Health-care exec’s Medicare fraud scheme included lobbying Washington

October 5, 2011

Miami health-care executive Larry Duran orchestrated one of the largest Medicare frauds in U.S. history, submitting more than $205 million in phony claims and landing a record-breaking 50-year prison sentence for his crimes.

But another piece of Duran’s scheme also caught the eye of prosecutors. They say he extended his fraud through his lobbying efforts, all aimed at getting official Washington to make it easier for mental health centers such as his to make money.

An advocacy group he helped set up, the National Association for Behavioral Health (NABH), has spent more than $750,000 on lobbying efforts over the past five years, including staging “fly-ins” on Capitol Hill and providing advice to group members on how to get around Medicare denials, according to the Justice Department. The group also held fundraisers for lawmakers such as Sen. Mary Landrieu (D-La.) and former congressman Kendrick B. Meek (D-Fla.), records show.

“Duran did not stop with just committing a massive fraud on the Medicare program through his own companies. Duran franchised his fraud to others,” trial lawyer Jennifer Saulino wrote in a sentencing memo. The advocacy group he helped found, she said, “provided Duran a legitimate-looking vehicle to lobby Congress to allocate more money, through Medicare, to Duran and his co-conspirators for their fraudulent schemes.”

The case has alarmed advocates and providers in the mental health field who fear that Duran’s illicit operation — and his related lobbying efforts — will undermine the legitimate needs of poor patients struggling with psychiatric problems. It comes amid a widening crackdown by the Justice Department on fraud within Medicare, the government’s health-care program for the elderly and disabled, and Medicaid, which serves the poor.

Duran said he pleaded guilty in the case to atone for his actions.

“I am sorry, and I have been for years,” he testified at his sentencing hearing Sept. 16. “Not that day that I was arrested, but for years and years. I had to live with all of this for a very long time.”

The company at the center of the case, American Therapeutic Corp., was a chain of seven Florida clinics co-owned by Duran, 49, and his girlfriend, Marianella Valera, 40. The firm made an estimated 866,000 bogus claims and received $87 million in fraudulent Medicare fees, laundering much of the money through an elaborate system of shell companies, according to Duran’s guilty plea.

The basic scheme, records show, worked like this: Duran and Valera paid up to $400,000 a month in kickbacks to assisted living centers, halfway homes and others to procure a steady stream of patients for their clinics, which claimed to be providing group mental health treatment. Doctors frequently faked records or signed off on charts without seeing any patients.

Patients often suffered from Alzheimer’s disease, dementia or other conditions unsuited for therapy and were frequently left to urinate or defecate on themselves as they waited for treatment that never came, testimony showed.

“The people that were there were just kept there and run through like cattle,” the judge in the case said.

Part of Duran’s strategy, prosecutors alleged, was to use his connections to push for policy changes to benefit his fraudulent business. Justice Department officials said in court testimony that Duran was an NABH founder, a board member and a leading financial contributor, writing at least $49,000 in checks to the group. “He had a very integral part of the lobbying role,” FBI agent Patrick Koeth testified during sentencing. “Basically, his involvement was to keep pushing for those lobbying efforts.”

The NABH was formed in 2006 with a corporate address in Baton Rouge and operates in Washington, according to tax and lobbying forms. The group provided an unsigned statement saying that Duran quit the NABH in 2009 and that “the organization has not had contact with him since that time.”

“NABH agrees that Medicare fraud must not be tolerated, and our members applaud the Department of Justice for uncovering such activity in order to protect the vulnerable individuals who need services the most,” the statement read.

Records show the group has been represented by some of Washington’s top lobbying firms: Patton Boggs, Alston & Byrd, Bryan Cave and, most recently, Polsinelli Shughart. Polsinelli lobbyist Harry A. Sporidis said in an e-mail that he had “very little interaction” with Duran, who he said left the NABH shortly after the group hired him.

The group boasts of its success in fighting for higher Medicare rates for partial hospitalization programs — the type of service Duran offered — and solicited money for a “policy defense fund” to fight proposed cuts.

On its Web site, the group takes credit for legislation in December 2009 that would have added meals and transportation costs to Medicare reimbursements for such clinics. One of the co-sponsors was Meek, the beneficiary of a fundraiser hosted by Duran two months earlier.

The NABH also hosted a New Orleans fundraiser for Landrieu in August 2010, according to an invitation. Jane Campbell, Landrieu’s chief of staff, said the senator “had no knowledge of Duran’s scheme” at the time of the event. Duran did not attend the fundraiser or donate to Landrieu, Campbell said.

In January 2010, Duran met with Rep. Ileana Ros-Lehtinen (R-Fla.) to “see if she can help us out with some of the issues with Medicare and some of the services we’re currently providing,” according to a video of the visit submitted into evidence by prosecutors.

Ros-Lehtinen’s office did not respond to requests for comment.

U.S. District Judge James Lawrence King agreed with prosecutors that Duran deserved 50 years in prison but did not accept their argument that his Washington lobbying and fundraising activities should be a factor in the decision.

“The judge didn’t buy that theory,” said Lawrence Metsch, Duran’s lead defense attorney. Metsch said Duran plans to appeal his sentence, which is billed as the longest prison term ever imposed for Medicare fraud. Valera was sentenced to 35 years for her role in the scheme, and more than two dozen others have been convicted or charged.

Mental-health advocates say the Duran case has been deeply damaging to legitimate providers, many of which are nonprofits, have little clout and rely heavily on federal support. Linda Rosenberg, president of the National Council on Community Behavioral Healthcare, said the NABH appeared to be focused primarily on securing higher Medicare fees for private, for-profit clinics.

“To have them involved in fraud like this is horrendous,” Rosenberg said. “It hurts people with mental-health issues and their families. Everyone gets tainted when something like this happens.”

Staff researcher Lucy Shackelford contributed to this report.

Deputy Editor, National Politics
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