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Editor: Mike Bothwell
Profession: Qui Tam Attorney

Category: Settlements and Verdicts

A Miami jury found Gustavo Smith, 43, guilty of all 17 counts charged against him in the September 2007 indictment, including: conspiracy to defraud the U.S. government, to commit health care fraud, and to submit false claims to the Medicare program; seven counts of health care fraud; seven counts of submitting false claims to the Medicare program; conspiracy to commit money laundering; and one count of money laundering. Sentencing has been scheduled for July 2, 2008.

Smith used patients names from his Medstar pharmacy to bill the Medicare program for durable medical equipment. At the six day trial, patients testified that they never received any equipment from Medstar and had no medical need for the equipment. Several doctors also testified that they never wrote prescriptions for the equipment being billed by Medstar and never prescribed the types of equipment being billed by Medstar. Such equipment included negative pressure wound pumps, wound care supplies and pharmaceuticals. Through this fraudulent billing, Smith billed Medicare approximately $3 million over a one year period.

The jury also heard evidence that Smith also owned and operated Orthotics Fitters. This second company was used to bill Medicare program for the same equipment being billed through Medstar. During 2006, Smith caused Orthotics Fitters to bill another roughly $2.9 million in fraudulent claims for negative pressure wound pumps and wound care supplies that were never actually provided.

Smith's co-defendant, Friedhelm Schock, the nominal owner of Medstar, was acquitted on all charged counts.

The case was prosecuted by Trial Attorneys Hank Bond Walther and John K. Neal of the Criminal Division's Fraud Section, with the investigative assistance of the FBI and U.S. Department of Health and Human Services, Office of the Inspector General. The case was brought as part of the Medicare Fraud Strike Force that has been operating in the Miami area since March 2007. The Medicare Strike Force is led by Deputy Chief Ogrosky of the Criminal Division's Fraud Section and the office of U.S. Attorney R. Alexander Acosta of the Southern District of Florida. Since March 1, 2007, the Strike Force has brought charges against 120 defendants, resulting in more than 100 convictions to date.