Hospital Director Sentenced to 3 Years in Federal Prison in Construction Kickback Scheme

January 18, 2012

Sometimes you just have to wonder if there aren't some depths to which human beings won't sink.  Frankly, the more you follow the news, the more likely it is that you become cynical and accept the fact that there's virtually no limit to what some lowlifes will do to make a buck, a dishonest one at that.

For example, on January 28, 2011, David Hamedany, 55, of Glendale, CA, the former director of construction for HuntingtonMemorial Hospital in Pasadena, CA was indicted on 12 counts of mail fraud, each count of which carried a maximum statutory penalty of 20 years in federal prison. In May 2011, Hamedany pleaded guilty to two counts of mail fraud.

Okay, let's just stop here for a moment.

I don't know about you but when I hear about a crime involving a hospital it tends to get me worked up.  I mean, c'mon, when we're talking about hospitals, we're talking about sick patients, families in distress, the most vulnerable moments in many of our lives.  And this venue is deemed an opportunity by some con artist to make a quick buck?

Getting back to Mr. Hamedany, what misdeeds did this hospital officer do?  According the federal prosecutors, he orchestrated a kickback scheme in which Huntington Memorial Hospital paid companies  for work that was never done. And you wondered why they were charging you $45 for a bandage and $15 for a bowl of lousy green Jell0?

The 90% Solution

It seems that from 2006 through 2010, Hamedany was the director of construction for Huntington Memorial Hospital. That should have been enough of a career achievement and accolade for most - apparently, not so for Hamedany. Starting in 2008, he orchestrated a billing and kickback scheme whereby the hospital paid over $3.8 million to three Northern California companies that performed no work at all for the hospital. What these companies did was kick back 90% of the paid fees to entities controlled by Hamedany or his relative, which netted him about $3 million.

I'd like to maintain some composure here but, for godsakes, 90%?  Greed is one thing. Ripping off a facility that provides services to the sick is another thing.  But, wow, what kind of pig would demand a 90% kick back?

It seems that Hamedany earned his 90% vig by offering inflated contracts to the companies performing services for the hospital.  Of course, it takes two to tango and the conspiratorial service providers were apparently all too happy to agree to over bill for their services as a way to cover the cost of Hamedany's kick back. It was a sweet deal for Hamedany and his coterie of providers - but not so sweet for the hospital which incurred some $4.8 million in overcharges when all was said and done.

Prison

On January 17, 2012,  Hamedany was sentenced in federal court in the Central District of California to three years in federal prison and ordered to pay $4.8 million in restitution.In addition to his prison sentence and multi-million dollar restitution, Hamedany transferred ownership of his personal residence to Huntington Hospital as partial restitution, and has also agreed to relinquish claims to vehicles and approximately $500,000 seized last year from a bank account last year.

Bill Singer's Comment

The once quaint notion that hospitals are beneficent charitable organizations doling out sympathy and medical care is a fallacy. Today, medical care is business - big business.  Look at publicly traded companies such as HCA, Humana, Lifepoint, Community Health Systems, Tenet, or others, and you will see little that looks like a non-profit charity.

When hospitals are faced with increased costs, the response is often lay-offs of health care staff or increased charges to patients.  Fraudulently paying $10 for something easily available for $1 causes negative reverberations throughout the medical industry.  It inhibits robust competition among vendors seeking to do business with the hospital if they know whose palm to grease with a wad of cash. The damage caused by cases such as Hamedany is that at the bottom of this pile of graft and corruption, those most vulnerable, the chronically ill and their families, suffer through reduced services and higher charges.