Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 1 of 50 PageID: 285

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1 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 1 of 50 PageID: 285 John Robertelli, Esq. RIVKIN RADLER LLP 21 Main Street, Suite 158 Court Plaza South, West Wing Hackensack, New Jersey (201) John.robertelli rivkin.com [email protected] Attorneys for Plaintiffs Government Employees Insurance Co., GEICO Indemnity Co., GEICO General Insurance Company and GEICO Casualty Co. UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY GOVERNMENT EMPLOYEES INSURANCE CO., GEICO INDEMNITY CO., GEICO GENERAL INSURANCE COMPANY and GEICO CASUALTY CO., Civil Action Case No. 2:12-cv-7281 (FSH/PS) Plaintiffs, MLS MEDICAL GROUP LLC, FIRST AMENDED COMPLAINT (With Jury Demand) -against- -and- MARK L. SCHWARTZ, D.O. a/k/a MARK SCHWARTS, D.O., Defendants. COMPLAINT Plaintiffs Government Employees Insurance Co., GEICO Indemnity Co., GEICO General Insurance Company and GEICO Casualty Co. (collectively "GEICO" or "Plaintiffs"), as and for their Complaint against the Defendants, hereby allege as follows:

2 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 2 of 50 PageID: 286 INTRODUCTION 1. This action seeks to recover more than $345, that the Defendants wrongfully have obtained from GEICO by submitting, and causing to be submitted, hundreds of fraudulent charges through MLS Medical Group LLC ("MLS") for initial examinations, electromyography tests ( "EMGs"), and nerve conduction velocity tests ( "NCVs") (collectively the "Fraudulent Services"). The Fraudulent Services purportedly have been provided to individuals ("Insureds") who claim to have been involved in automobile accidents and are eligible for insurance coverage under GEICO no-fault insurance policies. 2. In addition, GEICO seeks a declaration that it is not obligated to pay more than $1, 320, in pending fraudulent claims seeking payment for the Fraudulent Services that have been submitted or caused to be submitted by the Defendants through MLS because: (i) the Fraudulent Services were not medically necessary, and were performed to the extent that they were performed at all pursuant to pre-determined fraudulent protocols designed solely to financially enrich the Defendants; (ii) the billing codes used for the Fraudulent Services misrepresented and exaggerated the level of services that purportedly were provided in order to inflate the charges submitted to GEICO; and 2

3 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 3 of 50 PageID: 287 (iii) the Fraudulent Services were performed - to the extent that they were performed at all - pursuant to illegal kickback arrangements between MLS, its purported owner Mark L. Schwartz, D.O. a/k/a Mark Schwarts, D.O. ("Schwartz"), and the healthcare providers who referred the Insureds to MLS. 3. The Defendants fall into the following categories: (i) Defendant MLS is a New Jersey medical professional limited liability company through which the Fraudulent Services purportedly have been performed and have been billed to insurance companies, including GEICO. (ii) Defendant Schwartz is a physician licensed to practice medicine in New Jersey, purports to own MLS, and purports to perform many of the Fraudulent Services. 4. As discussed below, the Defendants at all relevant times have known that: (i) the Fraudulent Services have been ordered and performed to the extent that they have been performed at all - pursuant to fraudulent, predetermined protocols designed solely to maximize charges to GEICO and other insurers, not because they are medically necessary or designed to facilitate the treatment of or otherwise benefit the Insureds who purportedly have been subjected to them; (ii) the billing codes used for the Fraudulent Services have misrepresented and exaggerated the level of services that purportedly are provided in order to inflate the charges submitted to GEICO; and (iii) the Fraudulent Services have been performed - to the extent that they have been performed at all - pursuant to illegal kickback arrangements between MLS, Schwartz, and the referring healthcare providers. 3

4 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 4 of 50 PageID: As such, the Defendants do not now have - and never had - any right to be compensated for the Fraudulent Services that have been billed to GEICO through MLS. The chart annexed hereto as Exhibit "1" sets forth a representative sample of the fraudulent claims that have been identified to-date that the Defendants have submitted, or caused to be submitted, to GEICO. The Defendants' fraudulent scheme began as early as 2008 and has continued uninterrupted since that time. As a result of the Defendants' scheme, GEICO has incurred damages of more than $345, THE PARTIES I. Plaintiffs 6. Plaintiffs Government Employees Insurance Co., GEICO Indemnity Co., GEICO General Insurance Company and GEICO Casualty Co. are Maryland corporations with their principal places of business in Chevy Chase, Maryland. GEICO is authorized to conduct business and to issue automobile insurance policies in New Jersey. II. Defendants 7. Defendant MLS is a New Jersey medical professional limited liability company with its principal place of business in New Jersey. MLS was organized on or about August 15, 2006, purports to be owned by Schwartz, and has been used by Schwartz 4

