Huge debt-relief fraud in Pompano Beach bilks $70 million from thousands of victims

By Joseph A. Mann Jr., FloridaBulldog.org 

Jeremy Lee Marcus, accused of bilking thousands of consumers in a $70 million fraud, as pictured in a February 2016 press release by his Helping America Group.

In a debt-relief scheme that affected about 15,000 people across the country, three telemarketing executives headquartered in Pompano Beach and using a branch in Panama bilked victims out of an estimated $70 million, according to the Florida Attorney General’s Office, the Federal Trade Commission (FTC) and the attorney working to retrieve assets in the complex case.

A civil complaint filed recently in federal court in Fort Lauderdale by the Attorney General’s office and the FTC alleged that telemarketers at several of the companies managed from the Pompano Beach office building offered to consolidate personal debts for customers, pay off, settle or obtain dismissals for these obligations and improve their credit ratings.

Customers were allegedly convinced to pay from a few hundred to more than a thousand dollars per month to one of the so-called debt-relief companies that were part of the scheme, according to the complaint.

In most cases, no payments were made to reduce these debts. Moreover, customers ended up becoming victims: They incurred even greater indebtedness thanks to fake loans obtained from the companies, loans that were supposedly being used to pay their pre-existing debt. Some customers were sued by their old creditors or were forced into bankruptcy.

Running since 2013 with a headcount reaching around 150 managers, telemarketers, administrative staff and others, this South Florida-based operation was shut down in May by a federal judge who issued a preliminary injunction and asset freeze order affecting the individuals and companies involved.

The court also appointed a Receiver, Jonathan E. Perlman, a shareholder at the Miami-based law firm Genovese Joblove & Battista and an attorney with extensive experience in receivership roles. His formidable task is to sift through the maze of companies, accounts and financial operations to recover funds for defrauded customers.

Defendants – human and corporate

On May 8, the FTC and the State of Florida filed a complaint seeking an injunction with the U.S. District Court of the Southern District of Florida. (Case No. 17-cv-60907-Altonaga) The defendants in the case were Jeremy Lee Marcus, who was described by the Receiver as the CEO and an owner of the group of companies in the debt relief operation; Craig Davis Smith, the COO and also an owner; and Yisbet Segrea, an executive who ran the office in Panama, plus dozens of corporate defendants controlled by the individual defendants. These included 321Loans Inc., Financial Freedom National Inc., Helping America Group, Marine Career Institute Sea Frontiers Inc., Instahelp America Inc. and Breeze Financial Solutions.

Receiver Perlman believes there could be more than 80 companies involved as corporate and related defendants, but that 23 are currently investigation targets since they offer the best potential for recovery, he told the Florida Bulldog.

The Pompano Beach office building described by authorities as the headquarters for the multi-million dollar fraud. Photo: Joseph A. Mann Jr.

The companies operated as a “common enterprise” through an interrelated network with commingled funds, all allegedly controlled by the three defendants, the complaint says.

According to the FTC and Florida Attorney General’s complaint, these are the basics: The defendants made their money by promising customers large debt consolidation loans at attractive rates, or by telling customers they were taking over the task of servicing consumers’ pre-existing debt relief accounts. In both cases, customers paid the defendants millions of dollars under the false premise that these alleged debt-relief companies would pay off, settle or obtain dismissals of consumers’ debts and improve their credit ratings.

In fact, there were no actual loans. Defendants kept most of the loan payments and paid very little or nothing toward reducing their customers’ debts. Eventually, the victims found out that no one was paying their original debts, their accounts were in default and their credit scores had suffered. In some cases, original creditors filed lawsuits against the consumers and some were forced into bankruptcy.

One scam victim, Derek S. from Vero Beach, told about his experience with the debt-relief group in an April affidavit.

Two years ago, he said, he did a Google search for a debt consolidation firm and found Helping America Group (HAG), one of the corporate defendants. “At that time, I was current on my debts and was making the minimum payments monthly,” he said in the affidavit. “I was looking for a company to consolidate my debt and to make one lower monthly payment.”

A fake loan

After calling HAG and learning about their services, Derek was told that another defendant firm, 321Loans, would be making the loan to him and would pay off his creditors. The loan, a fake, was for a total of $10,835 plus interest at 9.99 percent. He was also told to stop paying his creditors, not to talk to them and that another group firm, Breeze Financial, would help improve his credit score.

He started making monthly payments to Paralegal Support, still another firm in the group, and subsequently called several times to ask for a progress report. He was told “it would take time to negotiate the debt.”

A few months later, he called two of his creditors, who said they never heard of HAG or 321. He tried to cancel his agreement but was not allowed to do so until after he had filed complaints with the Florida Attorney General and the Better Business Bureau. Last December, 321Financial – another element in the scheme — issued a cancellation letter and a refund of $200.13.

“I paid thousands of dollars to HAG/321 and they did not do anything they promised,” he said. “My debt effectively had been doubled.”

The joint state-federal complaint filed last May states that the defendants were in violation of the Federal Trade Commission Act, the FTC’s Telemarketing Act (covering consumer fraud and abuse) and the FTC’s Telemarketing Sales Rule (TSR). The Florida Attorney General brought the action under the state’s Deceptive and Unfair Trade Practices Act and the Telemarketing Act.

The defendants, who are free, have denied any wrongdoing. While the current case against the defendant group is a civil action, a criminal suit could be filed in the future, according to an attorney familiar with fraud actions.

The FTC and the Florida Attorney General’s office declined to comment on the progress of the case, since it is still open.

