VAX-D Chiropractic Fraud

TWO CHIROPRACTORS FOUND GUILTY BY FEDERAL JURY

IN “VAX-D” FRAUD SCHEME

Atlanta, GA - A jury in federal district court has returned a guilty verdict against ARTHUR HARGRAVES, 67, of Douglasville, Georgia, and DANIEL PUFFENBERGER, 52, of Kissimmee, Florida, on charges of health care fraud, relating to fraudulent billings for a controversial back pain treatment known as Vertebral Axial Decompression or “VAX-D.”

A co-defendant, HOWARD BERKOWITZ, 60, of Atlanta, Georgia, pleaded guilty in March 2007. The jury deliberated less than one hour after a 6-day trial.

United States Attorney David E. Nahmias said, “Today’s verdict sends the message that health care providers who fraudulently bill for their services will be held accountable for their crimes. These defendants received millions of dollars that they were not entitled to, by lying to insurers about the services they were providing patients. These lies contribute to the problem of soaring health costs for all.”

According to United States Attorney Nahmias and the information presented in court: BERKOWITZ, an orthopedic surgeon, and HARGRAVES and PUFFENBERGER, both chiropractors, operated a health care network in North Georgia and Tennessee known as the Associated Spinal Care Network (”ASCN”). The defendants were convicted of running a fraud scheme involving ASCN’s billing for a back pain procedure known as Vertebral Axial Decompression, or “VAX-D.”

VAX-D is a non-invasive back pain procedure that uses a mechanical table to stretch a patient’s spine. Blue Cross/Blue Shield of Georgia considered VAX-D to be investigational and not medically necessary, and made clear to health care providers that it did not cover the procedure. Evidence at trial showed that ASCN, at the direction of BERKOWITZ, HARGRAVES, and PUFFENBERGER, nevertheless billed Blue Cross/Blue Shield of Georgia for over $3 million relating to the VAX-D procedure from 2001 through 2005. The defendants were convicted of lying to Blue Cross about what procedures ASCN was performing in order to get paid for this non-covered procedure.

Specifically, instead of using the specific billing code assigned to VAX-D, ASCN used a different code that pertained to surgical nerve decompression procedures. The Indictment charged that the defendants used that code because they knew Blue Cross would pay for it, but would not pay for VAX-D. The proof at trial included testimony from the defendants’ former employees, several of whom were explicitly instructed by HARGRAVES and PUFFENBERGER to not refer to the procedure as VAX-D when speaking to insurers, and to white-out references in documents to VAX-D because the defendants told the employees that insurers do not cover VAX-D.

The defendants were indicted in March 2007. HARGRAVES and PUFFENBERGER could receive a maximum sentence of 50 years in prison and a fine of up to $1,250,000. BERKOWITZ, who pleaded guilty, faces a maximum sentence of 10 years imprisonment and a fine of up to $250,000. In determining the actual sentence, the Court will consider the United States Sentencing Guidelines, which are not binding but provide appropriate sentencing ranges for most offenders. BERKOWITZ has already re-paid the entire restitution owed to the insurance company, which is approximately $2.5 million. A sentencing date before United States District Judge Richard W. Story has not yet been set by the court.

This case was investigated by Special Agents of the Federal Bureau of Investigation.

Assistant United States Attorneys Justin S. Anand and Teresa D. Hoyt are prosecuting the case.

For further information please contact David E. Nahmias (pronounced NAH-me-us), United States Attorney, or Charysse L. Alexander, Executive Assistant United States Attorney, through Patrick Crosby, Public Affairs Officer, U.S. Attorney’s Office, at (404) 581-6016. The Internet address for the HomePage for the U.S. Attorney’s Office for the Northern District of Georgia is www.usdoj.gov/usao/gan.

