Sham Rehab and Fake Hospice: 15 Charged in $1.8 Billion Fraud Case

Federal prosecutors in Los Angeles say 15 people, six of them medical professionals, billed insurers for addiction treatment that was a sham, hospice care for patients who were not dying and heart procedures that patients did not need. The Justice Department announced the charges Thursday. Eight people were arrested and seven more were charged. Every charge is an allegation. One defendant, Nicholas Moore, has pleaded guilty, and a second, Thomas Steven Mladinich, has a plea agreement.

What the $1.8 Billion Counts

The headline number counts claims. The release says the schemes resulted in over $1.8 billion in fraudulent claims. FBI Director Kash Patel’s statement in the same release calls it “$1.8 billion in losses,” and First Assistant U.S. Attorney Bill Essayli refers to “intended losses.” Actual payouts appear case by case. In the Medi-Cal pharmacy case, for example, $269 million was claimed and at least $178.7 million was paid.

The $1.8 billion is the sum of three cases: more than $1.6 billion in addiction treatment, $134 million in heart procedures and $138 million in hospice. The roughly $270 million Medi-Cal case is listed “in addition.” By simple addition, the combined total comes to about $2.1 billion, while the headline says “nearly $2 billion.”

The split between private and public money is also worth knowing. The largest scheme, the $1.6 billion addiction case, was billed to private insurance companies. Patel’s statement describes the defendants as stealing from “taxpayer funded healthcare and insurance programs.” The Medicare and Medi-Cal cases add up to roughly $540 million in claims.

The Cases

Addiction treatment. Prosecutors say Nathan Young and his father, David Young, both of Los Angeles, controlled dozens of treatment companies and directed “body brokers,” including Honey and Cody Phipps of Greenville, Texas, to find people who were unhoused, poor or attending support groups. The indictment alleges the group favored people with the most generous insurance and sometimes enrolled them in policies they did not qualify for. Patients were lured to California with free flights, money, hotel stays and drugs, among other offers. Once there, according to the indictment, “non-premium” patients were housed in crowded, unsanitary places described as “trap houses.” Prosecutors say the Youngs directed that patients who tried to leave be drugged “to knock the client out,” and that “therapy” was often a Zoom call with more than 100 attendees. In text messages quoted by the department, the Phippses tell a prospective patient they can “lay out on [the] beach” while the video points at the ceiling and insurance is billed. Moore, who pleaded guilty, admitted helping submit $199 million in false claims as an area manager.

Hospice. Three defendants are accused of enrolling Medicare patients who were not terminally ill, for more than $138 million in billing. Prosecutors say Geoffrey Jimenez’s Transitions Hospice discharged about 85 percent of its patients for reasons other than death, more than four times the national average. Many patients, according to the complaint, learned they had been enrolled only when Medicare or their own doctors contacted them. Dr. Richard Keech, 83, is accused of signing false certificates of terminal illness for patients who had not chosen hospice. Armani Raffi is accused of running four linked Sherman Oaks hospices that billed about $21 million, paying marketers $1,500 to $1,800 per referral.

Heart procedures. Dr. Harold Tabaie, 78, a cardiothoracic surgeon, is accused of performing atherectomies, a procedure that uses a bladed catheter to clear arteries, on patients who did not have artery disease. Prosecutors say his business partner, chiropractor Hany Malek, posed as a medical doctor to diagnose patients. The indictment alleges the pair billed under other providers’ names to hide the volume and offered patients free transportation and groceries. About $135 million was billed to Medicare, and the department says some patients were left in extreme pain.

Other charges. Two doctors are accused of taking per-patient kickbacks to sign genetic test orders. Mladinich is accused of taking up to $250,000 in kickbacks for sending patients to a rehab facility. Christina Mareik of Whittier is charged in a Medi-Cal pharmacy scheme that allegedly exploited a pause in prior authorization rules. Dr. Dejun Wang of Walnut is accused of selling drug samples, including Ozempic and Mounjaro, to pharmacy owners.

Why Data Did the Catching

The heart procedure case started with a chart. The department says data analytics showed Tabaie as an “extreme outlier” among Medicare billers of atherectomies nationwide from 2016 through 2023. Assistant Attorney General Colin McDonald put it this way: “the data will lead us to wherever you are.” The department says its Health Care Fraud Strike Force program has charged more than 6,200 defendants, who billed more than $45 billion since 2007.

What You Can Do

•      Compare your Medicare statements with your calendar. Medicare advises checking that each listed service happened and that the details are right. Look for hospice or procedure charges you never chose.

•      Treat offers of money, gifts or free transportation as a warning sign. So is anyone other than your doctor asking for your Medicare number.

•      To report suspected fraud, call 1-800-MEDICARE (1-800-633-4227) or the inspector general’s tip line at 1-800-HHS-TIPS.

•      Patients who believe they were treated by Tabaie or Malek can call the Justice Department’s Victim Assistance line at 1-888-549-3945 or email victimassistance.fraud@usdoj.gov.

Sources:

•      U.S. Department of Justice, “Los Angeles Health Care Fraud Takedown Results in Charges Against 15 Defendants” (Oct. 22, 2026)

•      Medicare.gov, “Reporting Medicare fraud and abuse”

•      HHS Office of Inspector General, “Report fraud”