A former CPA who owned Airport Medical Supply, in Van Nuys, Calif., was sentenced to 51 months in federal prison after pleading guilty to health care fraud and tax charges detailed in a plea agreement filed by prosecutors last year.
Eli Gichon, age 73, of Encino, the owner of Airport Medical Supply, was also ordered by U.S. District Judge Manuel L. Real to pay restitution of $4,093,263 to Medicare and $1,400,353 to the Internal Revenue Service and to spend three years on supervised release after serving his prison sentence.
According to court records, Gichon was a CPA who operated AMS from within the premises of Eli’s Airport Cleaners, a dry cleaning business he owned and operated in Van Nuys. He was charged last March in the case (see Ex-CPA Charged in $7.6M Health Care Fraud Scheme).
In his plea agreement, Gichon admitted that he employed co-defendants Christopher Hill and Feliciano Dy to work as marketers for AMS. Hill and Dy were each indicted on multiple counts of health care fraud.
From January 2003 through March 2009, Gichon admitted he obtained beneficiary information needed to bill Medicare for durable medical equipment by paying kickbacks to Hill, Dy, and others to recruit beneficiaries for AMS. To recruit the Medicare beneficiaries for AMS, the marketers would promise the beneficiaries cash and/or free durable medical equipment. T hey would transport the recruited beneficiaries to AMS.
Gichon admitted that he used the recruited beneficiaries’ information to prepare false claims for durable medical equipment, such as power wheelchairs and accessories, hospital beds, and mattresses that were not provided to the beneficiaries or were not medically necessary. He and others created false invoices from a non-existent medical supply company to substantiate that AMS had purchased the non-existent durable medical equipment.
Gichon’s scheme resulted in a total loss to Medicare from the fraudulent claims that AMS submitted of approximately $4,093,263.
In addition to the health care fraud scheme, Gichon admitted that he subscribed to a false tax return for the 2006 tax year, upon which he failed to report over $912,000.
As a part of his plea, Gichon admitted that, for the years 2004, 2005, and 2006, he received over $3,813,000 in receipts from Medicare through AMS that he did not report on his personal income tax returns. Gichon’s failure to report the income to the IRS resulted in tax due of over $1,400,000.
As a part of his plea, Gichon has agreed to file amended tax returns with the IRS correctly reporting the unreported income, prior to sentencing, for the years indicated above. Additionally, Gichon has agreed that he is liable for the civil fraud penalty assessed by the IRS on the understatements of his tax liability for the years 2004 through 2006. The civil fraud penalty is assessed at a rate of 75 percent of the tax due to the IRS.
Gichon also admitted that $1,734,074.30 seized by law enforcement on April 17, 2007 from bank accounts he maintained at California National Bank and Washington Mutual Bank were proceeds of health care fraud. Gichon has agreed not to contest the forfeiture of the seized funds to the government.
At the conclusion of Tuesday’s sentencing hearing, Judge Real ordered Gichon to begin serving his sentence on March 14, 2011.
Last week, a related defendant, Christopher Hill, was sentenced by Judge Real to spend 27 months in federal prison. Hill previously pleaded guilty to health care fraud charges in a plea agreement filed with the court last year. Hill was further ordered to pay restitution of $116,078.00 and to spend three years on supervised release after serving his prison sentence. Judge Real ordered Hill to begin serving his sentence on February 14, 2011.
Feliciano Dy pleaded guilty to a health care fraud charge last July and was sentenced on Sept. 27, 2010 to five years of probation and ordered to pay restitution in the amount of $193,412.99.
The investigation and prosecution of Gichon, Hill, and Dy was conducted by IRS - Criminal Investigation and the Federal Bureau of Investigation in Los Angeles in conjunction with the U.S. Attorney’s Office for the Central District of California.
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