The US Department of Justice (DOJ) announced on June 8, 2023 that Steven King, a compliance executive of pharmacy holding company A1C Holdings LLC, was convicted of defrauding Medicare out of more than $50 million in a scheme involving dispensing medically unnecessary lidocaine and diabetic testing materials.
King was one of five individuals charged by DOJ in 2019 with conspiracy to commit healthcare fraud and wire fraud. Three of those individuals pleaded guilty prior to King’s conviction, and the fourth is set to be tried in September 2023. The group operated a network of affiliated pharmacies in an effort to obscure the entities’ ownership. The fraud allegedly involved sending unwanted medications to patients and profiting from high reimbursement rates.
The pharmacies operated in Georgia, Kansas, Michigan, Missouri, Tennessee, Texas, and Virginia, and were falsely reported to payors as brick-and-mortar retail operations in an attempt to reduce government oversight, even though they delivered most of their prescriptions via mail, for which they were not authorized. King and his co-conspirators were also accused of taking other steps to conceal the Medicare fraud, including shipping refills and transferring patients among affiliated pharmacies without patient consent.
In response to recipients of the prescription medications making several complaints, the co-conspirators were found to have improperly waived co-payments in an effort to persuade recipients to accept items they did not need or want. In other instances, the group was even bolder and submitted benefits claims for products delivered to consumers without any consent or for patients who were long deceased. Plainly, the conduct violated Medicare and pharmacy benefit manager/payer rules.
King was convicted by a jury after a six-day trial and now faces up to 20 years in prison for his role in the conspiracy. He is scheduled to be sentenced on September 14. DOJ observed that, as the chief compliance officer, King was in a “unique position” to prevent the fraud, but rather he “used his position to defraud Medicare instead,” which surely will factor into the sentencing decision that will be made by the federal district court judge who presided over the trial.
It also is notable that, although the trial was held in Detroit, the case was prosecuted by attorneys from the Criminal Division’s Fraud Section from “Main Justice” in Washington, DC, and King’s conviction was announced by Assistant Attorney General Kenneth Polite and not by local prosecutors.
Further, this was certainly not the first time the government has pursued fraud enforcement against a healthcare compliance officer. Back in the early 2000s, in a high-profile civil fraud prosecution arising from the government’s corporate false claim prosecution of Tenet Healthcare, DOJ brought a civil False Claims Act (FCA) action against the former Chief Compliance Officer and Associate General Counsel of Tenet for making certain false certifications to the HHS Office of Inspector General under Tenet’s Corporate Integrity Agreement and for causing the submission of false Medicare claims tainted by alleged Stark Law violations.
That FCA complaint was dismissed in 2010 based on the government’s failure to bring the action within the applicable statute of limitations. United States v. Christi Sulzbach, 2010 WL 1531492, Case 0:07-cv-61329-KAM (S.D. Fl. Apr. 16, 2010) (order dismissing FCA intervened complaint on motion for summary judgment). Since then, there have been other compliance officers who have been targeted in civil FCA investigations.
Criminal prosecutions of compliance officers remain rare; however, and given the brazen scheme at play, healthcare industry compliance officers likely should not view this conviction as a harbinger of a DOJ “initiative” to seek out compliance professionals as part of Medicare fraud prosecutions. But it does underscore that corporate compliance efforts must be meaningful and that a compliance officer who is materially involved in perpetuating, or perhaps even fails to report, a fraudulent scheme will not be immune from prosecution.
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