5 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 5 of 50 PageID: 289 as a vehicle to submit fraudulent billing to GEICO and other insurers. 8. Defendant Schwartz resides in and is a citizen of New Jersey. Schwartz was licensed to practice medicine in New Jersey on about April 19, 1996, purports to be the owner of MLS, and purports to perform many of the Fraudulent Services. Al though the Fraudulent Services include EMGs and NCVs, which are forms of electrodiagnostic testing and generally should be performed by physicians who have been trained as physiatrists, neurologists, or who have been certified in the subspecialty of electrodiagnostic medicine, upon information and belief Schwartz is not board certified as a physiatrist or neurologist, and is not certified in the subspecialty of electrodiagnostic medicine. JURISDICTION AND VENUE 9. This Court has jurisdiction over the subject matter of this action under 28 U.S.C. 1332(a) (1) because the matter in controversy exceeds the sum or value of $75,000.00, exclusive of interest and costs, and is between citizens of different states. Pursuant to 28 U.S.C. 1331, this Court also has jurisdiction over the claims brought under 18 U.S.C et seq. (the Racketeer Influenced and Corrupt Organizations ("RICO") Act) because they arise under the laws of the United States. In addition, this Court has supplemental jurisdiction over the 5

6 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 6 of 50 PageID: 290 subject matter of the claims asserted in this action pursuant to 28 o.s.c Venue in this District is appropriate pursuant to 28 O.S.C. 1391, as the District of New Jersey is the District where one or more of the Defendants reside and because this is the District where a substantial amount of the activities forming the basis of the Complaint occurred. ALLEGATIONS COMMON TO ALL CLAIMS I. An Overview of the No-Fauit Laws and Licensing Statutes 11. GEICO underwrites automobile insurance in New Jersey. 12. New Jersey has a comprehensive statutory system designed to ensure that motor vehicle accident victims are compensated for their injuries. The statutory system is embodied within the Compulsory Insurance Law (N. J. S. A. 39: 6B-1 to 3) and the Automobile Reparation Reform Act (N.J.S.A. 39:6A-l et seq.) (collectively referred to as "New Jersey's No Fault Laws"), which require automobile insurers to provide Personal Injury Protection Benefits ("PIP Benefits") to Insureds. 13. Under New Jersey's No Fault Laws, an Insured can assign his or her right to PIP Benefits to the providers of healthcare services in exchange for those services. Pursuant to a duly executed assignment, a healthcare provider may submit claims directly to an insurance company in order to receive payment for medically necessary services, using the required 6

7 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 7 of 50 PageID: 291 claim forms, including the Heal th Care Financing Administration insurance claim form (known as the "HCFA-1500 form"). 14. Pursuant to N.J.S.A. 39:6A-4, an insurer such as GEICO is only required to pay PIP Benefits for reasonable, necessary, and appropriate treatment. Concomitantly, a healthcare provider is only eligible to receive benefits for services that it rendered that were medically necessary. Pursuant to N.J.S.A. 39: 6A-2 (m) : "Medically necessary" consistent with the treatment of the injury: means that the treatment symptoms or diagnosis, is and ( 1) is not primarily for the convenience of the injured person or provider, ( 2) is the most appropriate standard or level of service which is in accordance with standards of good practice and standard professional treatment protocols, as such protocols may be recognized or designated by the Commissioner of Banking and Insurance, in consul tat ion with the Commissioner of Heal th and Senior Services or with a professional licensing or certifying board in the Division of Consumer Affairs in the Department of Law and Public Safety, or by a nationally recognized professional organization, and (3) does not involve unnecessary diagnostic testing. 15. Additionally, in order for a healthcare provider to be eligible to receive PIP Benefits, it must comply with any and all significant qualifying requirements of law that bear upon rendition of the underlying service. Thus, a healthcare provider is not entitled to receive PIP Benefits where it has failed to 7

8 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 8 of 50 PageID: 292 comply with all applicable statutory and regulatory requirements governing healthcare practice in New Jersey. See N.J.S.A. 39:6A-2(1) 16. Pursuant to N.J.A.C. 13: , physicians are prohibited from paying kickbacks, either directly or indirectly, for patient referrals. 17. New Jersey has established a medical fee schedule (the "Fee Schedule") that is applicable to claims for PIP Benefits. When a healthcare provider submits a claim for PIP Benefits using the current procedural terminology ("CPT") codes set forth in the Fee Schedule, it represents that: ( i) the service described by the specific CPT code that is used was performed in a competent manner in accordance with applicable regulations; (ii) the service described by the specific CPT code that is used was reasonable and medically necessary; and (iii) the service and the attendant fee were not excessive. 18. In addition, when a healthcare provider submits a claim for PIP benefits under the Fee Schedule, it represents that the charges are in accordance with the requirements set forth in N.J.A.C. 11:3-29.4, which prohibit unbundling of charges. among other things 19. Insurers such as GEICO are not obligated to make any payments of PIP Benefits to providers of healthcare services that were not rendered in accordance with the applicable 8

