O.C. Grand Jury indicts 15 people in alleged healthcare scam

More than a dozen Southern California healthcare providers, including a prominent donor to President Obama, have been indicted in an alleged multimillion-dollar insurance kickback scheme that resulted in the death of a 6-month-old Los Angeles boy.

An Orange County Grand Jury last week indicted 45-year-old Kareem Ahmed and 14 associates, alleging he formulated topical creams and oversaw an extensive network of kickbacks that paid doctors and pharmacists more than $25 million to prescribe and distribute the products.

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For the Record

Healthcare indictments: In the June 25 LATExtra section, an article about the indictment of 15 healthcare providers in an alleged insurance kickback scheme misidentified the media outlet that first reported the story. It was KPCC-FM (89.3) that broke the story, not KPPC.

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Ahmed, president of Ontario company Landmark Medical Management, and the others face a total of 44 counts on felony charges including conspiracy, trading rebates for patient referrals, insurance fraud and involuntary manslaughter, according to two grand jury indictments.

According to the indictments, which were first reported by KPCC, Ahmed and two employees worked with a pharmacist to formulate three topical creams “based on the profitability of the ingredients,” and then actively recruited doctors treating workers’ compensation patients.

The indictment alleges that the scheme, which ran from 2009 to 2013, involved payments ranging from $600,000 to $8 million to doctors who prescribed creams made by pharmacists who had contracts with Ahmed. In addition to Ahmed, the indictment includes chiropractors, doctors and pharmacists.

The creams were dispensed by two Orange County pharmacies, Tustin Community Pharmacy Inc. and Curt’s Compounding Pharmacy in Fountain Valley, owned by Curtis Hague, who received a total of more than $8 million, the indictments allege. Hague and Michael Rudolph, who owns the Tustin pharmacy, were among the targets of the indictments.

Ahmed is accused of masterminding a scheme to produce the medicines instead of prescribing readily available formulas, and of trying to mask the scheme by forming contracts with the care providers for the purchase of future account receivables.

Reached by phone, a spokeswoman for Landmark Medical called the charges “meritless.”

“Kareem Ahmed and his employees are innocent of all charges that have been alleged.... We expect full exoneration of any wrongdoing,” said Lori Serafino, Landmark’s head of legal compliance.

With little prior history of political giving, Ahmed emerged as a major donor to Obama’s 2012 reelection campaign, giving $1 million to the pro-Obama Priorities USA Action that year, and an additional $5,000 to the president’s campaign, according to data from the Center for Responsive Politics.

In addition, Ahmed made the center’s list of 100 top donors to outside spending groups, and also gave $100,000 each to the House Majority PAC and Senate Majority PAC, and thousands more to the Democratic Congressional Campaign Committee and the Los Angeles County Democratic Central Committee.

Ahmed, Dr. Andrew Jarminski, and Rudolph, a pharmacist, also face involuntary manslaughter charges, which allege that the trio caused the death of a child identified as Andrew G. “in commission of a lawful act which might produce death, in an unlawful manner and without due caution.”

In that case, Jarminski is accused of prescribing one of the creams to Priscilla Lujan, a young mother from East L.A. who saw Jarminski in his Long Beach office in February 2012 after complaining of an injury while working at Goodwill Industries.

According to her attorney, Shawn McCann, Lujan applied the cream to her knee and shoulder before preparing a bottle for her 6-month-old son, Andrew Gallegos, and putting him to bed.

The next morning, McCann said, Lujan found her son cold and unresponsive.

A report from the L.A. County coroner’s office shows that the infant died of “multiple drug intoxication,” and noted “extremely high and lethal” levels of pain reliever Tramadol and cough suppressant Dextromethorphan as well as high levels of the antidepressant Amitriptyline, three ingredients in the cream. Traces of the chemicals were also found on the baby’s bottle.

“In their hurry to prescribe this to a lot of people, they rushed it out the door to her without warnings,” McCann said.

“She held the baby, she fed the baby, she bounced it on her knee and allowed the baby to suck on her fingers, not realizing that she had just administered a very potent and poisonous medication,” he said, adding that his client had initially been arrested on suspicion of causing the child’s death.

McCann said that even after the medication was found to have caused the baby’s death, Jarminski’s office continued to ship the ointment to the grieving mother.

The child’s parents are now suing Jarminski; Joseph Gutierrez, a physician’s assistant; Healthcare Pharmacy; Allied Medical Group Inc., and Industrial Pharmacy Management, alleging that manufacturing defects and negligence contributed to Andrew’s death.

According to the grand jury indictment, Ahmed allegedly paid Jarminski more than $1.9 million and Rudolph more than $1 million over three years.

Calls to attorneys representing Jarminski, Industrial Pharmacy Management and Rudolph’s business, Tustin Community Pharmacy, were not returned.

christine.maiduc@latimes.com

Twitter: @cmaiduc