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So. Cal. Trucking School Submits $4M Fake Training Claims

Claims Administrators should carefully review SJDB vouchers for possible fraudulent claims, especially if they pertain to Alliance School of Trucking in Chatsworth.

Emmit Marshall, 52, the owner and president of the trucking school pleaded guilty to federal criminal charges for bilking the United States Department of Veterans Affairs out of more than $4 million in tuition and other payments after falsely certifying that veterans had attended classes that they never took.

The is scheduled for a sentencing hearing on a November 18, where Marshall will face a statutory maximum sentence of 100 years in federal prison.

Marshall, the owner and president of Chatsworth-based Alliance School of Trucking (AST), admitted in his plea agreement that, from July 2011 until April 2015, he and co-defendant Robert Waggoner, 56, of Canyon Country, who was a director at AST, schemed to defraud the VA. Marshall and Waggoner recruited eligible veterans to take trucking classes paid under the Post-9/11 GI Bill. AST was certified to offer classes under the Post-9/11 GI Bill that included a 160-hour Tractor Trailer & Safety class and a 600-hour Select Driver Development Program.

Pursuant to the Post-9/11 GI Bill, the VA paid tuition and fees directly to the school at which the veteran was enrolled. The VA also paid a housing allowance to the veteran enrolled full-time in an approved program, and, in some cases, the VA paid a books and supplies benefit directly to the veteran.

Marshall admitted that Waggoner and another individual recruited eligible veterans to enroll at AST by telling the veterans they could collect housing and other fees from the VA without attending the programs. Knowing that the vast majority of veterans enrolling at AST did not intend to attend any portion of those programs,

Marshall and Waggoner created and submitted fraudulent enrollment certifications, according to Marshall’s plea agreement. They also created student files that contained bogus documents.

When they became aware of the investigation into their conduct, Marshall, Waggoner and others at AST removed fraudulent documents from student files, and Marshall later ordered that these files be destroyed, the plea agreement states.

Waggoner is scheduled to go to trial in this case on February 25, 2020.

Surgical Risk of Death Highest After Going Home

The deadliest time for many surgery patients isn’t when they’re on the operating table, it’s while they’re recovering in the hospital and after they go home, a new study published in the Canadian Medical Association Journal (CMAJ) suggests.

For the study, researchers examined outcomes for more than 40,000 patients 45 and older who underwent non-cardiac surgery at 28 hospitals in 14 countries. Researchers monitored patients for complications and deaths within 30 days of surgery.Overall, five people, or less than 1% of patients, died in the operating table, and another 500 patients, or 70%, died in the hospital. Another 210 deaths, or 29%, didn’t happen until after patients were sent home.

Nearly half of all the deaths were associated with three complications: major bleeding, heart damage, and bloodstream infections.

“Many families anxiously wait to hear from the surgeon whether their loved one survived the operation, but our research demonstrates that very few of the deaths occur in the operating room,” said Dr. P.J. Devereaux, senior author of the study and director of the Division of Perioperative Care at McMaster University in Canada.

“Our research now demonstrates that there is a need to focus on postoperative care and transitional care into the home setting to improve outcomes,” Devereaux said by email.

A wide range of technological and medical advances have made surgery safer and less invasive in recent years, the study team notes. But at the same time, patients also are coming to the hospital sicker and being sent home with complex care needs that once would have meant a lengthy hospital stay.

Patients who experienced major bleeding after surgery were more than twice as likely to die within 30 days as people who didn’t have this complication. And patients who developed heart injuries even though they didn’t have heart surgery were also more than twice as likely to die.

Patients who got sepsis, a serious bloodstream infection, were more than five times more likely to die within 30 days than people who didn’t get these infections.

Inflammation may be a common denominator in the complications that were most responsible for deaths, said Barnaby Charles Reeves of the University of Bristol in the U.K., author of an editorial accompanying the study. “Surgery causes a body-wide inflammatory reaction,” Reeves said by email. “This can lead to single or multi-organ failure (kidney, heart, lungs, sepsis etc.) which leads to death.”

