The Justice Department on Thursday charged 15 defendants, including six medical professionals, in a sweeping Los Angeles-area health care fraud crackdown involving more than $1.8 billion in allegedly fraudulent claims. According to the announcement, the cases include the largest substance abuse treatment fraud scheme ever prosecuted by the department — a $1.6 billion sober-home operation that allegedly trafficked vulnerable people across the country, drugged them to keep them in facilities, and billed their insurance for treatment that never happened.
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| The federal courthouse in downtown Los Angeles, where several defendants made their initial court appearances on Oct. 22 (file photo) |
Eight defendants were arrested, with six expected to make initial appearances Thursday at the U.S. District Court in downtown Los Angeles and two at a federal court in Texas. The action follows a June crackdown in which the department charged 455 people in cases involving more than $6.5 billion in alleged false claims.
The $1.6 Billion Sober-Home Scheme
The centerpiece of the takedown is the case against Nathan "Pablo" Young, 39, and David "Sancho Lopez" Young, 71, both of Los Angeles, and Honey Phipps, 42, and Cody Phipps, 36, both of Greenville, Texas. Prosecutors allege the father-and-son Young duo controlled dozens of purported substance abuse treatment companies in the Los Angeles area and around the country, billing private insurers more than $1.6 billion for sham treatment.
The group allegedly used so-called "body brokers" — including Honey and Cody Phipps — to target vulnerable people: individuals who were unhoused, living in poverty, or attending substance abuse support groups. Recruiters allegedly sought out people whose insurance policies provided the most generous reimbursements, and in some cases fraudulently enrolled individuals in new insurance policies for which they were not eligible.
"These charges include the largest sober home fraud scheme the Department has ever prosecuted," said Assistant Attorney General Colin M. McDonald of the National Fraud Enforcement Division. "If you steal health care dollars from the American taxpayer or abuse your position to harm patients, we are coming for you — and the data will lead us to wherever you are."
Drugged, Trapped, and Billed
The indictment paints a stark picture of what patients experienced once lured to Southern California. The defendants allegedly offered recruits free flights, money, apartments, hotel stays, cars, gift cards, marijuana, cigarettes, and even illegal drugs. Patients with high-reimbursing "premium" insurance received luxurious accommodation and dinners, while everyone else lived in cramped, unsanitary, often derelict housing the indictment describes as "trap houses."
When patients tried to leave, the indictment alleges, staff drugged them with medication — "to knock the client out" — cut them off from family, seized their belongings, and physically blocked exits. Employees allegedly coached patients to fabricate symptoms to qualify for detox. After detox, the supposed "therapy" allegedly consisted of Zoom sessions with more than a hundred attendees that patients did not have to join — they were told they could "lay out on the beach" while insurance was billed. Nicholas Moore, 33, of North Myrtle Beach, South Carolina, pleaded guilty in the case; prosecutors say he managed several of the Youngs' facilities and helped submit $199 million in fraudulent claims.
Unnecessary Artery Surgeries Flagged by Data
In a second major case, prosecutors charged Dr. Harold Tabaie, 78, of Anaheim, a cardiothoracic surgeon, and his business partner Hany Malek, 61, of Tarzana, a chiropractor, with a $135 million scheme to bill Medicare for medically unnecessary arterial procedures. Malek allegedly posed as a medical doctor to diagnose patients with arterial disease and sent them to Tabaie for atherectomies — an invasive procedure in which a bladed catheter clears plaque from arteries — performed on patients who did not actually have the disease. Some experienced extreme pain, the indictment says.
To hide the volume, the defendants allegedly billed procedures under other providers' names and lured patients with illegal kickbacks including free transportation, groceries, household goods, gift cards, and utility payments. The case was identified through data analytics: Tabaie's atherectomy billing was an extreme national outlier from 2016 through 2023. Malek was also charged with submitting fraudulent Paycheck Protection Program loan applications, allegedly using the proceeds for personal expenses and coin purchases.
