Loyola University Chicago School of Law, JD 2023
Eighteen former NBA players were charged with defrauding the league’s health and welfare benefit plan. The former players were charged under 8 USC Section 1347, otherwise known as the federal healthcare fraud statute. The fraud scheme submitted $3.9 million in fake claims, for which $2.5 million was paid out. Although the defrauding occurred for over three years, the defendant’s messy work ultimately raised red flags.
What is the healthcare fraud statute?
The healthcare fraud statute is a federal law that prohibits any person or organization from knowingly defrauding any healthcare benefit program. Healthcare benefit programs include any public or private plan or contract. The perpetrator must knowingly and willfully execute a fraudulent scheme. Prosecutors can present proof of actual knowledge or can demonstrate the perpetrator had constructive knowledge. Constructive knowledge is satisfied if a person is aware of a high potential for illegal conduct and takes steps to purposely avoid learning about the illegal conduct.
The healthcare industry loses tens of millions of dollars a year to fraud. To combat this issue, the healthcare fraud statute penalizes an attempt to commit healthcare fraud in the same way as the successful commission of the fraud. The perpetrator must take a substantial step toward the commission of the crime to be deemed to have violated the healthcare fraud statute for attempting to commit healthcare fraud. Violating the healthcare fraud statute will result in fines up to $250,000 for individuals or $500,000 for organizations. Additionally, a perpetrator can be imprisoned for up to ten years in a federal prison. If the fraud results in serious bodily injury, the imprisonment can last up to 20 years.
Often, those facing prosecution of a healthcare fraud statute violation are very likely to be facing charges under other federal statutes as well. These statutes can include the Anti-Kickback statute, the False Claims Act, and more.
The Anti-Kickback statute prohibits any person or entity from offering, soliciting, making or accepting payment of any kind to induce or reward any person for recommending, ordering, buying, or arranging federally funded medical goods or services. The False Claims Act prohibits any person or organization from knowingly submitting false claims to any federal healthcare program. Federal healthcare programs can include any program that provides health benefits that are in part or fully funded by the U.S. Government or any state healthcare system. It is obvious these statutes can often be interrelated.
Who is involved?
According to the U.S. attorney for the Southern District of New York, Terrence Williams led the healthcare fraud scheme. The 11th overall pick of the 2009 NBA draft went on to play four years in the NBA. Over his NBA career, Williams earned nearly $7 million.
The scheme began in 2017 when Williams submitted a $19,000 fraudulent claim for chiropractic care in November 2017. He received a $7,672 payout from that allegedly false claim. It is believed that Williams then recruited other players to partake in his scheme.
The charge goes on to allege that the ex-players submitted fraudulent claims to get reimbursed for medical and dental procedures that never happened. The complaint asserts that Williams would personally supply false invoices in support of the fraudulent claims in exchange for kickback payments by using fake email addresses to impersonate an administrative manager and signed emails with the fake administrative manager’s name, employer, business address, phone number, and fax number. Williams accumulated at least $230,000 through the kickback payments.
The defendants’ scheme involved two dental offices and a chiropractic office in the Los Angeles area and a wellness office in Washington. The defendants acted quite sloppy. Some submitted claims for medical care at the locations in California or Washington when the former players were actually overseas. Others filed claims for the same procedure done on the same teeth within thirty days of each other. Each defendant reportedly obtained reimbursements that range from $65,000 to $420,000.
What are the next steps?
Impending prosecution will determine the fate of the former NBA players. If found guilty, each player could be fined up to $250,000 and could face up to 10 years in federal prison. Prosecutors are intending to recover all property derived directly or indirectly from the fraud scheme. If this is not possible, prosecutors will seek forfeiture of any other property the player owns that add up to the same value.