Government investigators focus on pandemic-related fraud has culminated in a recent criminal conviction As announced by the Department of Justice (DOJ), on Friday, January 13, 2023, a federal jury convicted a Colorado physician of theft for misappropriating almost $250,000 in federal COVID-19 relief funds, including both the Medicare Accelerated and Advance Payment Program (“MAAPP”) and the Paycheck Protection Program (“PPP Loans”). This is the first conviction we are aware of with respect to MAAPP to date, but marks another example of the government’s enforcement efforts to address COVID-19-related fraud. It is also a reminder for healthcare providers to remain vigilant in complying with COVID-19 relief fund program requirements as such government focus on COVID-19-related fraud continues unabated.
To address the pandemic’s impact on healthcare providers, the federal government rolled out several relief programs. At issue in this case, first, the Centers for Medicare & Medicaid Services (“CMS”) expanded the MAAPP to increase the cash flow to Medicare providers at the start of the COVID-19 pandemic. Under this expansion, qualifying providers received advanced payments from Medicare, which effectively provided an interest free loan that providers would pay back during a recoupment period through reduced reimbursement for Medicare services. Second, Congress enacted the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, which, among many other programs, created forgivable loans (the PPP Loans) for small businesses, which could have included healthcare providers.
In the recently announced conviction, Dr. Francis Joseph, of Highlands Ranch, Colorado, was found guilty of misappropriating funds from these two COVID-19 relief programs. In connection with the government funds, Dr. Joseph was convicted in federal court of theft in connection with healthcare and wire fraud. Now, Dr. Joseph is facing a maximum penalty of 20 years for the healthcare and wire fraud.
DOJ’s case on MAAPP funds focused on Dr. Joseph transferring almost $87,000 in MAAPP to a family member’s account to which the provider entity did not have access. In other words, DOJ argued to the jury that a program CMS developed to ensure healthcare providers could remain solvent with access to low-interest loans was used by Dr. Joseph illegally for personal gain. While a particularly egregious example, other smaller providers should ensure they have kept records on how they used these funds to further the provider’s ability to provide care at the start of the pandemic, rather than take advantage of government funding in a manner that could be challenged in the future.
Similarly, Dr. Joseph was found guilty of a scheme to defraud the government and unjustly enrich himself with PPP Loans. He was alleged to have submitted a false and fraudulent PPP Loan application he submitted in the name of an entity despite being previously terminated from such entity’s employ. After receiving almost $180,000 in PPP Loans, Dr. Joseph went on to transfer the funds from a false company account to his personal account and use the funds to pay for his own personal expenses.
This conviction comes on the heels of previous DOJ statements indicating the government’s readiness to disrupt pandemic-related fraud schemes. DOJ formed a COVID-19 Fraud Enforcement Task Force, has seized millions in CARES Act-related fraud, and has arrested and charged numerous healthcare-related defendants in various fraud schemes. This interest is likely to only grow as the public health emergency ends and the government has more time to review the use of COVID-19-related support. While most providers will not have such egregious conduct for investigation, providers should still ensure that they maintain records and protect themselves from future investigations to ensure they can successfully demonstrate appropriate use for such funds.