Two Margate firefighters, a Ventnor police officer and a co-owner of Tony’s Baltimore Grill in Atlantic City were among seven arrested Friday by federal agents in an ongoing $50 million compounding medication fraud case.

The accused surrendered to FBI agents at the Northfield office early Friday morning. The defendants left the office in handcuffs, each accompanied by a federal agent, who drove them to U.S. District Court in Camden. Meanwhile, a 50-count indictment unsealed Friday revealed the structure of the local criminal organization authorities allege cheated taxpayer-funded public workers’ health insurance programs out of more than $50 million.

The alleged local ringleaders, who recruited a network of people to submit fraudulent claims for medically unnecessary prescriptions, were identified as Northfield residents William Hickman, 42, a pharmaceutical sales representative, and his wife, Sara, 42.

According to the indictment, the company formed by Sara Hickman, Boardwalk Medical LLC, received roughly $26 million in kickbacks for its role, some of which it distributed to others in the enterprise for their services as recruiters.

Also arrested and charged Friday were:

Brian Pugh, 41, of Absecon, co-owner of Tony’s Baltimore Grill and owner of BP Med 1 LLC

Thomas Schallus, 42, a Ventnor police officer, who was allegedly recruited by Pugh

Christopher Broccoli, 47, of West Deptford, Gloucester County, a Camden firefighter

Thomas Sher, 46, of Northfield, and John Sher, 37, of Margate. Both men, Margate firefighters, were allegedly recruited by their brother Michael Sher, another Margate firefighter. Michael Sher pleaded guilty in the case earlier.

The seven join a total of about 30 people charged in the case since August 2017. Most are from Atlantic County, and the list includes teachers, firefighters, police officers, state troopers and other public employees along with a doctor and pharmaceutical representatives.

According to the indictment, the Hickmans allegedly recruited Pugh, who is also accused of conspiracy to commit money laundering and individual acts of money laundering.

Hickman also allegedly recruited Michael Sher, founder of MBC Distributions LLC, who then recruited his two brothers.

All seven pleaded not guilty Friday before U.S. Magistrate Judge Ann Marie Donio in Camden. The judge set bail at $100,000 on William Hickman and issued travel restrictions on him, as he is considered a flight risk.

According to the indictment, Sara Hickman established Boardwalk Medical in her name to hide her husband’s involvement. The company was used to work with an unnamed Louisiana compounding pharmacy to cheat the New Jersey State Health Benefits Program and the School Employees Health Benefits Program, authorities said.

Sara Hickman allegedly signed a contract as president of Boardwalk Medical with the compounding pharmacy, giving her company a percentage of the amount the pharmacy received from the pharmacy benefits administrator, which paid claims for the New Jersey public workers health insurance programs.

On Friday afternoon, the defendants were led one by one into the tight federal courtroom in Camden with chains around their waists, their hands cuffed, while family members watched from the back.

Sara Hickman’s attorney, Lee Vartan, complained about press being present as the defendants were led out of the FBI office in Northfield in handcuffs early Friday, calling the process “wholly inappropriate.”

“That jeopardizes not only her good reputation,” Vartan said, “but our ability (to fairly defend her).”

“We do not know who tipped off the press to being there,” countered Assistant U.S. Attorney R. David Walk.

All seven were all charged with conspiracy to commit health care fraud and wire fraud and with individual acts of health care fraud and wire fraud.

The Sher brothers are only allowed to meet if there is one parent present and they do not discuss the case, Donio said. A fourth, unnamed brother is also included in the rule because he is considered a possible witness.

As the two attorneys deliberated, the Sher brothers’ mother cried in the back of the room.

All defendants must turn in their passports by noon Monday and must abstain from excessive drinking. John Sher is prohibited from drinking any alcohol and is subject to mental health treatment and drug testing and treatment as part of pretrial arrangements. Broccoli must also submit to mental health treatment.

Pugh’s attorney, Michael Baldassare, said the U.S. Attorney’s Office “smears” Pugh’s name. Pugh co-owns Tony’s Baltimore Grill.

“He is a well-respected local businessman, and he is presumed innocent. After a two-year, multimillion-dollar failure to find any evidence against the big corporate players, the prosecutors are trying to bully police officers, teachers and hard-working local business people,” Baldassare said. “That’s why they do the cheap tactic of a perp walk. This is very troubling, and it will not stand.”

Margate Mayor Michael Becker said the process for indicted public employees means they are suspended without pay.

“It’s a sad day in Margate, but we have a plan in place to ensure public safety,” Becker said.

Schallus, an acting sergeant with the Ventnor Police Department, was suspended from the department without pay effective Thursday, police Chief Doug Biagi confirmed.

A warrant used to search Dr. James Kauffman’s Egg Harbor Township medical practice named Boardwalk Medical, a suspected shell company, as the local company that split the profits after Kauffman wrote medically unnecessary prescriptions to a company in Louisiana. Kauffman was charged in his wife April’s 2012 murder and with leading an opioid ring with the Pagans motorcycle gang. He died in jail before his trial could be held. Retired Pagans member Ferdinand Augello, also charged in the murder plot and drug ring, was convicted in October and sentenced to life in prison.

News of the massive fraud ring first surfaced in July 2017 after federal authorities subpoenaed Margate, Ventnor and Atlantic City requesting information about employee health benefits.

Recruiters allegedly offered the public employees hundreds of dollars per month to agree to obtain prescription compounded medications without any examination by a medical professional.

According to the U.S. Attorney’s Office, the defendants recruited individuals from July 2014 to April 2016 asking them to get expensive and medically unnecessary compound medications from the Louisiana pharmacy.

Officials said the Hickmans then had Pugh and other conspirators recruit others, mainly public employees, whose medical benefits covered the expensive compounding medications and drugs.

William Hickman paid Dr. John Gaffney, of Margate, to reward him for signing prescriptions without examining the patients, according to the indictment. Gaffney previously pleaded guilty to conspiracy to commit health care fraud and admitted taking payments and signing prescriptions for patients he did not see, officials said.

Contact: 609-272-7239

Twitter @AublePressofAC

Staff Writer

I cover breaking news on the digital desk. I graduated from Temple University in Dec. 2017 and joined the Press in the fall of 2018. Previously, I freelanced, covering Pennsylvania state politics and criminal justice reform.

Staff Writer

In my first job after college got paid to read the New York Times and summarize articles for an early online data base. First reporting job was with The Daily Record in Parsippany. I have also worked in nonprofits, and have been with The Press since 1990.

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