Justice Department Charges 15 in Los Angeles Health Care Fraud Cases Tied to $1.8 Billion in Alleged False Claims

The Justice Department said Thursday that it charged 15 defendants, including six medical professionals, in Los Angeles-area health care fraud cases involving more than $1.8 billion in alleged fraudulent claims to government and private insurance programs.

The cases announced Oct. 22 span what prosecutors described as three major categories: an alleged $1.6 billion sham substance-abuse treatment scheme that the department called its largest-ever prosecution of its kind; a separate $135 million Medicare fraud case accusing a surgeon and his business partner of performing medically unnecessary artery procedures that allegedly harmed patients; and three hospice-related cases involving more than $138 million in alleged false billings.

The charges include indictments, criminal complaints and informations, all of which contain allegations that must be proved in court. The Justice Department said eight defendants were arrested Thursday, with six expected to appear in federal court in downtown Los Angeles and two in federal court in Texas. Defendants are presumed innocent unless and until proven guilty.

The largest case centers on what prosecutors said was a sprawling sham rehab scheme that billed private insurers for more than $1.6 billion. The Justice Department identified Nathan Young, David Young, Honey Phipps and Cody Phipps as defendants in the case, alleging that the Youngs controlled dozens of purported treatment companies and used “body brokers,” or marketers, to recruit vulnerable people to Southern California and other places for treatment that prosecutors say was fraudulent or a sham.

The department said the case is the largest sober home fraud scheme it has ever prosecuted. Nicholas Moore, who prosecutors said worked as an “area manager,” pleaded guilty and admitted helping submit $199 million in fraudulent claims, according to the department.

“These charges include the largest sober home fraud scheme the Department has ever prosecuted, and a scheme involving unnecessary invasive procedures detected through data analytics,” Assistant Attorney General Colin M. McDonald of the Justice Department’s National Fraud Enforcement Division said in a statement. “Our message is simple: if you steal health care dollars from the American taxpayer or abuse your position to harm patients, we are coming for you – and the data will lead us to wherever you are.”

In a separate case, prosecutors charged Dr. Harold Tabaie, a cardiothoracic surgeon, and Hany Malek, a chiropractor and business partner, in an alleged $135 million Medicare fraud scheme tied to atherectomies at two Los Angeles-area clinics. Atherectomy is an invasive procedure used to remove plaque from arteries.

According to the Justice Department, Tabaie performed atherectomies on some patients who did not have artery disease, repeated procedures when earlier ones failed and subjected some patients to “extreme pain and discomfort.” Prosecutors also alleged that the defendants billed procedures under other providers’ names to conceal unusually high volumes and used kickbacks and insurance plan-switching to maximize reimbursement.

The department said data analytics flagged Tabaie as an “extreme outlier” in atherectomy billing. The procedure has drawn scrutiny in recent years because overuse can expose patients to significant risks without clear medical benefit.

“It is especially egregious when doctors and other health care professionals, who pledged to do no harm, resort to petty greed and criminality,” First Assistant U.S. Attorney Bill Essayli for the Central District of California said in a statement.

The hospice cases announced Thursday involved allegations that patients who were not terminally ill were enrolled in hospice care so providers could bill Medicare. Prosecutors said one case charged Geoffrey Jimenez by complaint in an alleged scheme through Transitions Hospice Inc., which they said was part of a broader network of hospice entities that billed more than $107 million and showed unusually high rates of patients being discharged alive. In another case, Dr. Richard Keech was charged by information with causing more than $10 million in false hospice claims by allegedly signing false certifications that patients were terminally ill. A third case charged Armani Raffi by information in what the department described as a multi-entity hospice fraud scheme that generated about $21 million in false claims.

The Justice Department also said Christina Mareik was indicted after previously being charged by complaint in June in a separate alleged $270 million Medi-Cal pharmacy fraud case involving bogus prescriptions through Monte Vista Pharmacy. Other cases in Thursday’s takedown included indictments against Hassan Badday and Robby Ayoub over alleged illegal kickbacks tied to medically unnecessary genetic testing, and against physician Dejun Wang over alleged illegal sales of prescription drug samples including Ozempic, Rybelsus and Mounjaro.

Investigative agencies listed by the department across the cases included the FBI, the Department of Health and Human Services Office of Inspector General, IRS Criminal Investigation, the Drug Enforcement Administration and the U.S. Marshals Service.

The hospice allegations come amid heightened federal scrutiny of the sector. In May, the Centers for Medicare & Medicaid Services imposed a six-month nationwide moratorium on new hospice and home-health Medicare enrollments, citing fraud and program-integrity concerns.