Two Sentenced for Investment Fraud

News release from the FBI:

Two Former Canopy Financial Co-Founders Sentenced to 15 and 13 Years in Prison for $75 Million Investment Fraud and Raiding $18 Million from Custodial Heath Care Expense Accounts of 1,600 Customers 

U.S. Attorney’s OfficeFebruary 15, 2012

Northern District of Illinois(312) 353-5300

CHICAGO—Two co-founders of Canopy Financial, Inc., a bankrupt health care transaction software company based here, have been sentenced to 15 and 13 years in prison for defrauding investors and clients of more than $93 million. Anthony Banas, Canopy’s chief technology officer, was sentenced today to 160 months in prison, while Jeremy Blackburn, Canopy’s former president and chief operating officer, was sentenced on Jan. 24 to 180 months in prison. Both men pleaded guilty in late 2010 to one count of wire fraud, admitting they engaged in a fraud scheme that cheated investors of approximately $75 million and also misappropriated more than $18 million from customer accounts intended for health care savings and expenses.

The sentences, imposed by U.S. District Judge Ruben Castillo in Federal Court, were announced by Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois; Robert D. Grant, Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation; and James Vanderberg, Special Agent in Charge of the U.S. Department of Labor Office of Inspector General in Chicago. The Securities and Exchange Commission’s Chicago Regional Office assisted in the investigation.

In imposing sentence on both defendants, Judge Castillo noted that this case was the most aggravated financial fraud he had seen in his 18 years on the federal bench. The judge ordered both men to pay mandatory restitution and forfeiture totaling $93,125,918. Approximately $50 million has been recovered so far through Canopy’s bankruptcy proceedings, and the government anticipates that the bankruptcy trustee will pay the claims of the health savings account customers. Banas, 34, of Homer Glen, was ordered to begin serving his sentence on April 18. Blackburn, 38, of Bolingbrook, was ordered to report to prison on March 20.

According to court documents, Blackburn and Banas used false information about Canopy’s financial condition, including a bogus auditor’s report and falsified bank statements, to fraudulently obtain approximately $75 million from several private equity investors in 2009. Approximately $39 million of that money was used to redeem shares of other Canopy investors, including approximately $1.6 million that went to Blackburn and $975,000 that went to Banas, while another $29 million obtained from investors was deposited into Canopy operating accounts. Blackburn and Banas also misappropriated Canopy operating funds for their own benefit.

Blackburn alone took approximately $6 million in unauthorized withdrawals and transfers from Canopy bank accounts during 2009. Blackburn typically directed a Canopy employee, or occasionally Banas, to transfer Canopy funds to his bank accounts or to pay for his personal expenses, including credit card balances, luxury car purchases, and funding his account with a private jet company. Among Blackburn’s luxury car purchases with Canopy funds were the following: two 2010 Range Rover SUVs, a 2009 Bentley, a 2008 Lamborghini, a 2010 Lamborghini, a 2009 Rolls Royce Phantom, a 2009 Aston Martin DBS, a 2009 Bentley Continental, and a 2009 Ferrari 430. Blackburn also paid for personal home renovations, bought sports tickets and purchased jewelry and watches using misappropriated Canopy funds.

Banas used misappropriated Canopy money to invest $300,000 in a nightclub. Banas also spent $400,000 between 2007 and 2009 on other personal expenses.

Blackburn admitted that he created phony bank statements during 2009 to conceal the transfer of more than $18 million from special health care accounts in which Canopy held funds as custodian for the benefit of more than 1,600 clients and customers to make payments to medical providers. The funds were transferred to Canopy’s own operating accounts, as well as to benefit Blackburn and Banas personally.

In 2004, Blackburn, Banas and a third individual co-founded Canopy, which reportedly was one of the country’s fastest-growing privately held companies before it entered bankruptcy proceedings in November 2009. Canopy, which had offices in Chicago, Plainsboro, N.J., and San Francisco, developed and marketed software programs for banks and health care payers to administer and process payments involving health-related savings and spending accounts. Canopy’s products related to expense tracking, online bill payment and claims processing for healthcare transactions.

Beginning in March 2009, in connection with the offer and sale of Series D preferred stock by Canopy, Blackburn and Banas made materially false representations to prospective investors about Canopy’s financial condition, including its revenues, profitability and total number of client accounts, and falsely represented to prospective investors that its financial statements had been audited by KPMG, the international network of audit, tax and consulting firms.

