LAWFUEL – Legal News Network – An Orange County man who wa…

LAWFUEL – Legal News Network – An Orange County man who was one of the ringleaders of a large-scale durable medical equipment (“DME”) scheme that defrauded Medicare out of millions of dollars was sentenced yesterday to ten years in prison.

Phu Luong, 51, of Huntington Beach, was sentenced by United States District Judge Cormac J. Carney in Santa Ana. In addition to the prison term, Judge Carney ordered Luong to pay $6,417,000 in restitution to Medicare.

Luong was convicted in April 2006 of 35 counts of health care fraud and five counts of money laundering. Luong was the owner of a DME company called United Medical Supply (“United”) that submitted fraudulent claims to Medicare for DME that was not medically necessary and, in many cases, never delivered. Three others also convicted at trial of 35 counts of health care fraud were:

Sareth Tath, 56, of Long Beach, Luong’s partner, who recruited physicians to provide fraudulent prescriptions for DME;
Mo Thi Pham, 50, of Westminster, Tath’s partner, who hired drivers and marketers to recruit Medicare beneficiaries to receive DME that was not medically necessary; and
Peter Kim, 82, of Los Angeles (90022), who recruited and drove beneficiaries to the physicians.
At trial, the government proved that Luong used United to fraudulently bill Medicare for motorized wheelchairs and enteral nutrition, which is liquid nutrition such as Ensure and is only covered by Medicare if a patient requires tube-feeding. Motorized wheelchairs are covered by Medicare only if a patient is confined to a bed or chair and is unable to use a manual wheelchair. In this case, none of the beneficiaries billed by United had feeding tubes or required motorized wheelchairs. In fact, many of the beneficiaries billed for motorized wheelchairs could walk.

The four convicted at trial were among 10 defendants indicted in March 2005. Previously, four of the 10 defendants pleaded guilty to health care fraud. They are:

Vu Nguyen, 34, of Santa Ana, a United employee who submitted the fraudulent claims to Medicare;
Truc Duong, 38, of Garden Grove, an employee of the physicians recruited by Tath;
Khanh Duong, 32, of Garden Grove, who along with his wife, Truc Duong, recruited beneficiaries and drove beneficiaries to the physicians; and
Vu Nghi, 48, of Garden Grove, who also recruited and drove beneficiaries to the physicians.
The two remaining defendants accused in the scheme are medical doctors:

Derrick Hubbard, 46, formerly of Los Angeles and Atlanta, who fled to South Africa after he was indicted; and
Matthew Khatibloo, 72, of Fullerton, who fled to Iran after the indictment was issued.
Both doctors operated medical offices in the same building in Fountain Valley. Hubbard was captured in South Africa and is scheduled to go on trial on February 6, 2007. Khatibloo remains a fugitive.

According to the indictment and the evidence presented at trial, Tath recruited physicians – Hubbard and Khatibloo – to prescribe enteral nutrition and motorized wheelchairs that were not medically necessary. Pham assisted Tath in running the doctors’ offices and managed the marketers, who recruited Medicare beneficiaries to see Hubbard and Khatibloo by promising the beneficiaries free “milk” (enteral nutrition) and other medical supplies. Kim also recruited beneficiaries, and he drove the recruited beneficiaries from Los Angeles County to Orange County to see Hubbard and Khatibloo.

Once they saw the recruited Medicare beneficiaries, Hubbard and Khatibloo allegedly would do only cursory examinations and, without fail, prescribe enteral nutrition and sometimes motorized wheelchairs.

United not only billed for supplies that were not medically necessary, but also routinely overbilled Medicare for the amount of supplies that were delivered, and would often bill for supplies that were never delivered.

The money laundering charges against Luong were based on his purchases of luxury items with the proceeds of the Medicare fraud, such as a $185,575 yacht, a $118,000 Rolls-Royce automobile, a $1.7 million down payment on a mansion in Huntington Beach; a $170,395 Lamborghini, and $120,000 in gambling bills at the Bellagio Hotel & Casino in Las Vegas.

The investigation into United’s activities began when Medicare noticed that United was submitting an exorbitant number of claims for enteral nutrition and that the referring physician on almost all of the claims was either Hubbard or Khatibloo. Furthermore, Medicare received 363 complaints against United, which generally alleged that the beneficiaries did not need or did not receive the items billed by United to Medicare.

Of $24 million in fraudulent claims submitted by United, Medicare paid approximately $14 million.
“IRS Criminal Investigation is committed to working with other federal law enforcement agencies and the United States Attorney’s Office to ensure that criminals are held accountable,” said Debra King, Special Agent in Charge for IRS. “Today’s sentencing demonstrates to the American public that IRS Criminal Investigation will aggressively pursue fraudulent schemes and illegal activities to protect the interests of hardworking taxpayers.”

The three other defendants convicted at trial are scheduled to be sentenced in April 2007.
The case was investigated by the United States Department of Health and Human Services, Office of Inspector General; the Federal Bureau of Investigation; and IRS-Criminal Investigation Division.

CONTACT: Assistant United States Attorney Jeannie M. Joseph
(714) 338-3576
Assistant United States Attorney Lawrence E. Kole
(714) 338-3594

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