Fertility Doctor Told of Conspiracy in Talks

SANTA ANA —  In private discussions with prosecutors, former UC Irvine fertility doctor Sergio C. Stone admitted that he and his two partners conspired to overbill insurance companies so that they could reap extra profits, according to court papers filed Thursday.

Stone told prosecutors that he and other physicians at the now defunct Center for Reproductive Health would routinely charge fees for an assistant surgeon, even when none participated in an operation.

Stone “stated that when he agreed to permit this fraudulent activity, he recalled being told by [his former partners] that they had been engaging in such a practice and they wanted it to continue,” according to court papers filed by prosecutors.

Stone’s apparent admission was made when he met with prosecutors and investigators in January 1996, a few months before he was indicted on 23 counts of mail fraud and income tax invasion.

Under terms that prosecutors agreed to before being allowed to interrogate Stone, information he divulged could not be used against him during any trial he might face. But prosecutors could use his statements to rebut any contradictory information that Stone might offer in his defense.

With the jury in Stone’s trial out of court Thursday, Assistant U. S. Attys. Thomas Bienert and Wayne Gross announced that the prosecution wanted to use the statements to rebut Stone’s defense during the case so far that he never deliberately plotted to dupe insurance companies.

William Kopeny, one of Stone’s lawyers, strenuously objected to the prosecution’s efforts to have the statements admitted in evidence.

U. S. District Judge Gary L. Taylor deferred his ruling, saying he would first have to see what evidence the defense presents.

The prosecution closed its case Thursday morning. Prosecutors are contending that Stone and his partners--Dr. Jose P. Balmaceda and Dr. Ricardo H. Asch--routinely used unlicensed personnel, including students and foreign research fellows, to help perform medical procedures, and then billed the insurance company as if the work was performed either by another member of the medical team or by another licensed physician.

The three doctors also took in more than $250,000 in cash that was not declared on their income tax forms, the prosecution contends.

Stone, Asch and Balmaceda were each indicted on 23 federal charges, including 20 counts of mail fraud, two counts of filing false income tax returns, and one count of conspiracy to commit tax fraud.

The charges came out of an investigation into allegations that human eggs and embryos were stolen from patients at UCI’s Center for Reproductive Health, and then implanted in other women or shipped to medical research laboratories.

Asch and Balmaceda left the country shortly after the scandal broke in the fall of 1994.

With the jury in court Thursday afternoon, Santa Ana attorney John Barnett opened Stone’s defense, contending that the doctors were simply following university policy when they billed for doctors who were not present during an operation.

Dr. John J. Ryan, a UCI doctor who helped post Stone’s $3-million bond, testified that it was “normal procedure” to list some doctors as being present--even when they were not--so that the university could bill for their services.

Another former UCI doctor, Mark Anthony Zepeda, said that UCI’s billing policy could be misleading “but it was the Ten Commandments [and] you just follow the rules.”

Stone’s statements to prosecutors before his indictment could pose potential problems for the defense. Defendants typically engage in these so-called “proffer sessions” to show their goodwill and to get favorable treatment from prosecutors.

Kopeny, the defense attorney, said the defense will attempt to offer evidence that will make Stone’s prior statements inadmissible.

“If the government offers it, we’ll deal with it,” Kopeny said.