Fraud watch: Braces, braces and more braces

Chula Vista, Calif., resident and business owner Fernando Valenzuela Ayub pleaded guilty in federal court May 27, admitting that he conspired with others to launder millions of dollars of health care fraud proceeds and paid unlawful kickbacks. According to his plea agreement, Valenzuela and co-conspirators owned and operated multiple DME companies, which sold orthotics – including back, wrist and knee braces – to Medicare beneficiaries. Valenzuela admitted that in operating the DME companies, he and co-conspirators paid unlawful kickback payments to sham marketing companies who provided bogus prescriptions for DME. In total, Valenzuela paid $3.7 million in kickbacks. Once Valenzuela’s DME companies were suspended from billing Medicare, Valenzuela conspired to put DME companies in the names of nominee owners while he maintained control of the companies and the monies received from Medicare. In total, Valenzuela billed Medicare approximately $51 million and was paid approximately $20 million and ultimately laundered at least $14 million of Medicare proceeds. As part of his guilty plea, Valenzuela agreed to forfeit $7,101,320. Valenzuela’s sentencing is scheduled for Aug. 15, 2025.  

A former Kentucky resident was recently sentenced to two years and nine months in federal prison for engaging in a conspiracy to commit health care fraud in connection with durable medical equipment businesses. Reyes was also ordered to pay restitution in the amount of $6,004,916. U.S. Attorney Michael A. Bennett of the Western District of Kentucky and Special Agent in Charge Kelly J. Blackmon of the Department of Health and Human Services, Office of Inspector General (HHS-OIG), made the announcement. According to court documents, Pedro Reyes, 54, formerly of Elizabethtown, Ken., through multiple Kentucky companies, executed a scheme in which he fraudulently billed Medicare for DME like orthopedic equipment and back, knee and shoulder braces, that was medically unnecessary, unwanted by patients and not prescribed by their medical providers.