Hundreds of San Diego-area Marines charged with defrauding federal government – ​​NBC 7 San Diego

Honor, courage and commitment are the core values ​​of the U.S. Marine Corps. Yet federal prosecutors say integrity disappeared from hundreds of service members involved in one of the largest military fraud conspiracies in recent history. The U.S. government has never disclosed what, if any, disciplinary action they received and won’t answer any questions about where they are now.

Federal charging documents go into great detail about the elaborate and lucrative scheme, in which a Utah pharmacy filled fake prescriptions written by a Tennessee clinic as part of a sham medical study.

Those prescriptions sold for big bucks. When the conspiracy was at its height, the clinic billed TRICARE, the government-sponsored military health care system, more than $10,000 per prescription, sometimes more than $20,000. These were not life-saving drugs; rather, the pharmacy often filled prescriptions for cosmetic creams, such as stretch mark cream and sunscreen, or a “wellness pill.”

To find fake patients, four Marines and one sailor acted as recruiters to identify service members and their families who knowingly participated in the scheme in exchange for monthly bribes of $300. More than 350 Marines and family members participated in the scheme. The vast majority were stationed at Marine Corps Air Station Miramar.

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“It took very little work to sign people up to receive free money,” Joshua Morgan, one of the Navy recruiters (now formerly active duty), told prosecutors.

Gary Barthel, a former Marine and defense attorney, often represents service members who become embroiled in similar schemes. With 40 years of experience in military law, the former military court-martial prosecutor has also worked as a legal advisor to commanding generals.

“The temptation is there,” Barthel said. “They are young, they are short of money and they will not hesitate to take advantage of the opportunity.”

Barthel told NBC 7 he was initially shocked by the allegations against hundreds of active-duty Marines from San Diego, but said it is not unusual for service members to be recruited into criminal enterprises.

“Especially younger service members,” Barthel said, “don’t get paid a lot. It’s easy for them to look the other way. Marines are generally trained to take risks, so it’s easy for them to do that.”

The scheme was successful: It was launched in 2014 and raised $65 million. The protagonists, the married owners of the clinic, spent that money on a lavish lifestyle. Prosecutors say that included an 82-foot yacht, two Aston Martins, gold and silver bullion, dozens of pieces of farm equipment, tractor-trailers and three real estate properties in Tennessee.

‘It opened the floodgates to fraud‘

Clinic owners weren’t the only ones who realized how easy it was to steal from Uncle Sam. Dozens of other clinics and pharmacies were treating TRICARE like a personal piggy bank. The surge in fake prescriptions for compounded drugs left the military health care program with a $2 billion problem seemingly overnight. It was so bad that TRICARE nearly went bankrupt.

So how did we get here?

In 2012, TRICARE changed its policy for compounded prescriptions, which are custom-made medications created specifically for patients. They are commonly prescribed when a drug, ingredient, or dosage is not commercially available. For example, if a patient is allergic to an ingredient in a common prescription.

In 2012, TRICARE allowed pharmacies to charge for each individual ingredient. The Department of Defense said that “opened the floodgates to fraud.” Before 2012, the average pharmacy prescription for compounding drugs was $100. Within two years, the average cost for a 30-day supply had skyrocketed to $13,000.

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The fraud scheme ends

The fraud was stopped about a year later, after a national crackdown on organized fraud schemes involving fake compounding prescriptions resulted in dozens of indictments across the country.

That brings us back to San Diego. The Justice Department charged 11 people. All pleaded guilty and were sentenced.

The mastermind of the scheme, clinic owner Jimmy Collins, was sentenced to 10 years in prison. He and his wife, Ashley, an accomplice, were also ordered to repay the $65 million. The two doctors who wrote the fake prescriptions were sentenced to two years in prison, and the five recruiters received sentences of between six and 21 months.

The Justice Department sent out more than a dozen press releases about the case, touting its investigation and its findings, but one glaring absence from those releases was any details about the discipline directed at hundreds of fake Navy patients.

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There were no details about court proceedings, plea deals, sentences, dishonorable discharges, demotions, letters of reprimand, monetary restitution or fines.

