Creator of Fraudulent Chicago-Area Pharmacy Sentenced to Five Years in Prison for $1.6 Million Fraud Scheme

The creator of a fraudulent Chicago-area pharmacy has been sentenced to 60 months in federal prison for his role in a $1.6 million health care fraud scheme.

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney John R. Lausch Jr. of the Northern District of Illinois, Special Agent in Charge Jeffrey S. Sallet of the FBI’s Chicago Field Office and Special Agent in Charge Lamont Pugh III of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Chicago Regional Office made the announcement.

James Calhoun, 74, of Des Plaines, Illinois, was sentenced by U.S. District Judge John Z. Lee of the Northern District of Illinois.  Judge Lee also ordered Calhoun to pay $1.6 million in restitution.  Calhoun pleaded guilty in September 2018 to one count of conspiracy to commit health care fraud. 

As part of his guilty plea, Calhoun admitted that he defrauded Medicare Part D of $1.6 million through an elaborate scheme in which he created a fictitious pharmacy on paper called “Cal’s Pharmacy” and used it to process hundreds of prescription claims for drugs that were never dispensed.  For most of its existence, the pharmacy had no physical location or inventory, he admitted.  Calhoun further admitted that he enrolled himself as a beneficiary in a Part D program and, from around January 2012 continuing through at least May 2015, Calhoun went to doctors’ appointments to try to obtain prescriptions for drugs that he would then pretend to fill at Cal’s Pharmacy, including and most often for the drug Arixtra, an expensive daily injection.  Calhoun also admitted that acting as Cal’s Pharmacy’s owner, a fact that was concealed through the use of a straw owner, Calhoun collected all of the Part D reimbursement payments made to Cal’s Pharmacy.  In addition to pretending to fill prescriptions for himself, Calhoun admitted that he fabricated prescription claims for three other people, including his codefendant and wife, Betty Calhoun.  Calhoun also admitted that later on in the scheme, when Medicare started to deny the prescription claims, Calhoun appealed the denial and knowingly created and submitted to Medicare false and fabricated checks as part of his appeal, including to an administrative law judge, claiming they showed his payment for Arixtra prescriptions from Cal’s Pharmacy.   

The total loss to Medicare was $1.6 million, Calhoun admitted.

Betty Calhoun pleaded guilty to one count of health care false statements in November 2018 and was sentenced to probation. 

This case was investigated by the FBI and HHS-OIG.  Trial Attorney Leslie S. Garthwaite of the Criminal Division’s Fraud Section prosecuted the case. 

The Criminal Division’s Fraud Section leads the Medicare Fraud Strike Force.  Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in 12 cities across the country, has charged nearly 4,000 defendants who have collectively billed the Medicare program for more than $14 billion.  In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

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Author: March 13, 2019

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