North Jersey financial advisor convicted in multimillion-dollar health care conspiracy

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Late last week in Camden federal court, Kaival Patel, 54, of West New York was found guilty on 11 counts of defrauding public health insurance plans out of more than $4 million as part of an overarching conspiracy that has led to the convictions or guilty pleas of more than 45 individuals, according to the U.S. Attorney’s Office for the District of New Jersey.

Patel, a financial advisor most recently with Stifel, Nicolaus & Co. until his 2022 indictment, was accused by prosecutors of participating in a scheme to market compound prescription medications – specialty medications mixed by a pharmacist to meet a patient’s specific needs, such as vitamins, scar creams, pain creams, libido creams and more.

“Patel created and operated a company called ABC Healthy Living LLC to market compound prescription medications. Patel and his conspirators learned that the certain state and local government employees had insurance that would reimburse up to a thousand dollars for a one-month supply of certain compound medications,” according to case documents and trial evidence released by the U.S. Attorney’s Office. “Patel and a conspirator approached Patel’s family member, a medical doctor who owns and operates a clinic in Newark, New Jersey, and convinced him to authorize prescriptions for the compound medications for patients who had no medical need for the prescriptions. Patel received commissions for the compound medication prescriptions.”

Prosecutors alleged that Patel and the conspirators paid a group of corrections officers to go to Patel’s family member’s medical practice to receive fraudulent prescriptions. That family member, Kaival’s cousin Dr. Saurabh Patel, pleaded guilty in February to one count of conspiring to commit health care fraud.

“Patel conspired with a compounding pharmacist to add unnecessary ingredients to the compound medications to further increase their cost and augment his illicit profits,” prosecutors allege. “Patel engaged in a series of financial transactions to receive proceeds from the health care fraud and wire conspiracy.”

Following an 11-day trial before U.S. District Judge Robert Kugler, Patel was convicted Dec. 7 of one count of conspiracy to commit wire fraud and health care fraud, four counts health care fraud, one count of conspiracy to commit money laundering by transacting in criminal proceeds, and five counts of money laundering by transacting in criminal proceeds.

The count of conspiracy to commit wire and health care fraud carries a maximum penalty of 20 years in prison and $250,000 fine (or twice the gross pecuniary loss from the offense, whichever is greatest). Each of the remaining 10 counts carry a maximum penalty of 10 years in prison and a $250,000 fine (or twice the gross pecuniary gain or loss from the offense, whichever is greatest).

Patel is scheduled for sentencing April 10, 2024.

“This defendant lined his own pockets by taking advantage of health insurance plans for New Jersey state and local government employees, defrauding them of millions of dollars by conspiring to obtain reimbursements for medically unnecessary compound prescription medications,” said U.S. Attorney for New Jersey Philip Sellinger. “Together with our law enforcement partners, we will continue to investigate and prosecute those who abuse and defraud the health care system.”

In a statement to NJBIZ, Patel’s attorney, Robert Stahl, of Westfield-based Stahl Gasiorowski Criminal Defense Lawyers, said that his client was not the mastermind that the government is painting him – but instead, an unwitting participant in the scheme who was used by others.

“My client is obviously disappointed with the verdict and is exploring all of his options going forward, including an appeal,” Stahl told NJBIZ. “He is heartened by the unwavering support of his family and friends. While the government press release paints him as the mastermind of a health care fraud conspiracy, the evidence at trial showed that the professional, career pharmaceutical sales representatives devised a scheme to corrupt doctors, patients and specialty pharmacies to defraud PBMS and insurance companies.”