HOUSTON, March 2, 2017 - A federal jury has convicted the final defendant of 12 involved in a conspiracy to pay and receive kickbacks relating to the Medicare program, announced U.S. Attorney Kenneth Magidson. The jury deliberated for four hours following a three-day trial before convicting Cheryl Waller, 70, of Houston, of one count of conspiracy to pay and receive kickbacks and one count of receiving kickbacks.
The other 11 defendants had previously pled guilty for their respective roles in the conspiracy. David Edson, 68, of Palm Harbor, Florida, and Jeffery Parsons, 57, of Crockett, each pleaded guilty to conspiracy to pay and receive kickbacks as well as two counts of money laundering. Aretha Johnson, 64, of Wimberley, also pled to the conspiracy and to one count of money laundering, while Inger Michelle Pace, 54, of Missouri City, and Ronald Turner, 56, of Fresno, each pleaded guilty to the conspiracy and to one count of paying and receiving kickbacks. The remaining defendants - Deborah Davis, 54, of Atlanta, Georgia; James Bobino, 48, Ernestine Johnson, 58, Jackie Harris, 54, and Vermon Lacy III, 32, all of Houston; and Mary Browning, 68, of Beasley – were convicted of the conspiracy.
Edson and Parsons were the vice presidents of Development and Operations, respectively, for Continuum Healthcare LLC. which owned Westbury Community Hospital in Houston. Aretha Johnson, Pace, Bobino, Waller, Browning and Davis each owned personal care homes in Houston, while Ernestine Johnson, Harris, Lacy and Turner were marketers for Continuum.
During trial, the jury heard that Continuum owned and operated three community mental health centers in the Houston area known by their locations as Hornwood, Baytown and Missouri City. Each location operated a partial hospitalization program (PHP) which is supposed to be a treatment program for individuals with mental illness. A PHP was intended to closely resemble a highly structured, short-term hospital inpatient program but was a distinct and organized intensive treatment program that offered less than 24-hour daily care. In 2010, Continuum opened Westbury Community Hospital with Hornwood and Baytown becoming outpatient centers and continuing to operate their existing PHPs under the Westbury name. Westbury also opened a PHP.
Edson and Parsons were responsible for the day-to-day operation of Continuum/Westbury and were involved in the implementation of the various kickback programs. The vast majority of the people referred in exchange for payment did not qualify for PHP services either because they were not experiencing an acute psychotic episode or because they were suffering from mental retardation, dementia or Alzheimer’s.
At the trial, the jury heard that Waller owned several personal care homes which housed individuals with severe mental illnesses like schizophrenia. Waller was paid $132,000 by Continuum to send her residents to the Continuum PHP. Edson testified that Waller was paid $6,000 per month to send her patients to Continuum.
During their pleas, Edson and Parsons admitted to paying co-defendants to bring patients to Continuum. Ernestine Johnson, Aretha Johnson, Pace, Bobino, Harris, Lacy, Turner, Browning and Davis each admitted receiving payment to do so, receiving $498,000, $2.6 million, $329,000, $499,000, $328,000, $140,000, $447,000, $155,000 and $250,000, respectively. Edson admitted to causing Continuum to fraudulently bill Medicare $50.5 million and causing Medicare to pay $18.8 million based on the false and fraudulent claims associated with the patients the co-defendants delivered.
U.S. District Judge Gray Miller accepted the pleas and presided over the trial. He has set sentencing for all 12 defendants on June 16, 2017. Everyone was permitted to remain on bond pending those hearings. At that time, everyone faces up to five years in prison and a possible $250,000 fine for the underlying conspiracy charge. Pace and Turner also face an additional five years for paying and receiving kickbacks, while Edson, Parsons and Aretha Johnson could receive up to 10 years in a federal prison for each of the respective money laundering convictions.
The FBI, U.S. Department of Health and Human Services - Office of the Inspector General, Texas Attorney General's Medicaid Fraud Control Unit and IRS - Criminal Investigation participated in the joint investigation. Assistant U.S. Attorneys Al Balboni and Tina Ansari are prosecuting the case.