Finding customers and making the pitch

The scheme attracted potential victims by using Internet advertising and websites, direct mail and unsolicited phone calls. The defendants also bought presumably legitimate debt-relief firms and acquired their clients’ names as well as personal and financial information. Here’s how it allegedly worked:

  • Companies in the group used ads on their websites or sent personal letters to the potential client’s home address. Sometimes falsely identifying themselves as nonprofits, they offered low-interest loans so a consumer could combine all debts and make one payment at a more favorable interest rate. For example, a typical letter sent by one of the group companies, 321Loans, offered up to $35,000 at 4 to 7 percent interest to cover debts from credit cards, private student loans, accounts in collection, medical bills, etc. The letter said the credit was pre-approved.
  • The group supplied its Pompano Beach telemarketing staff with training manuals that taught “The Art of the Sale.” Some nuggets from the manuals: “The more time you spend qualifying (researching) the prospect, the less time you will waste pitching unqualified people for hours only to find they HAVE NO $$$,” and “so remember your ABC’s – Always Be Closing!”
  • When people called a “customer approval center” (or when sales staff made unsolicited phone calls), prospects were told that a loan would be made to cover the full amount of their debt, plus interest. The loan would be used to pay off all indebtedness, and the lucky consumer would only have to make monthly payments that were much less than what they were paying. The companies told consumers they could provide low-interest loans because their nonprofit status allowed them to borrow at favorable rates.
  • While potential clients were still on the phone, telemarketers emailed them a link to a document designed to look like a loan agreement. Consumers clicked on highlighted areas to initial and sign the agreement, which committed them to pay back the loan and fees, wherever applicable. The 50 to 75 page document in fact contradicted the sales pitch made by the telemarketers.
  • Consumers agreed to have their bank accounts debited immediately for their first loan “repayment” or for a processing fee. Then monthly “repayments” were automatically taken from their accounts, ranging from $200 to over $1,000.  Few or no payments were made to creditors, and a consumer with, say, $8,000 in old debts, would owe the pre-existing amount, plus the $8,000 “loan” taken out from a defendant company.
  • When consumers were told by original creditors that none of their bills had been paid, dismissed or settled, the defendant companies strung them along with false explanations, such as more time was needed to validate the consumers’ debts or to confirm payoff amounts. Clients who called to complain were given excuses and treated badly. Sometimes, the only contact number available was disconnected.
  • In another aspect of this scam, the group, using mostly outside legal counsel, worked with some clients who were sued by creditors before the operation was shut down in May, according to the Receiver’s Amended First Interim Report filed in June. In these cases, the group’s attorneys ironically won large claims for clients related to supposed violations of the Telephone Consumer Protection Act or the Florida Consumer Collection Practices Act by credit card companies. But clients only received a small portion of the damages. For example, one client received $1,000 from a law firm working with the group after a credit card company paid a total of $80,000. Many cases followed a similar pattern, and some customers apparently were not aware of the amount of the total settlement.

Recovering assets for victims

“I’m essentially the CEO of this defunct enterprise,” Perlman, the court-appointed Receiver, told the Florida Bulldog. “My main goal is to conserve and protect all the assets of the receivership.”

Assets – cash and a wide range of real estate – include a 50,000 square foot headquarters building at 1410 SW 3rd St., Pompano Beach. Other tenants in the building who were unrelated to the defendant group continue to provide revenue to the receivership.

So far, the receivership has served over 30 banks with orders for records, and continues to look for other financial institutions that might be a source of assets.

Perlman told a Florida Bulldog reporter that the information his office has gathered so far indicated that “the amount taken from customers has been $70 million, and continues to rise.” It will increase as more bank records come in. The estimate in May was $50 million.

“We come in unannounced and serve papers to all the institutions we know about,” he said. “We try to obtain money and other assets voluntarily. If not, you take it to the judge.”

While the receivership is identifying and seizing assets related to the case, reimbursement to victims will come after the asset search is completed and the current civil proceeding resolved.
Perlman’s team has set up a website, www.321loansreceivership.com, to inform victims and the public about developments in the receivership process. Currently, he is the Temporary Receiver, but has petitioned the court to be named Permanent Receiver.

Fraud and billing mistakes cost Medicare – and taxpayers – tens of billions last year

By Fred Schulte, Kaiser Health News 

Federal health officials made more than $16 billion in improper payments to private Medicare Advantage health plans last year and need to crack down on billing errors by the insurers, a top congressional auditor testified Wednesday.

James Cosgrove, who directs health care reviews for the Government Accountability Office, told the House Ways and Means oversight subcommittee that the Medicare Advantage improper payment rate was 10 percent in 2016, which comes to $16.2 billion.

Adding in the overpayments for standard Medicare programs, the tally for last year approached $60 billion — which is almost twice as much as the National Institutes of Health spends on medical research each year. (more…)

Hallandale freezes payments for city development, jobs programs citing waste & fraud

By William Gjebre, FloridaBulldog.org 

Hallandale Beach City Manager Roger Carlton

Hallandale Beach City Manager Roger Carlton has ordered what could be a multi-million dollar freeze on all payments under two city jobs and business development programs, saying they “have lost their way.”

Carlton acted about what he said was “waste” and possible fraud weeks before a report by county investigators became public last week that accused City Commissioner Anthony Sanders of failing to disclose payments he received from a local community group awarded city funds, including money under the two programs, with his backing.

In a June 5 memorandum obtained by Florida Bulldog, Carlton, who was appointed city manager by a new reform-minded city commission majority, expressed outrage about the flawed city programs and public apathy about them.

“I am angry about this situation,” Carlton wrote. “… It is extremely disappointing that there is no outrage in the community about these programs. No demands for reform have been publicly made to date. No complaints regarding the fact that public funds, which should have been utilized effectively to build capacity of local contractors, or help individuals find work can be found.”

In a preliminary July 7 report, the Broward Inspector General’s office said Commissioner Sanders “engaged in a pattern of misconduct” when he “failed to disclose payments” made to him, other family members and his church, Higher Vision Ministries, by a jobs development group, Palms Community Action Coalition (PCAC) during a three-year period. Sanders voted to give PCAC three grants and backed seven funding agreements under the Community Benefit Program (CBP), resulting in the PCAC receiving a total of $893,320 from 2013 through 2015, according to the report.

Carlton’s directive was aimed at the CBP and the Hallandale Opportunity Project (HOP), the city’s administrative arm created to monitor job development, including placement and training, and the purchase and use of local subcontractors and residents, by firms that won contracts. Those gaining contracts under the program pledged a percentage of the contract to hire residents and subcontractors and/or earmark funds to train and create jobs for residents.

