Germantown Doctor Gets 8-Year Sentence In Tax Fraud Scheme

GERMANTOWN, MD – Atif Babar Malik was sentenced Tuesday to eight years in prison followed by three years of supervised release in two criminal schemes that involved $1.376 million in kickbacks and fraudulent billing, along with a conspiracy to defraud the United States of more than $2.1 million in taxes, the US Department of Defense announced in a press release.

Per the sentence, Malik is also required to pay a $75,000 fine, $175,000 in restitution and to forfeit $241,976.

Malik was tried along with co-defendant Sandeep Sherlekar. The pair of doctors merged their pain management practices in 2009 to create Advanced Pain Management Services, the DOJ wrote. Co-defendants Muhammad Ahmad Khan and Vic Wadhwa were respectively the CEO and CFO of the organization, which changed its name to the American Spine Center (APMS/ASC) in 2010.

According to the DOJ, American Spine Center required patients who were prescribed controlled substances as pain medications to submit urine samples to monitor the levels of pain medication and other narcotics in their bodies.

According to evidence presented at trial, in late 2011, Mubtagha Syed, the marketing agent for Accu Reference (which was owned by co-defendant Konstantin Bas), proposed to Khan and Wadhwa that the clinic start referring patients’ urine toxicology specimens to Accu Reference in return for the payment of kickbacks.

After Malik and Sherlekar approved the plan, which also came to include back braces from another Bas-controlled company, the clinic began submitting all of its patients’ urine specimens to Accu Reference.

Each month from April 2011 through July 2012, APMS/ASC referred between 700 and 1,300 patient urine specimens to Accu Reference in return for kickbacks. Accu Reference received approximately $4.4 million from claims submitted to Medicare and private insurers for testing the specimens.

After deducting its overhead expenses on the testing, Accu Reference split its profits 50/50 with Khan, Wadhwa, Sherlekar, and Malik. (Syed also received a share of Accu Reference’s profits.) From the time the kickback payments commenced in June 2011 until the end of the scheme in August 2012, Bas caused his companies to pay kickbacks totaling $1.376 million to Sherlekar, Malik, Khan and Wadhwa.

Khan and Wadhwa deceived Drs. Sherlekar and Malik about the full amount of the kickback payments from Accu Reference, however, and retained more than 60% of the kickback payments for themselves. Sherlekar and Malik each received approximately $240,000 in kickbacks from the scheme.

In addition, according to evidence presented at trial, from January 2010 through the summer of 2012, APMS/ASC fraudulently submitted bills to Medicare and private insurers using a billing code that represented that two separate physicians had provided the nerve block and the anesthesia, when in fact, only one physician performed both, the DOJ said. As a result of this fraudulent “upcoding,” APMS/ASC received a higher level of reimbursement from insurers.

For example, on Jan. 3, 2012, Sherlekar provided both spinal injections and anesthesia to a large number of patients at APMS/ASC’s Frederick office. However, he texted Dr. Malik that “I am using your name today as surgeon as we have 34 procedures here [in Frederick] and 20 in Waldorf,” to which Malik responded “ok.” Malik was seeing patients at his office in Hackettstown, New Jersey that day.

On June 25, 2018, Malik pleaded guilty to conspiring to defraud the IRS. Malik admitted that from 2009 through 2012, he underreported his taxable income by approximately $3,374,997, resulting in additional taxes owed of $1,157,712. Malik failed to report as income the kickback payments received from Accu Reference; he did not report and instead pocketed large amounts of the cash payments received by the practice from patients; and he used the services of a corrupt New Jersey accountant to fraudulently overstate APMS/ASC’s business expenses on its corporate tax returns and to understate the income received from the company.

• Sandeep Sherlekar, age 52, of Germantown, Maryland, died before his scheduled initial appearance and arraignment. The charges were dismissed after his death.

• Konstantin Bas, age 41, of Brooklyn, New York, pleaded guilty to conspiring to violate the Anti-Kickback Act. Scheduled to be sentenced on September 12, 2018 at 10:00 a.m.

• Mubtagha Shah Syed, age 50, of Jersey City, New Jersey; pleaded guilty to conspiring to violate the Anti-Kickback Act. Scheduled to be sentenced on September 12, 2018 at 2:15 p.m.

• Vic Wadhwa, 41, of Frederick, Maryland, pleaded guilty to violating the Anti-Kickback Act. Scheduled to be sentenced on September 26, 2018 at 4:00 p.m.

• Muhammad Ahmad Khan, age 44, charged with the kickbacks conspiracy and conspiracy to defraud the United States. He is a fugitive.

United States Attorney Robert K. Hur commended the FBI, the Department of Health and Human Services – Office of the Inspector General, IRS - Criminal Investigation, the Defense Criminal Investigative Service, and the Office of Personnel Management – Office of the Inspector General for their work on the investigation. Mr. Hur also thanked Assistant U.S. Attorneys Jefferson M. Gray and Sean R. Delaney, who prosecuted the case against Dr. Malik.

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