Investigations Newsletter: Investment Bank Fined $400 Million For Failing to Remediate Deficiencies in its Risk Management Systems

Arent Fox

Investment Bank Fined $400 Million For Failing to Remediate Deficiencies in its Risk Management Systems

On October 7, the Federal Reserve Board and Office of the Comptroller of the Currency issued a consent order addressing “significant ongoing deficiencies” in Citigroup’s risk management and internal controls systems identified by the Federal Reserve Board years earlier. In addition to agreeing to a remediation plan described in the consent order, Citigroup also agreed to pay a $400 million penalty for its longstanding failure to remedy the issues described in the consent order.

The consent order requires Citigroup to conduct a gap analysis of its enterprise-wide risk management framework and internal controls systems to determine what remedial actions are needed and to submit a plan focused on enhancement of Citigroup’s data quality management program to ensure that it provides timely and accurate information for the risk management and internal controls systems. In addition, according to the consent order, Citigroup’s board of directors must submit a plan describing the actions it will undertake to oversee remediation of the issues identified in the consent order.

A copy of the consent order can be found here.

Two Individuals Charged In $24 million COVID-Relief Fraud Scheme

Diamond Blue Smith, a Florida-based recording artist, and Tonye Johnson, owner of a Pennsylvania towing company, were charged for their alleged role in a scheme to file fraudulent loan applications seeking more than $24 million in Paycheck Protection Program (PPP) loans under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

Smith was charged with wire fraud, bank fraud, and conspiracy to commit wire and bank fraud for allegedly obtaining a $426,000 PPP loan for his company Throwbackjersey.com LLC using falsified documents, and another $708,000 PPP loan, also using falsified documents, for his other company, Blue Star Records LLC. Smith allegedly used the PPP loans on luxury purchases, including a $96,000 Ferrari. Johnson is alleged to have obtained a $389,000 PPP loan for his company, Synergy Towing & Transport using falsified documents, and then using loan proceeds to pay other co-conspirators.

In total, 13 defendants have been indicted for their alleged involvement in the scheme, which involved the submission of over 90 fraudulent applications worth about $24 million that led to PPP loan payments of at least $17.4 million.

The DOJ’s press release can be found here.

Three Charged for Role in Alleged Medicare Fraud Scheme Involving Sale of Patient Data

Nathan LaParl and Talia Alexandre of Florida, and Stefanie Hirsch of California, were charged for their alleged role in a Medicare fraud scheme that involved selling patient data in exchange for more than $1.6 million in kickbacks. The patient data was used by the scheme’s mastermind to submit $109 million in false Medicare claims.

According to the charges, LaParl and Alexandre hired foreign call centers to contact Medicare beneficiaries to see if they were interested in discounted or free durable medical equipment (DME). Information provided by the beneficiaries was sold to co-conspirators who used it to file fraudulent Medicare claims for DME using shell companies. Alexandre allegedly received $1,469,000 in kickbacks, and LaParl is alleged to have received over $220,000. Hirsch is alleged to have given LaParl access to a patient eligibility tool that she had qualified access to as the owner of a scooter and wheelchair company. According to the charges, Hirsch charged LaParl about $0.25 per patient check.

The conspiracy’s mastermind, Juan Camilo Perez Buitrago, was charged with health care fraud in July, and is expected to plead guilty.

The DOJ’s press release can be found here.

Physical Therapist Sentenced to Two Years’ Imprisonment For Role in Medicare and Medicaid Fraud Scheme

Hatem Behiry was sentenced to two years imprisonment for his participation in a $30 million scheme to defraud Medicare and the New York State Medicaid Program. Behiry was convicted in May 2019 following a six-week trial of health care fraud, wire fraud, mail fraud, conspiracy to commit the same, and conspiracy to make false statements in connection with a federal health care program.

Behiry is one of eleven defendants to be sentenced for his role in the scheme, which involved three medical doctors who posed as owners of Brooklyn-based clinics that fraudulently billed Medicare and Medicaid for services and supplies that were not provided, were not medically necessary, or were otherwise fraudulently billed. All three doctors, who have also been convicted and sentenced, signed fraudulent documents that represented that they owned the clinics, signed medical charts and billing documents for patients that they did not actually see, and issued referrals for unnecessary medical services.

Behiry participated in the scheme from its early stages in 2007 through 2012. He was found to have signed medical records in which he falsely claimed that he provided physical therapy services when, in fact, he only engaged in brief conversations with patients. In order to bill Medicare and Medicaid for about an hour of physical therapy services, patients were instructed to remain at the clinic for an hour, where they spent the time watching television or engaging in services not covered by Medicare or Medicaid as physical therapy. Medicare and Medicaid paid a total of more than $5 million for physical therapy services billed by Behiry, $800,000 of which Behiry transferred from clinics to his own company.

Other defendants involved in the scheme received sentences ranging from approximately one to ten years.

The DOJ’s press release can be found here.

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Arent Fox
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