“It’s not a pretty outcome,” Carlton said in a brief interview with the Florida Bulldog, adding “millions of dollars” are at stake. The city manager also said the city will “recover as much as possible” of any misused funds.

“I have directed the Finance Department and the Capital Improvement Division to cease making any payments to consultants, contractors, design/engineering firms and/or individuals under the CBP/HOP program until a complete review … can be completed,” Carlton said in his memo.

Exception to freeze for a handful

“The only exception to this payment freeze,” he wrote, “will be to those individuals and firms who are doing actual physical work or are in a verifiable training program at a job site, and who are qualified participants due to their employment and residency status.”

Jeremy Earle, assistant city manager, has been placed in control of the troubled programs and was directed to reform them. The city’s review of the programs, Carlton’s memo said, “will include an analysis of waste, fraud and abuse.” It added, “Without equivocation, there has been waste. Fraud and abuse will be determined.”

“If necessary,” Carlton stated, “the results of our review will be brought to the appropriate authorities for their determination.”

In his memo, Carlton said the city must retool the programs – not terminate them — and make them effective by using “best practices across the country… We must also eliminate providers that are not contributing to program goals.”

The new controversy surrounding the Hallandale’s CBP is similar in some aspects to that involving the city’s troubled Community Redevelopment Agency, which came under investigation by the Broward Inspector General Office five years ago. The findings: The city’s CRA lacked effective city oversight, agency funds were mixed with city funds, a good deal of spending lacked documentation, and policies changed frequently or were not adhered to. The IG found $2.2 million in questionable CRA expenditures from 2007 to 2012, including inappropriate loans and grants to local businesses and nonprofits.

The IG’s new probe – as reported by Florida Bulldog in June 2016 – was already underway when Carlton took over as city manager on Feb. 6, 2017.  He didn’t like what he found surrounding the CBP and HOP.

“During the past six years, the CBP and the HOP programs have lost their way for a complex variety of reason,” Carlton said in the memo. Successful bidders for city contracts “have contributed to the CBP and HOP at a rate which has grown so rapidly since the recovery of the Great Recession, that there are not enough small contractors of unemployed/underemployed workers in the city of Hallandale Beach to feed into the program.”

The programs ran afoul, he stated, because:

  • Program personnel for both the city and companies awarded contracts were hired often without a competitive process or without demonstrating the ability met the goals of the programs.
  • City monitoring staffers were not given “uniform standards or criteria… to follow” and were not included in negotiations to understand CBP provisions of each contract; and sanctions for failing to comply were less severe than the cost of complying.
  • “City administrators did not demand the excellence and fair-dealing required for the effective use of public funds. That is our fault, and the city administration will resolve these issues going forward.”
  • “The city commission also needs to shoulder some of the responsibility for the difficulties in this program. The rumors, confrontations, accusations and innuendos regarding abuses in the CBP/HOP are not new. When my predecessor brought a series of reforms on October 19, 2016, these reforms were approved by the city commission in a 3/2 vote…, but were not made a priority. The turmoil that swirled around city hall at the time, in part, allowed the need to implement the reforms as a priority of the organization to go unmet.”

In its July 7 report, the Broward IG also stated that Commissioner Sanders solicited and received contributions from developments seeking to do business with the city under the CBP program during the period of the investigation.

The IG report revealed some possible payment discrepancies that could receive closer review by the city:

  • PCAC had an agreement to pay $1,000 a month to Higher Vision to transport job trainees to Sheridan Technical College in Hollywood, with payments totaling $31,000. But the report said no services were provided after May 16, 2015. It also said the city provided free bus passes to the trainees to get to the school.
  • The city provided $17,000 from October 2014 to September 2015 for PCAC to send 10 women to Sheridan Technical to receive training as nurse aides. But six of them dropped out.

New majority on Hallandale commission wants to know: Where did CRA millions go?

Update: Jan. 23 – Hallandale Beach city commissioners Monday night gave initial approval to hiring an accounting firm to conduct a forensic audit of the city’s long troubled Community Redevelopment Agency.

Sitting as directors of the CRA, the commission designated the firm of Stanley I. Foodman, CPA & Advisor, to work with newly appointed City Manager Roger Carlton to determine the audit’s scope and cost. Carlton will present their proposal to commissioners for approval at a meeting next month.

Vice Mayor Keith London, who presented the item that won unanimous approval, said the audit will determine the CPA fund balances dating back to 2012, when a CRA fund was first established. The audit will also review prior land purchases by the CRA that forced $7.4 million in cuts from the CRA budget.

By William Gjebre, FloridaBulldog.org  

The Hallandale Beach City Commission. From left to right: Anthony Sanders, Anabelle Taub, Mayor Joy Cooper, Vice Mayor Keith London, Michele Lazarow

The new majority on the Hallandale Beach City Commission will seek the first-ever forensic audit of all expenditures by its troubled Community Redevelopment Agency for the past five years, including finding out why $7.4 million had to be cut to balance the agency’s budget this fiscal year.

Current Vice Mayor Keith London and Commissioner Michele Lazarow had been frustrated in seeking such an audit by the previous commission majority headed by Mayor Joy Cooper.

The November city commission election resulted in London and Lazarow gaining the backing of new City Commissioner Anabelle Taub. Cooper was reelected, but failed to gain another commissioner to back her and her ally, Commissioner Anthony Sanders. They’re expected to vote on the audit, aimed at determining whether any wrongdoing occured, later this month.

“Let’s see where the money went,” London said. “We are going to get to the bottom of this.”

The new commission trio already has flexed its power in a remake of city hall.

It was responsible for the ousters of City Manager Daniel Rosemond and City Attorney Lynn Whitfield, and replacing them with long-time South Florida government administrator, Roger Carlton, and a new city attorney, Jennifer Merino. Merino was general counsel for the Broward Inspector General’s Office, which investigated and severely criticized the spending practices of the city’s CRA four years ago.

“It’s time to clean house of the city manager and the city commission … the collusion,” Lazarow said.

Now the new commission majority will be seeking answers about the spending of the much-troubled CRA.

‘We need to find out’

“We need a full forensic audit [of the CRA],” London said. “We need to find out about the $7.4 million, and we need to know what we have left.”

