The search warrant for Dr. James Kauffman’s Egg Harbor Township medical practice reveals allegations of the illegal activities he was involved in beyond accusations of murder and running a drug ring with an outlaw biker gang out of his practice, exposing him as a “one-man crime spree.”
Underneath the lurid accusations of the endocronologist’s alleged 2012 murder-for-hire plot involving his wife, April, in their Linwood home, and dealings with the Pagan’s Motorcycle Club were allegations of a more lucrative criminal enterprise — health care fraud.
In 2017, the Department of Justice opened 967 new criminal health care fraud investigations, and federal prosecutors filed criminal charges in 439 cases involving 720 defendants, with a total of 639 defendants convicted of health care fraud-related crimes, according to the Department of Health and Human Services and the Department of Justice Health Care Fraud and Abuse Control Program Annual Report. Kauffman, until his death in January from apparent suicide in his Hudson County jail cell, was among those doctors believed to be taking advantage of the system.
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Kauffman was ordering unnecessary blood testing through a lab in his office, billing Medicare and Medicaid and receiving “tens of thousands of dollars each month” in kickbacks, according to the warrant for the June 2017 search of his office on Ocean Heights Avenue. In addition, he was writing faulty prescriptions for expensive compounded medications as part of an ongoing, $50 million state health benefits fraud scheme, the warrant states.
From Jan. 1, 2015, to June 1, 2016, Kauffman wrote medically unnecessary prescriptions for vitamins, lotions and creams 750 times with more than 650 going to the now-defunct Central Rexall Drugs Inc. in Hammond, Louisana, according to the warrant, citing an FBI investigation.
A spokeswoman for the FBI declined to comment.
In what is described in the warrant as a “pyramid scheme,” the drugs would cost Central Rexall $10 a dose, but they would charge the insurance company about $6,000, then split the profits with a recruiter. The warrant names Boardwalk Medical LLC, Northfield, a suspected shell corporation, as the local company that split the profits.
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The owner of Boardwalk Medical, identified in the warrant as a local pharmaceutical representative, has not been charged in the scheme. A call to the phone number publicly listed for his residence to request comment has not been returned. The name of the owner of Boardwalk Medical is being withheld by The Press because he has not been charged.
Rutgers Law School professor David M. Frankford said when a doctor prescribes medication to a patient who has no need for it, it’s fraud.
“Effectively you’re referring patients to compounding, and if the care is unnecessary, it’s fraud,” he said.
And as soon as a doctor receives money for referring a patient to medically unnecessary treatment, a kickback, it’s what Frankford called a “slam dunk” for prosecutors.
It is unclear how much Kauffman is alleged to have collected in the compounding scheme, but Frankford said it comes down to one motivating factor for doctors: “Greed. It’s just greed.”
And that greed had an effect on Kauffman, who used both the opioid ring and the compounding scheme to take advantage of the health care system.
Criminal justice professor Ross Allen, who teaches at Rutgers University–Camden, says in white-collar crime, the suspects tend to see victims as faceless — like when they steal from an insurance company. If they get away with it once, there’s a “can’t be caught” mentality that can lead to more criminal activity, Allen said.
“Who’s going to question the doctor?” he asked. “It’s like a blank checkbook if they have a prescription pad.”
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Central Rexall Drugs closed Dec. 30, 2016, after compounding medications for more than 120 years, filling prescriptions for patients all over the U.S., according to its website.
The pharmacy was suspended by the Defense Heath Agency in April 2015 for having filled faulty prescriptions for compounded drugs to patients with TRICARE, a military health insurance company, an accusation the pharmacy denies, according to court documents.
A spokesman for the U.S. Attorney’s Office Eastern District of Louisiana, as well as the pharmacy’s attorney, declined to comment.
Atlantic County Prosecutor Damon G. Tyner has linked Kauffman to the compounding scheme at least twice, including last August, when he said the search of Kauffman’s office was partially related to a separate county investigation into prescription health benefits fraud.
So far, 19 defendants have pleaded guilty in the federal court case, including pharmaceutical representatives from across South Jersey as well as teachers and firefighters.
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In the spring, Tyner’s office offered no comment on the investigation. In July, Superior Court Judge Bernard E. DeLury issued a gag order on all parties in the case surrounding the 2012 killing of April Kauffman to prevent “further negative impact on the criminal justice process.”