Providence Scheduling Pleads Guilty to Mail Fraud in Referral Scheme
Wednesday, April 5, 2017 | 0
Another company will plead guilty for its role in an illegal referral scheme involving providers, attorneys and marketers in Southern California.
At the same time, a doctor accused of paying illegal fees for patient referrals is asking a federal court for more time to prepare for trial after a missing a deadline to accept a plea agreement offered by federal and state prosecutors.
Providence Scheduling Inc. agreed to plead guilty to a single count of mail fraud, according to a document filed with the U.S. District Court for Southern California on March 27. The plea agreement, like others prosecutors have secured in the case against Providence, and related cases against providers and an applicants’ attorney, are not available through the court’s website.
However, a deferred prosecution agreement and a plea agreement obtained by the Center for Investigative Reporting show Providence Scheduling was at the center of a scheme to refer injured workers to doctors and set a quota for services doctors would have to prescribe to receive more referrals.
Providence and its owners, Carlos Arguello and Fermin Iglesias, assigned a value to certain ancillary procedures doctors would be required to meet, according to court documents. For example, doctors received a credit of between $30 and $50 for each magnetic resonance imaging they ordered for an injured worker.
But they were credited only for ordering ancillary services provided by other companies owned by Iglesias, such as Medex Solutions Inc. and Meridian Medical Resources Inc. Providers would receive credit toward meeting the quota only for durable medical equipment provided by Meridian.
Iglesias in December pleaded guilty to a single count of conspiracy to defraud and deprive patients of the right to their doctors’ honest services. He is scheduled to be sentenced July 31.
Arguello pleaded guilty to a single count of conspiracy to commit mail and wire fraud last August. He is scheduled to be sentenced on Aug. 8.
The U.S. Attorney’s Office agreed not to prosecute Prime Holdings International in its December plea agreement with Iglesias, who identified himself as the chief executive officer of the company. Iglesias admitted that the scheme generated more than $9.5 million in claims, and income of more than $5 million, between 2013 and 2015.
Iglesias agreed that Prime Holdings would be held jointly and severally liable for any fine imposed on Medex Solutions and Meridian Medical Resources. The U.S. Attorney’s Office agreed not to prosecute Prime Holdings if the company satisfies the agreement, cooperates with the ongoing investigation, dubbed Operation Backlash, into illegal referral schemes throughout Southern California, and does not violate any state or federal law.
As part of the agreement, Iglesias admitted the scheme involved multiple doctors including San Diego chiropractor Steven Rigler, who in November 2015 pleaded guilty to conspiracy to commit honest services mail fraud.
Although his plea agreement is not available through the federal court’s website, a copy obtained by the Center for Investigative Reporting shows he agreed to pay a monthly fee of $3,000 to Arguello and Iglesias in exchange for at least 40 referrals per month.
Rigler also said he, Arguello and Iglesias solicited patients for the referral scheme from applicants’ attorneys, including one identified as “S.O.” who is likely San Diego attorney Sean O’Keefe. The U.S. Attorney’s Office in announcing charges against Iglesias, Arguello and others in 2016 said O’Keefe previously pleaded guilty to related federal charges.
O’Keefe in November 2015 pleaded guilty to conspiracy to commit honest services mail fraud and health care fraud. He admitted to referring patients to Pacific Hospital of Long Beach and receiving kickbacks from the hospital's former owner, Michael D. Drobot.
“The co-conspirators arranged to have the medical professionals recommend two surgeries for each patient with a spinal injury — one surgery accessing the spine from the front of the body, and the second surgery accessing the spine from the back of the body — to generate more charges to bill” work comp carriers, according to O’Keefe’s plea agreement.
Rigler and O’Keefe are both scheduled to be sentenced July 24.
Meanwhile, the deferred prosecution agreement Iglesias signed on behalf of Prime Holdings also alleges Dr. Ronald Grusd of Beverly Hills received referrals from Providence Scheduling.
Grusd, who owns California Imaging Network, was indicted in November 2015 on federal charges that he paid illegal fees to a chiropractor in exchange for referrals. In addition to the federal charges, Grusd is also accused of paying kickbacks to a chiropractor identified as “Dr. A” in an indictment filed with the San Diego County Superior Court.
Grusd pleaded not guilty to both the state and federal charges.
Last month, his attorneys asked the court to postpone until November the trial scheduled to begin June 6. They say the continuance is needed to review discovery, locate witnesses, prepare a defense and otherwise adequately prepare for trial.
The U.S. Attorney’s Office on Tuesday filed a response opposing any delays on the grounds that Grusd has had ample time to prepare for the trial. And prosecutors say he rejected a plea offer on Friday.
On Tuesday, Grusd’s attorneys said in court documents that they “did not reject the government’s plea agreement.” Rather, prosecutors stated that the offer expired March 31 and that the defense, “unfortunately, was unable to resolve questions regarding restitution at the state level by that date.”
Grusd’s attorneys say San Diego prosecutors told them any restitution required as part of an agreement to resolve the state-level charges would be based on “what was actually paid.”
“Unfortunately, the defense was unable to decipher exactly what was meant in terms of ‘what was actually paid,’ whether that meant money allegedly paid to marketers, money the insurance companies paid as claims, whether that was solely for counts in the plea agreement” or if it also included all counts in the indictment, Grusd’s attorneys said in court filings Tuesday.
The federal court scheduled a hearing this Friday on the request for a continuance.
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