9 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 9 of 50 PageID: 293 regulations and/or statutes governing the provision of those services. 20. New Jersey has a strong public policy against insurance fraud. This policy is manifested in a series of statutes, including the Insurance Fraud Prevention Act, N.J.S.A. 1 7: 33A-1 et seq. A heal th care provider violates the Insurance Fraud Prevention Act if, among other things, it: Presents or causes to be presented any written or oral statement as part of, or in support of or opposition to a claim for payment or other benefit pursuant to an insurance policy, knowing that the statement contains any false or misleading information concerning any fact or thing material to the claim; or Prepares or makes any written or oral statement that is intended to be presented to any insurance company or any insurance claimant in connection with, or in support of or in opposition to any claims for payment or other benefit pursuant to an insurance policy, knowing that the statement contains any false or misleading information concerning any fact or thing material to the claim; or Conceals or knowing fails to disclose the occurrence of an event which affects a person's initial or continued right or entitlement to (a) any insurance benefits or payment or (b) the amount of any benefit or payment to which the person is entitled. See N.J.S.A. 17:33A A healthcare provider also violates the Insurance Fraud Prevention Act if it either: (i) "knowingly assists, conspires with or urges any person or practitioner to violate any of provisions of this act"; or (ii) "knowingly benefits, 9

10 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 10 of 50 PageID: 294 directly or indirectly, from the proceeds derived from a violation of this act." Id. II. The Defendants' Fraudulent Treatment and Billing Protocol A. The Kickbacks 22. One of the key aspects of the Defendants' fraudulent scheme is their ability to gain access to Insureds so that they can purport to perform or provide the Fraudulent Services. 23. MLS does not advertise or market its services to the general public, and is a transient provider that does not provide services at any single, fixed location. Instead, MLS operates from the offices of a network of healthcare providers located throughout central and northern New Jersey, who specialize in treating patients with no-fault insurance who claim to have been injured in automobile accidents. 24. MLS and Schwartz gain access to the offices of these healthcare providers by paying kickbacks to these healthcare providers in exchange for patient referrals. The kickbacks are disguised as ostensibly legitimate fees to "lease" space or personnel from the healthcare providers. In fact, these are "pay-to-play" arrangements that cause the healthcare providers to provide access to Insureds and to refer the Insureds to MLS and Schwartz. 25. The amount of the kickbacks that the Defendants pay to these healthcare providers generally is based on the volume of 10

11 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 11 of 50 PageID: 295 Insureds that the healthcare providers refer to MLS and the number of referrals that can be generated. 26. In exchange for these kickbacks from Schwartz and MLS, and in exchange for the ability to utilize fraudulent examination and diagnostic testing reports generated by the Defendants to support their own medically unnecessary treatment and billing to automobile insurers, these healthcare providers automatically refer Insureds to MLS regardless of the Insureds' indi victual symptoms, presentment or - in most cases - the total absence of any medical problems arising from any automobile accident. 27. These healthcare providers refer Insureds to MLS despite their knowledge that the Fraudulent Services that the Defendants purport to perform and/ or provide play no genuine role in the treatment or care of the Insureds. 28. The unlawful kickback relationships that Schwartz and MLS establish with these referring healthcare providers are essential to the success of the Defendants' fraudulent scheme. The Defendants derive significant financial benefit from the relationships because without the access to the Insureds provided by the referring healthcare providers, the Defendants would not have the ability to implement their fraudulent treatment and billing protocol, bill automobile insurers 11

12 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 12 of 50 PageID: 296 including payments. GEICO, or generate income from insurance claim 29. The referring healthcare providers likewise benefit from MLS, their unlawful kickback relationships with Schwartz and not only because of the financial benefit conferred by the kickbacks, themselves, but also because the phony examination and diagnostic testing reports generated by the Defendants are used by the referring healthcare providers to support the continuation of their own medically-unnecessary services to the Insureds. B. The Fraudulent Initial Examinations 30. Upon receiving a referral pursuant to the kickbacks that they pay to the referring healthcare providers, the Defendants purport to provide virtually every Insured with an initial examination, supposedly conducted by Schwartz. 31. The Defendants then bill the initial examinations through MLS to GEICO under CPT code 99204, typically resulting in a charge of $ The charges for the initial examinations are fraudulent in that the initial examinations are medically unnecessary and are performed to the extent that they are performed at all - pursuant to the kickbacks that the Defendants pay to the referring providers. 12

