Wow

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tax time. tax form with money. pen

Have you ever been speechless after you hear about something that is just too hard to fathom? (Like a Southern California man who carried out a series of carefully devised plans to commit fraud and fund a lavish lifestyle? The nerve of him.) Matthew Hogan Peters, 38, used his two compounding pharmacies located in Southeast Portland, Ore., to submit false reimbursement claims to Medicare, Medicaid, and other healthcare-benefit programs, then conspired to conceal his income and fraudulently decrease his federal income tax liability. (Oh, and there was some identity theft thrown in there too.) Brace yourselves folks – this is an interesting case likely to leave you speechless too.

Peters’ indiscretions were revealed when multiple government agencies pursued a lengthy investigation over several years into alleged illegal kickbacks. His two pharmacies and others owned by family members located in several states were also implicated. (It sounds like this apple didn’t fall too far from the fraud tree, if you know what I mean.)

The scam involved incentivizing healthcare providers to write prescriptions for custom-mixed medications that result in sizeable reimbursements from health insurance providers, then directing those prescriptions to Peters’ pharmacies for dispensing. (Sounds like a self-licking ice cream cone to me.) Peters sought approximately $3.4 million in reimbursements for medication that his pharmacies supposedly dispensed.

In mid-2015, Peters’ reimbursement claims were audited, and nearly $25 million in unwarranted reimbursements were discovered. Apparently, there was a lack of records proving that customers had received the compounded medications. When Peters heard about the discrepancies, he tried to avoid suspension from the insurance network by forging 41 patient attestations that they had received the compounded medication. He used Docu-Sign, an electronic signature application, from his personal computer to sign off as the patients. (That was a clever idea until auditors saw that the signatures all had the same unique digital code, which ultimately got Peters’ pharmacies suspended from the network.)

As you might imagine, this healthcare fraud scam was very profitable to Peters. So profitable that he had to hide some of the $14 million in gross income he received between 2014 and 2017. Peters came up with a few more schemes to conceal his exorbitant income and decrease his federal income tax liability.

Peters spent the pharmacy profits on personal expenses and told his accountant (and the IRS) that these were business expenses. These “so-called” legitimate business expenses included a $3.3 million property and construction in Belize and homes in Laguna Beach and San Carlos, Calif., and Incline Village, Nev., worth more than $5 million. (Let’s not forget the millions in cash transfers to straw entities and trust accounts in the names of others for Peters’ personal use.) His “business expenses” allowed him to illegally reduce his income tax liability by more than $5.4 million

It’s ironic that Peters operated two compounding pharmacies, because he used these companies to further compound his own personal problems. The mixture of healthcare fraud, tax evasion and identity theft landed him in prison for three years plus another three years of supervised release. He was also ordered to pay more than $3,441,263 in restitution to the IRS, not including back taxes previously paid. (Wow, what a waste. What if this fraudster had actually used his compounded medications to actually heal people instead of causing more harm?)

Today’s Fraud of the Day comes from a Department of Justice press release, “Owner of Local Compounding Pharmacies Sentenced to Federal Prison for Tax Evasion and Health Care Fraud,” dated December 10, 2021.

PORTLAND, Ore.—A Southern California man who owned and operated two local compounding pharmacies was sentenced to federal prison today for evading the payment of approximately $5.5 million in personal income taxes and submitting false reimbursement claims to CVS Caremark, a national pharmacy benefit manager.

Matthew Hogan Peters, 38, was sentenced to three years in federal prison and three years’ supervised release. Peters was also ordered to pay more than $3,441,263 million in restitution to the IRS, in addition to back taxes Peters has already paid.

 

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Larry Benson, Senior Director of Strategic Alliances, LexisNexis Risk Solutions - Government

Larry Benson is responsible for developing strategic partnerships and solutions for the government vertical. His expertise focuses on how government programs are defrauded by criminal groups, and the approaches necessary to prevent them from succeeding.

Mr. Benson has 30 years of experience in sales and business development. Before joining LexisNexis® Risk Solutions, he spent 12 years founding and managing two software technology startups. During the 1990s he spent 10 years as a Regional Director helping to grow a New England-based technology company from 300 employees to 7,000. He started his career with Martin Marietta Aerospace working on laser guided weapons and day/night vision systems.

A sought-after speaker and accomplished writer, Mr. Benson is the principal author of “Fraud of the Day,” a website dedicated to educating government officials about how criminals are defrauding government programs. He has co-authored WTF? Where’s the Fraud? How to Unmask and Stop Identity Fraud’s Drain on Our Government, and Data Personified, How Fraud is Changing the Meaning of Identity.

Benson holds a Bachelor of Science in Physics from Albright College, and earned two graduate degrees – a Master of Business Administration from Florida Institute of Technology, and a Master of Science in Engineering from Lehigh University.