In addition to the phony audit report, Blackburn and Banas created falsified bank statements for the months of January through June 2009, purporting to show a Canopy account at Northern Trust Bank with monthly balances ranging between $5.7 million and $8.9 million. Blackburn admitted that these misrepresentations caused certain investors, including entities affiliated with Spectrum Equity Investors, to invest a total of nearly $75 million in shares of Canopy preferred stock in July and August 2009.

The government was represented by Assistant U.S. Attorneys Stephanie Zimdahl and Manish Shah.

The prosecution falls under the umbrella of the Financial Fraud Enforcement Task Force, which includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit:www.StopFraud.gov.

Nurse Pleads Guilty in Health Care Fraud Scheme

News release from the FBI:

Miami-Area Nurse Pleads Guilty in $25 Million Health Care Fraud Scheme

U.S. Department of Justice January 24, 2012

Office of Public Affairs (202) 514-2007/TDD (202) 514-1888

— filed under: Breaking News, Health Care Fraud, Press Release

WASHINGTON—A Miami-area nurse pleaded guilty today for his participation in a $25 million home health Medicare fraud scheme, the Department of Justice, the FBI and the Department of Health and Human Services (HHS) announced today.

Jorge Pineiro, 42, pleaded guilty before U.S. District Judge Joan A. Lenard in Miami to one count of conspiracy to commit health care fraud. Pineiro was originally charged in a February 2011 indictment.

According to plea documents, Pineiro was a registered nurse who worked for ABC Home Health Care Inc. and Florida Home Health Care Providers Inc., two Miami home health care agencies that purported to provide home health and therapy services to Medicare beneficiaries. Pineiro and his co-conspirators operated ABC and Florida Home Health for the purpose of billing Medicare for expensive services that were not medically necessary and/or were never provided. The medically unnecessary services were prescribed by doctors, including, but not limited to, Pineiro’s co-defendant, Dr. Jose Nunez.

According to court documents, beginning in approximately June 2008, and continuing until approximately March 2009, Pineiro and his co-defendant nurses falsified patient files for Medicare beneficiaries to make it appear that they qualified for home health care and therapy services. Pineiro knew that the beneficiaries did not actually qualify for and did not receive the services. Pineiro and his co-defendant nurses described in nursing notes and patient files symptoms that were non-existent, such as tremors, impaired vision, weak grip and inability to walk without assistance. They included these symptoms to make it appear that the patients were unable to self-inject insulin and were homebound, thus appearing to qualify for home health care benefits under Medicare.

Pineiro admitted that he knew these files were falsified so that Medicare could be billed for medically unnecessary therapy and home health-related services. As a result of Pineiro’s participation in the illegal scheme, the Medicare program was billed approximately $118,000 for purported home health care services that were not medically necessary and/or were never provided.

Pineiro also recruited Medicare beneficiaries who allowed Florida Home Health to bill Medicare for services that were medically unnecessary and/or never provided. Pineiro solicited and received kickbacks and bribes from the owners and operators of Florida Home Health in return for allowing the agency to bill Medicare on behalf of the patients he recruited. The patients that Pineiro recruited did not qualify for the services that were billed to the Medicare program. Pineiro knew that the patient files for his recruited patients were falsified to make it appear that the patients qualified for services from Florida Home Health.

Eighteen co-defendants, including Nunez, Licet Diaz, and Lisandra Alonso, have pleaded guilty for their roles in the fraud scheme. Nunez, Diaz, and Alonso were sentenced to 40 months, 87 months and 78 months in prison, respectively. Two remaining defendants, Dr. Francisco Gonzalez and Odalys Alvarez-Medina, are scheduled for trial on Feb. 14, 2012. An indictment is merely a charge, and defendants are presumed innocent until proven guilty.

Sentencing for Pineiro has been scheduled for April 9, 2012.

The charge of conspiracy to commit health care fraud carries a maximum prison sentence of 10 years. The defendant also faces fines and supervised release, as well as forfeiture of any property or proceeds derived from his criminal activities.

Today’s guilty plea was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; John V. Gillies, Special Agent in Charge of the FBI’s Miami Field Office; and Special Agent in Charge Christopher Dennis of the HHS Office of Inspector General (HHS-OIG), Office of Investigations Miami office.
This case is being prosecuted by Trial Attorney Joseph S. Beemsterboer of the Criminal Division’s Fraud Section. The case was investigated by the FBI and HHS-OIG, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Miami.

Since their inception in March 2007, strike force operations in nine locations have obtained indictments of more than 1,160 individuals who collectively have falsely billed the Medicare program for more than $2.9 billion. In addition, the HHS Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.
To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to: www.stopmedicarefraud.gov.