Alan D. Bersin, United States Attorney, and William D. Gore, Special Agent in Charge, San Diego Division of the Federal Bureau of Investigation, today announced the culmination of a massive two and one-half year investigation code-named "Sure Buck."

Indictments and arrests of 23 individuals from Mexico and Southern California were carried out this morning in San Diego County.

The Federal Bureau of Investigation, in partnership with the National Insurance Crime Bureau (NICB) and private industry, has successfully identified, penetrated, indicted, and arrested an international group of foreign and domestic providers and suppliers. These individuals are believed to operate both within and outside of the United States, defrauding U.S. health care insurers.

The majority of arrest sites will not be disclosed in order to protect the integrity of the ongoing investigation. However, certain arrest and search locations can be disclosed and include:

• Medical Provider Services (search location)
  3130 Bonita Road Suite 108
  Bonita, California
  Arrestees: LeRoy Alexander
• Medical Repair Center (search location)
  8300 Center Street
  La Mesa, California
  Arrestees:
  David Palmer
  Salvador Vega
• Wells Fargo Bank
  5522 Balboa Avenue
  San Diego, California
  Arrestee:
  Paula Whitsell
• Private residence of Minerva McGregor
  Chula Vista, California

Bill Gore, FBI Special Agent in Charge states, "I am proud of the accomplishments brought to light today by our office. The challenge to federal investigators has been to develop an effective investigative strategy to address health care fraud schemes that are complex and multi-national. This operation has successfully infiltrated the fraud being committed in our region, which was made more complex by the international border."

Prior to the arrests today in San Diego, U.S. Justice Department officials briefed Mexican government authorities concerning the operation. The two governments pledged their support and cooperation in confronting crime in the White Collar fraud arena as they have in other areas. The PGR office in Los Angeles and the United States Attorney's Office in San Diego have established a liaison working group to monitor legal developments in this case and to consult as necessary and appropriate to resolve specific issues as they arise.

U.S. Attorney Alan Bersin comments, "Prosecuting health care fraud is the Attorney General's top priority on the White Collar Crime agenda. Operation Sure Buck demonstrates that insurance fraud and false billing--cross border or otherwise--will be detected, prosecuted, and punished in this region on a cooperative basis."

A special briefing package has been prepared, which showcases the operation and further details the violations and issues.

United States law enforcement is focusing on the problem of fraudulent health care claims, particularly hospitalization claims, made to U.S. private insurers. Research has concluded that various U.S. billing agencies/services used by physicians (also known as providers) in, for example, border towns along the southwest border, encourage foreign-based physicians to utilize their services for fraudulent activities. Local private insurers suspect that physicians obtain patient identifiable information from friendly businesses and physicians in the U.S. or the patients themselves who cut 'deals' with foreign providers for a percentage of the paid claims. As an example of these 'deals,' patients have plastic surgery and the procedure is billed to the insurance company as emergency medical services. Once patient identifiable information is obtained, the foreign physician utilizes American based billing services to submit their fraudulent claims. These billing agencies maintain American addresses (usually postal box addresses) and promise the foreign physicians faster payment and higher fees. The providers and billing agencies then submit bills which reflect grossly inflated charges and/or charges for services never provided. The profits collected are divided between the billing agency, the doctor, and in some cases, the patient.

In the past, American insurers have utilized private claims investigators in the United States to determine if suspect claims were fraudulent. However, over the past several years, most of the foreign providers and American billing agencies have been coaching their staffs and patients on what to tell insurance investigators inquiring about claims and past hospitalizations. Private insurers advise that facilities which provide experimental treatments have learned how to bill for traditional medicine in order to collect from insurers. Hospitals and clinics have been constructed outside the United States to thwart the rejection of claims by American insurers which previously were not paid on the basis that the medical facility was inadequate to treat the claimed ailment. All of this has made catching the frauds and perpetrators extremely difficult.

Most American insurers complain that their investigators have conducted on-site reviews at foreign clinics/hospitals which revealed that these facilities did not have the equipment nor facilities necessary to conduct the procedures which they were billing the insurer. The insurers also complain that some of the patients, which their investigators were able to contact, advised that they had never received the treatment for which the billing agency submitted claims. Rather, the patients had gone to the foreign provider identified in the claim for only minor treatment. Insurers further advise that the foreign providers and their U. S. billing agencies were engaged in:

• Misrepresenting services rendered;
• Submitting charges for services not rendered;
• Inflating fees to maximize insurance reimbursement; and,
• Concealing the location of hospitals/clinics they represent.