The federal charging documents leave no doubt that the fake patients were indeed aware of the fraudulent scheme. They claim that Navy recruiters “directed fictitious TRICARE beneficiaries to falsely state on a preprinted form that they had seen a physician… the beneficiaries had not seen or spoken with any medical professional regarding the prescription drugs they had been prescribed.”

And prosecutors apparently knew exactly who those Marines were. Documents show that recruiters kept detailed records of bribe payments to the fake beneficiaries, making it much easier for prosecutors to piece together the details.

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Beginning in January, NBC 7 Investigates repeatedly asked the U.S. Attorney’s Office for the Southern District of California and the U.S. Department of Justice whether the government plans to pursue criminal charges against Marines who accepted fake prescriptions in exchange for bribes.

A spokeswoman said the Justice Department would not discuss the case beyond what was written in its press releases and sent us this statement:

“The United States prosecuted several individuals, including some members of the military, who played key roles in the fraud scheme, knew and understood the scheme, and intended to defraud Tricare. The Justice Department has a longstanding practice of not confirming, denying, or commenting on investigations or inquiries involving individuals who are not charged with a federal crime.“

A representative from MCAS Miramar told NBC 7 to contact the Department of Defense, which in turn told us to file a Freedom of Information Act request with the U.S. Marine Corps, which we did. However, these types of public records requests typically take more than a year to process.

The Naval Criminal Investigative Service also declined to provide information on the discipline of service members.

Military law expert Barthel told us not to hold our breath before giving answers.

“The Justice Department is not going to prosecute these military officers,” Barthel said. “They are going to pursue the ringleaders involved in the conspiracy.”

But the $65 million plan would not have been possible without the help of those foot soldiers.

“They wouldn’t have been able to commit these crimes if it weren’t for the other 350 people down there who are being bribed to get these prescriptions,” Barthel said. “I would be very surprised if the brass didn’t take any action, any disciplinary action.”

It’s possible the Marines faced consequences in a military court, though NBC 7 was unable to find that information in publicly available court-martial records.

“This really puts the organization, the military institution, in a bad light,” Barthel told NBC 7. “If the brass didn’t take action in a case like this, then they’re sending the wrong message to other Marines in the unit. In other words, that they can get away with it… Not only are they robbing service members and veterans of their health insurance, but they’re also robbing taxpayers of money.”

Changes in TRICARE

The Defense Health Agency administers TRICARE. NBC 7 also asked them for an interview for this article, which they declined. However, a spokesperson did send us a statement detailing changes to how prescriptions are reimbursed to compounding pharmacies.

In May 2015, DHA instituted a screening process for all compounded prescription ingredients. Ingredients that are not known to be safe, effective, or medically necessary are not cost-shared. This screening process is similar to one that pharmacy benefits company Express Scripts implemented for its commercial clients. These measures resulted in a 98 percent reduction in costs.

In addition to instituting strict screening measures where appropriate, DHA invoked temporary suspensions of claims payments.

Generally, temporary suspensions of payment of claims may be invoked to protect the interests of the government for a period reasonably necessary to complete the appropriate criminal, civil, and administrative investigation or proceedings.

Prior authorization requirements were also established as a safeguard for legitimate compounds to have their ingredients reviewed and to allow the beneficiary’s physician to present evidence that the compound is safe, effective, and medically necessary.

Additionally, following the April 2015 spike, DHA began conducting administrative audits of compounding pharmacies to verify the validity of compounding claims. The audits included consultations with providers and pharmacies, as well as detailed reviews of claims, and any overpayments identified during this process were recovered.

Finally, the Department of Justice, in collaboration with DHA and the Defense Criminal Investigative Service, established the Compounding Pharmacy Fraud Task Force to handle civil and criminal investigations of pharmacies, physicians, and marketers involved in the compounding pharmacy scheme.

By law, DHA/TRICARE may recover losses of only one dollar in civil settlements. Double or triple damages, fines, or penalties allowed in civil settlements are returned to the U.S. Treasury. Settlement recoveries apply to TRICARE benefit dollars for the year in which the money is received.

Since 2013, TRICARE, with the assistance of ESI, our pharmacy benefit contractor, has recovered $35,812,489 from compounding pharmacies.