London was referring to last August when city commissioners, who are also directors of the CRA, were forced to cut $7.4 million from the proposed $25.9-million CRA budget for this year after being told by the city administration that the agency had counted land purchases by the agency as cash.

At that meeting, then City Manager Rosemond said an “adjustment” had to be made — the city commission had no choice but to approve the budget cut.

Prior to that, London said the city manager had given commissioners assurances that cash was available to the CRA, only to learn that the value of the city-purchased land by the CRA cannot be counted as cash.

Both London and Lazarow lobbied for a forensic audit of expenditures at that time, but lacked a third vote. The commission instead voted to seek a forensic audit that delved only into CRA land purchases.

Making matters worse, London said, Rosemond later came back and told commissioners that he was unable to engage any firm willing to conduct the forensic audit of land purchases — and, therefore, no firm was hired.

That all changed, however, with the November city commission election. Lazarow was reelected, along with newcomer Taub. London was not up for reelection.

Now in the majority, London said he wants audit to cover CRA spending back to 2012, the first year city commissioners established a separate funding account for the agency.

“We need to know what we have,” he said.

“We have to inquire about the $7.4 million,” said Lazarow, adding she plans to back London’s request for a forensic audit when he brings it up for a commission vote. Taub, who was not available for comment, is also expected to back the request.

City co-mingled CRA funds

Prior to 2012, the city had co-mingled CRA funds with city funds. That practice started in 1996, when the CRA was established under state law. The agency has been funded through property tax increases in the CRA boundaries.

It was only when the Broward Inspector General’s Office began its probe and issued a scathing report that some changes were made, including separating CRA-collected funds from other city tax revenues. Florida Bulldog had reported about questionable loans to local businesses and land purchases through the CRA nearly a year before IG investigators descended on city hall in April, 2012 seeking records and questioning officials as the probe became public.

After a 14-month investigation, the Inspector General’s Office in 2013 stated the Hallandale Beach CRA had “grossly mismanaged” millions of dollars in funds between 2007 and 2012. It found $2.2 million in questionable expenditures by the CRA, including inappropriate loans and grants to local businesses and non-profits, as well as the improper use of bond proceeds.

Before and after that report, London asked for a forensic audit of agency funds, but was outvoted by his commission colleagues.

Mayor Cooper denied the city had done anything wrong. The city commission majority at that time then ousted the agency’s recently appointed CRA executive director, Alvin Jackson, who won praise by the Inspector General for efforts to improve the CRA.

The city commission, over the objections of London, placed the agency once again under the direct management of the city manager. Except for Jackson’s short tenure, city managers have had full control of the CRA since 1996, during which the agency failed to keep adequate records, including changing loan and grant policies in violation of existing rules.

Both London and Lazarow said they are pleased with the new appointees, in particular Merino, 36.

“She has knowledge of our city,” said London, referring to Merino’s work with the agency that investigated the city’s CRA.

“Merino has a history [with the city],” Lazarow said. “She has been watching our meetings.”

Carlton, 69, has held several key positions with public agencies, among them: Miami Beach city manager (1992-1995), executive assistant Miami-Dade county manager (1977-1981).

Report: Taxpayer-supported Broward Health engaged in ‘cultural civil war’

By Dan Christensen, FloridaBulldog.org bhcompliance2

The law firm that’s overseeing taxpayer-supported Broward Health’s compliance with conditions imposed by the U.S. last year when it paid $70 million to resolve alleged lawbreaking has concluded the troubled hospital district is in a state of “cultural civil war.”

Baker Donelson was hired in December to serve as the “Independent Review Organization” (IRO) under the terms of a five-year Corporate Integrity Agreement between the North Broward Hospital District (NBHD) – Broward Health’s legal name – and the U.S. Department of Health and Human Services.

The IRO’s 137-page annual report, obtained by Florida Bulldog using Florida’s Public Records Law, lays out what it says are Broward Health’s “numerous systems deficiencies” while also defending itself from anonymous, yet widely distributed accusations that it was not truly independent and was hired thanks to insider connections.

The report, often citing unnamed sources, is highly critical of Broward Health’s recently departed Chief Compliance Officer Donna Lewis for refusing to produce, among other things, requested information about employee complaints. Also singled out for criticism: Broward Health’s Interim CEO Pauline Grant and Chief Information Officer Doris Peek, who, along with Lewis, are accused of planting “negative articles regarding the IRO in the local media.”

Former Broward Health Chief Compliance Officer Donna Lewis

Former Broward Health Chief Compliance Officer Donna Lewis

Grant and Peek both denied the accusation on Sunday. “I never planted any negative articles,” said Grant. Lewis could not be reached for comment.

The report and its exhibits can be downloaded here.

“There has been a pervasive pattern of personal destruction in which former and some current members of the senior management team use public meetings, the media, self-serving reports disguised as work product, and frivolous ‘anonymous’ complaints through the disclosure program as a means to falsely attack the character of, pressure, or aid in the termination of NBHD’s Board of Commissioners, senior management, and others,” the report says. “In other situations, it appears the methods are used to enhance the influence of senior management’s departmental fiefdoms.”

The report goes on to assert that management actions “appear to be routinely based upon self-interest, protection of position and department, not for the betterment of the system.” That “lack of professionalism” fails “not only the patients the system services, but the taxpayers who help fund it.”

Anticipating the report’s release, Broward Health’s board voted last week to authorize management to request up to 60 days to respond to the IRO report which will be sent to a federal monitor and could lead to further government action against Broward Health.

A new CEO coming soon

Who will author the response is unclear. The board recently has interviewed several candidates to become Broward Health’s permanent President/CEO. A meeting to make that selection is set for Oct. 31.

Broward Health, with four hospitals, three outpatient facilities and nearly 9,000 employees all north of Griffin Road, is the ninth-largest public health system in the country. It is a special taxing district overseen by a board of commissioners appointed by the governor.

The report says Broward Health suffers from “operational mismanagement” to include “considerable understaffing” in key areas such as physician services and the compliance and ethics office. Likewise, the report notes, two seats on the governing board of commissioners remain vacant. (On Friday, Gov. Rick Scott appointed Parkland’s Bev Capasso, a former chief executive officer of Jackson Memorial Hospital, to one of those seats.)

