Lead Defendant In Health Care Fraud and
NOV 16 -- (DALLAS) – Yesterday, in U.S. District Court in Dallas before United States Magistrate Judge Irma C. Ramirez, lead defendant Rakesh Jyoti Saran pleaded guilty to one count of conspiracy to commit health care fraud and other federal offenses; two counts of mail fraud; and one count of conspiracy to distribute controlled substances, announced United States Richard B. Roper. Saran, age 44, of Arlington, Texas, faces a statutory maximum sentence of twenty years imprisonment. He will be scheduled for sentencing by U.S. District Judge Jorge A. Solis.
Saran was arrested on September 21, 2005 on charges outlined in a 201-count federal indictment alleging that from November 1999 through September 20, 2005 he and the codefendants conspired with each other and others to commit health care fraud, wire fraud, mail fraud, and money laundering and to engage in the illegal distribution of controlled substances in a drug diversion scheme.
“The conviction of Rakesh Jyoti Saran and his co-conspirators, along with the forfeiture of their ill gotten gains should demonstrate the governments resolve in targeting, arresting and prosecuting those individuals involved in the illegal distribution of pharmaceutical drugs over the internet,” said Special Agent in Charge, James L. Capra of the Dallas Division of the DEA. “This partnership of local, state and federal agencies nationwide lead to the dismantling of this internet trafficking organization. This was an extremely complex undertaking and all agencies, investigators and prosecutors should be commended for their perseverance and dedication to duty.”
Based on plea papers filed yesterday, Saran operated twenty-three Texas-incorporated pharmacies through two companies owned by him, Carrington Healthcare Systems, Inc. and Infinity Services Group, Inc., and purchased expensive pharmaceuticals at significant discounts from pharmaceutical wholesale suppliers, including AmerisourceBergen, located in Valley Forge, Pennsylvania; Anda, Inc., located in Florida; Cardinal Health, located in Dublin, Ohio; H.D. Smith, located in Fort Worth, Texas; and Morris & Dickson Co., L.L.C. in Shreveport, Louisiana. Saran’s pharmacies purchased controlled substances such as hydrocodone (an addictive painkiller), phentermine hydrochloride (an appetite suppressant), alprazolam (used to treat anxiety, depression, panic disorder and premenstrual syndrome), and promethazine cough syrup (containing codeine) and obtained significant price discounts by obtaining fraudulent memberships in Group Purchasing Organizations (GPOs). To qualify for the significantly discounted “contract pricing” available to GPOs, Saran fraudulently represented to wholesale suppliers that his purchases were for “institutional distribution” and signed contracts containing “own use” or “closed door pharmacy” provisions restricting his distribution of the pharmaceuticals to institutions such as prisons, long-term care facilities, and rehabilitation hospitals. However, Saran sold the significantly-discounted pharmaceuticals outside the scope of the provisions, making substantial profits from the diverted transactions. Saran did not disclose to the wholesalers that the pharmacies were alter ego businesses he had created and that he had obtained individual DEA registration numbers for each one to camouflage his identity as the actual purchaser.
Saran also utilized his pharmacies to operate a “store front” website designed to facilitate the distribution of controlled substances to internet customers. Using the website, drug users illegally acquired controlled substances and dangerous drugs without valid prescriptions and without doctor intervention, paying up to four times the cost if the substances had been acquired legally.
Saran also used his pharmacies to fill pharmaceutical order from other Internet Facilitation Centers (IFC) involved in the illegal distribution of dangerous drugs and controlled substances. Additionally, Saran also played an integral role in providing promethazine cough syrup with codeine, hydrocodone, and alprazolam to individuals who illegally sold these drugs “on the street”, acquiring approximately $20 million in proceeds for doing so.
As part of his plea agreement, Saran will forfeit assets earned from his illegal activities, including over $1,000,000 in cash seized at his residence; more than $375,000 found in bank accounts; several vehicles; and a custom home under construction in Arlington.
In addition to his own guilty plea, Saran entered guilty pleas on behalf of twenty corporations he controlled and used in the criminal conspiracy, including Alliance Pharmacy Services, Inc.; AMS Pharmaceuticals Group, Inc.; Carrington Health Care System, Inc.; Dalamar Services, Inc.; East Pointe Pharmacy Services, Inc.; Everest Services, Inc.; Infiniti Services Group, Inc.; Med-Care Infusion Services, Inc.; National Executive Management, Inc.; Orion Pharmacy Services, Inc.; Precision Pharmacy Services, Inc.; Premium Pharmacy Services, Inc.; Quantum Infusion, Inc.; Reliance Pharmaceutical, Inc.; Southwest Infusion, Inc.; SWS Pharmacy Services, Inc.; Texas Home Infusion, L.L.C.; Tri-Phasic Pharmacy, Inc.; Trinity Infusion Services, Inc.; and Trinity Pharmacy Services, Inc.
Sixteen other defendants, including managers and employees of Saran’s various pharmacies, have also pleaded guilty to charges in the indictment, including conspiracy to commit healthcare fraud and conspiracy to distribute controlled substances.
U.S. Attorney Roper said, “These convictions show that Internet Pharmacies who illegally peddle controlled substances over the internet will be brought to justice. Saran’s multimillion dollar nationwide operation was successfully dismantled by the hard work and cooperation of federal, state and local law enforcement. These successful convictions should exemplify federal and local law enforcement’s commitment to address this serious problem of rouge on line pharmacy.”
U.S. Attorney Roper especially recognized the investigative efforts and teamwork of the U.S. Food and Drug Administration - Office of Criminal Investigations; Federal Bureau of Investigation; Drug Enforcement Administration; Internal Revenue Service – Criminal Investigation; U.S. Department Social Security Administration - Office of the Inspector General; U.S. Department of Veteran Affairs - Office of the Inspector General; Texas Department of State Health Services and the Texas State Board of Pharmacy.