The California Department of Insurance assisted with this investigation
“Investigations such as this are lengthy and complex and often require multiple investigative agencies. We thank the investigators who spent many hours on this and saw it through prosecution and sentencing.”
– CSLEA President Alan Barcelona
SANTA CLARA COUNTY – On January 30, 2024, the Santa Clara County Superior Court sentenced the last of 15 defendants who were running a massive statewide insurance scam in which they set up a telemarketing company to push overpriced and unneeded prescriptions and medical devices to thousands of Californians.
The defendants, mostly Los Angeles residents, approximately $40 million from insurance companies in the largest medical fraud case ever prosecuted in Santa Clara County. They called themselves “The Care Group.”
Seven defendants were sentenced for felonies and eight defendants for misdemeanors, with punishments including county jail.
“This group used people’s pain and illnesses to criminally enrich themselves,” District Attorney Jeff Rosen said. “They tried to hide behind a maze of dozens of shell corporations and straw owners. We found them anyway – and now they will pay back their victims and be held accountable.”
The multi-year, multi-agency investigation to unravel the complex scheme was called C.R.E.A.M. (Cash Rules Everything Around Me.)
Between 2015 to 2020, the defendants committed fraud on a massive statewide scale by operating an illicit call center from their Beverly Hills offices, a durable medical device company, and six pharmacies located in Southern California. They targeted unwitting patients throughout the state, including in Santa Clara County, filling, and billing thousands of fraudulent prescriptions for items like neck braces and pain creams.
The scheme involved purchasing and turning small pharmacies into pain cream and medical device mills that only fulfilled prescriptions signed by doctors who received thousands of dollars in “kick-backs.” The defendants selected pain creams and devices for their high reimbursement rates. For instance, the defendants would bill insurance companies upwards of $4,000 for medication that could be purchased for a few hundred dollars. The prescribing doctors rarely met with or spoke to the patients.
At least five insurance carriers were defrauded of approximately $40 million dollars throughout the state of California, with a loss of approximately $2.3 million occurring in Santa Clara County. As part of the negotiated disposition, the defendants paid more than $8.3 million in restitution – making this the largest lump sum restitution recovery for victims in an insurance fraud case prosecuted by the Santa Clara County’s District Attorney’s Office. The money will be used for victim restitution.
The investigation was spearheaded by the Santa Clara County District Attorney’s Office Bureau of Investigation in collaboration with the California Department of Insurance, and with assistance from California State Board of Pharmacy and the San Mateo, Monterey, and Los Angeles County district attorneys’ offices.
