Surgery Center Owner Pleads Guilty to Federal Charges, Admits Paying Physicians Bribes and Kickbacks for Patient Referrals
|U.S. Attorney’s Office September 20, 2013|
CHICAGO―The owner of multiple area outpatient surgery centers pleaded guilty today to federal fraud and tax charges, admitting that he paid bribes and kickbacks to physicians for patient referrals and impeded the Internal Revenue Service in the collection of federal income taxes. The defendant, Raghuveer Nayak, was scheduled to stand trial starting October 1 in U.S. District Court, but the trial was stricken following today’s guilty plea.
Nayak, 58, of Oak Brook, entered a conditional plea of guilty to one count of mail fraud and also pleaded guilty to one count of impeding the IRS. The conditional plea allows Nayak to appeal a legal issue pertaining to the mail fraud count and, if he prevails, he may withdraw his plea to that count alone. U.S. District Judge Robert Gettleman scheduled a sentencing hearing for January 22-23, 2014.
Nayak faces a maximum sentence of 20 years in prison on the mail fraud count and a maximum fine of $250,000, or an alternate fine totaling twice the loss or twice the gain, whichever is greater, as well as mandatory restitution. Impeding the IRS carries a three-year maximum prison term and a $250,000 fine. The court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
According to a written plea agreement, Nayak opened Rogers Park One-Day Surgery Center in about 1998, and he opened Lakeshore Surgery Center about seven years later. Both facilities are privately owned one-day surgery centers where surgeons performed outpatient surgeries not requiring an overnight stay, ranging from urological to podiatric to orthopedic procedures. Nayak’s profits depended upon doctors bringing patients for surgery to his outpatient facilities, rather than to a traditional hospital, or to one of the many other surgery centers in the Chicago area.
As part of the scheme, Nayak paid or offered to pay physicians money in exchange for referring patients to or conducting surgeries at Rogers Park and Lakeshore, rather than at a hospital or competing surgery center. Nayak paid some physicians cash in exchange for patients they brought or referred to Rogers Park and Lakeshore, in amounts that reflected the volume of surgeries they conducted at the surgery centers or the number of patients they referred there. Nayak paid these physicians cash in exchange for referrals to his surgery centers, intending that the money would influence their medical motives and further intending that the physicians would not disclose the cash payments to their patients. Nayak did not intend to cause the medical patients any physical or monetary harm by his cash payments to their physicians.
Nayak admitted that he paid one physician, a podiatrist, approximately $200-300 in cash per surgery he conducted at Rogers Park or Lakeshore, in addition to the professional fees the doctor billed separately to his patients’ insurance companies. Nayak gave the podiatrist the cash when they were alone, including at the doctor’s office, and Nayak acknowledged that the doctor did not disclose the cash payments to his patients. In total, this physician conducted approximately 142 surgeries at Rogers Park between 2004 and 2009, for which Nayak paid the doctor cash.
In impeding the IRS, Nayak admitted that he paid physicians money in exchange for referrals of patients the physicians had made or would make to Rogers Park and Lakeshore. Nayak paid these physicians in cash, in an attempt to actively conceal the payments, knowing that the natural consequence would be a lack of documentation of the cash payments in Rogers Park’s and Lakeshore’s business records if the IRS were to audit or question the transactions. Nayak did not disclose the cash payments to his bookkeeper and outside tax preparer, and he did not file, issue, or cause to be issued Forms 1099 for physicians to whom he paid cash in exchange for patient referrals for tax years 2002 through 2010. Nayak knew that a foreseeable consequence of his actions was that the federal income tax returns filed by the physicians to whom he made cash payments would be false. Nayak also instructed the podiatrist to not deposit the cash Nayak gave him in his bank account and to not report those cash payments on his federal tax returns, intending that the doctor would file federal tax returns that would be false.
The government also contends, but Nayak disputes, that in approximately 2002, he engaged in a scheme to obtain cash, including to make cash payments to physicians in exchange for patient referrals, by giving Individual A more than $2 million in checks drawn on Nayak’s medical facilities from about 2002 through December 2008. In exchange, at Nayak’s direction, Individual A gave Nayak cash in an amount equal to approximately 70 percent of the value of the checks that he gave Individual A. As part of this scheme, Nayak hid the true purpose of the checks that he provided to Individual A by indicating to his tax preparer that the checks to Individual A were for advertising and should be treated as advertising expenses on the tax returns that Nayak signed and caused to be filed for himself and for his facilities.
In addition to those two facilities, Nayak owned and/or controlled the following health care-related businesses in Illinois and Indiana: Lakeside Surgery Center LLC, Merillville Plaza Surgery Center LLC, Lincoln Park Open MRI, Delaware Place MRI LLC, Paulina Anesthesia Inc., Illiana Anesthesia, Western Touhy Anesthesia Inc., and Division Medical Diagnostics Inc., according to the indictment.
The guilty plea was announced Gary S. Shapiro, United States Attorney for the Northern District of Illinois; Robert J. Shields, Jr., Acting Special Agent in- of the Chicago Office of Federal Bureau of Investigation; and James C. Lee, Special Agent in Charge of the Internal Revenue Service Criminal Investigation Division.
The government is being represented by Assistant U.S. Attorneys Carrie Hamilton, Andrianna Kastanek, and Jeffrey Perconte.