Operation RayScam: Medical Practitioner Arrested

Acting Attorney General John Hoffman and the Office of the Insurance Fraud Prosecutor (OIFP) announced that seven medical practitioners - including one from Franklin Lakes - were arrested yesterday for allegedly taking illegal kickbacks worth approximately $200,000 from Diagnostic Imaging Affiliates (DIA) in exchange for patient referrals to the company’s testing facilities.

In a span from 2008 to 2013, the doctors allegedly made more than 20,000 referrals to DIA centers, which resulted in payments of millions of dollars from private insurance carriers and the Medicare and Medicaid programs.

Arrest warrants were executed by investigators from the Office of the Insurance Fraud Prosecutor and the Division of Criminal Justice. Each medical practitioner, which included six physicians and a chiropractor, were charged with second-degree health care claims fraud and third-degree commercial bribery. They were processed at the Division of Criminal Justice Office in Whippany and released on bail.

Dr. James W. Cahill, 51, of Franklin Lakes was among the arrested. Cahill, an orthopedic surgeon that practices in Hackensack, has allegedly referred hundreds of scans, worth hundreds of thousands of dollars to the Zuberi organization. In exchange for the scans, Cahill allegedly received approximately $4,000 in gift cards, some of which he used at a boating supply store, West Marine in Lodi. It is also alleged that his wife used a $1,000 gift card at a Louis Vuitton store in Hackensack on Christmas Eve 2012.

The arrests were made in the latest phase of “Operation RayScam”, which was launched in June when the OIFP Medicaid Fraud Control Unit arrested Rehan “Ray” Zuberi, 45, of Boonton Township, the owner of DIA, for his alleged role as the leader of a criminal enterprise that provided hundreds of thousands of dollars in illegal kickbacks to medical practitioners in exchange for patient referrals to his testing facilities.

It is alleged that under Zuberi’s direction, the organization paid kickbacks to numerous medical practitioners, including chiropractors and physicians, in return for patient referrals to DIA testing centers for expensive diagnostic tests (e.g., MRIs and PET scans).

These alleged kickbacks were paid using checks from “shell” corporations created by the Zuberi enterprise and gift cards/certificates. The Zuberi enterprise also disguised the payment of kickbacks by providing doctors services (e.g., patient transportation and office renovations). By obtaining referrals through the alleged kickback scheme, the Zuberi enterprise may have generated millions of dollars in illegal profits. Under state law, medical practitioners are not permitted to accept a benefit in exchange for a referral.

DIA is an umbrella corporation that manages numerous subsidiary diagnostic imaging facilities, which are located in northern and central New Jersey. More than a dozen search warrants were executed in June at locations that included 10 DIA-owned facilities, the offices of DIA’s billing company and three homes.

“The medical practitioners arrested yesterday betrayed the trust of their patients and allegedly scammed insurers both public and private to enrich themselves,” said Acting Attorney General Hoffman. “Medical practitioners should only be concerned with the quality of care they provide and recommend. They should not be selling their medical opinion to the highest bidder.”

“Our investigation has shown that the medical practitioners allegedly saw their payments from DIA rise and fall based on the number of referrals they made,” said Acting Insurance Fraud Prosecutor Ronald Chillemi. “These medical professionals were supposed to provide sound advice and care, but they were instead concerned with the incentives tied to their performance as alleged fraudsters.”

The doctors arrested yesterday include:

Dr. Simon B. Santos-Arias, 71, of Guttenberg – From 2008 to present, Santos-Arias referred several thousand scans valued at more than a million dollars to Zuberi-owned facilities. It is alleged that a Zuberi employee made payments on Zuberi’s behalf to Dr. Santos-Arias in the amount of approximately $18,800. In exchange for Santos-Arias’ cooperation in the scam, a relative of the doctor is also alleged to have received a free CT scan at one of Zuberi’s imaging centers. Dr. Santos-Arias’ practice is located in Union City.

Dr. Michael L. Gross, 47, of New York, N.Y. – From 2008 to 2013, Gross allegedly referred from his Hackensack office thousands of scans, which were billed by DIA to insurers for hundreds of thousands of dollars. Gross, an orthopedic surgeon, allegedly received approximately $4,500 in gift cards form the Zuberi organization, which he and his practice’s administrator used to purchase luxury items. On one occasion in May 2013, he allegedly used a $1,000 Nieman Marcus gift certificate to partially pay for a $5,627 purchase, which included a $3,000 gown. It is also alleged that a DIA employee made purchases estimated at more than $8,000 at a health spa owned by Gross.

Dr. William M. Steck, Sr., 70, of West Orange – Steck, a gynecologist/obstetrician in West Orange, received his first alleged kickback from the Zuberi organization, a check for $1,000, in January 2010. Prior to that time, Steck had referred fewer than 100 tests to Zuberi’s imaging centers. Following that initial payment, and continuing through November 2011, Steck allegedly referred hundreds of scans to DIA imaging centers and received an estimated amount of $55,000 as compensation from Zuberi shell companies.

Dr. Alan P. Epstein, 45, of Manalapan – Epstein allegedly referred dozens of scans valued at several thousand dollars to Zuberi-owned medical imaging centers. In exchange, Zuberi allegedly paid approximately $2,000 for architectural services and permits that were meant to expand Epstein’s practice, Epstein Chiropractic in Elizabeth. During certain points of Epstein’s work with the Zuberi organization from September 2012 to December 2013, it is also alleged that the organization spent an average of approximately $4,000 per month to pay for Epstein’s patient transportation expenses.

Dr. Guillermo A. Munoz, 49, of Union – In 2013, Munoz allegedly received approximately $13,000 in kickbacks from the Zuberi organization in exchange for referring to it dozens of scans. He was allegedly compensated, among other ways, via sham rental agreements, which provided that Zuberi’s organization pay monthly “rent” to use space at two locations of Munoz’ Elizabeth offices. It is alleged that the “rental agreement” was a sham designed to conceal the kickbacks from Zuberi’s organization.

The charges announced today are merely accusations and the defendants are presumed innocent until proven guilty. Because the charges are indictable offenses, they will be presented to a grand jury for potential indictment. Second-degree crimes carry a sentence of five to 10 years in state prison and a criminal fine of up to $150,000, while third-degree crimes carry a sentence of three to five years in state prison and a criminal fine of up to $15,000. The investigation is ongoing.

Acting Insurance Fraud Prosecutor Chillemi noted that important cases have started with anonymous tips. People who are concerned about insurance cheating and have information about a fraud can report it anonymously by calling the toll-free hotline at 1-877-55-FRAUD, or visiting the Web site at www.NJInsurancefraud.org. State regulations permit a reward to be paid to an eligible person who provides information that leads to an arrest, prosecution and conviction for insurance fraud.