Fifteen Charged in Los Angeles Health Care Fraud Takedown Tied to $1.8 Billion in False Claims

LOS ANGELES — The Justice Department announced charges Thursday against 15 defendants, including six medical professionals, in health care fraud schemes that prosecutors say generated more than $1.8 billion in fraudulent claims against government and private insurance programs in the Los Angeles area. Eight of the defendants were arrested Thursday.

The largest scheme, worth over $1.6 billion in billed claims, targeted vulnerable people who were trafficked into Southern California for substance abuse treatment that was never provided or was medically unnecessary, the department said. It is the largest case of its type ever prosecuted by the department.

Sham treatment centers and body brokers

Prosecutors charged Nathan Young, 39, his father David Young, 71, and Honey Phipps, 42, and Cody Phipps, 36, with running dozens of purported treatment companies in the Los Angeles area and around the country. According to the indictment, “body brokers” targeted people who were unhoused or in poverty and those attending substance abuse support groups, selecting patients based on how generous their insurance coverage was and in some cases fraudulently enrolling them in new policies.

The defendants lured patients to Southern California with offers of free flights, money, apartments, hotel stays, cars, gift cards, marijuana, cigarettes and other drugs, prosecutors said. Once there, some patients found cramped, unsanitary housing described as “trap houses,” and the Youngs allegedly directed that patients be drugged “to knock the client out” if they tried to leave. Group “therapy” in some cases consisted of video calls with more than 100 attendees that patients could attend from a beach, according to text messages quoted in court filings.

Nicholas Moore, 33, who managed and served as a nominal owner of some of the facilities, pleaded guilty to conspiracy to commit health care fraud and wire fraud. Moore admitted to assisting the Youngs in submitting $199 million in fraudulent claims.

Unnecessary surgeries, hospice fraud and a pharmacy scheme

The department also announced charges in a $135 million scheme in which Dr. Harold Tabaie, 78, a cardiothoracic surgeon, and his business partner Hany Malek, 61, allegedly billed Medicare for unnecessary atherectomies (invasive procedures in which a bladed catheter clears plaque from arteries), performed on patients who did not actually have disease in their arteries. Prosecutors say Malek posed as a medical doctor to diagnose patients, billed procedures under the names of other providers, and induced beneficiaries with kickbacks including free transportation, groceries and utility bill payments. Some procedures left patients in extreme pain, according to the indictment. The case was flagged through data analytics showing Tabaie was an extreme national outlier in billing for the procedure.

Three separate hospice fraud schemes billed Medicare over $138 million for patients who were not terminally ill, and another defendant was indicted in a $270 million scheme to defraud Medi-Cal, California’s Medicaid program, through bogus pharmacy claims.

“If you steal health care dollars from the American taxpayer or abuse your position to harm patients, we are coming for you — and the data will lead us to wherever you are,” Assistant Attorney General Colin M. McDonald said in the announcement. FBI Director Kash Patel said eight arrests were executed Thursday.

The charges are allegations, and the defendants are presumed innocent.

Reporting based on coverage by the U.S. Department of Justice and the HHS Office of Inspector General.