13 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 13 of 50 PageID: In most cases, the Insureds who present to the Defendants for treatment are involved in relatively minor, "fender-bendern accidents, to the extent that they are involved in any actual accidents at all. To the extent that the Insureds are treated at a legitimate hospital following their accidents, they virtually always briefly are observed on an outpatient basis and then sent on their way after a few hours. Concomitantly, virtually none of the Insureds whom the Defendants purport to treat suffer from any significant injuries or health problems as a result of the relatively minor accidents they experience or purport to experience. 34. By extension, almost none of the Insureds whom the Defendants purport to treat require any of the Fraudulent Services that the Defendants purport to provide. But for the kickback payments from the Defendants, the referring heal th care providers would not refer Insureds to MLS in the first instance. 35. Furthermore, the charges for the initial examinations are fraudulent in that they misrepresent the extent of the initial examinations. 36. Pursuant to the Fee Schedule, the use of CPT code typically requires that the Insured present with problems of moderate-to-high severity. 37. Though the Defendants routinely bill for the initial examinations under CPT code 99204, the Insureds never present 13

14 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 14 of 50 PageID: 298 with problems of moderate-to-high severity or even moderate or low severity. Rather, the Insureds almost never have any medical problems at all as the result of any automobile accident. 38. Furthermore, the use of CPT code typically requires that the physician spend 45 minutes of face-to-face time with the Insured or the Insured's family Though the Defendants routinely bill for the initial examinations under CPT code 99204, neither Schwartz nor any other physician associated with MLS ever spends 45 minutes on the initial examinations. Rather, the initial examinations rarely last more than 10 minutes, to the extent that they are conducted at all. 40. In addition, pursuant to the Fee Schedule, when the Defendants submit charges for initial examinations under CPT code 99204, they represent that: ( i) they have taken a "comprehensive" patient history; {ii) they have conducted a "comprehensive" physical examination; and (iii) they have engaged in medical decision-making of "moderate complexity". 41. Pursuant to the Fee Schedule, a "comprehensive" patient history requires among other things that the healthcare provider take a history of all body systems, not only the body systems that are related to the patient's present complaint. 14

15 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 15 of 50 PageID: Pursuant to the Fee Schedule, a "comprehensive" patient history also requires that the healthcare provider take a complete past, family, and social history from the patient. 43. Though the Defendants routinely bill for the initial examinations under CPT code 99204, and thereby falsely represent that they have taken a "comprehensive" patient history from the Insureds they purport to treat during the initial examinations, they never take a history of all of any Insured's body systems, nor do the they ever take a complete past, family, and social history from any Insured. 44. Rather, after purporting to provide the initial examinations, the Defendants simply prepare reports containing ersatz patient histories which falsely contend that the Insureds suffered injuries in automobile accidents. 45. These phony patient histories do not genuinely reflect the Insureds' actual circumstances, and instead are designed solely to support the other Fraudulent Services that the Defendants purport to perform and then bill to GEICO and other insurers. 46. Pursuant to the Fee Schedule, a "comprehensive" physical examination requires - among other things - that the healthcare provider either: ( i) conduct a general examination of multiple patient organ systems; or (ii) conduct a complete examination of a single patient organ system. 15

16 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 16 of 50 PageID: Though the Defendants routinely bill for the initial examinations under CPT code and therefore, falsely represent that they have conducted a "comprehensive" physical examination of Insureds during the initial examinations, they never conduct a general examination of multiple organ systems, nor do they conduct a complete examination of a single organ system. Rather, to the extent that the Defendants conduct any physical examination at all during the initial examinations, it virtually always is limited to a perfunctory check of the Insured's vital signs and range of motion. 48. Pursuant to the Fee Schedule, the complexity of medical decision-making is measured by: ( i) the number of diagnoses and/or the number of management options to be considered; (ii) the amount and/or complexity of medical records, diagnostic tests, and other information that must be retrieved, reviewed, and analyzed; and (iii) the risk of significant complications, morbidity, mortality, as well as comorbidi ties associated with the patient's presenting problems, the diagnostic procedures, and/or the possible management options. 49. Though the Defendants routinely falsely represent that their initial examinations involve medical decision-making of "moderate complexity", in actuality the initial examinations do not involve any medical decision-making at all. 16

17 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 17 of 50 PageID: First, in most cases, the initial examinations do not involve the retrieval, review, or analysis of any significant amount of rnedical records, diagnostic tests, or other information, nor do they involve the retrieval, review, or analysis of any complex medical records, diagnostic tests, or other information. 51. When the Insureds present to the Defendants for "treatment" pursuant to the kickbacks paid by the Defendants to the referring providers, they generally do not arrive with any medical records other than, at times, radiology reports; the Defendants do not request any medical records from the referring providers; the Defendants do not conduct any diagnostic tests prior to the initial examinations; and the initial examinations almost always are predicated solely on whatever the Insureds choose to verbally self-report to the Defendants. 52. Second, in virtually every case, there is no risk of significant complications or morbidity - much less mortality - from the Insureds' relatively minor medical complaints, to the limited extent that they ever have any medical complaints arising from automobile accidents at all. Nor, by extension, is there any risk of significant complications, morbidity, or mortality from the diagnostic procedures or treatment options provided by the Defendants, to the extent that the Defendants provide any such diagnostic procedures or treatment options in 17

