WASHINGTON—Two former owners of a Los Angeles-area medical equipment
wholesale supply company pleaded guilty today to conspiring with their
customers to defraud Medicare.
The pleas were announced by Assistant Attorney General Lanny A.
Breuer of the Justice Department’s Criminal Division; U.S. Attorney
André Birotte, Jr. of the Central District of California; Glenn R.
Ferry, Special Agent in Charge for the Los Angeles Region of the U.S.
Department of Health and Human Services Office of Inspector General
(HHS-OIG); Bill L. Lewis, Assistant Director in Charge of the FBI’s Los
Angeles Field Office; and Joseph Fendrick, Special Agent in Charge of
the California Department of Justice, Bureau of Medi-Cal Fraud and Elder
Abuse (Cal-DOJ).
Rajinder Singh Paul, 69, and Baljit Kaur Paul, 65, of Redlands,
California, each pleaded guilty before U.S. District Judge Percy
Anderson in the Central District of California to one count of
conspiracy to commit health care fraud.
In court documents, Rajinder and Baljit Paul admitted that they were
the president and vice president, respectively, and shareholders of AHPK
Inc., a medical equipment wholesale supply company located in Redlands
and Ontario, California, and formally known as Major’s Wholesale Medical
Supply Inc. The Pauls later sold Major’s Wholesale Medical Supply Inc.
to Major’s Wholesale Medical Supply LLC (collectively, “Major’s”) and,
according to court documents, remained employed at Major’s Wholesale
Medical Supply LLC as consultants until they were terminated in February
2009.
During the time the Pauls either owned or worked as consultants for
Major’s, Major’s sold durable medical equipment (DME) almost exclusively
to customers who owned and operated DME supply companies, according to
court documents. A majority of Major’s customers were Medicare providers
and relied on Medicare to make money, which they did by billing
Medicare for the DME that they purchased from Major’s.
One of the more popular items of DME that the Pauls sold at Major’s
were power wheelchairs. Court documents indicate that to attract
customers, the Pauls sold power wheelchairs to Major’s customers
wholesale for between $850 to $1,000 each. Major’s customers, however,
billed these power wheelchairs to Medicare at a rate of between $3,000
to $6,000 per wheelchair.
The Pauls admitted they knew that Major’s customers were dependent on
Medicare for their revenue and that Major’s customers could not pay
Major’s unless Medicare paid the customers first. To foster customer
loyalty, the Pauls engaged in a variety of conduct over a period of six
years that helped Major’s customers defraud Medicare, including by
providing Major’s customers with false inventory purchase agreements
that showed they had higher credit limits than they really did. Major’s
customers submitted these false inventory purchase agreements to
Medicare to prove, as required by Medicare, the ability to purchase the
volume of DME they billed.
The Pauls also admitted they provided Major’s customers with
backdated invoices, knowing customers were billing Medicare for power
wheelchairs and DME before the customers actually purchased or delivered
the equipment. The Pauls admitted that by backdating these invoices,
they provided Major’s customers with the paper trail the customers
needed to prove to Medicare that they had both purchased the DME and
purchased it before they submitted their claims to Medicare. According
to court documents, the Pauls backdated or falsified invoices for more
than 100 different customers.
Court documents indicate that two of many customers who conspired
with the Pauls to defraud Medicare owned and operated a number of
fraudulent DME supply companies in the Los Angeles area, including one
customer who used “straw,” or nominee, owners to operate the customer’s
companies. The Pauls admitted they provided these two customers with
false inventory purchase agreements and backdated invoices that the
customers used to defraud Medicare. The Pauls admitted that as a result
of their conduct, these two customers were able to use their fraudulent
DME supply companies to submit approximately $16,662,143 in false claims
to and receive approximately $9,743,609.42 in ill-gotten reimbursement
payments from Medicare.
At sentencing, scheduled for July 8, 2013, the Pauls each face a maximum penalty of 10 years in prison and a $250,000 fine.
This case is being prosecuted by Jonathan T. Baum of the Criminal
Division’s Fraud Section. The case was investigated by the FBI, HHS-OIG,
and Cal DOJ and was brought as part of the Medicare Fraud Strike Force,
supervised by the Criminal Division’s Fraud Section and the U.S.
Attorney’s Office for the Central District of California.
Since its inception in March 2007, the Medicare Fraud Strike Force,
now operating in nine cities across the country, has charged more than
1,480 defendants who have collectively billed the Medicare program for
more than $4.8 billion. In addition, HHS’s Centers for Medicare and
Medicaid Services, working in conjunction with HHS-OIG, are taking steps
to increase accountability and decrease the presence of fraudulent
providers. To learn more about the Health Care Fraud Prevention and
Enforcement Action Team (HEAT), go to www.stopmedicarefraud.gov
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