Guilty pleas mount in federal healthcare fraud case

As Florida businessman Larry Everett Smith, who was indicted in Greeneville in an alleged $931 million healthcare-fraud case – the second largest in U.S. history - was preparing for trial with his newly hired defense attorneys, federal prosecutors added another level of complication and legal peril.

Three people who were previously absent from the radar screen appeared out of the blue and on Monday pleaded guilty to healthcare fraud and fraudulently introducing misbranded drugs that appear to incriminate Smith in ways not alleged in the original indictment.

Smith, who lives in the Tampa area, allegedly conspired with the others to obtain millions of vitamins from a manufacturer that was not approved by the Food and Drug Administration, branded them at a facility two of the defendants owned and then billed pharmacy benefit managers as if they were prescription drugs, according to the indictment.

When billing the PBMs for the nonprescription drugs, Smith’s drug companies were required to collect the copays that were uncollectable because the prescriptions allegedly were fraudulent in the first place.

As a work-around, Smith and his codefendants allegedly made it appear that the company that branded the drugs, Sterling Knight, paid the entire copay for thousands of prescriptions. They allegedly partnered with a legitimate coupon-processing company to run the copays through Smith’s companies.

“(Two defendants) caused Sterling Knight and (the coupon-processing firm) to help Smith collect the money from Smith’s pharmacies … and then direct it back to those same pharmacies, all for the purpose of obtaining the remittance indicating that the patients’ copays had been paid, which was false,” one plea agreement states.

The plea agreements do not implicate the three others charged in the original indictment, Tampa-area residents Andrew Assad, Peter Bolos and Michael Palso.

Smith and the others allegedly purchased thousands of prescriptions – at one point they were paying $395,000 per week in illegal kickbacks - that had been obtained by fraudulent means through advertisements posted on Facebook and other high-traffic websites.

The man who allegedly fraudulently generated the prescriptions, Scott Roix, has already pleaded guilty and is cooperating with federal officials.

The alleged healthcare fraud many states that have combined populations of 170 million. While some of the alleged victims lived in East Tennessee, it’s unclear how the federal prosecution originated in such a relatively obscure location.

The trial, which has been postponed multiple times due to the COVID-19 epidemic, is scheduled to begin in July. The plea cutoff date is in May.

Smith recently fired the attorney that had represented him since he was indicted in 2018. He hired attorneys from a prestigious Knoxville law firm, and another from Michigan.