DOJ charges 15 in $2 billion California healthcare fraud takedown

LOS ANGELES - The Department of Justice on Thursday announced major charges against 15 people —including six medical professionals—for their alleged roles in California healthcare fraud schemes that collectively submitted $2 billion in fraudulent claims to public and private insurers.

What we know:

Federal authorities unveiled a series of indictments detailing systemic abuses across Southern California and several other states. 

The enforcement actions stem from multi-agency investigations targeting fraudulent addiction treatment centers, fake hospice programs, unnecessary surgical procedures, illegal kickback rings, and pharmacy fraud schemes.

Substance abuse treatment fraud

In the largest case of its kind ever prosecuted by the Department of Justice (DOJ), four individuals—Nathan Young, David Young, Honey Phipps, and Cody Phipps—were charged in a $1.6 billion scheme to traffic vulnerable individuals to Southern California for fake substance abuse treatment. 

According to officials, the Youngs allegedly controlled dozens of purported rehab facilities and directed marketers to target homeless individuals and support group attendees.

Patients were allegedly enticed with offers of free flights, luxury apartments, cash, and free drugs. Once they arrived in California, however, patients were held in overcrowded "trap houses," drugged to prevent them from leaving, and enrolled in Zoom therapy sessions where they were told to leave their cameras on while lounging at the beach so facilities could continuously bill private insurers, officials said.

In a related case, Nicholas Moore pleaded guilty to conspiracy for his role as an area manager assisting in submitting $199 million in false claims.

Unnecessary arterial surgeries

Dr. Harold Tabaie, a 78-year-old cardiothoracic surgeon, and his business partner, chiropractor Hany Malek, were indicted in a $135 million Medicare fraud scheme. Malek allegedly posed as a medical doctor to diagnose patients with arterial disease, after which Tabaie performed unnecessary atherectomies—invasive procedures using bladed catheters to clear plaque.

RELATED: LA doctor and chiropractor indicted in $135M unnecessary surgery fraud scheme

The procedures caused severe pain to patients, and the duo allegedly billed Medicare under other providers' names to conceal their volume, officials said. Malek was also charged with bank fraud for fraudulently obtaining a Paycheck Protection Program (PPP) loan and using the funds for personal expenses, including buying rare coins.

Hospice care fraud

Federal prosecutors unsealed charges in three distinct hospice fraud schemes totaling over $138 million in false billing.

Transitions Hospice Inc.

Geoffrey Jimenez was charged in a $107 million multi-entity hospice scheme, including $9.8 million billed directly through Transitions Hospice. Marketers allegedly recruited non-terminally ill seniors at community centers with offers of free services, avoiding the word "hospice." Transitions recorded an 85% non-death discharge rate, and fraud proceeds were allegedly used to buy personal vehicles in beneficiaries' names without consent.

Blue Cross Hospice & Atlantica Management

Dr. Richard Keech was charged with causing over $10 million in false hospice claims by allegedly signing fake certificates of terminal illness for Medicare beneficiaries who were not terminally ill and did not know they had been placed on hospice care.

Sherman Oaks Hospice Network

Armani Raffi was charged in a $21 million scheme operating four interconnected hospices. Raffi allegeldy used nominee owners, falsified certifications, and paid marketers up to $1,800 per referral to cycle non-terminal patients through facilities, generating non-death discharge rates up to five times the national average.

Kickbacks and pharmacy fraud

Genetic Testing Kickbacks

Dr. Hassan Badday and Dr. Robby Ayoub were charged in separate indictments for allegedly accepting per-patient cash kickbacks from a Houston lab marketer in exchange for ordering medically unnecessary genetic tests on Medicare patients, resulting in over $5.5 million in fraudulent billing.

Rehab Referral Kickbacks

Thomas Steven Mladinich pleaded guilty to receiving up to $250,000 in illegal kickbacks for referring drug-addicted patients to a rehab facility under a sham marketing contract that required patients to stay at least 21 days.

Medi-Cal Pharmacy Fraud

Christina Mareik was indicted for her alleged role in a $269 million scheme exploiting Medi-Cal’s temporary suspension of prior-authorization requirements to bill tens of millions per month for high-reimbursing, unnecessary generic medications through Monte Vista Pharmacy.

Illegal Drug Sample Sales

Dr. Dejun Wang was indicted for unlawfully selling prescription drug samples—including popular weight-loss and diabetes drugs Rybelsus, Ozempic, and Mounjaro—to San Gabriel Valley pharmacy owners for repackaging and resale.

What we don't know:

While eight defendants were taken into custody during initial sweeps across Los Angeles, Texas, and Illinois, federal officials have not detailed the current status or locations of the remaining seven charged individuals.

It's unclear how many total patients were harmed across the various medical clinics and sham treatment facilities, or how much stolen money may ultimately be recovered through pending asset forfeiture proceedings.

What they're saying:

Federal law enforcement leadership strongly condemned the alleged exploitation of patients and taxpayers.

"These charges include the largest sober home fraud scheme the Department has ever prosecuted, and a scheme involving unnecessary invasive procedures that was detected through data analytics," said Assistant Attorney General Colin M. McDonald of the Justice Department’s National Fraud Enforcement Division. "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 you."

"It is especially egregious when doctors and other health care professionals, who pledged to do no harm, resort to petty greed and criminality," said First Assistant United States Attorney Bill Essayli. "The cases announced today represent billions of dollars in intended losses. Every dollar drained out of our private and public health insurance systems is one less dollar available to those who truly need it."

FBI Director Kash Patel emphasized the collaborative nature of the enforcement action. 

"The defendants — including 6 medical professionals – made fraudulent claims to steal from taxpayer-funded healthcare and insurance programs, including substance abuse treatment programs, hospice care, and Medicare programs in the Los Angeles area designed to help the most vulnerable," Patel stated.

What's next:

The defendants face preliminary hearings and arraignments in U.S. District Courts located in downtown Los Angeles, the Northern District of Texas, and the Northern District of Illinois. 

Prosecutors are working to seize property and money bought with stolen funds, while federal agents continue to investigate the marketers and referral networks allegedly connected to the schemes.

What you can do:

Patients or family members who suspect they were victimized by the arterial procedure scheme involving West Regional Cardio Thoracic or Angelus Medical Clinic can contact the Justice Department Fraud Division’s Victim Assistance Unit at 1-888-549-3945 or by emailing victimassistance.fraud@usdoj.gov. 

Anyone who suspects health care fraud or improper billing can report details directly to the Department of Health and Human Services Office of Inspector General.