5 Doctors, 3 Pharmacists Guilty in $20-Million Scheme : 11 Convicted in Medicaid ‘Fraud Mill’

Five doctors and three pharmacists were among 11 medical workers convicted in U.S. District Court here Wednesday of bilking the Medicaid program of almost $20 million in what the Justice Department said is the largest prosecution of its kind ever.

The 11 were accused of running a network of clinics, medical laboratories and pharmacies that were, in the words of one prosecutor, “fraud mills,” used to write and fill thousands of phony prescriptions for codeine-based cough syrup and sedatives for drug addicts. Combining the two prescriptions allowed addicts to get a “high” similar to one produced by heroin.

Medical Tests

The doctors and pharmacists then billed the federally financed Illinois Medicaid program for millions of dollars worth of unnecessary medical tests, examinations and supplies.

One pharmacist involved in the scheme testified during the trial that he alone earned $500,000 from the fraud over the four-year period it was in operation.

Calling Medicaid cheating “the single largest area for fraud outside of the defense budget,” Anton R. Valukas, U.S. attorney for the Northern District of Illinois told The Times that techniques used to unravel this case will be “a primer for similar (federal) prosecutions across the country.”

Two-Month Trial

The 11 were found guilty of racketeering, conspiracy to commit racketeering, illegal drug distribution and mail fraud in a jury trial that lasted more than two months. They were among 40 persons, including 16 doctors, named by a federal grand jury in February, 1984, in a 149-count indictment. At the time, Justice Department officials called the case the biggest in history both in terms of dollars and persons involved.

Among those convicted Wednesday was the man the government said masterminded the scheme, pharmacist Morton Goldsmith, 51, of north suburban Skokie. He faces a possible sentence of life in prison for his role, according to federal officials. U.S. District Judge John F. Grady will sentence the 11 on March 31.

Wednesday’s verdict, after almost 30 hours of jury deliberation, was a dramatic conclusion to the fraud that was, in part, uncovered by WBBM-TV, the CBS-owned station in Chicago. Of those originally indicted, 24 pleaded guilty, three doctors were found mentally incompetent to stand trial, one died of a drug overdose while awaiting trial and one is yet to be tried. Another doctor died of a drug overdose before he could be indicted and a second had been declared legally insane before being hired by Goldsmith.

Detailed Look

Testimony during the long trial provided a detailed look into the massive fraud that relied in part on physically and mentally impaired doctors, some of them drug addicts themselves, to write fraudulent prescriptions.

Testimony showed that Goldsmith controlled or owned 20 phar macies, clinics and medical laboratories that were used to process the fraudulent Medicaid bills.

The clinics would serve only drug addicts who would pay cash for the prescriptions in exchange for submitting to unnecessary tests and allowing a range of services and supplies to be charged against their public aid identification card.

To inflate bills to the government, for example, a blood sample from one patient was billed as being taken and tested from several patients.

Bills for Toothpaste

In addition, the government was often billed for items ranging from condoms to toothpaste.

One government witness, pharmacist Jerome Steinborn, who pleaded guilty to charges of racketeering and mail fraud and agreed to testify in the trial, was asked if the clinics ever treated any sick persons.

“I hope not,” he told the jury.