Numerous complaints were received from private insurance carriers by the San Diego Division of the FBI, as well as other FBI offices, regarding fraudulent billing practices by foreign providers. Dr. Joaquin Merlos, a foreign provider and LeRoy Alexander, a U. S. billing service owner, were identified as among the group of foreign providers and U. S. billers, involved in this type of fraudulent activity.

Illustrating the magnitude of the fraudulent billings, one insurance company suffered losses in excess of $300,000 a month to this group. Merlos and Alexander were also suspected of simultaneously billing at least 48 other insurance companies. The losses were estimated to be in the millions.

The FBI in San Diego initiated a unique, covert operation in an effort to take a more proactive approach to health care fraud. The goals of this investigation were to identify and ascertain those foreign and U.S. providers who maintained a nexus within the United States and the U.S.-based billing services and suppliers, which routinely assist these providers in the following areas:

• Submitting claims for services not rendered;
• Inflating fees to maximize insurance reimbursement;
• Concealing the location of the hospitals/clinics the billing services represent; and,
• Misrepresenting services rendered through wide-spread billing manipulation to defraud U.S. private insurance companies.

This investigation also allowed the FBI to determine the full scope of these billing rings and identities of additional individuals involved in these schemes.

During the course of the FBI's undercover operation, the subjects engaged in an illegal fraudulent billing conspiracy, in which 82 fraudulent claims were filed totaling approximately $800,000.

On September 30, 1997, a Federal Grand Jury returned true bills of indictment on all 23 subjects identified in this proactive investigation. The subjects: 17 foreign physicians and an assistant, two U.S. bankers, one U.S. billing service owner and two U.S. durable medical equipment suppliers, were indicted on a variety of charges to include 191 counts of Mail Fraud, 23 counts of Conspiracy to Defraud, 23 counts of Aiding and Abetting, and two counts of Cash Transactions Reporting (CTR) violations.

On Tuesday, October 14, 1997, the San Diego Office of the FBI executed 22 arrest warrants at five separate locations in Southern California. Search warrants were executed at a durable medical equipment supply company and a medical billing service.

• Title 18, USC, Section 1341 - Mail Fraud;
• Title 18, USC, Section 2 - Aiding and Abetting;
• Title 18, USC, Section 371 - Conspiracy;
• Title 31, USC, Section 5313(a) and 5324(1) - Failure to File Currency Transaction Reports;

• Le Roy Alexander - 39 years of age, U.S. citizen, and resides in Bonita, California;
• Dr. Joaquin Merlos - 39 years of age, citizen and resident of Mexico;
• Dr. Adrian Vasquez - 31 years of age, citizen and resident of Mexico;
• Dr. Antonio Rodriguez - 39 years of age, citizen and resident of Mexico;
• Dr. Fernando Eng - 40 years of age, citizen and resident of Mexico;
• Dr. Pascual Figueroa - 40 years of age, citizen and resident of Mexico;
• Dr. Elizabeth Quintana - 40 years of age, citizen and resident of Mexico;
• Dr. Jose Angel Munguia - 35 years of age, citizen and resident of Mexico;
• Dr. Marco Antonio Cordova - 38 years of age, citizen and resident of Mexico;
• Dr. Antonio Oceguera - 40 years of age, citizen and resident of Mexico;
• Dr. Javier Meda Anaya - 35 years of age, citizen and resident of Mexico;
• Dr. Pablo Flores Duenas - citizen and resident of Mexico;
• Dr. Victor Cubillas - 41 years of age, citizen and resident of Mexico;
• Dr. Luis Valdez - 32 years of age, citizen and resident of Mexico;
• Dr. Martin Macias - 34 years of age, citizen and resident of Mexico;
• Dr. Jose Miro - citizen and resident of Mexico;
• Dr. David Ledezma - 29 years of age, dual U.S.-Mexican citizenship, and resides in Mexico;
• Dr. Silvia Flores - 28 years of age, citizen of Mexico, and resides in Mexico;
• Javier Ramirez Merlos - 29 years of age, resident of Mexico;
• David Palmer - 38 years of age, U. S. citizen, resident of La Mesa, California;
• Salvador Vega - 24 years of age, resident of Chula Vista, California;
• Paula Whitsell - 43 years of age, U. S. citizen, resident of Chula Vista, California; and
• Minerva McGregor - 50 years of age, resident of Chula Vista, California.

The San Diego Division gratefully acknowledges the National Insurance Crime Bureau, the Internal Revenue Service, Blue Cross of California, Great West Life and Annuity, and The Guardian for their invaluable assistance.

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