Leader of $63 Million Mental Health Fraud Scheme Pleads Guilty in Miami

Organizer of Sophisticated Multi-State Fraud Scheme Pleads Guilty to Health Care and Money Laundering Charges

WASHINGTON – The owner of a string of community mental health centers pleaded guilty today in connection with a health care fraud and money laundering scheme involving defunct health care provider Health Care Solutions Network Inc. (HCSN), announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; Michael B. Steinbach, Acting Special Agent in Charge of the FBI’s Miami Field Office; and Special Agent in Charge Christopher B. Dennis of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), Office of Investigations Miami office.

Armando Gonzalez, 50, of Hendersonville, N.C., pleaded guilty before U.S. District Judge Cecilia M. Altonaga in the Southern District of Florida to one count of conspiracy to commit health care fraud and one count of conspiracy to commit money laundering.  Under the terms of his plea agreement, Gonzalez will also forfeit his interest in property valued at several million dollars, including $987,910 in currency seized in July 2012 as well as several vehicles and properties located in Hendersonville.

According to court documents, HCSN operated community mental health centers (CMHC) at three locations in Miami-Dade County, Fla., and one location in Hendersonville.  HCSN purported to provide partial hospitalization program (PHP) services to individuals suffering from mental illness.  A PHP is a form of intensive treatment for severe mental illness.

According to Gonzales’s plea agreement, HCSN obtained Medicare beneficiaries to attend HCSN for purported PHP treatment that was unnecessary and, in many instances, not even provided.  HCSN obtained beneficiaries in Miami by paying kickbacks to owners and operators of assisted living facilities (ALF).  According to court documents, HCSN routinely admitted patients in Miami who were ineligible for PHP treatment because they suffered from medical conditions – including mental retardation, dementia and Alzheimer’s disease – that could not be effectively treated by PHP services HCSN was purporting to provide.

According to Gonzalez’s plea agreement, his employees routinely fabricated patient census data and patient medical records that were then utilized to support false and fraudulent billing to government sponsored health care benefit programs, including Medicare and the Florida Medicaid program.

Gonzalez pleaded guilty to directing his employees in North Carolina to routinely submit fraudulent PHP claims for Medicare patients who were not even present at the CMHC or on days when the CMHC was closed due to snow.  Similar to HCSN’s Florida operations, patients who were suffering from conditions such as mental retardation were improperly and routinely admitted to HCSN for purported treatment.  To increase its patient base, HCSN Hendersonville employed “marketers” in North Carolina who recruited ineligible patients from surrounding counties.  HCSN would then transport the patients daily and reward them for their attendance by giving them cigarettes.

In furtherance of the North Carolina fraud scheme, HCSN employees and licensed therapists routinely fabricated patient progress notes purportedly documenting intensive mental health therapy.  In reality, patients were crowded into dysfunctional groups that often exceeded more than 20 people. HCSN therapists would then produce bogus therapy notes for sessions that had little therapeutic value and, in many cases, never even occurred.

According to Gonzales’s plea agreement, he was the president of Miami-based Psychiatric Consulting Network Inc., which he used as a shell corporation to launder HCSN health care fraud proceeds.
According to court documents, from 2004 through 2011, HCSN billed Medicare and the Florida Medicaid program approximately $63 million for purported mental health services. The false and fraudulent billing resulted in more than $28 million in payments from Medicare and Florida’s Medicaid programs.

In addition to Gonzalez, former HCSN employees John Thoen, Alexandra Haynes, Serena Joslin and Sarah Da Silva Keller have pleaded guilty to health care fraud and related charges.  ALF owners Daniel Martinez, Raymond Rivero, Ivon Perez and Alba Serrano have pleaded guilty to health care fraud and related charges for their roles in the scheme.  Alleged co-conspirators Paul Layman and Wondera Eason are scheduled for trial on Jan. 14, 2013, before judge Altonaga in the Southern District of Florida.

The cases are being prosecuted by Special Trial Attorney William J. Parente and Trial Attorneys Allan J. Medina and Steven Kim of the Criminal Division’s Fraud Section.  The case is being investigated by the FBI and HHS-OIG 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 Southern District of Florida.

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, is taking steps to increase accountability and decrease the presence of fraudulent providers.