Patients may also not recognize that something is wrong when they’re coming off anesthesia or taking narcotic painkillers after surgery, Devereaux said. “This makes patients after surgery vulnerable to delays in recognizing complications and hence delays in treatment,” Devereaux said.

Spinal Implant Company and CEO Face Fraud Claims

The United States has filed a civil healthcare fraud lawsuit against Life Spine Inc., Michael Butler, the founder, president, and chief executive officer of Life Spine, and Richard Greiber, the vice president of business development of Life Spine. The Government’s complaint seeks damages and civil penalties for paying kickbacks in the form of millions of dollars of consulting fees, royalties, and intellectual property acquisition fees to surgeons to induce them to use Life Spine’s spinal implants, devices, and equipment.

The lawsuit alleges that the surgeons who received these payments accounted for approximately half of Life Spine’s total domestic sales of spinal products from 2012 through 2018. As set forth in the complaint, these payments violated the Anti-Kickback Statute and, as a result of this unlawful conduct, Life Spine, Butler, and Greiber caused hospitals and surgeons to submit false claims for payment to Medicare and Medicaid.

Life Spine is a Delaware corporation with its principal place of business in Huntley, Illinois. Life Spine designs, develops, manufactures, and markets medical devices and equipment primarily used in spinal surgeries performed by orthopedic surgeons and neurosurgeons, including implants and instruments. Butler is the founder, president, and chief executive officer of Life Spine and is its majority shareholder. Butler was closely involved in overseeing the operations of Life Spine. From 2012 to 2015, Greiber was involved in selecting and approving surgeons who served as paid “consultants” for Life Spine.

Life Spine paid surgeons to induce them to use Life Spine Products during their surgeries. Life Spine aggressively recruited surgeons who had the potential to use a high volume of Life Spine Products to enter into agreements to serve as paid consultants and/or to transfer their patents/patent applications to Life Spine in exchange for payments and promised support to bring the surgeons’ new products to market.

Life Spine tied these agreements and the associated payments – as well as the company’s continued commitment to devote resources to the surgeons’ product development projects – to the surgeons’ usage of Life Spine Products. Life Spine and Butler expected surgeons to commit to using Life Spine Products at a certain level in exchange for the consulting fees, royalties, and intellectual property acquisition fees paid to them.

Life Spine, with the knowledge, involvement, and participation of Butler and Greiber, entered into agreements with dozens of surgeons. These agreements included medical education agreements under which the surgeons were paid to provide training and/or educational services; product development agreements under which the surgeons were paid to purportedly provide input on new products and then would receive royalties on future sales of the product; and intellectual property agreements under which the surgeons were paid large up-front acquisition fees for their patents/patent applications and then would receive royalties on sales of any products developed based on the patents. Life Spine paid surgeons millions of dollars in consulting fees, royalties, and intellectual property acquisitions pursuant to these agreements.

The Government intervened in a private whistleblower lawsuit before Judge Jed S. Rakoff that had previously been filed under seal pursuant to the False Claims Act.

The case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorneys Jennifer Jude, Jeffrey K. Powell, and Lara K. Eshkenazi are in charge of the case.

2018 WCJ Ethics Committee Finds Four Violations

The Workers’ Compensation Ethics Advisory Committee (EAC ) is a state committee independent of the Division of Workers’ Compensation. The EAC is composed of nine members, each appointed by the DWC administrative director for a term of four years. The EAC meets four times a year.

Anyone may file a complaint with the EAC. Complaints may be submitted anonymously but must be in writing. On receipt of the complaint, the EAC opens a case. Each complaint that alleges misconduct by a judge is formally reviewed by the EAC. To ensure the objectivity of the reviewing members, the names of the complainant, WCALJ, witnesses, and the DWC office where the alleged misconduct occurred are redacted from complaint copies.

