Insurance Scammers Revealed by New Times Go to Trial

Nine years ago, New Times exposed a massive and macabre insurance-fraud scam involving medically unnecessary surgeries and grossly overpriced procedures.

Now, four key players in the monumental scheme are about to go on trial in Southern California, including a lawyer who once threatened to sue this newspaper for libel and other alleged wrongdoing over the reporting and writing about the historic fraud.

A series of articles on the scam began with "Rent a Patient" (April 24, 2003). It described how healthy Phoenix-area "patients" were getting paid about $800 each to travel to the Los Angeles area to endure unneeded and potentially dangerous sweat-gland and sinus surgeries, colonoscopies, endoscopies, and gynecological and testicular procedures.

The clinics where these surgeries occurred then would submit outrageously high claims to insurance companies. Those companies — about 30 of them — included some of the nation's largest, and they asked few questions of the submitting doctors and clinics.

Instead, they paid out tens of millions of dollars in reimbursements until New Times exposed the scheme, and insurance-fraud investigators nationwide finally got involved.

"If anyone wants to know what this case is all about, all they have to do is read [the New Times] stories," Orange County prosecutor Rick Welsh said at the time.

(California officials said later that 2,841 healthy people from around the nation had participated in the fraud at Unity Outpatient alone, part of the estimated $154 million scheme.)

The first story described how several employees at Onyx Environmental Services — a large hazardous-waste plant in West Phoenix — had abused a generous health-insurance plan that allowed for quick and easy "out of network" access to medical care.

The Onyx group often traveled to California on weekends to undergo the procedures.

The firm's policy called for insurance reimbursement checks to be issued directly to those patients treated out of state for supposed medical issues.

But about a dozen of the Phoenix-area "rent-a-patients" greedily cashed those reimbursement checks themselves — about $400,000 worth in the second half of 2002 — instead of handing them over to their "capper," as they were supposed to do.

Unity Outpatient's attorney, Roy Chester Dickson, then sued the Onyx employees in Orange County, California, on behalf of his clients, an action that spelled the beginning of the end for Unity and for Dickson himself.

"It's going to unravel like a cheap suit," Phoenix attorney Holly Gieszl told us at the time, speaking of the rent-a-patient scheme. She represented some of the sued Arizona rent-a-patients, most whom never did "reimburse" Unity and apparently evaded any kind of criminal or civil sanctions.

Dickson wrote to New Times in May 2003, saying in part, "The entire [original] article is grossly libelous as it applies to Unity. It wrongfully and inexcusably [accuses] Unity of 'massive insurance fraud,' 'submitting ridiculously padded bills to Blue Cross and Blue Shield,' and of 'engaging in a conspiracy with certain employees of Onyx Environmental Services' to defraud insurance companies."

Later in 2003, Dickson claimed in a letter, "In your [original] article, you provide absolutely no evidence to support your libelous accusations against me," adding that "this Law Office will not accept any telephone calls from Mr. Paul Rubin or anyone else from your so-called newspaper."

Dickson could not be reached for comment for this story.

He is one of the four onetime Unity Outpatient players about to go on trial for crimes directly related to what New Times revealed in its series.

The charges against the quartet include grand theft, conspiracy, insurance fraud, filing false claims, and aggravated white-collar crime. Dickson additionally is charged with money laundering, perjury, filing false tax returns, and failure to file tax returns.

Each of the defendants faces long prison terms if convicted.

The state of California and the feds earlier brought criminal charges against several others involved in the high-dollar scam, including doctors, so-called "cappers" (middlemen who would find the "patients"), and bookkeepers.

One of the doctors, William Hampton, was sentenced in early 2008 to 10 years in federal prison and ordered to pay almost $2.5 million in restitution after he was convicted of healthcare fraud. Hampton, 53 at the time of his sentencing, performed hundreds of unnecessary procedures, including many at Unity Outpatient, the clinic New Times focused on in its series.

One of the scheme's masterminds, Tam Vu Pham, is serving a 12-year prison sentence.

The "People's Trial Brief," which Orange County prosecutors filed last month, details what they hope to prove at trial.

"In April 2003, the Phoenix New Times published a story in its newspaper that Unity was recruiting, transporting, and paying patients to undergo unnecessary medical procedures," the legal brief says.

"This story was of great concern for the defendants that insurance companies and law enforcement would discover the fraudulent scheme. As a result, the defendants tasked Roy Dickson to quash the story.

"On April 30, 2003, the Orange County District Attorney's Office and other agencies executed a search warrant on the [defendants'] homes and the Unity office. On that day and those following, and upon Roy Dickson's advice, the owners of Unity transferred over $2 million obtained by fraudulent billings into Dickson's attorney trust account.

"Shortly thereafter, Dickson transferred the funds into his co-defendant's corporations and LLCs [limited liability corporations], used to disguise the stolen funds and to prevent the victims and law enforcement from seizing them."

The government is alleging that Dickson charged and received 3 percent on all the money laundered during this part of the scam and that he also "negotiated the sale of over $9 million in receivables from fraudulent insurance billings, which included claims that were based on fraud and capping."

The state of California has barred Roy Dickson from practicing law, which may be the least of his worries.

As for the former Onyx workers who participated in the scheme by agreeing to undergo surgical procedures for money, information is hard to come by.

Their onetime attorney Gieszl (whom Dickson also went after in court, unsuccessfully) says some of the "patients" have stayed in the Phoenix area and are working in different capacities.

New Times recently asked Gieszl about one of the workers interviewed for the original story, a Cuban refugee named Oskar Mora, then in his early 30s.

Mora was a genial, soft-spoken man who had been a laborer at Onyx. He freely admitted to undergoing the sweat-gland surgery at Unity in return for money, as he lifted up his shirt and displayed two dime-size circular scars inches apart under each armpit.

"They really screwed me up with this," he said at the time, complaining that he was feeling a severe loss of strength in his hands, a documented side effect of sweat surgeries.

Gieszl says Oskar Mora was the victim of a murder a few years ago.

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Paul Rubin
Contact: Paul Rubin