Hospices That Billed the Living
Three hospice fraud schemes, together worth over $138 million in false Medicare claims, targeted patients who were not terminally ill. Geoffrey Jimenez, 60, of Los Angeles, was charged over Transitions Hospice, Inc., which allegedly enrolled non-terminal beneficiaries and billed roughly $9.8 million, of which more than $8.3 million was paid. The hospice had a non-death discharge rate of about 85 percent — more than four times the national average — indicating its patients were not dying. Prosecutors say Jimenez recruited seniors at community centers, carefully avoided the word "hospice," and controlled more than a dozen additional entities that collectively billed over $107 million in similar claims.
Dr. Richard Keech, 83, of Torrance, was charged in a $10 million scheme as medical director of at least two hospice companies, allegedly signing certificates falsely certifying beneficiaries — some unaware they had been placed on hospice at all — as terminally ill. Armani Raffi, 59, of Van Nuys, was charged with orchestrating a four-hospice operation in Sherman Oaks that allegedly submitted $21 million in false claims, paid marketers $1,500 to $1,800 per referral, and cycled patients between agencies to prolong billing.
Kickbacks, Fake Prescriptions, and Drug Samples
The remaining cases widen the net. Dr. Hassan Badday, 48, of Los Angeles, and Dr. Robby Ayoub, 52, of Huntington Beach, were charged in separate indictments with accepting illegal kickbacks for authorizing medically unnecessary genetic testing orders — taking cash and wire payments from a marketer for a Houston laboratory, ApolloMDx, in exchange for access to Medicare patients' DNA. The orders generated more than $4.2 million in claims tied to Badday and $1.3 million tied to Ayoub.
Thomas Steven Mladinich, 38, of Newport Beach, was charged with receiving $150,000 to $250,000 in kickbacks for referring drug-addicted patients to a rehab facility, with payments disguised under a sham "marketing services" contract. Christina Mareik, 61, of Whittier, was indicted in a nearly $270 million scheme to defraud Medi-Cal by billing tens of millions per month for medically unnecessary high-reimbursing generic drugs through Monte Vista Pharmacy — exploiting a suspension of prior-authorization requirements. Prosecutors say roughly $269 million in false claims were submitted, of which Medi-Cal paid at least $178.7 million. Finally, Dr. Dejun Wang, 62, of Walnut, was charged with selling prescription drug samples — including Rybelsus, Ozempic, and Mounjaro — to pharmacy owners who repackaged and dispensed them.
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| The U.S. Department of Justice headquarters in Washington, D.C., which announced the charges (file photo) |
What This Means
Health care fraud is among the most expensive white-collar crimes in America, and officials stressed it is not victimless. "Every dollar drained out of our private and public health insurance systems is one less dollar available to those who truly need it," said First Assistant U.S. Attorney Bill Essayli. "Healthcare fraud cheats American taxpayers and health care programs out of billions of dollars," added Patrick Grandy, the assistant director in charge of the FBI's Los Angeles field office.
The cases also signal a shift toward data-driven enforcement. The atherectomy case was caught not by a whistleblower but by algorithms flagging an extreme billing outlier — the same kind of analytics officials say will define future crackdowns. The department's new Fraud Division, announced in April, is coordinating these efforts alongside the White House Task Force to Eliminate Fraud, a whole-of-government initiative chaired by Vice President J.D. Vance. The hospice charges also land amid heightened scrutiny: in May, the Centers for Medicare and Medicaid Services imposed a six-month nationwide moratorium on new hospice and home-health Medicare enrollments, citing fraud concerns.
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| Seal of the U.S. Department of Justice (file photo) |
What Happens Next
All 15 defendants are presumed innocent until proven guilty, and the charges — some by indictment, some by complaint, some by information — are allegations only. Several defendants will now move through initial appearances, detention decisions, evidence disclosures, and pretrial motions. In the sober-home case, trial attorneys from the Justice Department's Fraud Division are prosecuting alongside the U.S. Attorney's Office for the Central District of California, with the FBI, IRS Criminal Investigation, and the DEA investigating.
FBI Director Kash Patel said the bureau will "continue to move aggressively with our Department of Justice to dismantle fraud networks stealing from hard working taxpayers." Given the multi-year scope of several schemes — and the dozens of companies allegedly involved — officials did not rule out further arrests.
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