In calendar year 2018, the EAC considered and resolved 3 complaints from 2017. Of 29 new complaints received in 2018, the EAC considered 28 and resolved 24. Of the resolved complaints, 4 resulted in findings of judicial misconduct. The Workers’ Compensation Ethics Advisory Committee has now published these investigations in its Annual Report, 2018.

In one of the cases, an applicants’ attorney, complained that despite the fact that applicant had been represented by competent counsel who had already explained the panel process to the applicant, the judge become irate when complainant attempted to walk through a Compromise and Release (C&R) because no panel qualified medical evaluator (QME) waiver had been included with the C&R. When complainant told the judge that that complainant had never before been required to submit such a waiver on a represented case, the judge replied, “You’re full of [expletive]”  When complainant asked the judge not to use expletives, the judge said, “If you don’t like it, file a complaint.” The committee identified an ethics violation and recommended to the CJ that appropriate action be taken.

In another case, an unrepresented applicant complained that while arguing a Motion to Recuse the WCJ, the judge replied, “You’re a goddam liar.” The complainant then walked out of the courtroom hurt, depressed, scared, and full of anxiety. Based on its review of the investigation, the EAC found that it was a single, technical violation, with no past pattern. Based upon that conclusion, the EAC recommended no further action by the CJ.

Another complaint from a witness alleged that the judge was clearly angry and spoke to complainant very aggressively and asked complainant to wait for the question to finish; the judge alluded to the fact that complainant had consumed too much caffeine, which complainant denied. Complainant stated that this is an example of improper demeanor for a judge and willful neglect of proper decorum for a judge. The committee found a single technical violation but no past patterns. The EAC acknowledged the challenges presented by a difficult witness. The EAC recommended further appropriate action.

An an unrepresented applicant, complained that the judge was recused from the expedited hearing because the judge had a former business relationship with the agent for the defense. The complainant said that the judge can see who is on the calendar when scheduled and had the responsibility to do something without imposing on complainant to appear for no reason. Complainant argued that this mistake caused delays in the case. The committee found a technical violation for failing to put the disclosure on the record and recommended further action.

$13.4 M Restitution Affirmed in Largest Premium Fraud Scam

Michael Vincent Petronella owned several businesses, including The Reroofing Specialists, Inc., doing business as Petronella Roofing, Western Cleanoff, Inc., and Petronella Corporation.

An SCIF claims manager compiled a list of 42 persons who filed workers’ compensation claims under Petronella Roofing’s policy whose payroll had not been reported to SCIF. A certified public accountant compared the payroll reports and audit documents defendant provided SCIF with the quarterly employee wage reports actually received by EDD. Over that 8-year span, the difference in payroll reported to EDD and that reported to SCIF exceeded $29 million.

Petronella was convicted of 33 counts of insurance premium fraud. The superior court sentenced defendant to 10 years in state prison. It also and ordered him to pay $500,000 in restitution award in 2013. The Court of Appeal reversed the trial court’s restitution order, but otherwise affirmed the judgment in the 2013 published case of The People v Michael Vincent Petronella (2013) 218 Cal.App.4th 945. (Petronella 1 )

After additional restitution hearings, the trial court ordered Petronella to pay restitution in the amount of $13.4 million, which is $18 million less than what the prosecution requested, but $12 million more than what he felt he owed. So he again appealed, contending that the court’s restitution order is irrational and lacking evidentiary support.

The Court of Appeal disagreed with Petronella, and affirmed the restitution order in the unpublished case of People v. Petronella (2019) – (Petronella II).

