As widely reported in the media recently, 18 former NBA players and a spouse of one of them were criminally charged on October 7 by federal prosecutors of the Southern District of New York with defrauding the NBA Players’ Health and Welfare Benefit Plan (the “Plan”). These defendants are alleged to have submitted nearly $4 million in fraudulent reimbursement claims for medical and dental services that they never received. Of the alleged false claims submitted, players are accused of pocketing about $2.5 million. Additionally, as a result of his role as ring leader in the scheme, one of the defendants allegedly received about $230,000 in kickbacks from the other defendants. Among other charges, the players are charged with conspiracy to commit healthcare fraud, which carries a maximum sentence of 20 years in prison.
In a nutshell, this is how the defendants allegedly pulled off the scheme. The ring leader of the scheme allegedly supplied the other defendants with false invoices to support their false and fraudulent claims. These claims were then submitted for reimbursement to the Plan. Amazingly, a number of the supporting documents submitted with the claims were allegedly not on the medical service provider’s letterhead, contained unusual formatting, have grammatical errors – all revealing red flags, yet were paid anyhow.
According to U.S. Attorney, Audrey Strauss, “the defendants’ playbook involved fraud and deception. Thanks to the hard work of our law enforcement partners, their alleged scheme has been disrupted and they will have to answer for their flagrant violations of law.” FBI Assistant Director Michael J. Driscoll went on to say, “today we’ve charged 18 former players and one spouse for their alleged participation in a healthcare fraud scheme that resulted in nearly $2 million in losses to the National Basketball Association’s Health and Welfare Benefit Plan.” Putting this in the larger context, Driscoll went on to say, “the healthcare industry loses tens of billions of dollars a year to fraud. Thanks to the work of our dedicated FBI agents and partners alike, cases like this demonstrate our continued focus on uncovering healthcare fraud scams that harm both the industry and the consumers of their services.”
Review and analysis of the Government’s 32-page indictment reveals the following background and highlights concerning the criminal conduct allegations against the defendants:
- The NBA’s Plan provided certain benefits to eligible active and former players and their eligible dependents;
- The defendants were charged with submitting false and fraudulent claims to the Plan for reimbursement of expenses for medical and dental services that were not actually rendered;
- One of the defendants, Terrence Williams, orchestrated the scheme by recruiting other participants by offering to supply them with false invoices, etc., in exchange for kickbacks paid to him;
- The NBA Plan is designed to provide supplemental coverage to eligible participants over their existing medical and dental coverage. The Plan was funded through contributions by NBA member teams;
- The Plan is administered by a Board of Trustees which consists of three members appointed by the NBA and three appointed by the Players’ Association. The Board appointed an Administrative Manager to oversee the Plan’s day-to-day management and to determine if claims filed are eligible to be paid under the Plan. During the time period of the scheme (2017-2020), the Plan engaged two different Administrative Managers at different times;
- Named in the indictment as relevant persons are the following: the named defendants (including the one spouse); a chiropractic office ; a dental office; a “wellness” office; two doctors; an administrative manager employee; and two other associates of Mr. Williams;
- In addition to possible prison time, the defendants could face forfeiture of property (real or personal) and fines.
At the media conference announcing the Government’s indictment, U.S. Attorney Strauss emphasized that the charges contained in the indictment are “merely allegations, and that the defendants are presumed innocent unless and until proven guilty.” She went on to say the investigation of the case continues and did not rule out further indictments.
As with any complex case such as this one, there are many questions yet to be answered:
- What responsibility does the NBA have for overseeing the Plan?
- What are the roles and responsibilities of the Plan’s Board of Trustees and the Administrative Manager?
- Did the Plan have any dedicated staff such as an executive director or did it simply contract with the Administrative Manager for proscribed services?
- What is the review process for approving the submission of medical and dental claims?
- How did the Government learn of the alleged fraudulent scheme? A whistleblower?
- Who are the un-named relevant persons listed in the indictment and how were they involved?
- Who, if any person, has been cooperating with the prosecutors on the investigation of this case?
- What can sports organizations and their compliance and ethics officers, players, and former players learn from this scandal to prevent future scams from occurring?
At the close of the Government’s press release on the indictment, the public was reminded that, “the entirety of the text of the indictment , and the description of the indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.”
Nevertheless, if the Government is able to prove the charges beyond a reasonable doubt, serious problems exist in the management of the Plan. Certainly, questions of competence and diligence, among others, will need to be answered by the administrators and trustees involved.