Source: Office of United States Attorneys
SANTA ANA, California – The founder and former CEO of the now-defunct Sovereign Health Group addiction treatment provider was arrested today on an eight-count federal grand jury indictment alleging he submitted more than $149 million in fraudulent claims to health insurers – including for fraudulent urinalysis claims – and, in addition, paid more than $21 million in illegal kickbacks for patient referrals.
Tonmoy Sharma, 61, of Tustin, was arrested this afternoon at Los Angeles International Airport and is expected to make his initial appearance and be arraigned tomorrow in United States District Court in downtown Los Angeles.
Sharma is charged with four counts of wire fraud, one count of conspiracy, and three counts of illegal remunerations for referrals to clinical treatment facilities.
Also arrested today was co-defendant Paul Jin Sen Khor, 45, of Irvine, who worked as Sovereign’s cash management and accounts payable supervisor. Khor is charged with one count of conspiracy and one count of illegal remunerations for referrals to clinical treatment facilities. Khor was arraigned this afternoon in United States District Court in Santa Ana. He pleaded not guilty and a July 29 trial date was scheduled. A federal magistrate judge ordered him released on $20,000 bond.
According to the indictment, the San Clemente-based Sovereign once was a prominent addiction treatment provider throughout Southern California and several other states. From 2014 to 2020, Sovereign billed private insurance companies for drug addicted and mentally ill patients often at high, out-of-network rates.
At Sharma’s direction, Sovereign employees aggressively pursued patients through various forms of marketing, directing the patients to contact the company at its toll-free phone number. Once patients called in to Sovereign’s call center, employees used various tactics to enroll patients into the company’s treatment facilities, including misrepresentations. One such misrepresentation was that a patient’s treatment would be paid for by a foundation funded by donations from former Sovereign patients.
In fact, the foundation was a sham organization and a ruse for Sovereign employees – at Sharma’s direction – to obtain patients’ names, dates of birth, and Social Security numbers for use in surreptitiously obtaining health insurance coverage on their behalf. In order to obtain these private health insurance plans, Sovereign employees, at Sharma’s direction, made false representations on insurance applications, claiming qualifying life events that had not happened in order to obtain new insurance outside the enrollment period and inflating or underreporting their income so the patients would qualify for Affordable Care Act government-subsidized private insurance instead of Medicaid, whose reimbursement rates were significantly lower than private insurers.
Patients generally did not know that Sovereign would enroll them into these policies or authorize Sovereign to do so. Sovereign employees at times even pretended to be the patients when calling into those insurance companies. Those insurance companies would not have covered any services under plans obtained by these fraudulent means.
Sovereign also fraudulently billed insurers more than $29 million for urinalysis tests not authorized by the purported ordering health providers. At Sharma’s direction, Sovereign submitted fraudulent claims for comprehensive urinalysis screening, including through its laboratory, Vedanta Laboratories Inc. Sovereign patients were frequently drug tested through both cup testing and comprehensive panel testing. The cup testing returned results within minutes, while the panel testing was much more comprehensive, with results taking several days to return. The comprehensive panel testing screened for dozens of different substances and, accordingly, was billed at a significantly higher rate than cup testing.
Sharma directed Sovereign employees to frequently administer cup testing and comprehensive panel testing on patients, including comprehensive panel testing up to three times a week. Sovereign submitted thousands of claims to insurance companies, including for comprehensive panel tests that purportedly were authorized by physicians when, in reality, the physicians did not authorize the tests. Sovereign also submitted numerous claims to the insurance companies, including urinalysis tests, after physicians were no longer working at Sovereign.
Finally, in addition to the patients obtained through the call center above, Sharma and Khor also procured patients for Sovereign by paying illegal kickbacks to patient brokers. To conceal the nature of these transactions, Sharma and Khor caused Sovereign to enter sham contracts that referred to the brokers’ services as “marketing hours,” a term the brokers used when sending invoices to Sovereign for payment. Sovereign paid more than $21 million in illegal kickbacks for patient referrals.
An indictment is merely an allegation. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
If convicted, Sharma would face a statutory maximum sentence of 20 years in federal prison for each wire fraud count. Both defendants would face up to five years in federal prison for the conspiracy count, and up to 10 years in federal prison for each illegal remunerations count.
The FBI, the United States Department of Health and Human Services Office of Inspector General, and the California Department of Health Care Services are investigating this matter.
Assistant United States Attorney Solomon Kim of the Major Frauds Section is prosecuting this case.