18 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 18 of 50 PageID: 302 the first instance. In almost every instance, any diagnostic procedures and "treatments" that the Defendants actually provide are limited to a series of medically unnecessary diagnostic tests and pain management modalities, none of which are healthor life-threatening if properly administered. 53. Third, in virtually every case, the Defendants do not consider any significant number of diagnoses or treatment options for Insureds during the initial examinations. Rather, to the extent that the initial examinations are conducted in the first instance, the Defendants make a nearly identical, predetermined "diagnosis" for every Insured, and select from a predetermined, limited menu of treatment options for every Insured. 54. Specifically, in almost every instance, during the initial examinations the Insureds do not report any medical problems that legitimately can be traced to an underlying automobile accident. 55. Even so, in nearly every case, the Defendants prepare initial examination reports in which Schwartz provides some combination of the following boilerplate "diagnoses" and in many cases all of them - to virtually every Insured: (i) back pain; (ii) sprain/strain; (iii) muscle spasm; 18

19 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 19 of 50 PageID: 303 (iv) (v) neck pain; and pain in limb. 56. Then, Schwartz directs virtually every Insured to return to MLS for medically unnecessary EMGs and NCVs. Though there are a significant number of diagnoses and potential treatment options that might be indicated for an automobile accident victim, depending on his or her individual circumstances and presentment, Schwartz selects from a predetermined, limited menu of diagnoses and treatment options for every Insured that are not tailored to the unique circumstances of the Insureds and that are designed to maximize the Defendants' billing, rather than to benefit the Insureds. 57. In order to facilitate the phony, boilerplate "diagnoses" that they provide to virtually every Insured, the Defendants report the initial examinations using a checklist form on which a limited menu of potential diagnoses including the aforesaid phony "diagnoses" but no others are preprinted. 58. In many cases, the phony, boilerplate "diagnoses" that the Defendants issue to virtually every Insured are contravened by the police reports generated following the Insureds' 19

20 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 20 of 50 PageID: 304 accidents, to the extent that any police report is generated in the first instance. For example: (i) On July 2, 2011, an Insured named Patient 1 purportedly was involved in an accident. The police report indicates that the accident was a trivial fender bender, during which Patient 1 backed into another vehicle at low speed. The police report explicitly stated that the accident caused no injuries. Even so, Schwartz purported to diagnose Patient 1 with back pain, muscle spasm, neck pain and limb pain on October 5, 2011 more than three months after Patient l's accident. (ii) On October 26, 2010, an Insured named Patient 2 purportedly was involved in an accident. The po_1_ice report indicates that the accident was a trivial fender bender, during which Patient 2 was rear-ended in traffic at very low speed. The police report further states that the accident caused no injuries. Even so, Schwartz purported to diagnose Patient 2 with back pain, muscle spasm, neck pain and limb pain on March 7, more than four months after Patient 2's accident. (iii)on October 16, 2010, an Insured named Patient 3 purportedly was involved in an accident. The police report indicates that the accident was a trivial fender bender, during which Patient 3 was side-swiped while parked on the side of the road. The police report further states that the accident caused no injuries. Even so, Schwartz purported to diagnose Patient 3 with back pain, muscle spasm, neck pain and limb pain on February 7, 2011 almost four months after Patient 3' s accident. (iv) On April 16, 2010, an Insured named Patient 4 purportedly was involved in an accident. The police report indicates that the accident was a trivial fender bender, during which the car in which Patient 4 was traveling was rear-ended while stopped in traffic. The police report further states that the accident caused no injuries. Even so, Schwartz purported to diagnose 20

21 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 21 of 50 PageID: 305 Patient 4 with limb pain on August 26, 2010 more than four months after Patient 4's accident. (v) On March 13, 2011, an Insured named Patient 5 purportedly was involved in an accident. The police report indicates that the accident was a trivial fender bender, during which the car in which Patient 5 was traveling was rear-ended at low speed while slowing down at a yield sign. The police report further states that the accident caused no injuries. Even so, Schwartz purported to diagnose Patient 5 with back pain, muscle spasm, neck pain and limb pain on May 16, 2011 more than two months after Patient S's accident. (vi) On July 21, 2011, an Insured named Patient 6 purportedly was involved in an accident. The police report indicates that the accident caused no injuries. Even so, Schwartz purported to diagnose Patient 6 with back pain, muscle spasm, neck pain and limb pain on October 5, more than two months after Patient 6's accident. 59. In many cases, the Defendants purport to diagnose lasting effects from soft-tissue injuries such as strains and sprains months after the Insureds supposedly experienced their automobile accidents, long after any genuine problems arising from the contusions or sprains would have resolved. For instance: (i) On April 17, 2010, an Insured named Patient 7 purportedly was involved in an accident. Patient 7 did not present to MLS for an initial examination until January 24, 2011, more than eight months after his alleged accident. Though any soft tissue injuries Patient 7 experienced in his accident would have resolved by the time he appeared at MLS for an initial examination, he nonetheless received the Defendants' boilerplate soft tissue pain diagnosis following the initial examination. 21

