Former NBA Players’ Alleged Fraud Scheme Flops

Tom Winter, NBC News Correspondent for Investigations, and Jonathan Dienst, WNBC Chief Investigative Reporter and NBC News Contributing Correspondent, broke the news on the morning of October 7th that 18 former National Basketball Association (“NBA”) players had been arrested.[1]

The NBA players were arrested, per Winter’s reporting and law enforcement officials, and charged federally for allegedly defrauding the NBA’s Health and Welfare Benefit Plan, which provides certain health and welfare benefits to certain former NBA players as well as their spouses and eligible dependents. Among the players that were arrested were Terrence Williams, the player whom the indictment states “orchestrated” the scheme, Sebastian Telfair, Darius Miles, Tony Allen, Shannon Brown, and Glen “Big Baby” Davis.

According to the indictment[2], Williams allegedly worked with the other players to conduct a scheme whereby Williams would supply false invoices for medical services received to a group of former players in exchange for kickback payments to Williams. The alleged kickback payments were made to Williams by the other NBA players after they were reimbursed for their allegedly fraudulent schemes. In total, the indictment states that nearly $3.9 million in fraudulent claims were submitted, nearly $2.5 million in fraudulent payments were received, and Williams netted nearly $230,000 in kickback payments from the other NBA players.

While the case against Williams and the other NBA players is not one brought under The False Claims Act, The Physician Self-Referral Law, or the Anti-Kickback Statute, the regulatory scheme created by these laws provides a helpful understanding of the reason for increased scrutiny on billing in the healthcare context and may also be implicated by the doctors who were involved in this alleged scheme. The False Claims Act, 31 U.S.C. §§ 3729 – 3733, in relevant part, prohibits anyone from “knowingly present[ing] or caus[ing] to be presented, a false or fraudulent claim for payment or approval” or from “conspir[ing] to commit a violation” of The False Claims Act. A “kickback,” while the term may be familiar from popular parlance (e.g., the kickbacks Williams received from the other NBA players would be an example of a kickback in the popular parlance) and may be allowable in some business contexts, is defined and specifically prohibited (unless certain exceptions apply) in the healthcare context in relation to the Physician Self-Referral Law (42 U.S.C. § 1395nn), commonly known as the Stark Law, and the Anti-Kickback Statute (42 U.S.C. § 1320(a)-7b(b)) (“AKS”). The Stark Law and

AKS, working together with The False Claims Act, other federal laws, and similar state laws and regulations, seek to prevent the payment of remuneration[3] to induce or reward patient referrals in the healthcare industry unless, as mentioned previously, certain exceptions apply and to prevent the submission of false or fraudulent claims for payment to Medicare or Medicaid. Simply put, the government has an interest in ensuring i) that patients are referred from one doctor to another because of the level of care they will receive, not because of a financial arrangement between the two doctors, and ii) that the government is not defrauded through false claims submissions – these losses due to fraud are in the tens of billions of dollars per year according to the U.S. Attorney’s Office for the Southern District of New York’s press release regarding this indictment.[4]

AKS is a criminal statute that carries an intent requirement – “knowingly and willfully.” A violation of AKS is a felony and liability may attach for both those offering the kickback and those receiving kickbacks. Those violating AKS may face fines of up to $25,000 for each violation and prison terms of up to 5 years. AKS also carries civil penalties including potential fines of up to $50,000 per violation and civil assessments of up to three times the amount of the kickback. What is interesting in this case, however, is that despite a chiropractic and rehabilitation office, two dental offices, and other doctors and doctors’ offices being referenced in the indictment, the indictment was not brought against these persons. It is unclear what role these offices and doctors had in the ultimate scheme, and if they also received kickbacks in violation of AKS and The False Claims Act, or to what extent they knew of and participated in the fraudulent scheme, but it appears based on the indictment that some of these offices and doctors may have aided Williams in perpetrating the alleged scheme by providing false invoices for Williams to then provide to the other former NBA players. It is possible that an indictment against these offices and doctors for violations of AKS could be coming next.

According to the indictment and the reporting of Winter and Dienst, Williams allegedly orchestrated the fraudulent scheme from 2017 to 2020 that allegedly involved, among other alleged acts, Williams helping other players obtaining fake medical letters to support false invoices, Williams impersonating an individual who processed plan claims, and filing for chiropractic and other services that were allegedly never received. The charges brought against Williams and the other NBA players are for conspiracy to commit health care fraud and wire fraud, as well as a charge of aggravated identify theft against Williams, not the potential violations of AKS as described above which the doctors involved may face. If found guilty, Williams and the other players allegedly involved in this scheme could face significant fines and even prison time of up to 20 years.

[1] Further reporting on this situation from Winter and Dienst can be accessed here, here, and here.

[2] The indictment can be found here: https://www.justice.gov/usao-sdny/press-release/file/1440076/download. [3] Remuneration in this context might be in the form of cash or other items or services of value. [4] 19 Defendants Charged With Defrauding The National Basketball Association Players’ Health And Welfare Benefit Plan | USAO-SDNY | Department of Justice.