The report traces Broward Health’s “cultural war” to the hospital district’s “pervasive physician-centric tradition, in which senior management and staff instinctively defer to physicians, particularly regarding compensation.”

Broward Health Interim CEO Pauline Grant

Broward Health Interim CEO Pauline Grant

Allegedly illegal pay deals between Broward Health and its physicians was the focus of the False Claims Act lawsuit brought by whistleblower Dr. Michael Reilly that led to the $70 million settlement in September 2015. Allegedly violated in the scheme: the Stark Law, which generally prohibits physicians from referring patients to hospitals with whom they have a financial relationship, and the Anti-Kickback Statute, which prohibits paying physicians for healthcare referrals.

Without naming names, the report says some physicians are involved in “repetitive upcoding,” or assigning improper billing codes for medical procedures to increase their Medicare and Medicaid reimbursements. Baker Donelson says it has “encouraged” Broward Health to hire “expert coders” to handle coding for it doctors “to help remove even the appearance of a conflict of interest in coding.”

The report is similarly critical of Broward Health’s “ineffective response to the implementation” of compliance monitoring and auditing procedures, notably the lack of what’s known as a “Focus Arrangements” database that can track government-reimbursed physician referrals and sales.

‘Lack of commitment to compliance’

Baker Donelson’s report, prepared under the direction of attorney J. Scott Newton, accuses Broward Health of a “lack of commitment to compliance” both before and after the embarrassing federal investigation and costly settlement. It says problems began after Lewis was hired as chief compliance officer in April 2011.

One month later, a federal subpoena announced the start of the government’s fraud probe. It sought a multitude of records about physician contracts and other matters, yet appears to have had no “impact whatsoever on the operation or effectiveness of the compliance program,” according to the report.

The report’s litany of deficiencies, however, neglects to note that Broward Health’s compliance troubles pre-date Lewis’ arrival. For example, for more than a decade both management and the board ignored a lobbyist registration policy adopted in 2004. The district finally implemented a policy requiring lobbyists to register last month as a result of a Florida Bulldog story in May.

Baker Donelson’s report praises the “outstanding work” of Broward Health’s controversial General Counsel Lynn Barrett and her Legal Department in making important changes to the district’s poorly crafted compliance program by re-writing its Code of Conduct and ethics policies. The problem: the implementation of those measures was “seriously deficient in many critically high risk areas,” the report says.

The report, however, makes no mention of various controversies that have swirled around Barrett. They include allegations Barrett improperly attempted to block the public from meetings, steered millions of dollars in legal work to law firms with strong ties to Gov. Scott, and failed to cooperate with the FBI during an ongoing federal grand jury investigation into allegedly corrupt purchasing practices at Broward Health.

The report also details Baker Donelson’s annoyance at an article published in Medicare Compliance Review that “impugned the IRO’s qualifications.” The report suggests Interim CEO Grant, Compliance Chief Lewis and Chief Information Officer Peek planted the story.

A newsletter’s upsetting story

The story apparently at issue was published in June by a newsletter with a different name, Report on Medicare Compliance. Among other things, the story quoted Donna Lewis as criticizing the board’s efforts to identify the author of the anonymous email that raised questions about Baker Donelson’s independence and other matters. She told the newsletter that anonymous allegations are “routine” compliance matters and that the board’s high-profile hunt for the author had “eroded” trust.

“I have never seen a compliance complaint take up so much time from a governing body,” she said.

At a subsequent meeting by Baker Donelson with top Broward Health management, “it was emphatically noted to Grant that what appeared to be senior management-placed negative articles regarding the IRO in the local media would not deter our work. We advised Grant that we did not believe any articles or public comments were made without her authorization.”

The report adds that anonymous employees had told the law firm that Grant, Lewis and Peek “were overheard in Peek’s office discussing” what later became the article.

“Contacting the media, particularly because of the Florida Sunshine law, appears to be used as a common weapon in the cultural war at NBHD as a means of asserting false allegations and/or pressure on those who would refuse to change the culture of corruption,” the report says.

“Here, while it is certainly beyond the scope of our review, the IRO questions whether tax dollars were used to publish the ‘Medicare Compliance Review’ article and if so, if that constitutes an improper misuse of public funds. We will leave that determination for state officials, should they undertake a review.”

The cash-rich pharmaceutical lobby and the rising cost of drugs for Medicare seniors

By Stuart Silverstein, FairWarning 

President George W. Bush signing the Medicare Prescription Drug Improvement and Modernization Act of 2003.

President George W. Bush signing the Medicare Prescription Drug Improvement and Modernization Act of 2003.

When the Republican-controlled Congress approved a landmark program in 2003 to help seniors buy prescription drugs, it slapped on an unusual restriction: The federal government was barred from negotiating cheaper prices for those medicines. Instead, the job of holding down costs was outsourced to the insurance companies delivering the subsidized new coverage, known as Medicare Part D.

The ban on government price bargaining, justified by supporters on free market grounds, has been derided by critics as a giant gift to the drug industry. Democratic lawmakers began introducing bills to free the government to use its vast purchasing power to negotiate better deals even before former President George W. Bush signed the Part D law, known as the Medicare Modernization Act. (more…)

‘We are a law firm’: How telemarketers sold false hope to homeowners struggling to pay mortgages

Broward’s Inspector General probes Hallandale Beach CRA – again

By William Gjebre, FloridaBulldog.org 

Hallandale Beach Mayor Joy Cooper is flanked on the left by Commissioners Keith London and Michele Lazarow and on the right by Commissioners Bill Julian and Anthony Sanders. The commission also sits at the city CRA's board of directors

Hallandale Beach Mayor Joy Cooper is flanked on the left by Commissioners Keith London and Michele Lazarow and on the right by Commissioners Bill Julian and Anthony Sanders. The commission also sits at the city CRA’s board of directors

The Broward County Inspector General’s Office has launched another inquiry into Hallandale Beach’s Community Redevelopment Agency, three years after finding the city “grossly mismanaged” millions of dollars in CRA funds.