In affirming the restitution order of $13.4 million, the Court of Appeal concluded: “The fact of the matter is appellant carried out one of the largest insurance premium scams in the history of California’s workers’ compensation system. To the extent the scope and nature of his misconduct precludes an exact determination of SCIF’s losses, the equities favor SCIF as far as calculating the amount of restitution it is due. (See People v. Prosser (2007) 157 Cal.App.4th 682, 691; People v. Baker (2005) 126 Cal.App.4th 463, 469.) In light of all the relevant considerations, we are satisfied there is a factual and rational basis for the trial court’s restitution order. No abuse of discretion or other ground for reversal has been shown.”

$2B Roundup-Cancer Jury Verdict Reduced to $87M

A California judge on Thursday reduced a $2 billion jury verdict, slashing the award for a couple who blamed Bayer AG’s glyphosate-based weed killer Roundup for their cancer to $86.7 million. The civil Roundup litigation which is based upon the contested assertion that the product causes cancer, may be a precursor to California agricultural workers fling similar workers’ compensation claims against their employers.

Reuters reports that Superior Court Judge Winifred Smith of the California Superior Court in Oakland said the jury’s billion-dollar punitive damages awards were excessive and unconstitutional, but rejected Bayer’s request to strike the punitive award outright.

Under Smith’s final order, California couple Alva and Alberta Pilliod would receive roughly $17 million in compensatory and $69 million in punitive damages, down from $55 million and $2 billion, respectively.

Bayer in a statement on Thursday said Smith’s decision to slash the award was a step in the right direction, but added it would file an appeal.

“We continue to believe that the verdict and damage awards are not supported by the evidence at trial and conflict with the extensive body of reliable science and conclusions of leading health regulators worldwide that confirms glyphosate-based herbicides can be used safely and that glyphosate is not carcinogenic,” the company said.

Bayer faces Roundup cancer lawsuits by more than 13,400 plaintiffs across the United States. The Germany-based company bought Roundup maker Monsanto in a $63 billion deal last year, but has since seen its share price tumble over the glyphosate litigation.

Plaintiffs allege Roundup causes non-Hodgkin’s lymphoma and that Monsanto for decades tried to influence scientists and regulators to bury cancer evidence. Bayer denies those allegations.

The company had asked Smith to strike the punitive damages award in the Pilliods’ case, arguing that hundreds of studies and assessments by regulators worldwide concluded the herbicide to be safe for human use. But the judge in her Thursday order rejected those arguments.

“In this case there was clear and convincing evidence that Monsanto made efforts to impede, discourage, or distort scientific inquiry and the resulting science,” Smith said.

Bayer to date has lost three U.S. jury trials in the Roundup litigation, with juries in California awarding multi-million dollar awards. It is appealing the decisions.

In August, the company is scheduled to face its first trial outside California at a courthouse in St. Louis, Missouri. Monsanto has recruited Missouri-based expert witnesses to make its case in a place where it has century-old roots but where juries often hit companies with huge damages.

July 22, 2019 News Podcast


Rene Thomas Folse, JD, Ph.D. is the host for this edition which reports on the following news stories: Judge Releases DEA Records on 76 Billion Opioid Pills, Employer Escapes SCIF Premium Default Judgment, Pharmaceutical CEOs Now Face Criminal Prosecutions, Dolphus Pierce D.C. Comp Fraud Conviction Affirmed, Couple Convicted of Manufacturing Fake Oxycodone, Feds Say San Diego “Gateway for Fentanyl”, CDC Reports Drop in Overdose Deaths, Presidential Candidates Plan to Lower Drug Costs.

Drobot to Plead Guilty – Faces 50 Years – in NEW Case

The imprisoned former owner of Pacific Hospital in Long Beach has agreed to plead guilty to new federal criminal charges for illegally selling his luxury cars and keeping the proceeds for himself, disobeying a court order that he forfeit the money because of a previous conviction for orchestrating a nearly $1 billion health care fraud scheme.

Michael D. Drobot, 74, formerly of Corona del Mar but who is now imprisoned at Taft Correctional Institution in Kern County, has been charged in a three-count criminal information with wire fraud, engaging in monetary transactions in property derived from unlawful activity, and criminal contempt of court.