22 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 22 of 50 PageID: 306 (ii) On August 27, 2011, an Insured named Patient 8 purportedly was involved in an accident. Patient 8 did not present to MLS for an initial examination until February 1, 2012, more than five months after his alleged accident. Though any soft tissue injuries Patient 8 experienced in his accident would have resolved by the time he appeared at MLS for an initial examination, he nonetheless received the Defendants' boilerplate soft tissue pain diagnosis following the initial examination. (iii) On August 24, 2010, an Insured named Patient 9 purportedly was involved in an accident. Patient 9 did not present to MLS for an initial examination until January 24, 2011, five months after his alleged accident. Though any soft tissue injuries Patient 9 experienced in his accident would have resolved by the time he appeared at MLS for an initial examination, he nonetheless received the Defendants' boilerplate soft tissue pain diagnosis following the initial examination. (iv) On September 22, 2010, an Insured named Patient 10 purportedly was involved in an accident. Patient 10 did not present to MLS for an initial examination until April 20, 2011, almost seven months after his alleged accident. Though any soft tissue injuries Patient 10 experienced in his accident would have resolved by the time he appeared at MLS for an initial examination, he nonetheless received the Defendants' boilerplate soft tissue pain diagnosis following the initial examination. (v) On June 11, 2011, an Insured named Patient 11 purportedly was involved in an accident. Patient 11 did not present to MLS for an initial examination until December 20, 2011, more than six months after her alleged accident. Though any soft tissue injuries Patient 11 experienced in her accident would have resolved by the time he appeared at MLS for an initial examination, she nonetheless received the Defendants' boilerplate soft tissue pain diagnosis following the initial examination. 22

23 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 23 of 50 PageID: 307 (vi) On May 9, 2011, an Insured named Patient 12 purportedly was involved in an accident. Patient 12 did not present to MLS for an initial examination until October 25, 2011, more than five months after her alleged accident. Though any soft tissue injuries Patient 12 experienced in her accident would have resolved by the time he appeared at MLS for an initial examination, she nonetheless received the Defendants' boilerplate soft tissue pain diagnosis following the initial examination. (vii)on July 9, 2010, an Insured named Patient 13 purportedly was involved in an accident. Patient 13 did not present to MLS for an initial examination until March 7, 2011, almost eight months after his alleged accident. Though any soft tissue injuries Patient 13 experienced in his accident would have resolved by the time he appeared at MLS for an initial examination, he nonetheless received the Defendants' boilerplate soft tissue pain diagnosis following the initial examination. (viii) On November 27, 2011, an Insured named Patient 14 purportedly was involved in an accident. Patient 14 did not present to MLS for an initial examination until June 21, 2012, almost seven months after his alleged accident. Though any soft tissue injuries Patient 14 experienced in his accident would have resolved by the time he appeared at MLS for an initial examination, he nonetheless received the Defendants' boilerplate soft tissue pain diagnosis following the initial examination. (ix) On January 31, 2010, an Insured named Patient 15 purportedly was involved in an accident. Patient 15 did not present to MLS for an initial examination until September 1, 2010, more than seven months after his alleged accident. Though any soft tissue injuries Patient 15 experienced in his accident would have resolved by the time he appeared at MLS for an initial examination, he nonetheless received the Defendants' boilerplate 23

24 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 24 of 50 PageID: 308 soft tissue pain diagnosis following the initial examination. (x) On April 4, 2010, an Insured named Patient 16 purportedly was involved in an accident. Patient 16 did not present to MLS for an initial examination until March 7, 2011, more than 11 months after her alleged accident. Though any soft tissue injuries Patient 16 experienced in her accident would have resolved by the time she appeared at MLS for an initial examination, she nonetheless received the Defendants' boilerplate soft tissue pain diagnosis following the initial examination. 60. To the extent that they are involved in any actual automobile accidents at all, most of the Insureds whom the Defendants purport to treat have been involved in very minor accidents involving a low-speed collisions or side-swipes. These trivial "fender-benders" do not cause any long-term injuries to the Insureds who purportedly experience them. 61. Instead, the Defendants' fraudulent diagnoses are used by the Defendants solely as a false basis to perform and bill for NCVs and EMGs. C. The Fraudulent Electrodiagnostic Testing 62. Pursuant to the fraudulent, boilerplate diagnoses that the Defendants provide during the initial examinations, the Defendants purport to subject most Insureds to medically unnecessary NCVs and EMGs (collectively, "electrodiagnostic" or "EDX" testing). 24

