FOUR FAMILY MEMBERS AND TWO DOCTORS CHARGED WITH MEDICAL INSURANCE FRAUD FOR $22 MILLION SOBER LIVING BILLING SCHEME

Case # 17CF1241, 17CF1242, 17CF1243

Date: May 23, 2017

FOUR FAMILY MEMBERS AND TWO MEDICAL DOCTORS CHARGED WITH MEDICAL INSURANCE FRAUD FOR $22 MILLION URINE TEST BILLING SCHEME AT SOBER LIVING HOMES

SANTA ANA, Calif. – Four family members and two doctors were charged last week with medical insurance fraud for a $22 million urine test billing scheme that operated through sober living homes the family owned and operated in Southern California.

Circumstances of the Case

• Between January 2008 and December 2016, defendants Pamela and Philip Ganong owned sober living homes in Orange County, Bakersfield, Los Angeles, and San Diego, through their business William Mae Company, which operated as Compass Rose Recovery (Compass).
• In December 2011, the Ganongs are accused of forming a medical testing lab called Ghostline Labs (Ghostline).
• Sober living residents at Compass were recruited by other Compass residents through Craigslist and by word of mouth.
• In 2012, William Mae Company/Compass had 12 employees registered on the company’s payroll and health insurance policy.
• The Ganongs are accused of fraudulently listing residents and non-residents of Compass as employees and expanding their health insurance policy to cover almost 100 employees.
• In January 2013, the Ganongs are accused of starting a temporary labor agency, Compass Rose Staffing, enrolling some residents and non-residents on the payroll, and requiring daily or frequent urine drug testing as a term and condition of employment.
• The Ganongs are accused of starting Compass Rose Staffing as a front to overbill insurance companies for the collection and testing of urine.
• Between 2012 and 2014, the Ganongs are accused of registering fraudulent employees on all four of their payrolls: William Mae Company, Compass Rose Recovery, Compass Rose Staffing, and Ghostline Labs, and submitting daily or frequent urine drug test samples for each employee under each company’s health insurance plan.
• The Ganongs are accused of paying minimal compensation to those enrolled as employees, not collecting co-pays or deductibles for the urine tests, and providing free rent as a kickback for submitting the urine samples.
• Defendant Stinson, Pamela Ganong’s sister, is accused of routinely dropping off paychecks at the Ganong’s sober living facilities, and sending emails to doctors hired by the Ganongs requesting urine drug test prescriptions.
• Phillip and Pamela Ganong are accused of committing insurance fraud by submitting claims for urine drug testing done by Ghostline for sober living residents and employees of the Ganongs for either services not covered, not rendered, or not medically necessary.
• The Ganongs are also accused of submitting bills for high complexity urine tests which Ghostline did not possess the proper certification to perform and sending them to another lab for confirmation testing, despite negative preliminary test results.
• Pamela, Philip, and their son William Ganong are accused of submitting bills in excess of $1 million dollars for drug testing themselves and close associates.
• The defendants are accused of changing insurance carriers four times to avoid detection, submitting bills to Aetna, Anthem, Cigna, and United Health Care, and continuing to submit bills for urine drug testing themselves.
• To further the scheme, the Ganongs are accused of hiring two medical doctors, defendants Montano and Schuder, who are accused of writing urine drug prescriptions starting at three times per week and increasing to seven times per week for most of the Ganongs’ employees.
• The doctors are accused of writing unnecessary urine test orders in exchange for 20 percent of the net insurance proceeds from urine drug testing billing and a per-patient fee of $200, in violation of law. Both Montano and Schuder are accused of knowing that Ghostline was owned by the Ganongs, who were not medical providers.
• Defendant Schuder is accused of acting as the Lab Director for Ghostline before the company existed, using a sober living home addresses in Costa Mesa as Ghostline’s address. She is accused of being paid $21,784 between 2012 and 2013 by Ghostline.
• In addition, when the Ghostline became the subject of audits with Anthem and Aetna, the Ganongs are accused of changing the company’s name to Brown Laboratories and continuing to bill for fraudulent urine drug testing.
• The defendants are accused of billing approximately $22 million to the four insurance companies and subsequently collecting $15 million.

The Orange County District Attorney’s Office Bureau of Investigation investigated this case.

Prosecutor: Deputy District Attorney Hope Callahan, Insurance Fraud Unit