U.S. Attorney’s Office
Western District of Missouri
(816) 426-3122
December 14, 2015

Fourth Defendant Pleads Guilty in Multi-Million-Dollar Fraud Scheme

KANSAS CITY, MO—Tammy Dickinson, United States Attorney for the Western District of Missouri, announced that a fourth defendant pleaded guilty in federal court today to his role in an elaborate fraud scheme in which conspirators impersonated representatives of Kansas City-based Cerner Corporation to entice dozens of physicians to invest more than $6 million, to sell an MRI to a Dallas area hospital for more than $1 million and to influence the outcome of several court proceedings.

David Hernon, 54, of Fishers, Ind. (formerly of Richardson, Texas), waived his right to a grand jury and pleaded guilty before U.S. Chief District Judge Greg Kays to a federal information that charges him with participating in a conspiracy to commit wire fraud from Aug. 25, 2008, to Feb. 19, 2015.

Hernon is the fourth defendant to plead guilty. David Tayce, 66, of Lucas, Texas, and Richard Bryant, 40, and his wife, Christina Bryant, 40, both of Sachse, Texas, have also pleaded guilty to their roles in the conspiracy.

Co-conspirators created dozens of companies which were designed to impersonate existing credible industry leaders. For each company, co-conspirators created a meticulous infrastructure that became the foundation for their fraud. For example, co-conspirators registered an Internet domain similar to other existing company domains in order to make e-mail accounts appear legitimate, leased virtual office space in the city of the existing company, established telephone numbers in the area code of the existing company and impersonated actual people who worked for the real companies. Co-conspirators then used these fake “employee” identities as well as the identities of fictional employees to communicate with investors, conduct business transactions, and manipulate court proceedings. They provided fabricated documents, agreements, quotes, and invoices that purported to be from the fake and fictional employees.

One of the companies that the co-conspirators impersonated was Cerner Corporation, which is a global supplier of health care information technology solutions, services, devices, and hardware. Cerner, which has more than 14,000 employees globally, is headquartered at 2800 Rockcreek Parkway, North Kansas City, Mo.

Co-conspirators impersonated Cerner to obtain investments, conduct business transactions and manipulate court proceedings. For example:

  • Co-conspirators impersonated Cerner in the fraudulent sale of a purported newly developed MRI system to Dallas Medical Center, and then conspired to cover it up by providing false testimony during the litigation of a subsequent lawsuit. Co-conspirators convinced employees of Dallas Medical Center and Prime Health Care (which acquired the hospital during the course of the fraud scheme) that they were working with Cerner. As a result, Dallas Medical Center transmitted two wire payments to the co-conspirators’ bank account totaling $1,061,550.
  • Co-conspirators solicited investments from more than 50 physicians totaling over $6 million, from February 2012 to December 2013, based upon false representations of commitments of other customers and investors – including Cerner – along with false financial statements and projections. Co-conspirators showed MRI images that were altered to make the images appear to have been created by an “iHeart” machine when they were not. Co-conspirators showed physicians demonstrations of a Lux Imaging Systems MRI, which was represented to be brand new technology manufactured by Lux Imaging Systems. In reality, it was actually an MRI system put together with used components, which co-conspirators disguised by removing and concealing its original labels, and concealing that Lux Imaging Systems was an entity created and controlled by the co-conspirators.
  • Co-conspirators used this fraudulent infrastructure to manipulate the filing and settlement of the involuntary bankruptcy of CMI Holding Company, Inc., in the Northern District of Texas. Co-conspirators impersonated bondholders in filing the bankruptcy, and then continued to impersonate them throughout the negotiation of the settlement of the bankruptcy. Incredibly, the co-conspirators also impersonated an investor, which enabled them to participate in settlement discussions from the other side of the litigation as well. As part of this scheme, they used fabricated documents and communications purporting to be from Cerner to obtain a larger settlement. Co-conspirators also created an entity to receive the funds of the settlement in place of the bondholders, and later conspired to cover it up by providing false testimony in another case.
  • Co-conspirators used this fraudulent infrastructure to manipulate the trial of LBDS Holding Company, LLC v. ISOL Technology, Inc., et al., in the Eastern District of Texas, by providing false testimony during the trial about Cerner and causing the admission of fabricated evidence purporting to be documents and agreements with Cerner in the trial.

Co-conspirators used this elaborate infrastructure of business entities, Web site domains, phone numbers, addresses, bank accounts and identities as a shield to prevent others from detecting their fraud, all while the co-conspirators continued to use this scheme repeatedly over several years to mislead new investors, new business partners and new courts.

Under federal statutes, Hernon, Tayce and the Bryants are each subject to a sentence of up to 20 years in federal prison without parole, plus a fine up to $250,000 and an order of restitution. Sentencing hearings will be scheduled after the completion of presentence investigations by the United States Probation Office.

This case is being prosecuted by Assistant U.S. Attorney Matthew P. Wolesky. It was investigated by the FBI.

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