A father-son team must pay $26.7 million in restitution, and do time in federal prison, for fraudulently signing up addicts for health insurance and getting kickbacks from treatment centers in California.
Jeffrey White played the dominant role creating the scam, leading his son Nicholas White into a scheme that used fake addresses to buy policies for clients in states where they didn’t actually live, but where Obamacare health care exchanges offered the most generous reimbursements for addiction treatment, the U.S. Department of Justice said.
The Whites, of Twin Peaks, paid the clients’ insurance premiums, arranged to have them transported to California and admitted into expensive treatment centers. In exchange, those centers paid the Whites as much as $7,500 per patient. The centers then went on to bill insurers thousands of dollars for treatment and expensive lab tests each week, prosecutors said.
At a sentencing hearing Tuesday, Feb. 23, Judge Alvin Thompson considered the influence that the elder White had in bringing his son, a former Marine, into the family business.
“To a degree, you were sucked into this course of conduct,” Thompson said, stressing that, while the son’s gain was only a fraction of his father’s, the younger man still profited from his endeavors.
The elder White, 63, was sentenced to 36 months in prison and three years of supervised release; Nicholas, 35, was sentenced to 13 months in prison and three years of supervised release.
The younger White was a former addict who became sober in his father’s clinic in Mexico, a sentencing report said. In 2014, he joined his father in recruiting addicts, using his empathy and experience as a former drug user to gain recruits’ trust.
While the father created the scam, the son provided organization and fine-tuning skills that put operations on spreadsheets and took it to a higher level, according to documents.
The scheme was detailed by the Southern California News Group nearly four years ago in its probe of deaths, sexual assault, drug abuse and paying for patients inside California’s loosely regulated addiction treatment industry on the so-called “Rehab Riviera.” Those stories have prompted several reforms, including federal probes, an Orange County District Attorney Office task force and new state laws designed to protect vulnerable people struggling with addiction. But officials say much more is needed.
The Whites were charged with defrauding Affordable Care Act programs in at least 12 states — Arizona, California, Connecticut, Delaware, Indiana, Kentucky, New Jersey, Ohio, Oregon, Pennsylvania, Tennessee and Texas — of more than $27 million. The Whites profited about $1 million through the scheme and pleaded guilty to one count each of conspiracy to commit health care fraud.
The case is believed to be the first involving fraudulent enrollment in ACA plans on a national scale, said U.S. Attorney John H. Durham of the District of Connecticut, where the Whites were prosecuted, in a statement.
Also indicted was Jeff Yates, owner of the now-defunct Morningside Recovery, which had several locations in Orange County. Yates was ill, apparently with cancer, according to court documents, and died in October. The DOJ asked the judge to dismiss the case against him in light of his passing.
The scheme worked for a while by creating phony residential leases, using fictitious landlords, in various states. The Whites used an online application and false cell phone numbers that made it appear the applicants lived at the fictitious addresses, and provided the false cell phone numbers to the ACA plans. If anyone at the ACA plan called the false local number, the call would ring through to a phone controlled by the Whites, prosecutors said.
The scam started to unravel when an insurer noticed that unrelated people in Connecticut were using the same address.
The Whites are released on bond. The son must report to prison on May 5. The father, who will be having surgery, must report to prison on August 24.
This investigation was the work of the U.S. Department of Health Human Services, the Federal Bureau of Investigation, the Internal Revenue Service and the U.S. Postal Inspection Service.
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