Drobot is scheduled to be arraigned on the information in the coming weeks in United States District Court in Santa Ana. He faces a statutory maximum sentence of 50 years in federal prison.

Drobot pleaded guilty in 2014 to charges of conspiracy and paying illegal kickbacks, admitting that he orchestrated a wide-ranging fraudulent kickback scheme where paid more than $50 million in bribes to doctors to steer hundreds of millions of dollars in spinal surgeries to his hospital. Drobot ultimately profited millions of dollars from the scheme.

According to his plea agreement filed on Tuesday, in January 2018, Drobot was sentenced to five years in federal prison and was ordered by the court to forfeit $10 million to the United States government and to partially satisfy the forfeiture by selling his 1965 Aston Martin, 1958 Porsche, and 1971 Mercedes-Benz automobiles. Drobot was ordered to perform this obligation by July 5, 2018.

Instead, from June 22, 2018 until September 14, 2018, Drobot intentionally violated the court’s forfeiture order in an effort to keep his criminal proceeds, the plea agreement states.

For example, on June 22, 2018, Drobot conveyed an interest in the Aston Martin car to a classic car auction company in exchange for a $1 million advance on the proceeds of the car’s sale, according to the plea agreement. Drobot admitted that he caused the auction company to wire $1 million to Drobot’s bank account. Drobot also admitted he used that money for personal expenses and not to satisfy the court’s forfeiture order. Drobot further admitted to laundering the money via transfers to third parties.

After Drobot violated the court’s forfeiture order, the government moved successfully in February 2019 to satisfy the outstanding money judgment by forfeiting Drobot’s interest in his Newport Beach residence and Perris, California business property.

As part of the underlying health care fraud scheme for which he was imprisoned, Drobot paid bribes to California State Senator Ronald Calderon in exchange for Calderon performing official acts to keep the spinal pass-through law on the books. Calderon served a 3½-year sentence in federal prison after admitting that he took bribes from Drobot and undercover FBI agents.

Prosecutors have charged 17 individuals and obtained 10 convictions as part of Operation Spinal Cap, which targets a long-running health care fraud scheme that generated nearly $1 billion in fraudulent claims to federal government, California state, and private insurers. Drobot spearheaded the scheme.

This case was investigated by the Federal Bureau of Investigation, IRS-Criminal Investigation, the California Department of Insurance, and the United States Postal Service, Office of the Inspector General.

This matter is being prosecuted by Assistant United States Attorneys Joseph T. McNally of the Violent and Organized Crime Section, Scott D. Tenley of the Santa Ana Branch Office, Ashwin Janakiram of the Major Frauds Section, and Jonathan S. Galatzan of the Asset Forfeiture Section.

Patient “Recruiter” Pleads Guilty in $65M Case

Former U.S. Marine Bradley White pleaded guilty in federal court to fraud charges, admitting that he participated in a scheme that bilked the military health care program known as TRICARE out of more than $65 million.

White, the sixth of eight defendants to plead guilty in the case so far, admitted as part of his guilty plea that he fraudulently recruited patients in return for a percentage of the amount TRICARE reimbursed for compounded medications that his sham patients ordered.  

White was charged on June 20, 2019, and entered his guilty plea to conspiracy to commit health care fraud before U.S. Magistrate Judge Bernard G. Skomal. Sentencing is set for October 18, 2019 before U.S. District Judge Janis L. Sammartino.

Compounded medications are specialty medications mixed by a pharmacist to meet the specific medical needs of an individual patient. Although compounded drugs are not approved by the Food and Drug Administration (FDA), they are properly prescribed when a physician determines that an FDA-approved medication does not meet the health needs of a particular patient, such as if a patient requires a particular dosage or application or is allergic to a dye or other ingredient.