25 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 25 of 50 PageID: In virtually every case, Schwartz purports to perform the EDX testing, which the Defendants then typically bill through MLS to GEICO as multiple charges under CPT codes 95861, 95864, 95900, 95903, 95904, and/or 95934, generally resulting in charges of between $4, and $4, for each Insured on whom the EDX testing purportedly is performed. 1. The Human Nervous System and Electrodiagnostic Testing 64. The human nervous system is composed of the brain, spinal cord and peripheral nerves that extend throughout the body, including through the arms and legs and into the hands and feet. Two primary functions of the nervous system are to collect and relay sensory information through the nerve pathways into the spinal cord and up to the brain, and to transmit signals from the brain into the spinal cord and through the peripheral nerves to initiate muscle activity throughout the body. 65. The nerves responsible for collecting and relaying sensory information to the brain are called sensory nerves, and the nerves responsible for transmitting signals from the brain to initiate muscle activity throughout the body are called motor nerves. Peripheral nerves consist of both sensory and motor nerves. They carry electrical impulses throughout the body, originating from the spinal cord and extending, for example, into the hands and feet through the arms and legs. The segments of nerves closest to the spine and through which impulses travel 25

26 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 26 of 50 PageID: 310 between the peripheral nerves and the spinal cord are called the nerve roots. A "pinched" nerve root is called a radiculopathy, and can cause various symptoms including pain, altered sensation and loss of muscle control. 66. EMGs and NCVs both are forms of electrodiagnostic tests, and purportedly are provided by the Defendants because they are medically necessary to determine whether the Insureds have radiculopathies. 2. The Fraudulent NCVs 67. NCVs are non-invasive tests in which peripheral nerves in the arms and legs are stimulated with an electrical impulse to cause the nerve to depolarize. The depolarization, or "firing", of the nerve is measured and recorded with electrodes attached to the surface of the skin. An EMG machine then documents the timing of the nerve response (the "latency"), the magnitude of the response (the "amplitude"), and the speed at which the nerve conducts the impulse over a measured distance (the "conduction velocity"). In addition, the EMG machine displays the changes in amplitude over time as a "waveform". The amplitude, latency, and shape of the response then should be compared with well-defined normal values to identify the existence, nature, extent, and specific location of any abnormalities in the sensory and motor nerve fibers. 26

27 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 27 of 50 PageID: There are several motor and sensory peripheral nerves in the arms and legs that can be tested with NCVs. Moreover, most of these peripheral nerves have both sensory and motor nerve fibers, either or both of which can be tested with NCVs. 69. F-wave and H-reflex studies are additional types of NCV tests that may be conducted in addition to the sensory and motor nerve NCV studies. F-wave and H-reflex studies generally are used to derive the time required for an electrical impulse to travel from a stimulus site on a nerve in the peripheral part of a limb, up to the spinal cord, and then back again. The motor and sensory NCV studies are designed to evaluate nerve conduction in nerves within a limb. 70. Like all of the other Fraudulent Services that the Defendants purport to provide, the charges for the NCVs are fraudulent in that the NCVs are medically unnecessary and are performed to the extent that they are performed at all pursuant to the kickbacks that the Defendants pay to the referring providers. 71. Though the Defendants purport to provide NCVs to Insureds in order to determine whether the Insureds suffer from radiculopathies, virtually none of the Insureds actually present with any radiculopathy symptoms or any other medical problems arising from any automobile accidents. In actuality, the Defendants purport to provide NCVs to Insureds as part of their 27

28 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 28 of 50 PageID: 312 pre-determined, fraudulent treatment protocol designed to maximize the billing that they can submit for each Insured. 72. The American Association of Neuromuscular and Electrodiagnostic Medicine ("AANEM"), which consists of thousands of neurologists and physiatrists and is dedicated solely to the scientific advancement of neuromuscular medicine, has adopted a recommended policy (the "Recommended Policy") regarding the optimal use of EDX medicine in the diagnosis of various forms of neuropathies, including radiculopathies. A copy of the Recommended Policy is annexed hereto as Exhibit "2". The Recommended Policy accurately reflects the demonstrated utility of various forms of electrodiagnostic tests, and has been endorsed by two other premier professional medical organizations, the American Academy of Neurology and the American Academy of Physical Medicine and Rehabilitation. 73. According to the Recommended Policy, the maximum number of NCVs necessary to diagnose a radiculopathy in 90 percent of all patients is: ( i) NCVs of three motor nerves; (ii) NCVs of two sensory nerves; and (iii) two H-reflex studies. 74. However, in an attempt to extract the maximum billing out of each Insured who receives NCVs, the Defendants routinely purport to perform and/ or provide: ( i) NCVs of 10 motor nerves; (ii) NCVs of 10 sensory nerves; as well as (iii) two H-reflex studies. 28

