Texas Man Charged in $1 Million Fraud Scheme
KANSAS CITY, MO—Tammy Dickinson, United States Attorney for the Western District of Missouri, announced today that a Texas man has been charged in federal court for his role in a fraud scheme in which a Dallas area hospital paid more than $1 million to purchase an MRI from conspirators who impersonated representatives of Kansas City-based Cerner Corporation.
Albert Davis, 54, of Richardson, Texas, was charged with conspiracy to commit wire fraud in a criminal complaint filed under seal in the U.S. District Court in Kansas City, Mo., on Feb. 12, 2015. The complaint and affidavit were unsealed and made public today upon Davis’s arrest and initial court appearance in the U.S. District Court in Tyler, Texas, where he remains in federal custody.
The federal criminal complaint alleges that Davis participated in a wire fraud conspiracy with at least six unnamed co-conspirators that began May 1, 2009. Davis allegedly convinced employees of Dallas Medical Center and Prime Health Care (which acquired the hospital during the course of the fraud scheme) that he and his co-conspirators were working with Cerner. As a result, Dallas Medical Center transmitted two wire payments to the conspirators’ bank account totaling $1,061,550.
Dickinson praised Cerner’s swift action in reporting the fraud. “As soon as Cerner employees became aware of this incident, they immediately notified representatives at the hospital and contacted law enforcement to provide information central to the investigation and prosecution of this case,” Dickinson said.
The charge is part of a multi-district investigation based in the Western District of Missouri, which also includes the Northern and Eastern Districts of Texas and the Western District of Arkansas.
According to an affidavit filed in support of the criminal complaint, Davis and his co-conspirators impersonated Cerner employees, physicians, investors and others—both in e-mails and in-person visits. The affidavit alleges that Davis and his co-conspirators created a fake Cerner business entity, opened a fake Cerner bank account, registered a fake Cerner Internet domain, created fake Cerner employee e-mail accounts, leased virtual office space for a fake Cerner address in Kansas City and paid for cellphones with local 816 area code phone numbers. They allegedly created fake Cerner product quotes and fake Cerner invoices.
Davis and his co-conspirators allegedly worked together as a part of several businesses and entities created by Davis and a co-conspirator. Co-conspirators are linked to at least 70 individual business entities registered in Texas, Colorado, Nevada, Wyoming, Washington, Delaware and Florida in which some combination of them are involved. These entities often utilize similar names and addresses, but usually maintain separate business registration and bank accounts.
Raji Kumar, CEO of Dallas Medical Center, told federal agents that she was approached by Davis and a co-conspirator in February 2012. According to the affidavit, they claimed they were partnering with Cerner to sell MRIs. She was told their company, iHeart, had cardiac MRI technology that was a breakthrough in medical science and would change the way patients were diagnosed with cardiac issues. After the initial meeting, the affidavit says, Kumar also met with other co-conspirators.
According to the affidavit, Cerner generated a real quote to sell an MRI, in partnership with Davis, to Dallas Medical Center. However, Cerner made the decision to not pursue the MRI deal with Davis, which was communicated to Davis in October 2012. According to Kumar, Dallas Medical Center was never told by Davis that Cerner was out of the deal.
Instead, the affidavit says, Dallas Medical Center began receiving e-mails purportedly from Cerner employees. The e-mails had the “@cernerinc” domain (which is not used by Cerner) and provided information and confirmation about the MRI sale.
On Oct. 17, 2012, Davis hosted representatives of Dallas Medical Center and Prime Health Care Services at Plano, Texas, for a site visit to look at their MRI. Davis allegedly introduced Kumar and others to an individual identified as “Senior Physicist Suresh Mitta of Cerner” (actually one of the unnamed co-conspirators) who helped demonstrate the equipment. This individual presented a “Cerner” business card to Kumar.
After the visit, Prime Health Care Services made the decision to purchase a new MRI system, as opposed to upgrading the current system.
On Nov. 5, 2012, Prime Health Care Services agreed to buy the MRI for $1,330,130. Conspirators allegedly provided instructions to wire the funds to a fake Cerner bank account. Conspirators allegedly sent a fraudulent invoice that divided the payment into three separate wire transfers of $508,250, $553,300 and $268,550. The first two payments were made in November and December 2012; the third payment was never made because the fraud was detected.
Kumar asked Davis for references, the affidavit says, and he provided three names. Kumar said she attempted to call the three references provided by Davis; two physicians from Oklahoma told her they were happy with the MRI from Cerner and had no issues. (When interviewed later by federal agents, both doctors said they had not talked with Kumar or anyone from Dallas Medical Center about an MRI.)
Kumar said the installation was never completed, and despite numerous calls, nothing was done. The hospital made the decision to try and involve Cerner directly to help finish the installation and get the MRI working.
A hospital employee called the real Cerner Corporation and left a message for the employee with whom they thought they had been dealing. That employee called him back, however, and stated that the hospital was confused, and that Cerner had not sold them an MRI. According to Kumar, on June 26, 2013, she exchanged calls and e-mails with employees from the real Cerner Corporation who had reviewed the e-mails Dallas Medical Center had received, along with the purported Cerner invoices. Cerner employees quickly identified that these were not authentic Cerner invoices and informed her that the e-mails were not sent from the real Cerner domain.
The affidavit also refers to another instance involving Dallas Medical Center in which Davis allegedly impersonated another company to sell a Cath Lab to the hospital, using the same techniques of registering a fake domain, fake e-mails, and a fake business entity. Prior to the MRI negotiations, the hospital made four payments totaling $491,000 to CIS Cardiovascular. These payments actually were made to a bank account over which Davis was the sole person with signature authority.
Criminal Complaint: Eastern District of Texas
In a separate case, Davis was charged with perjury in a federal criminal complaint filed in the Eastern District of Texas, related to his testimony in a civil trial in that district.
Davis, through his company LBDS Holding Company, LLC, sued a company called ISOL Technology, Inc., and two other firms for breach of contract, trade secrets misappropriation, civil conspiracy, unfair competition, and theft of trade secrets. According to court records, this case went to trial in the spring of 2014 and the jury awarded LBDS a verdict of approximately $25 million.
ISOL subsequently filed an emergency motion for sanctions against Davis’s company. In its motion, ISOL argued that LBDS manufactured and falsified evidence in the trial and committed a fraud upon the court. They asked the court to set aside the verdict.
During the trial, Davis and one of the unnamed co-conspirators both testified at trial about e-mails from the domain cernerinc.com. According to the affidavit, e-mails using the cernerinc.com domain were introduced as exhibits, along with a fake “Cerner Distribution Agreement” that purportedly committed Cerner to purchase 345 MRI systems from Davis.
Dickinson cautioned that the charge contained in this complaint is simply an accusation, and not evidence of guilt. Evidence supporting the charge must be presented to a federal trial jury, whose duty is to determine guilt or innocence.
This case is being prosecuted by Assistant U.S. Attorney Matthew P. Wolesky. It was investigated by the FBI.