweeping take-down of doctors and others they say lured vulnerable patients into needless surgical procedures, sham treatment programs and bogus hospice care, bilking taxpayers for nearly $2 billion.
“Whether it’s hospice fraud, or healthcare fraud or election fraud, California does fraud best,” the prosecutor added, seeming to connect the cases with his office’s simultaneous attempt to sequester midterm ballots it says were issued to noncitizens.
An hour later, California AG Rob Bonta held his own news conference to try to claim some of the credit for the arrests.
Bonta struck back at his own news conference across the street an hour later, saying Essayli had deliberately elided his team’s contribution to the raid — including the arrest of a surgeon accused of performing unnecessary and invasive procedures for profit — part of what he termed a pattern of “improper politicization and weaponization” of medical fraud investigations.
“This isn’t a political game for us,” Bonta said. “This is about protecting taxpayer dollars, protecting the programs that sick and vulnerable Californians rely on, and protecting our state.
This isn't the first time that Bonta and Essayli have been at odds recently. In August they were sparring over mail-in ballots.
In a post to X on Wednesday, First Assistant U.S. Atty. Bill Essayli, the top federal prosecutor in Los Angeles, accused California Atty. Gen. Rob Bonta, the state’s highest-ranking law enforcement official, of fighting to “preserve non-citizens’ access to mail ballots” and “shield fraudsters and illegals from accountability.”
On Thursday, Bonta fired back, accusing Essayli of being “more interested in currying favor with a desperate wannabe dictator” — a reference to President Trump — “than upholding the law himself.”
There's no love lost between these two. In any case, the charges announced today are pretty significant and include claims that homeless people in Texas and elsewhere were lured to California and used to bill the government for bogus treatments. In some cases the people in these schemes were well taken care of but in many more cases they were practically kidnapped victims who would be drugged into a stupor if they tried to leave.
Nathan Young, 39, a.k.a. “Pablo,” and David Young, 71, a.k.a. “Sancho Lopez,” both of Los Angeles, and Honey Phipps, 42, and Cody Phipps, 36, both of Greenville, Texas, were charged with a years-long scheme to traffic vulnerable patients from around the country to Southern California and elsewhere to receive sham substance abuse treatment that was billed to private insurance companies to the tune of over $1.6 billion.
As alleged in the indictment, father and son David and Nathan Young controlled dozens of purported substance abuse treatment companies in the Los Angeles area and around the country. The Youngs directed “body brokers,” including Honey and Cody Phipps, to target vulnerable populations, such as individuals who were homeless and in poverty and individuals attending substance abuse support groups.
The defendants allegedly sought out individuals whose insurance policies provided the most generous reimbursements, and often fraudulently enrolled individuals in new insurance policies for which they were not eligible, to ensure that they obtained the highest reimbursement for their sham treatment. The defendants lured these prospective patients to Southern California and elsewhere by offering them free flights, money, apartments, hotel stays, cars, gift cards, marijuana, cigarettes, controlled substances (including illegal drugs), and other prescription medications freely dispensed by doctors employed by the Youngs.
Once in California, however, most patients found that the promises made by the conspirators were illusory. Some so-called “premium” patients with high-reimbursing insurance policies received luxurious accommodation, stays in hotels and private apartments, and dinners, among other inducements, whereas the “non-premium” patients lived in cramped, unsanitary, crowded, and often derelict housing described as “trap houses.”
The Youngs recycled patients through their facilities to continue billing insurance, regardless of whether treatment was medically necessary or provided. To keep patients cycling through their facilities, the Youngs directed that patients be drugged with medication – “to knock the client out” – if they tried to leave.
Patients were also encouraged to use drugs so the conspirators could bill for detox services.
The conspirators further instructed employees to coach patients to fabricate symptoms so they would be eligible for detoxification services. In some instances, as a result of policies instituted by the Youngs, patients were encouraged to use drugs or alcohol to become eligible for “treatment.”
Once patients were out of detox, the Youngs provided substance abuse “therapy” that in reality consisted of Zoom sessions with more than one hundred attendees that patients did not have to participate in except to turn on their cameras. Patients were told that they could “lay out on [the] beach” without having to participate in therapy that was subsequently billed to insurance companies.
This is like the Southern Poverty Law Center paying people to be racist so they can profit from it down the line. And that's just one of several different types of fraud that were charged by the DOJ today.
California clearly hasn't been doing enough about fraud for some time. There's a reason that LA is home to so much of this medical fraud. Clearly the fraudsters believe they're less likely to get caught here than in other places.