According to the guilty plea, a team of individuals, including White, worked to recruit and pay Marines, primarily from the San Diego area, and their dependents – all TRICARE beneficiaries – to obtain compounded medications that would be paid for by TRICARE.  This information was sent to Choice MD, the Tennessee medical clinic that employed Drs. Carl Lindblad and Suzy Vergot.  Drs. Lindblad and Vergot then wrote prescriptions for the TRICARE beneficiaries, despite never examining the patients in person. Once signed by the doctors, these prescriptions were not given to the beneficiaries, but sent directly to particular pharmacies controlled by co-conspirators, which filled the prescriptions and billed TRICARE at exorbitant prices. TRICARE then reimbursed the pharmacy, and which in turn paid kickbacks – as a percentage of the TRICARE reimbursement — to the pyramid scheme of recruiters.

Both Dr. Lindblad and Dr. Vergot as well as Candace Craven, a nurse practitioner at Choice MD, have pleaded guilty for their roles in the conspiracy to commit health care fraud.  CFK, Inc., the corporate owner of one of the pharmacies, has also pleaded guilty as part of this investigation.  

Josh Morgan, another former Marine from San Diego, also pleaded guilty in March 2018 for his role in recruiting TRICARE beneficiaries to fraudulently receive these prescriptions.

According to court documents, between December 2014 and May 9, 2015 – the day that TRICARE stopped reimbursing for compounded medications – Drs. Lindblad and Vergot authorized 4,442 total prescriptions.  Over this time, their co-conspirators billed TRICARE $65,679,512 for these prescriptions. For his part, White admitted that he recruited patients who billed TRICARE over $7.6 million, for which he was paid over $195,000.

White was the eighth defendant charged in relation to this fraud scheme and the sixth to plead guilty. The two remaining defendants are Jimmy and Ashley Collins, owners of Choice MD. That case, 18CR0432-JLS, is still pending.

Chief Judge Says “Degradation of Civility” at WCAB

The Division of Workers’ Compensation has assigned a California Highway Patrol officer to each of the state’s 22 Workers’ Compensation Appeals Board offices after a handful of violent attacks against lawyers.

But sometimes it’s the lawyers themselves that need policing.

According to the report in the Insurance Journal, Paige Levy, chief judge for the DWC, said that in the past several years “there has been a degradation of civility” among the attorneys who practice before the board. It’s gotten to the point, she said, that she’s posted notices in some of the boards reminding attorneys to be civil to one another. She said eventually such notices may be posted at all of the board offices.

Over the last few years we have seen an increase in bad behavior among lawyers including in their treatment of judges, their treatment of court personnel and their treatment of their adversaries,” Levy said during the California Coalition of Workers’ Compensation’s annual conference. “I have too many times needed to call an officer into the courtroom just to deal with the fighting between counsel. I know our hearings and our offices are less formal. Please do not let that fool you. What we do at the WCAB is extremely important to our community and our state, even though we are in informal settings let’s never forget that.”

Levy said workers’ compensation judges don’t enjoy being forced in the role of scolding kindergarten teachers but frequently have no other choice but to tell educated professionals how to behave.

“It’s unfortunate that sometimes attorneys act that way,” she said. “We have to remember who we are and what we represent.”

Levy’s comments came as she updated members of the employer advocacy group on happenings at the DWC and WCAB. During the presentation, she mentioned that a CHP officer is assigned to each of the 22 WCAB district offices. Security at the Los Angeles board became a concern in 2010, when an injured worker stabbed a defense attorney in the back.

In 2017, the California State Bar added a supplement to the oath that attorneys take when they enter the profession. Rule 9:4 requires attorneys to recite: “As an officer of the court, I will strive to conduct myself at all times with dignity, courtesy and integrity.”

So why has attorney dignity declined so badly that the state’s chief workers’ comp judge felt it necessary to issue a reminder?

“That’s just not an answer that I have,” Levy said. “I think we just don’t treat each other as well as I would like.”