The first probe led to reform and a grand theft charge against the director of a local cultural program for misspending CRA grant money. What triggered the new probe, however, isn’t known.

“I cannot comment,” said Inspector General John W. Scott, who leads the independent watchdog agency that investigates allegations of fraud, corruption and gross mismanagement at the county and Broward’s 31 municipalities. He’s asked the city and the CRA to submit the requested information by July 1.

A key focus of the inquiry, however, is the city’s Community Benefit Program (CBP). The program seeks to encourage private development and city-funded projects to recruit, train and hire city residents and local vendors.

Tuesday’s letter to the city from the Inspector General’s Office requested a variety of CRA documents from Jan. 1, 2013 to the present. They include: all voting conflict memos submitted by city commissioners, who also serve for directors of the CRA; the minutes of all city commission and CRA meetings; a list of all bid solicitations with a Community Benefit Program component as well as documentation from vendors identifying specific partners to be engaged in the program.

In addition, Inspector General Scott’s office requested documents related to two groups that received grants from the city and the CRA: the Palms Community Action Coalition and the South Florida Educational Development Center.

The latest inquiry set off another disagreement among city officials.

“While the CBP has good intentions,’’ said City Commissioner Keith London, “it is my belief the program has been hijacked and abused by insiders who have used their power and influence to steer contracts and jobs to unqualified persons and companies for no other reason than their political connections.”

London said residents should “review the voting record of each commissioner who has blindly supported the CBP policy, every CBP expenditure and bid sheet awarding millions of taxpayer dollars to firms whose major qualification was their connection to city hall.”

But Mayor Joy Cooper, who has differed bitterly with London in the past, played down the significance of the IG’s records request.

We have been in compliance”

Cooper cited the city’s Hallandale Opportunity Program that monitors grants and contracts. She said the program’s monthly reports have indicated compliance with city provisions, including by the Community Benefit Program. “We have tightened up” controls over grants and contracts, Cooper said. “We have been in compliance.”

City Manager Daniel Rosemond added the same internal group has monitored city funds going to South Florida Educational Development Center and there have been “no performance issues.”

Rosemond likewise sought to downplay the significance of the Inspector General’s inquiry, observing that he merely asked for some records.

“This is not an investigation,” Rosemond said in an interview, adding “I don’t believe there is anything substantive” to the inquiry, but rather that the IG has received some information and “has a fiduciary responsibility to look at it.”

In an email to commissioners, Rosemond said, “The nature of the [IG] request appears to center around the city’s Community Benefit Program, its administration and recipients.”

Palms Community Action Coalition members could not be reached; South Florida Educational Development Center members did not return calls for comment.

Palms Community Action Coalition (PCAC) is a group attempting to prevent and reduce crime, drug abuse and gang activity. The coalition came under scrutiny during the Broward Inspector General’s previous probe – although there was no finding of wrongdoing. Under a three-year agreement with the city, PCAC has received a total of $306,000.

According to state documents, the South Florida Educational Development Center, established six years ago, is a non-profit group that provides educational job training for youth and adults in underserved areas. It received $45,000 last year and again this year, and will receive the same amount next year under a three-year agreement ending Sept. 30, 2017.

City Commissioner Michele Lazarow said she and Commissioner London have questioned the effectiveness of the Community Benefits Program. In some instances, she said, city funds appeared to be going to only a few groups. There is also concern that some firms receiving city contracts may be having trouble fulfilling promised job slots because there are not enough qualified workers in the city.

A city ‘investigated twice’

“I wonder how many other Broward County cities have been investigated twice,” said Lazarow.

Commissioner Anthony Sanders could not be reached for comment. Vice Mayor Bill Julian said he could not comment because he hadn’t seen the IG’s letter.

In March 2013, after a 14-month investigation, the Inspector General’s Office found $2.2 million in questionable expenditures by the Hallandale Beach CRA between 2007 and 2012, including inappropriate loans and grants to local businesses and non-profits, as well as the improper use of bond proceeds.

The city, the report stated, improperly spent $416,000 in CRA money for parks outside the CRA boundaries. The spending, which was not always documented, was often done at what amounted to the whim of former City Managers Mike Good and Mark Antonio, the report said.

The Hallandale Beach CRA, like other similar agencies in other municipalities, was established under a state law that allows the agency to raise and spend a large portion of increased property tax dollars collected within the CRA’s boundaries on projects aimed at eliminating slum and blight. Nearly 50 percent of those funds come from Broward County, which approved establishment of the agency.

While city officials contended that all expenditures were permissible under state law, the Broward IG cited in its report a 2010 opinion by Florida’s Attorney General that CRA expenditures must be connected to “brick and mortar” capital projects.

At the conclusion of the last investigation, Hallandale Beach officials denied wrongdoing and challenged the authority of the Inspector General to oversee the city’s CRA.

Nevertheless, the city ultimately made changes as a result of the probe that included updating its CRA development plans and adopting procedures for awarding grants. The city also announced plans to repay the CRA for funds used for parks outside the CRA boundaries.

The IG’s finding also led Broward prosecutors to charge Palm Center for the Arts (PCA) director Deborah Brown with grand theft in May 2014. The IG reported finding probable cause to believe that Brown spent nearly $5,000 in CRA funds on herself and her family. The funds were designated by the city in 2010 to send children on a trip to Washington, D.C.

The criminal case remains pending in Broward Circuit Court, with the next hearing set for Sept. 22.

Broward County’s $18.9 million airport flip-flop and a new, secret whistleblower case

By Dan Christensen, FloridaBulldog.org 

The Broward County Commission before Tuesday's vote to pay $18.9 million to settle a dispute with airport contractor Tutor Prerini.

The Broward County Commission before Tuesday’s vote to pay $18.9 million to settle a dispute with airport contractor Tutor Prerini.

With little public discussion, the Broward County Commission has overwhelmingly approved an $18.9-million payout to airport contractor Tutor Perini to settle a bitter dispute about who was to blame for costly construction delays.

