FBI accuses shoemaker of fraud

Tuesday, October 31, 2006

MEQUON, Wisc. - Federal officials have accused a manufacturer of diabetic shoes of obtaining Medicare approval for one product but selling another, defrauding the agency of $18 million.
In an affidavit unsealed Oct. 10, former CEO David Schlageter told FBI agents that, over a period of 18 months, Dr. Comfort sold heat-molded shoe inserts that did not meet new Medicare standards, according to an article in a local newspaper. In January 2004, Medicare announced that starting in June 2004, inserts would be subject to a coding verification review.
Following that announcement, Dr. Comfort ordered new inserts from its manufacturer in China to satisfy code requirements, spent $20,000 to have its supplier create new dies and ordered 50,000 to 60,000 pairs of the inserts. In June 2004, Medicare told the company those inserts were not thick enough, and therefore, not eligible for reimbursement.
According to the newspaper: Company owner Rick Kanter then ordered new inserts with thicker soles but no new dies for mass production, and told Schlageter to resubmit the inserts for review.
On Sept. 20, 2004, Dr. Comfort Shoes received approval for the new inserts, but continued to sell the originals, using its approval letter from SADMERC as evidence that the product met Medicare specifications, according to the newspaper.