Operation Spinal Cap Nets Son of Original Defendant in Kickback Scheme

Monday, June 6, 2016 | 4

The FBI kickback investigation dubbed "Operation Spinal Cap" in Southern California has resulted in guilty pleas from three more defendants, including the son of Pacific Hospital owner Michael D. Drobot, the U.S. Attorney’s Office said Friday.

Michael R. Drobot, 44, a Newport Beach resident, pleaded guilty to conspiracy and illegal kickback charges, according to recently unsealed court documents made public last week.

The younger Drobot will be sentenced Nov. 18 and faces up to 10 years in prison, a half-million-dollar fine, restitution and three years of supervised release.

His father of the same first and last name will be sentenced in February 2017 even though he pleaded guilty in 2014 as part of the kickback scheme, which centered on Pacific Hospital in Long Beach. In addition to pleading guilty to charges of conspiracy to defraud a federal health care program and paying illegal kickbacks, the older Drobot also admitted to bribing former state Sen. Ronald Calderon to get the lawmaker to fend off efforts to repeal the duplicate payment for spinal hardware. 

Calderon has pleaded not guilty to corruption charges, and a jury trial is scheduled to begin June 19. 

The three recent guilty pleas in the Spinal Cap case bring to nine the number of defendants convicted for receiving and paying kickbacks for spinal surgeries that generated more than $580 million in fraudulent bills, federal officials said.

Chiropractor Michael E. Barri, 48, of San Clemente, pleaded guilty March 11 to a conspiracy count and admitted taking bribes in exchange for patient referrals to Pacific Hospital from 2009 through late 2013. During a nine-month period alone in 2013, Barri took $158,555 in kickbacks after referring a dozen back surgery patients, court documents state. As a result of Barri’s referrals, Pacific billed insurers nearly $4 million for spinal surgeries, the government says.

Pacific Hospital marketer Linda Martin, 66, of Clovis, pleaded guilty to a conspiracy charge May 27 and recruited medical professionals to refer patients, with promises of kickbacks. She will be sentenced Aug. 19 and, like Barri, who will be sentenced in January 2017, faces a maximum of five years in prison.

“These unscrupulous defendants thought they had figured out a clever scheme to line their pockets in their bilking of the insurance system,” said Anthony J. Orlando, acting special agent in charge of the Internal Revenue Service’s criminal investigation unit. “Federal and state worker’s compensation programs were not designed as a slush fund for the greedy.

“Law enforcement is serious about investigating these crimes and holding accountable those who defraud government health care programs, and deprive patients of their right to honest services,” he said.

The conspiracy involved two other Drobot companies — California Pharmacy Management and its successor, Industrial Pharmacy Management — that created and managed essentially mini-pharmacies within doctors’ offices. The Drobots bought and dispensed the medications, and paid the doctors a cut from insurance company reimbursements.

The elder Drobot recruited his son into the scheme in 2005, when the junior Drobot personally began soliciting doctors and chiropractors to enter kickback agreements finalized by his father. The son later mediated disputes when kickback recipients complained about dollar amounts or when they did not refer as many patients as agreed.

The younger Drobot’s attorney, Jason DeBretteville of Newport Beach, did not return a telephone call and email seeking comment.

All nine defendants in Operation Spinal Cap are cooperating with investigators who continue to unravel the scheme, which involves dozens of surgeons, chiropractors, orthopedic specialists, marketers, personal injury lawyers and other medical professionals.

“The continuing results of Operation Spinal Cap are based on a tremendous effort by investigators and prosecutors handling this case, which is among the largest health care fraud schemes to be perpetrated in the state of California,” said Deirdre Fike, assistant director in charge of the FBI’s Los Angeles field office.

As part of the scheme, which stretched over 15 years, defendants typically paid $15,000 in kickbacks for each lumbar fusion surgery and $10,000 for each cervical fusion surgery, court records state.

Patients who never knew of the kickbacks were referred to Pacific Hospital even if they lived hundreds of miles away.

“Kickback schemes such as these threaten the financial integrity of public health care programs,” said Special Agent in Charge Scott Pierce of the U.S. Postal Services Office of Inspector General. The conspiracy involved mail fraud.

“The workers’ compensation program benefits thousands of postal employees who have received legitimate on-the-job injuries. This case should send a clear message to all health-care providers that workers’ compensation fraud is a federal crime that carries serious consequences and will not be tolerated,” Pierce said.

The motion to unseal can be found here. 

The case against Michael R. Drobot is here.

Michael R. Drobot's plea agreement is here.

The case against Barri is here.

Barri's plea agreement is here.

Martin's case is here.

Martin's plea agreement is here.