Health care fraud and money laundering conspiracy members charged in international telemedicine scheme

On November 7, 2023, additional members of a multi-million dollar health care fraud and money laundering conspiracy were indicted after generating over $500 million in fraudulent prescriptions. Led by defendant Brian Michael Sutton, the criminal group allegedly used their pre-existing relationships with private health insurance companies to acquire pharmacies across the US, which were then used to fulfill the fraudulent prescriptions. 

“Fraudulent health care billing drives up the cost of medical services for all those who need it. We will continue to aggressively investigate and prosecute those who take advantage of health care plans,” said US Attorney Breon Peace.

The international telemedicine scheme

Over a period of five years, Sutton and his co-conspirators operated from call centers in Utah before relocating to Russia. They targeted beneficiaries by offering prescription medications without required medical examinations. Sutton’s network, operating under aliases and utilizing encrypted communications, extended its influence by acquiring brick-and-mortar pharmacies in various states. To obscure their involvement, the group employed intricate money laundering tactics, funneling millions of dollars through shell companies and straw owners.

Upon securing the pharmacies, the fraudsters implemented pharmacy management software for remote reimbursement requests. Their team of “billers” submitted over $500 million in reimbursement requests for more than 50 pharmacies, leading to private insurers paying out over $280 million. 

While Sutton remains at large, his co-conspirators, Dela Saidazim and David Gary Bishoff, pleaded guilty in February 2023 and March 2023 respectively to health care fraud conspiracy. Both await sentencing. Three other defendants have been charged, and two more await arraigning. 

Health care fraud: Scenarios and red flags

According to the DOJ, health care fraud results in over one billion dollars in estimated losses each year from Medicare, Medicaid, and private insurance programs. In addition to this case of fraudulent marketing of services and misrepresenting charges, examples of health care fraud include:

• Billing for services or equipment that were never provided.
• Falsifying certificates of medical necessity.
• Billing for individual services that should be included in a single fee.
• Falsifying plans of treatment or medical records to justify payments.
• Misrepresenting diagnoses or procedures to maximize payments.
• Forgery of prescriptions and diverting prescription medication.
• Soliciting kickbacks for the provision of various services or goods.

To effectively prevent and detect these activities, compliance teams should familiarize themselves with the following transactional red flag indicators:

• Unusual cash deposits and withdrawals.
• The principal receiving payment from unrelated medical providers.
• Providers conducting business transactions that are not comparable to other similar businesses in terms of types, volumes, or velocity.
• Providers receiving payments from out-of-state insurers while allegedly treating local patients or local providers treating out-of-state patients.
• Transferring insurance payments through multiple accounts to avoid detection.
• False documentation to support transactions, such as sequential invoices or dates of service on holidays.

Key takeaways

When filing a suspicious activity report (SAR) relating to potential health care fraud, the Financial Crimes Enforcement Network’s (FinCEN) Health Care-Related Fraud Advisory asks compliance staff to reference the guidance by including the key term “FIN-2021-A001” and select SAR field 34g (health care – public or private health insurance). 

While the advisory includes a lot of information specific to COVID-19 health insurance fraud, the guidance also includes two case studies that highlight the variety of methods criminals use to launder fraudulent funds. As these methods continue to evolve, compliance teams should ensure they keep up with emerging trends and calibrate their fraud detection software accordingly, taking a risk-based approach.