The first person in a case involving several individuals of South Asian descent, was sentenced Sept. 11. The case related to an elaborate scheme of profiting from millions of dollars in kickbacks and fraudulent billing and tax fraud.
Chief U.S. District Judge James K. Bredar sentenced Atif Babar Malik, 48, of Germantown, Maryland, to eight years in prison, followed by three years of supervised release. The sentence was imposed for his trial conviction on 26 counts arising from two criminal schemes involving $1.376 million in kickbacks and fraudulently billing, as well as his guilty plea tax evasion of more than $2.1 million. Chief Judge Bredar also ordered Malik to pay a fine of $75,000; to pay restitution of $175,000; and to forfeit $241,976.
According to his plea agreement and the evidence presented to the jury at his 13-day trial, Malik is a physician trained in pain management. Malik and Indian-American co-defendant, 52-year old Dr. Sandeep Sherlekar (charges against whom were dismissed after he died), merged their pain management practices in February 2009 to create Advanced Pain Management Services, LLC (APMS), which had offices in Maryland and New Jersey. In August 2010, APMS began doing business under the name of American Spine Center, LLC (APMS/ASC). Co-defendants Muhammad Ahmad Khan and Vic Wadhwa were respectively the CEO and CFO of APMS/ASC.
A press release from the U.S. Attorney for the District of Maryland, says Wadhwa, 41, of Frederick, Maryland, pleaded guilty to violating the Anti-Kickback Act and is scheduled to be sentenced on September 26; and Khan, 44, charged with the kickbacks conspiracy and conspiracy to defraud the United States, is a fugitive; and Mubtagha Syed, 50, of Jersey City, New Jersey, the marketing agent for another company, pleaded guilty to conspiring to
violate the Anti-Kickback Act and was scheduled for sentencing Sept. 12
The Kickback Scheme
Physicians at APMS/ASC required patients who were prescribed controlled substances as pain relief medications to submit urine specimens to monitor the levels of pain medication or other narcotics in their bodies. According to evidence presented at trial, in late 2011, Syed, the marketing agent for Accu Reference (which was owned by co-defendant Konstantin Bas), proposed to Khan and Wadhwa that APMS/ASC start referring patients’ urine toxicology specimens to Accu Reference in return for the payment of kickbacks. After Malik and Sherlekar approved the plan, which also came to include back braces from another Bas-controlled company, APMS/ASC began submitting all of its patients’ urine specimens to Accu Reference.
Each month from April 2011 through July 2012, APMS/ASC referred between 700 and 1,300 patient urine specimens to Accu Reference in return for kickbacks. Accu Reference received approximately $4.4 million from claims submitted to Medicare and private insurers for testing the specimens. After deducting its overhead expenses on the testing, Accu Reference split its profits 50/50 with Khan, Wadhwa, Sherlekar, and Malik. (Syed also received a share of Accu Reference’s profits.) From the time the kickback payments began in June 2011 until the end of the scheme in August 2012, Bas caused his companies to pay kickbacks totaling $1.376 million to Sherlekar, Malik, Khan and Wadhwa. Khan and Wadhwa deceived Drs. Sherlekar and Malik about the full amount of the kickback payments from Accu Reference, however, and retained more than 60% of the kickback payments for themselves. Drs. Sherlekar and Malik each received approximately $240,000 in kickbacks from the scheme.
The Fraudulent Anesthesia Billing Scheme
In addition, according to evidence presented at trial, from January 2010 through the summer of 2012, APMS/ASC fraudulently upcoded a nerve block agent and the anesthesia, as a result of which APMS/ASC received a higher level of reimbursement from insurers. For example, on January 3, 2012, Dr. Sherlekar provided both spinal injections and anesthesia to a large number of patients at APMS/ASC’s Frederick office. However, he texted Dr. Malik that “I am using your name today as surgeon as we have 34 procedures here [in Frederick] and 20 in Waldorf,” to which Malik responded “ok.” Malik was seeing patients at his office in Hackettstown, New Jersey that day.
The Tax Evasion Scheme
On June 25, 2018, Malik pleaded guilty defrauding the IRS. Malik admitted that from 2009 through 2012, he underreported his taxable income by approximately $3,374,997, resulting in additional taxes owed of $1,157,712. Malik failed to report as income the kickback payments received from Accu Reference; he did not report and instead pocketed large amounts of the cash payments received by the practice from patients; and he used the services of a corrupt New Jersey accountant to fraudulently overstate APMS/ASC’s business expenses on its corporate tax returns and to understate the income received from the company, the press release said.
The remaining co-defendent, Konstantin Bas, 41, of Brooklyn, New York, pleaded guilty to conspiring to violate the Anti-Kickback Act and was also scheduled to be sentenced Sept. 12.