|TRENTON – Acting Attorney General John J. Hoffman announced that the Office of the Insurance Fraud Prosecutor has obtained a 45-count indictment charging 12 individuals with various offenses for their alleged roles in a scheme in which illegal “runners” were used to recruit motor vehicle accident victims as patients for chiropractic facilities, controlled by unlicensed individuals, and as clients for other medical and legal service providers. The defendants include two alleged ringleaders, who controlled the chiropractic facilities, two licensed chiropractors, and a doctor and a lawyer, both of whom allegedly made illegal payments to the ringleaders to have accident victims referred to them as clients.
Anhuar Bandy, 50, and his brother, Karim Bandy, 53, both of Colts Neck, allegedly received millions of dollars in illegal payments by referring the patients to medical and legal service providers including the following five people charged in the indictment:
- Dr. Mark Schwartz, D.O., 48, of Park Ridge, owner of MLS Medical in Park Ridge;
- David Walker, Esq., 55, of Rockaway, a personal injury lawyer;
- Alexandra Gallegos, 52, of Piscataway, a paralegal who received a percentage of the profits of Walker’s firm, who filed personal injury claims on behalf of the motor vehicle accident patients;
- Edward Formisano, D.C., 52, of Roxbury, a chiropractor and purported owner of Eclipse Chiropractic, located in Plainfield, Lakewood Chiropractic, located in Lakewood, Liberty Chiropractic Center, located in Jersey City, and Chiropractic Spine Center, located in Perth Amboy;
- Louis Brown, D.C., 62, of Rahway, a chiropractor and purported owner of True Healing and Wellness, located in New Brunswick, New Century Chiropractic, located in Dover, and Wellspring Rehabilitation, located in North Plainfield.
The 12 defendants were variously charged with racketeering, conspiracy, criminal use of runners and other related charges. Karim Bandy also was charged with two counts of first-degree money laundering.
“Today's charges uncover a massive criminal trifecta, as the fraud reached into the medical system, the legal system, and the insurance system, with the defendants ultimately extracting millions for their own uses,” Acting Attorney General Hoffman said. “The unethical ringleaders and service providers in this alleged scheme preyed upon unsuspecting automobile accident victims. People involved in motor vehicle accidents have enough to deal with without worrying about becoming pawns in an illicit racketeering scheme aimed at generating millions of dollars in illegal profits.”
“Through this elaborate scheme, runners allegedly picked up motor vehicle accident reports at local police stations under the Open Public Records Act and used those reports to solicit patients to the chiropractic facilities,” Acting Insurance Fraud Prosecutor Ronald Chillemi said. “Abuse of the OPRA statute to further a criminal enterprise is unacceptable and such behavior will not be tolerated in the State of New Jersey.”
The indictment alleges that between June 1, 2009 and Jan. 1, 2014, the principal defendants participated in a racketeering scheme in which Anhuar and Karim Bandy had control over several chiropractic facilities through purported “management companies” and “marketing companies” whose real purpose was to hide their ownership. It is alleged that Karim Bandy entered into business arrangements with Formisano to act as the “straw owner” of four chiropractic facilities and with Brown to act as “straw owner” of three chiropractic facilities. New Jersey regulations require that chiropractic facilities be owned by licensed chiropractors or medical doctors. An investigation determined that while the certificates of incorporation show that the chiropractors were the owners of the facilities, the de facto owner, Karim Bandy, through either First Choice Management or Precision Management, allegedly was the majority owner and received the majority of the gross revenue from the facilities. The investigation determined that First Choice Management, Precision Management and Kekk Marketing allegedly were created and used to facilitate the criminal “running,” to launder the proceeds of the criminal activity, and to disguise the true ownership of the chiropractic facilities.
The indictment alleges that, in order to generate revenue for the chiropractic facilities, Anhuar and Karim Bandy used runners to bring motor vehicle accident patients to the facilities so Formisano and Brown could bill insurance carriers for services rendered at the facilities. An investigation determined that, through the scheme, the chiropractic facilities allegedly billed insurance companies for millions of dollars for services they purported to perform. The checks sent by the insurance carriers were allegedly deposited into the various accounts of the chiropractic facilities or the management companies. A large portion of the monies deposited into the accounts of the chiropractic facilities would then allegedly be paid to the Bandy management companies.
The indictment alleges that, in addition to acting as a runner himself, Cesar Huaman, 45, of Orlando, Fla., recruited the following individuals to be runners in the scheme:
- Estefania Frias, 24, of Plainfield, who is Anhuar Bandy’s fiancé;
- Rene Lacotera, 36, of Elizabeth;
- Albert Lee Hughes, 32, of Orlando, Fla.
Frias allegedly recruited her mother, Lilian Frias, 51, of Plainfield, to be a runner in the alleged scheme.
The runners allegedly were paid up to $1,000 for each patient that they recruited for medical treatment. An investigation determined that the runners allegedly retrieved motor vehicle accident reports at local police stations, under the Open Public Records Act rules, and then visited the homes of the motor vehicle accident victims in an attempt to persuade them to utilize the services of the chiropractic facilities controlled by the Bandy brothers. The runners allegedly picked up the motor vehicle accident patients from their home and drove them to the chiropractic facilities. An investigation determined that payments allegedly were made to companies incorporated by Karim Bandy for over a thousand referrals of patients for medical treatment and/or clients for legal representation.
Walker and Gallegos allegedly met with patients at many of the chiropractic facilities in order to obtain the necessary paperwork to be retained by them as legal representation for bodily injury claims which the firm would take on a contingency basis. Walker and Gallegos allegedly accepted settlements from insurance carriers knowing that the clients had been recruited for treatment and representation through criminal activity. It is alleged that Walker and Gallegos knowingly paid “Kekk Marketing” to engage in running activity to recruit clients for the law firm.
