Hiding Fraud

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38077737 - pharmacist preparing some medicine in the pharmacy

Straw ownership involves someone who appears to legally own property, but does so on behalf of the actual owner, who does not want to be recognized. This practice is generally legal, however, it can used for illegal purposes, including concealing assets from the legal system or creditors, money laundering or to hiding illegal financial gains. Today’s ”Fraud of the Day” follows an article in Newsday that details the fraudulent activities of a Long Island pharmacy store owner who bilked Medicaid out of $16 million.

The article states that the 41-year-old store owner claims he was actually covering for his father, who owned and controlled three pharmacies indicted in the case. The father had already been barred from participating in the New York State Medicaid program due to a prior fraud conviction. (Note that the conviction prevented him from owning or controlling any pharmacy that treated Medicaid patients.) Apparently to prosecutors, that didn’t stop the father and son duo from acquiring 13 pharmacies that were authorized to fill prescriptions for Medicaid beneficiaries.

Prosecutors say the scheme was carried out during a three-year time period when the duo submitted hundreds of false claims to Medicaid for prescriptions that were not dispensed. The pharmacies, which the son says were controlled by the father, allegedly paid HIV patients not to fill their prescriptions and then billed Medicaid as if the prescriptions had been filled.

The son admitted to filing the false documents which drained more than $16 million from New York’s Medicaid program. He was sentenced to one to three years in prison. The pharmacies were ordered to pay $16.7 million in restitution, while the son has agreed to pay $500,000 in civil forfeiture.

The father, who has been charged with enterprise corruption, grand larceny and other crimes has not been convicted, and deserves his day in court. He fled the United States for his native country, Pakistan. While law enforcement is seeking extradition, one thing is for certain: the son is behind bars.

Source: Today’s ”Fraud of the Day” is based on an article titled, ”LI Pharmacy Owner Sentenced in $16M Medicaid Fraud,” written by Gary Dymski and published in Newsday on May 5, 2014.

A Dix Hills man who admitted his part in a scheme to defraud the state’s Medicaid program of more than $16 million was sentenced Monday to 1 to 3 years in prison, state prosecutors said.

Raheel Pervez, 41, was sentenced in Bronx Supreme Court before Justice Steven Barrett, state Attorney General Eric T. Schneiderman’s office said in a news release.

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.