ORGANIZER, TWO OTHERS SENTENCED IN $15 MILLION MORTGAGE FRAUD AFFECTING 80 PROPERTIES IN ATLANTA’S WEST END

Atlanta, GA - KEVIN G. WIGGINS, 41, of Ellenwood, Georgia; along with an appraiser, FRANK W. ASTWOOD, 37, of Hampton, Georgia, and an office manager, LYDIA WIGGINS CHRISTOPHER, 59, of Union City, Georgia were sentenced today by United States District Judge Jack T. Camp on charges related to a large-scale mortgage fraud scheme that targeted West End neighborhoods in Atlanta in 2001 and 2002.

United States Attorney David E. Nahmias said of today’s sentence, “This case started with concerns from neighborhood activists, which led to a diligent FBI investigation that revealed a scheme using phony rehabs and straw borrowers to steal millions of dollars from mortgage lenders. But the lenders were not the only victims of these crimes: The multiple foreclosed properties had a devastating effect on neighborhoods known for their historic character. These criminals will now go to prison, and we will continue our work to bring to justice others responsible for mortgage fraud.”

WIGGINS was sentenced to 8 years, 4 months in federal prison. There is no parole in the federal system. He was also ordered to serve 3 years of supervised release, pay restitution in the amount of $6,477,164, and perform 200 hours of community service.

ASTWOOD was sentenced to 3 years in federal prison, to be followed by 3 years of supervised release, pay restitution in the amount of $4,289,575, and ordered to perform 150 hours of community service.

CHRISTOPHER was sentenced to 8 months in federal prison and 8 months to be served in home confinement, to be followed by 3 years of supervised release, pay restitution of $940,532, and ordered to perform 150 hours of community service.

According to United States Attorney Nahmias and the information presented in court:

WIGGINS contracted for the purchase of over 80 distressed properties primarily in Atlanta West End neighborhoods at their true value which ranged from $24,000 to $80,000. Then, before he actually purchased the property, he deeded the properties to unqualified straw borrowers, some of whom were his relatives. Using false information about the unqualified straw borrowers, arranged for financing for them and obtained a total of over $15 million in mortgage loans.

When WIGGINS applied for those loans in the names of the straw borrowers, he inflated each property’s value by as much as $100,000 by falsely representing that the properties had been completely renovated or “rehabbed.” WIGGINS also claimed the properties were occupied by tenants paying rent in excess of the projected monthly mortgage amount. WIGGINS paid ASTWOOD three times the legitimate appraisal fees to write appraisals that falsely reflected that each property had been rehabbed.

In reverse order of the sequence of events in a legal real property transaction, WIGGINS purchased these properties after he had already “sold” them to the straw borrowers, using proceeds from the “sales” – which came from the fraudulently inflated mortgage loans obtained in the straw borrowers’ names – to buy the properties and to pay his appraiser, himself and other coconspirators. WIGGINS operated this scheme through a number of companies he had established, such as “TWF,” and “The Wiggins Family.” The lenders in this scheme suffered losses totaling approximately $7 million, and affected West End neighborhood property taxes doubled in part due to the fraudulently inflated property valuations.

WIGGINS, ASTWOOD and CHRISTOPHER were indicted by a federal grand jury in February 2007. WIGGINS pleaded guilty to the charges on October 17, 2007.

ASTWOOD pleaded guilty to this mortgage fraud conspiracy on June 14, 2007. CHRISTOPHER pleaded guilty to the charges on February 7, 2008.

This case was investigated by Special Agents of the Federal Bureau of Investigation. The United States Attorney’s Office also wishes to thank residents of West End neighborhoods and the “30310 Mortgage Fraud Task Force” for their assistance and support.

Assistant United States Attorney Gale McKenzie prosecuted the case.

For further information please contact David E. Nahmias (pronounced NAH-me-us), United States Attorney, or Charysse L. Alexander, Executive Assistant United States Attorney, through Patrick Crosby, Public Affairs Officer, U.S. Attorney’s Office, at (404) 581-6016. The Internet address for the HomePage for the U.S. Attorney’s Office for the Northern District of Georgia is www.usdoj.gov/usao/gan.