[September 11, 2019 Update: 20 Years in Prison! See updates below.] Philip Esformes is the poster boy in the biggest Medicare fraud trial in history. Prosecutors say he is the mastermind of a $1 billion fraud scheme. His trial, which began in February, is one for the books. The evidence thus far can only be described as wild. Miami Vice meets the Sopranos.
In this post, we will pull back the curtain and demonstrate how ordinary healthcare workers and patients can take down a Goliath.
Until his arrest in 2016, Esformes was the ultimate jet setter. Private jets, luxury mansions and a lifestyle none of us can afford. Prosecutors say, however, taxpayers paid for his high living.
According to the indictment, Esformes owned many Miami area nursing homes and assisted living facilities. Much of his revenues came from Medicare and Medicaid. Those programs, of course, are funded with tax dollars.
The government says Esformes gave kickbacks to physicians in return for medically unnecessary referrals to his facilities. That means he was bribing doctors to admit patients into his nursing homes even if they didn’t need that level of care.
The bribes were a two way street.
Prosecutors say that Esformes accepted bribes from other healthcare providers interested in getting business from his nursing homes. These included bribes from nursing companies, home care services, labs, vision care and therapy providers. Some bribes were in cash while others were allegedly payments to escorts enjoyed by Esformes.
One of Esformes’ co-conspirators is a physician’s assistant who would sometimes sign nursing home referrals without even meeting the patient.
It seems everyone was raking in the dough, even if the patients weren’t benefitting and with no regard to the taxpayers footing the bill.
As the trial started, all of Esformes’ co-conspirators pleaded guilty. That left him fighting the charges alone.
Most of the charges against Esformes are criminal conspiracy, wire fraud and Medicare fraud related.
There is also a charge of obstruction of justice. The indictment says that in 2015, he plotted with two brothers to get one out of the United States. The brothers were potential prosecution witnesses in the case. Unbeknownst to Esformes, the brothers were already cooperating with the feds and recorded a call discussing the scheme.
Shocking Evidence Revealed at Trial
One of the co-conspirators that already pled guilty was one of the first witnesses to testify. Nelson Salazar, who has already been sentenced to 39 months in prison, testified that he would deliver stacks of cash to Esformes or his attorney. Later they would disguise the bribes by allowing Salazar to rent a dilapidated assisted living facility at rents far above normal.
Remember earlier we said the kickbacks were a two way street. Salazar says he also signed a contract for a no show job. He would pick up a “paycheck” as a kickback.
Another former Esformes colleague, Gabriel Delgado, also took the stand for the prosecution.
Delgado admitted he had already been engaged in kickback schemes before he met Esformes. Because Esformes controlled so many nursing home beds, his kickback opportunities were much greater. Delgado testified that he helped connect him with pharmacies, home healthcare services and durable medical equipment suppliers willing to pay kickbacks. It didn’t matter whether the nursing home residents even needed these services.
Once again, the kickbacks ran both ways. Esformes would take kickbacks from suppliers in return for the right to provide services for patients in his facilities. At the same time, Delgado said Esformes would pay doctors kickbacks in order to get them to refer patients.
Like an episode from the fictional TV show the Sopranos, the pair began referring to cash bribes as “pasta” or “fettuccine.” Esformes got so worried about being recorded that he would make Delgado meet in a pool so as to short circuit any wiretap device.
Another one of his minions testified that he was given a “no show” job. The “paychecks” he received for his “job” were used in part to pay cash bribes when necessary.
The bribes started out as bundles of $100 bills but as the scheme grew, the kickbacks scheme became more sophisticated and involved false invoices, inflated invoices and even escorts for Esformes.
Kickbacks to physicians were ultimately concealed as false medical directorships. Rather than writing checks to doctors for each patient referred to Esformes, he created sham medical directorships. A witness testified that these doctors would be appointed a “medical director” for one of the nursing homes. The doctors could then be paid even though they had no duties or responsibilities as medical director.
In the criminal world there is often no honor among thieves. Ultimately, Delgado believed that if Esformes was caught Esformes would sell him out. In his words, “This guy gets confronted, he’s going to talk like a canary. I ain’t no rat, I ain’t no sapo! I ain’t no chivo!” [snitch or toad].
The bribes went beyond doctors and other healthcare providers. Delgado testified that Esformes bribed a state Agency for Healthcare Administration official $3000 per month in order to get advance notice of any inspection.
During the trial, prosecutors played a tape of Esformes calling one of his nursing homes and warning of an impending inspection. He is quoted as saying, “If they’re coming early, they’re coming for a reason. It means they’re trying to nail us.”
Defense attorneys attempted to discredit Delgado by suggesting he is lying in order to get a reduced sentence.
One witness traced the stolen Medicare monies to a one-of-a-kind $1.6 million Ferrari Aperta convertible. That means our tax dollars were spent on a luxury car driven by a convicted thief.
Another witness testified how she helped broker a deal where Esformes would pay a doctor $500 for each patient the doctor referred to a Esformes owned nursing home.