As part of the scheme, Anhuar Bandy allegedly ordered the office staff at the chiropractic facilities to refer the overwhelming majority of the patients to Schwartz and/or his company, MLS Medical. The indictment further alleges that Formisano and Brown would allow their names to be used as a referring medical provider to justify the medical necessity of the referral to Schwartz. Schwartz, through his company MLS Medical, allegedly paid Karim Bandy more than $1 million for patient referrals. It is further alleged that between June 25, 2010 and March 13, 2013, Schwartz submitted or caused to be submitted numerous bills to insurance companies for health care services purportedly rendered by MLS on the patients referred to him from the chiropractic facilities.
New Jersey law includes an “anti-running statute,” which imposes criminal penalties for acting as a runner or using, directing or employing a runner. The statute defines a runner as a person who attempts to procure a patient or client at the direction of and for a health care professional or attorney in exchange for a pecuniary benefit, when the health care professional or attorney intends to assert a claim against an insured person or an insurance carrier for providing services to the patient or client. The anti-running statute carries a presumptive sentence of three to five years in state prison, as well as other penalties.
Anhuar and Karim Bandy were arrested this morning at a home in Colts Neck, NJ. Estefania Frias, Lilian Frias and Rene Lacotera previously were arrested for their alleged roles in the schemes. All other defendants will be issued summonses to appear in court.
On Oct. 15, 2004, Anhuar Bandy was convicted on charges of criminal racketeering, conspiracy, health care claims fraud, and theft, charges brought by the Office of the Insurance Fraud Prosecutor. Bandy subsequently served approximately four years in state prison.
The indictment is merely an accusation and the defendants are presumed innocent until proven guilty. First-degree crimes carry a sentence of 10 to 20 years in state prison and a criminal fine of up to $200,000 while second-degree crimes carry a sentence of five to 10 years in state prison and a criminal fine of up to $150,000. Third-degree crimes carry a sentence of three to five years in state prison and a criminal fine of up to $15,000. A list of the specific charges against each of the defendants is below.
The indictment was handed up to Superior Court Judge Mary Jacobson on April 28. The indictment was unsealed today. The case will be venued in Mercer County where the defendants will be ordered to appear in court to answer the charges on a date to be determined.
Deputy Attorney General Reid Caster, Deputy Insurance Fraud Prosecutor Mark Ondris, Lt. Joseph Waters, Detective Michael Behar and Investigator/Analyst Marwa Kashef coordinated the investigation. Sgt. Jon Powers and Detectives Janet Amberg, Amy Carson, Heather Pittman, Richard Lane and Analyst Bethany Schussler assisted in the investigation. Acting Insurance Fraud Prosecutor Chillemi thanks the Special Investigations Units and counsel for the following insurance Companies: Allstate, Plymouth Rock, Liberty Mutual, Geico and Travelers; as well as the New Jersey Department of Banking and Insurance, the New Jersey Division of Taxation, and the National Insurance Crime Bureau for their assistance in the investigation.
Acting Insurance Fraud Prosecutor Chillemi noted that some important cases have started with anonymous tips. People who are concerned about insurance cheating and have information about a fraud can report it anonymously by calling the toll-free hotline at 1-877-55-FRAUD, or visiting the Web site at www.NJInsurancefraud.org. State regulations permit a reward to be paid to an eligible person who provides information that leads to an arrest, prosecution and conviction for insurance fraud.
The 12 defendants were charged in the indictment as follows:
- Anhuar Bandy, 50, of Colts Neck. Racketeering (2nd degree), Conspiracy (4 counts, 3rd degree), Criminal Use of Runners (14 counts, 3rd degree).
- Karim Bandy, 53, of Colts Neck. Money Laundering (2 counts, 1st degree), Racketeering (2nd degree), Conspiracy (4 counts, 3rd degree), Criminal Use of Runners (14 counts, 3rd degree), Failure to File a Tax Return (2 counts, 3rd degree), Filing a Fraudulent Tax Return (2 counts, 3rd degree).
- Dr. Mark Schwartz, D.O., 48, of Park Ridge. Racketeering (2nd degree), Health Care Claims Fraud (2nd degree), Insurance Fraud (2nd degree), Conspiracy (2nd and 3rd degree), Criminal Use of Runners (3rd degree).
- David Walker, Esq., 55, of Rockaway. Racketeering (2nd degree), Conspiracy (3rd degree), Criminal Use of Runners (3rd degree).
- Alexandra Gallegos, 52, of Piscataway. Racketeering (2nd degree), Conspiracy (3rd degree), Criminal Use of Runners (3rd degree).
- Edward Formisano, D.C., 52, of Roxbury. Racketeering (2nd degree), Conspiracy (4 counts, 3rd degree).
- Louis Brown, D.C., 62, of Rahway. Racketeering (2nd degree), Conspiracy (3 counts, 3rd degree).
- Cesar Huaman, 45, of Orlando, Fla. Racketeering (2nd degree), Conspiracy (3rd degree), Criminal Use of Runners (4 counts, 3rd degree).
- Estefania Frias, 24, of Plainfield. Racketeering (2nd degree), Conspiracy (3rd degree), Criminal Use of Runners (6 counts, 3rd degree).
- Rene Lacotera, 36, of Elizabeth. Criminal Use of Runners (3rd degree).
- Albert Lee Hughes, 32, of Orlando, Fla. Conspiracy (3rd degree), Criminal Use of Runners (2 counts, 3rd degree).
- Lilian Frias, 51, of Plainfield. Conspiracy (3rd degree), Criminal Use of Runners (3rd degree).