Two prominent law firms have been hit with a multimillion-dollar lawsuit in Tampa alleging one of their attorneys aided and abetted a Medicare fraud scheme.
Envision Insurance Co. is suing GrayRobinson, Foley & Lardner and attorney Tina Dunsford, along with a list of other defendants. Dunsford is a partner at GrayRobinson and formerly worked for Foley.
The 64-page suit filed in federal court accuses Dunsford of helping orchestrate a Medicare fraud scheme involving her client, Quality Health Plans Insurance Plans Inc. The complaint alleges Dunsford helped solicit Envision, an Ohio insurer, to pay an up-front fee of $600,000 under a long-term contract with QHP while hiding its insolvency.
Envision attorney Tom Angelo of Fort Lauderdale-based Angelo & Banta said the suit seeks to recover tens of millions of dollars in profits the company stood to gain under the contract.
“We believe these defendants have some deep pockets so we are going after them,” Angelo said. “This suit illustrates how Medicare is fraught with fraud.”
GrayRobinson managing partner Byrd “Biff” Marshall called the suit “nonsense.”
“This is a suit by an investor that made an investment in a client of ours and the client had financial problems and now the investor wants to sue Foley, our law firm and a variety of other entities in an attempt to get their money back,” he said. “It’s a nonsense claim that will be treated as such by the court.”
Dunsford and representatives of Foley & Lardner did not return calls for comment by deadline.
Quality Health Plans of Tampa was a 10,000-member health maintenance organization that was liquidated and forced into receivership by the state Department of Financial Services in 2011. Two principals, Sabiha Haider Khan and Dr. Nazeer Haider Khan, also defendants in the malpractice suit, were arrested last August on 13 felony charges. They were accused of intentionally filing misleading information with the state Office of Insurance Regulation to conceal financial instability at the company and placing policyholders at risk.
The OIR alleged favorable financial statements were submitted to prolong the appearance of financial stability and allow QHP to reap financial benefits when it had long been insolvent and didn’t meet state reserve requirements. In December 2011, QHP was ordered into liquidation, which revealed executives concealed a $5 million asset which had been collateralized for a loan at Herald National Bank in New York. The Khans face up to 30 years in prison.
Dunsford, who joined GrayRobinson in 2009, represented the Khans and QHP from its incorporation in 2007. She also was a director of a QHP affiliate and “had a pecuniary interest and direct financial benefit in QHP,” according to the lawsuit filed Jan. 10 in U.S. District Court in Tampa.
The complaint cited her work as a company attorney and director to support its claims that she aided an abetted fraud in “capacities that went significantly beyond the scope of the authority recognized by Florida law as existing between attorneys and clients.”
The lawsuit claims civil racketeering, fraudulent inducement, civil conspiracy, negligent misrepresentation, fraudulent concealment, aiding and abetting fraud and a violation of Florida’s Deceptive and Unfair Trade Practices Act.
Envision maintains Dunsford was aware QHP was in dire financial straits when she solicited Envision in 2007 to provide pharmacy benefits management to its Medicare clients.
At that point, the complaint alleges, QHP already was insolvent with a year-end deficit of $5 million in 2006 in violation of state law. As a state-licensed HMO, QHP was required to maintain a minimum net worth of $1.5 million, 10 percent of its liabilities or 2 percent of its annualized premiums.
The company also failed to maintain minimum levels of cash and securities as required by Florida statute, the complaint said. Instead of holding $1.5 million, it ended 2006 with a $5 million deficit.
To save the company and shore up capital, Dunsford helped QHP solicit the contract with Envision, according to the lawsuit.
QHP’s financial woes deepened in 2008 as its operating expenses rose 64 percent.
At that point, the complaint said Dunsford, realizing QHP had to raise capital “at all costs,” entered into a stock purchase agreement with Vicis Capital, a New York hedge fund. The deal called for Vicis managing director Christopher Phillips to become a director of QHP. In 2010, he pleaded guilty to a federal wire fraud conspiracy charge in a scheme to collect on fraudulent medical receivables involving two other unrelated companies.
Since January 2008, QHP failed to issue and collect monthly premiums from its Medicare enrollees, according to the suit. As a result, they unknowingly incurred large balances due to unpaid premiums.
Additionally, since September 2009, the Centers for Medicare and Medicaid Services received numerous complaints from QHP enrollees who were concerned about high premium invoices.
The centers investigated QHP and sanctioned the company for failing to comply with its requirements, fining the company $586,000, according to the suit.
Despite these ongoing issues, Dunsford issued a statement May 18, 2010, to Health News Florida stating the infractions were cased by a “misunderstanding” between QHP and Envision.
“This statement illustrated the brazen and outrageous nature of Dunsford’s conduct and her desperate attempts to continue to prolong the fraudulent scheme by any means necessary,” the lawsuit states.
According to the suit, QHP and Dunsford knew the Centers for Medicare and Medicaid Services would never approve the sale of the contract to Envision due to its violations and financial straits yet still requested the $600,000 payment from QHP.
QHP reported a $10.1 million capital infusion in 2011 and offered a letter from Bank of America confirming the money was deposited. The following month, the bank told the state that the letter was an apparent forgery. QHP attorneys including Dunsford confirmed the forgery along with the company’s insolvency in a Leon Circuit Court document filed in September 2011.