The investigation into state health benefits fraud does not fit typical criminal schemes.
LIVE discussion on the federal prescription-fraud case
From the amount of money stolen — more than $25 million — to those involved — doctors, teachers, police officers, firefighters and public employees — this isn’t a typical fraud case.
Then there’s the pace of the case.
Since early August, when the first guilty pleas were entered in U.S. District Court in Camden, 10 people have come forward and admitted their roles in the scheme.
But according to the pleas, hundreds of people were involved, writing the fraudulent prescriptions, recruiting patients willing to ask for the expensive, tailor-made medications, or allowing their identities to be used.
Two months later, the case continues to move forward, with law-enforcement observers predicting months more of pleas.
Federal court documents detail a massive prescription-fraud scheme from January 2015 to April 2016 that involved recruiting public employees — teachers, firefighters, municipal police officers and State Police troopers — to obtain medically unnecessary prescriptions for patients whom doctors never treated. The prescriptions included those for compounded pain creams, scar creams, antifungal creams, libido creams and certain vitamin combinations, all of which paid out generous reimbursements to the pharmacy from the health insurance plan.
In exchange for the prescriptions, the recruiters and the doctors received kickbacks from the out-of-state compounding pharmacy and pay co-conspirators, documents say.
David Frankford, a law professor at Rutgers University-Camden, said what makes this case different is the type of people who are involved.
“A lot of scams like this prey on the vulnerable,” Frankford said. “They offer them free lunches and transportation. That is not the case here.”
The 10 people to plead guilty to conspiracy to defraud the state health benefits plan include an Atlantic City firefighter, a Margate doctor and two Mainland-area pharmaceutical reps. All now are cooperating with authorities.
Defense attorneys and observers have described the fraud scheme as a “spoke and wheel” structure. It’s a description of a loosely knitted organization in which a center or “hub” controls the fraud through numerous “spokes,” or secondary co-conspirators.
These co-conspirators participate in independent transactions with the individual or group at the hub who collectively further a single, illegal enterprise. In many cases, each individual may not be aware of the size of the fraud or who else is perpetuating it.
So far, former Atlantic City firefighter Michael Pepper is the only public employee in the case to have accepted a plea deal.
But in the plea agreement between the government, Margate physician Dr. John Gaffney admitted writing phony prescriptions for at least 200 public employees.
The public employees who received fraudulent prescriptions could be interviewed by investigators to gain information about people higher up in the scheme and not face any legal repercussions, said Charles Ross, a New York-based attorney who has represented clients in medical compounding cases.
The employees could fit into one of three categories when it comes to the investigation, Ross said.
“They can either be witness, witness/target and targets,” said Ross. “Witnesses are usually people that prosecutors don’t have a case against but want to talk to, sometimes they will use subpoenas to get them to talk.”
Typically in large scale fraud cases, prosecutors focus on the bigger participants, as opposed to those at the bottom of the scheme, Ross said.
“Sometimes they will go after the smaller fish, but for the most part, they want the larger fish,” Ross said.
Ross said smaller law enforcement organizations could find it more difficult to prosecute a large number of those involved.
“For a smaller group, this would be a huge undertaking,” Ross said.
As the federal investigation continues to play out, the Atlantic County Prosecutor’s Office is doing its own investigation.
But Atlantic County Prosecutor Damon G. Tyner believes federal plea deals will continue.
“From the information that we have, these pleas will continue to happen over the next couple of months,” Tyner said.