Paperwork filed in support of the deal, including the settlement itself, revealed that an unidentified whistleblower recently sued Tutor Perini in circuit court using the Broward County False Claims Ordinance. The whistleblower’s claims are not known, but sources said an unhappy subcontractor filed the complaint. Whistleblowers who help the county recover money lost to fraud or other schemes can recover a reward of up to 25 percent of the proceeds.

Tuesday’s settlement deal, approved in a 6-1 vote, marks an expensive flip-flop by the county from assertions earlier this year by then-Broward aviation department boss Kent George that, in fact, Tutor Perini owed the county more than $34 million for those delays.

George stepped down as aviation director in March, but remains on the county’s payroll until the end of the year. He negotiated the settlement approved Tuesday.

In January, FloridaBulldog.org reported that on New Year’s Eve George had a letter sent to Tutor Perini demanding those damages cover the costs of a dozen “significant … deficiencies and unresolved issues” that seriously delayed completion of the $800-million expanded south runway at Fort Lauderdale-Hollywood International Airport.

“You owe us millions of dollars and now I’m paying you millions of dollars in a settlement?” Commissioner Lois Wexler said Tuesday. “Unless there’s a real explanation as to how it morphed into something else, I’ll be a no vote today.”

County Attorney Joni Armstrong Coffey, who recommended approval of the settlement, offered a brief discussion about that. Coffey indicated the county was responsible for the delays because change orders expanding the scope of Tutor Perini’s work were approved without an appropriate expansion of work days in which to complete it.

A dissatisfied Wexler voted a lonely no.

Tutor Perini, (NYSE: TPC) has contended that the county was to blame for the construction delays. In fact, the county aviation department lost more than a dozen claims adjudicated before a “dispute avoidance panel” established at the project’s outset to resolve disagreements between the county and its runway contractors.

In recommending approval, Coffey warned the county could have as much as $80 million in liability without a settlement.

County ‘probably could win’

Nevertheless, Commissioner Dale Holness said that in private discussions with “our staff and attorneys” he’s been assured the county “probably could win” a lawsuit against the company.

“But they weren’t sure a hundred percent because we had some issues on both sides,” Holness said.

Wexler went further. She said her “lengthy briefings” with staff bore little resemblance to Tuesday’s outcome.

“When Ms. Coffey and Mr. [Michael] Kerr [deputy county attorney] came to my office, they said, ‘Don’t worry, commissioner, we’re going to recoup, we’re going to recoup,’ ” Wexler said. “Now all of a sudden something else comes forward.”

The settlement includes $6.1 million that was approved but never paid to Tutor Perini, plus an additional $12.8 million. No commissioners asked how that figure was arrived at, and county staff did not explain.

The settlement raises the “final” contract amount to $239 million. The original contract award to Tutor Perini for design-build services was $179.9 million. Change orders approved by the county raised that figure to $226.2 million.

The settlement is with the Tutor Perini Fort Lauderdale-Hollywood Joint Venture.

California-based Tutor Perini is the prime consultant for the tunnel structures that carry the expanded and elevated south runway and taxiway over U.S. 1, the Florida East Coast railroad tracks and East Perimeter Road. The venture was also responsible for related construction, including the new southbound airport exit ramp to U.S. 1.

The original contract completion date for the runway project was Feb. 22, 2014. In fact, the runway opened for air traffic in September 2014, and the project was declared “substantially complete” in January 2015.

Still, work at the airport goes on. Today, Tutor Perini is adding decorative and architectural features to the U.S. 1 tunnels – finishing work worth several million dollars. The settlement requires Tutor Perini to finish all remaining work by Aug. 31.

Friction between Tutor Perini and the county isn’t limited to the airport project.

The company is the prime contractor on the new downtown county courthouse, a project that’s a year behind schedule, but is expected to open this summer. The Sun-Sentinel reported last month that a county public works official said Tutor Perini contends the county owes it $11.3 million for extra work.

The airport and courthouse disputes also figure in the selection of a contractor to build a long-sought expansion of the Broward County Convention Center and a next-door hotel on port property. Texas-based developer Matthews Southwest Holdings was accepted for the job in April, but Matthews’ team includes Tutor Perini – a fact that did not go over well at County Hall.

Miami U.S. Attorney’s Office, FBI accused of spying on defense in Medicare fraud case

By Dan Christensen, FloridaBulldog.org 

Judge Cooke has set a June 8 hearing to consider alleged wrongdoing by federal prosecutors and agents.

Judge Cooke has set a June 8 hearing to consider alleged wrongdoing by federal prosecutors and agents.

In a stunning twist in a long-running Medicare fraud case, both the Miami U.S. Attorney’s office and the FBI stand accused of spying on a defendant’s lawyer by illegally and secretly obtaining copies of confidential defense documents.

Court papers filed last week by attorneys for Dr. Salo Schapiro contend the secret practice was not the action of “just one rogue agent or prosecutor.” Rather, it was apparently an “office-wide policy” of both the U.S. Attorney’s Office and the FBI that’s gone on for “at least 10 years.”

The unwritten policy involves “surreptitiously copying defense counsel’s work product through the government-contracted copy service that the government requires defense counsel to use to obtain the discovery documents’’ needed to properly prepare for trial, according to court papers that seek either the dismissal of Schapiro’s indictment or the disqualification of the entire prosecution team.

Miami attorneys Howard Srebnick and Rossana Arteaga-Gomez represent Schapiro and filed the motion, which asserts that the U.S. Attorney’s Office has for several weeks been investigating itself in the matter.

Miami U.S. District Judge Marcia G. Cooke held an initial hearing Tuesday that was continued until June 8 at 1:30 p.m. The judge, in an order, has asked both parties to respond to this extraordinary question: “What remedies, if any, are available to the court were the court to find that the described conduct in defendant Schapiro’s motion is a systemic, consistent and/or pervasive practice of or on behalf of the United States Attorney’s Office?”

A spokeswoman for Miami U.S. Attorney Wifredo Ferrer would not be interviewed. However, late Thursday night prosecutors filed court papers confirming that an internal probe is underway and asserting that defense arguments are “based on erroneous accusations and insinuations.”

