FBI Arrests 400 in Sting

About 400 arrests have been made in the last two years and hundreds more are expected in a crackdown on health care fraud in California by the state’s four major FBI offices, officials said Thursday.

The investigation, coordinated with other federal and state law enforcement agencies, included a large-scale sting operation in Los Angeles. Targeting illegal kickbacks and false billing schemes, FBI agents set up their own “wellness clinic” in an office building in Encino and called it Western Comprehensive Care.

The Los Angeles effort, in which state and federal agents posed as doctors and former FBI agents posed as patients, was known as Durascam and began in 1998. Arrests were delayed until two years of undercover dealings with owners of medical supply companies and clinical laboratories were completed.

“Agents actually received about $180,000 in kickbacks,” said FBI Agent Daniel M. Martino, who headed the Los Angeles operation. “To date we have made 23 arrests [in Durascam], and we have another 116 suspects under active investigation.”

The suspects in the investigation offered kickbacks for the clinic to exaggerate or falsify documents justifying the need for such durable medical equipment as wheelchairs, oxygen concentrators and body braces, Martino said.

“Jesse James said he robbed banks because that’s where the money was,” Martino said. “Today the money is in health care, and these people want it. It’s that simple.”

Martino said the Durascam investigation turned into the largest undercover medical fraud inquiry in U.S. history because of its scope and the number of investigators involved. About 500 law enforcement agents and former agents took part, he said.

“It just keeps snowballing,” he said. “It’s still a very valuable operation, even though we shut down our clinic.”

In the overall state investigation, there have been 396 arrests so far, in San Francisco, Sacramento and San Diego in addition to Los Angeles, officials said at a news conference.

“Nationwide we have an estimated $270 billion in fraudulent medical claims, and $7.5 billion in California alone,” said FBI Assistant Director Ronald Iden, head of the bureau’s Los Angeles division. “We are announcing this to shed light on the problem and to show the unprecedented cooperation.”

Iden said FBI offices throughout the state are working with state agencies as part of the California Health Care Fraud Task Force on cases that include auto insurance fraud, false pharmacy billings, and Medicare and Medi-Cal fraud.

Two FBI investigations in Sacramento have focused on phony drug prescriptions and durable medical equipment orders that bilked Medi-Cal for prescription drugs at retail and wholesale levels.

One of those operations, called Phony Pharm, focused on pharmacists who billed Medi-Cal for drugs or equipment that were never dispensed or prescribed. That led to revelations that some wholesale drug companies were helping dishonest retailers by giving them phony invoices for bulk orders they never actually placed.

A third Sacramento investigation targeted phony bills to Medicare and Medi-Cal for blood work and lab tests that never occurred or were unnecessary.

FBI officials said 21 arrests have been made in connection with more than $50 million in the lab fraud investigation there. The other Sacramento investigations have led to 145 convictions and court-ordered restitution of about $48 million.

“When scam artists exploit our health care system, we all pay the price through higher insurance costs and misspent government funds,” said John C. Eckenrode, acting head of the FBI’s Sacramento office.

In San Diego, investigators focused on staged automobile accidents involving a fraud ring that operated throughout the state.

The ring staged accidents in San Diego, Los Angeles and San Francisco, then had the drivers report false injury claims. That led to 51 convictions--including those of five chiropractors and seven lawyers and law office administrators--in connection with 11 staged car collisions.

In San Francisco, another investigation centered on the sale of fraudulent health care plans. The owner of a firm called Interstate Services was charged with 53 counts of money laundering for allegedly selling health care plans that never paid off and embezzling the premiums.

In an interview, Bruce J. Gebhardt, head of the FBI’s San Francisco office, said the joint effort was highly productive.

“We’ve really made a point of looking at all the FBI offices here as one so we could attack the problem from all fronts,” he said.

The FBI worked with the Internal Revenue Service, the U.S. Defense Criminal Investigative Service and U.S. attorney’s offices throughout the state.

State agencies involved in the continuing investigations include the attorney general’s office, the California Bureau of Medi-Cal Fraud and the state Department of Health Services.

“We want to get the message out that we are going to continue to go after these people,” Iden said. “Ultimately, the costs are paid by all of us.”