The stakes were high for Esformes. He faced life in prison upon conviction. At 50 years old, even a 20 year sentence can be crushing.
Once Esformes and the others were arrested, most elected to cooperate. Only Esformes exercised his right to a trial. That is understandable considering he was facing life in prison.
After an 8 week trial, on April 5th, a jury found Philip Esformes guilty. He was convicted of was convicted of one count of conspiracy to defraud the United States, two counts of receipt of kickbacks in connection with a federal health care program, four counts of payment of kickbacks in connection with a federal health care program, one count of conspiracy to commit money laundering, nine counts of money laundering, two counts of conspiracy to commit federal program bribery, and one count of obstruction of justice. Absent a Hail Mary appeal, Esformes is likely to get a substantial prison sentence.
The FBI said in a statement after the verdict was announced,
“Philip Esformes is a man driven by almost unbounded greed. The illicit road Esformes took to satisfy his greediness led to over $800 million in fraudulent health care claims, the largest amount ever charged by the Department of Justice. Along that road, Esformes cycled patients through his facilities in poor condition where they received inadequate or unnecessary treatment, then improperly billed Medicare and Medicaid. Taking his despicable conduct further, he bribed doctors and regulators to advance his criminal conduct and even bribed a college official in exchange for gaining admission for his son to that university. The FBI and its partners are constantly investigating health care fraudsters, big and small, who steal money from taxpayers at the expense of patients in need of quality medical care.”
Update September 11, 2019: U.S. District Court Judge Robert Scola sentenced Philip Esformes to 20 years in prison.
The judge appeared to split the difference between the 30 years sought by the government and the 10 recommended by Esformes’ defense team. It appeared the judge was willing to shave an additional 4 years off the sentence if Esformes specifically accepted responsibility by admitting he paid bribes. He refused.
Not only wouldn’t Esformes admit his conduct, he has vowed to appeal. In an interview with the Miami Herald, his lawyers, “For three years, the government alleged a $1 billion fraud, but today the district judge rejected that grossly exaggerated characterization. We are optimistic that the [federal] court of appeals will reinstate the magistrate judge’s findings of deplorable prosecutorial misconduct and will vacate the convictions and sentence.”
In discussing the sentence, prosecutors backed away from the billion dollar figure but not Esformes’ guilt. Deputy Special Agent in Charge Denise Stemen of the Miami office of the FBI said,
“Philip Esformes is a man driven by almost unbounded greed. The illicit road Esformes took to satisfy his greediness led to millions in fraudulent health care claims, the largest amount ever charged by the Department of Justice. Along that road, Esformes cycled patients through his facilities in poor condition where they received inadequate or unnecessary treatment, then improperly billed Medicare and Medicaid. Taking his despicable conduct further, he bribed doctors and regulators to advance his criminal conduct and even bribed a college official in exchange for gaining admission for his son to that university.”
Esformes Implicated in the College Bribery Scandal Too?
The case is so wide reaching that it even spilled into the current controversy of parents paying bribes to get their kids into good colleges. Esformes was charged with paying a $75,000 bribe to now former University of Pennsylvania basketball coach Jerome Allen to get his son admitted to the university. No surprise, once admitted to the school, his son never made the team.
If paying a bribe to get your child into college isn’t bad enough, prosecutors think the money came from stolen Medicare funds. That means Esformes used stolen tax dollars to get his kid into college.
Philip Esformes and Whistleblowers
All of these schemes could have been stopped much earlier by a whistleblower. Assuming Gabriel Delgado was Esformes’ “bag man” and his recollection accurate, plenty of doctors, pharmacies and others were giving or receiving bags of cash. Doctors were signing off on nursing home admission documents either without seeing the patient or without caring what was in the patient’s best interest. Nursing home staff was being warned about “surprise” inspections.
That means there were dozens of billing staff, nurses and administrators who knew something was afoot. A billion dollar fraud doesn’t exist without many people knowing what was happening.
We note that Miami and southeastern Florida leads the nation in healthcare fraud. Although Philip Esformes may have run the largest healthcare fraud in history, he isn’t alone. There are many nursing homes, hospitals, labs, doctors and clinics with their hand in the public till. If you have inside information about these schemes, you may be entitled to a reward.
Medicare Pays Whistleblowers
Under the federal and Florida False Claims Act, whistleblowers with inside information about fraud involving Tricare, Medicaid or Medicare are entitled to cash rewards. Those rewards are based on what the government collects from the wrongdoers and are between 15% and 30% of what is collected.
Unfortunately, many people are afraid to come forward or don’t know how. They don’t know about the important legal protections available for whistleblowers. They don’t know about the rewards and they don’t know their identity can often be protected for a year or more giving them plenty opportunity to find a different job.
To learn more, visit our Medicare fraud whistleblower and kickback information pages. Think you have a case? Contact us online, by email or by phone at 202-800-9791. All inquiries are protected by the attorney – client privilege and kept confidential. Services available nationwide.