FBI raids multiple Rotech locations, carts away files

Saturday, May 31, 2003

ORLANDO, Fla. — In what appears to be the start of a large fraud investigation, FBI agents stormed into Rotech Healthcare locations in several states April 30, dismissed employees from work and then began to gather and cart away truck loads of medical documents, computers and desks.
In addition to the national HME’s Orlando headquarters, FBI agents reportedly raided Rotech operations in Texas, Maine, New York, Arkansas and Illinois. In Rotech’s Buffalo, N.Y., location, FBI agents entered with their hands on their guns and told employees to get away from their computers and hang up their phones. Agents then sent everyone home but three employees who helped retrieve information from computer hard drives, a Buffalo source told HME News.

In Orlando, dozens of FBI agents carted box loads of files into a postal truck, according to a local news report.

“They don’t call in the FBI unless they think it is serious,” said Tom Antone, a retired healthcare attorney.

That fact that the raids spanned several states indicates the investigation is probably not the work of a single U.S. attorney. More likely, it originated far up in the Department of Justice, indicating a much higher level of scrutiny and concern by federal officials, Antone said.

Rotech officials did not return calls, but acknowledged the raids in a May 1 press release. The company stated:

Federal agents served search warrants at the company’s corporate headquarters and four other facilities in three states and were provided access to a number of current and historical financial records and other materials. The agents also served a grand jury subpoena on the Company on behalf of the United States Attorney’s Office for the Northern District of Illinois relating to the same information. The Company is cooperating fully with the investigation; however, it has not been informed by the government of the subject matter of the inquiry.

The FBI did not return phone calls.

Early speculation among industry sources is that the raids are somehow connected to a rogue consultant who allegedly concocted an elaborate swindle that fabricated $30 million in non-existent sales of DME to the Veteran’s Administration. When news of that scheme came to light last summer, Rotech officials said no other employees had been involved and that the consultant had been fired.

In its May 1 release, Rotech stated that it previously provided information related to the phony VA business to the Division of Enforcement of the Securities and Exchange Commission.

Industry watchers now wonder if the current raids might have something to do with the VA debacle.

“Everyone thought that when Rotech said it was over, it was over,” said a former Rotech employee. “But that was just the internal investigation. Maybe it is a little bit more involved.”

This is not the first time FBI agents have raided Rotech. They did so in Aug. 2000 as part of an ongoing investigation into suspicions that the national HME has engaged in Medicare billing fraud.

The recent raids come as a bit of a surprise because to exit bankruptcy in spring 2002, Rotech had to pay the federal government $17 million for allegedly improperly billing Medicare. At that time, industry watchers surmised that settlement wiped the slate clean when it came to fraud and abuse allegations.

It now appears that may not be the case.