Howard Srebnick, left, and James V. Hayes

Howard Srebnick, left, and James V. Hayes

“Despite the charged language this is not a case about intrusion into the attorney-client relationship, eavesdropping or sneaking into the defense camp,” wrote Assistant U.S. Attorney James V. Hayes and Justice Department fraud attorney Lisa H. Miller.

Defense attorney Srebnick did not return a phone call seeking comment.

 Specifically, the court papers allege that Fort Lauderdale-based copying service Imaging Universe and president Ignacio E. Montero provided the government with CDs containing duplicates of documents Schapiro’s defense team culled from 220 boxes of evidentiary records in preparation for trial. Federal agents had seized those records from the mental-health clinic Biscayne Milieu, where Schapiro worked.

“Covertly cloning defense counsel’s work-product to obtain a tactical advantage is nothing short of ‘shocking to the universal sense of justice’ mandated by the Due Process Clause of the Fifth Amendment,” Srebnick and Arteaga-Gomez wrote. “To the extent that the prosecution team can infer from Dr. Schapiro’s selection of discovery documents his thought process, the government has violated his Fifth Amendment right not to be compelled to be a witness against himself. This intrusion into the attorney-client relationship has also violated Dr. Schapiro’s Sixth Amendment right to the effective assistance of counsel.”

The government responds

The government’s Thursday night response acknowledged that Imaging Universe did supply the FBI with duplicate CDs of what the company had copied for Schapiro’s defense team, but said the discs “were never requested by any agent, prosecutor or anyone else on the government’s behalf.”

Prosecutors Hayes and Miller also stated that they were unaware of the duplicate CDs until an FBI agent disclosed their existence in late April. They said that when they found out they immediately told “Montero to stop and began an internal inquiry.”

“To date it has found that there was simply no pervasive practice of receiving or recording defense discovery, and that it was not a widespread or institutionalized practice,” says the government’s response.

Nova Southeastern University constitutional law professor Robert Jarvis was skeptical of the defense’s sensational claims, but said that if the allegations prove true it could upend hundreds of criminal cases, free untold defendants and potentially result in criminal charges against government officials responsible for violating defendants’ rights.

“This opens a huge can of worms,” Jarvis said. “It’s potentially catastrophic for the government and I would think that the [U.S.] Attorney General would be swooping in on this. There are 95 judicial districts. If it happened in this office, you have to wonder if it’s happening in any others.”

Schapiro, 70, Sonia Gallimore, 74, both Broward residents, and Marlene Cesar, 64, of Allentown, PA., were indicted on charges of health care fraud and conspiracy and making false statements in September 2014. According to the indictment, they and other alleged co-conspirators submitted more than $55 million in phony Medicare claims through the Miami clinic, Biscayne Milieu, collecting more than $11 million. Previously, about 25 other owners and employees of the clinic pleaded guilty or were convicted of healthcare fraud.

On Tuesday, attorneys for Gallimore and Cesar filed paperwork seeking dismissal of their charges, claiming their clients’ rights were similarly violated by the alleged scheme.

The defense motion says that between late 2014 and last month, Schapiro’s lawyers repeatedly visited an FBI warehouse in Miramar where discovery documents are kept for review. During Arteaga-Gomez’s first visit to the warehouse federal agents told her that if she wanted to copy any documents she would have to use Imaging Universe, the motion says.

Since the indictment, Imaging Universe has charged Schapiro $8,200 to produce nine sets of discovery documents to his defense team. The motion identifies those records to include a dozen CDs containing approximately 1,140 PDF files, many with multiple pages.

The motion contends that company president Montero “lied” to Arteaga-Gomez about the copying process, and instead of making sure the government did not see the defense’s hand-selected files, provided FBI case agent Deanne Lindsey with duplicate copies.

Montero did not respond to a detailed voicemail message seeking comment.

Prosecutor discloses FBI received defense CDs

Hayes, the federal prosecutor on Schapiro’s case, first informed Srebnick and his associate that agent Lindsey “had been surreptitiously receiving the CDs” on April 22, according to the defense motion.

“Hayes proposed to immediately destroy the CDs,” but the lawyers asked instead that he give them to the defense, “which he did,” the motion says.

Hayes declined to be interviewed about the matter.

Arteaga-Gomez phoned Montero on April 25 to ask who had told him to provide copies of the CDs to the government. Montero, the motion says, answered that an “agent” told his office manager to do it. “Mr. Montero then stated that he had been providing to the U.S. Attorney’s Office for the past 10 years duplicate copies of the discovery documents selected by defense counsel in other cases.”

Montero also forwarded to Schapiro’s defense an April 21 email he sent to a healthcare-fraud paralegal in the U.S. Attorney’s Office, stating that he’d provided the Justice Department with duplicates of defense records “since 2006.” Montero added that both his old company, Xpediacopy, and Imaging Universe had done it.

If so, the alleged government misconduct spanned the administrations of three Miami U.S. Attorneys – Alex Acosta, who served from 2005-2009, Jeffrey Sloman acting U.S. Attorney from 2009-2010 and Wifredo Ferrer, who took over in May 2010.

Srebnick and Arteaga-Gomez wrote that they’ve recently had “multiple conversations” about the matter with Miami federal prosecutors and their supervisors.

“The U.S. Attorney’s Office has admitted that Agent Deanne Lindsey had been receiving copies of the CDs and had been keeping the duplicate CDs in a folder as she received them,” the motion says. Lindsey also “confessed to opening four of those duplicate CDs” looking for files, copying and pasting files onto her own CDs and providing “those new CDs to the government’s expert witness for trial preparation,” the motion says.

The prosecutors’ response sought to cast Lindsey’s contact with the records in less threatening way.

Prosecutors notified the defense last week that Montero had “confessed to lying to Rossana Arteaga-Gomez about the discovery process” in order to hide what was happening, the defense lawyers wrote.

“That the government-contracted copy service misled Ms. Arteaga-Gomez in order to cover-up the office-wide policy makes this case especially egregious,” the motion says.

Details about the size, terms and duration of Imaging Universe’s contract were not immediately available. The prosecutors’ response, however, said the contract is between Imaging Universe and the Government Publishing office.

Page 1 of 41234»

Newsletter

Notify me by email when new stories are published.