29 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 29 of 50 PageID: The decision of which peripheral nerves to test in each limb and whether to test the sensory fibers, motor fibers, or both sensory and motor fibers in any such peripheral nerve must be tailored to each patient's unique circumstances. In a legitimate clinical setting, this decision is determined based upon a history and physical examination of the individual patient, as well as the real-time results obtained as the NCVs are performed on particular peripheral nerves and their sensory and/ or motor fibers. As a result, the nature and number of the peripheral nerves and the type of nerve fibers tested with NCVs should vary from patient-to-patient. 76. The Defendants do not tailor the NCVs they purport to perform and/or provide to the unique circumstances of each indi victual Insured. Instead, they apply a fraudulent "protocol" and purport to perform and/or provide NCVs on the same peripheral nerves and nerve fibers for virtually every Insured that receives NCVs. Specifically, Schwartz purports to test some combination of the following peripheral nerves and nerve fibers - and, in many cases, all of them - on virtually every Insured who receives NCVs: (i) left and right superficial peroneal sensory nerves; (ii) left and right sural sensory nerves; (iii) left and right median sensory nerves; 29

30 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 30 of 50 PageID: 314 (iv) (v) (vi) left and right radial sensory nerves; left and right ulnar sensory nerves; left and right median motor nerves; (vii) left and right ulnar motor nerves; (viii) left and right peroneal motor nerves; (ix) left and right radial motor nerves; and ( x) left and right tibial motor nerves. 77. The cookie-cutter approach to the NCVs that the Defendants purport to provide to Insureds clearly is not based on medical necessity. Instead, the cookie-cutter approach to the NCVs is designed solely to maximize the charges that the Defendants can submit to GEICO and other insurers, and to maximize ill-gotten profits for the Defendants. 78. Assuming that all other conditions of coverage are satisfied, the Fee Schedule permits lawfully licensed healthcare providers in the northern New Jersey area to submit maximum charges of: (i) $ for each motor nerve in any limb on which an NCV is performed, under CPT code 95903; and (ii) $ for each sensory nerve in any limb on which an NCV is performed, under CPT code The Defendants routinely purport to provide and/ or perform NCVs on far more nerves than recommended by the Recommended Policy so as to maximize the 30

31 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 31 of 50 PageID: 315 fraudulent charges that can be submitted to GEICO and other insurers. 79. In many cases, the Defendants never conduct the billed-for NCVs in the first instance, and instead simply create ersatz NCV test reports in support of their fraudulent billing which falsely represent that the Defendants actually performed and/or provided the pertinent NCV. 80. NCV test results are contained in reports that display numeric values for each category of nerve measurements that are taken during an NCV test - i.e., conduction velocity, amplitude, latency, etc. The NCV reports also contain graphic waveforms, from which the numeric values for each category of nerve measurements are derived. Each waveform and numeric value is specific to a given nerve's electrical characteristics at the moment the measurement is taken. 81. Each waveform is unique. Even if the same nerve, on the same person, was retested moments later, the resulting waveforms and data would be somewhat different. In order for the waveforms and data from two different NCV studies to be identical, the electrical currents measured at the recording electrodes affixed to each different patient would have to be identical to the microsecond for the entire duration of the test. It is impossible for this to occur even a single time. Therefore, the set of values and waveforms for each nerve values 31

32 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 32 of 50 PageID: 316 that are reported in NCV reports represent the unique ufingerprints 0 of an Insured's nerves under specific conditions at a specific moment in time. 82. To further defraud GEICO, the Defendants have created and submitted NCV reports containing waveforms and numerical data that are duplicated across different patients. Essentially, the Defendants have fabricated phony NCV test results that they have created simply by copying the data from a pre-existing NCV report for another patient, then pasting it into NCV reports created for new patients. Then, they bill GEICO for these fabricated, phony NCV reports. Defendants send these reports to GEICO as evidence that they performed the tests and as a representation of the Insureds' medical conditions. Accordingly, each report misrepresents, among other things: ( i) that the NCV test was performed; (ii) that the transmitted NCV test results display the results of the Insureds tests; and (iii) that the purported findings are true representations of the Insureds' respective conditions. 83. For instance, the Defendants submitted a June 22, 2011 NCV test report for an Insured named Patient 17 that included median motor nerve, ulnar motor nerve, median sensory nerve, radial sensory nerve, superficial peroneal sensory nerve, and ulnar sensory nerve data that were an exact match for a July 25, 2011 median motor nerve, ulnar motor nerve, median sensory 32

33 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 33 of 50 PageID: 317 nerve, radial sensory nerve, superficial peroneal sensory nerve, and ulnar sensory nerve NCV they purportedly provided to a different Insured named Patient These matches confirm that the Defendants draw from a "stockn of NCV data and waveform images that they randomly assemble and combine with the Insureds' claim information to create the impression that the NCV reports represent valid test results, when in fact the Defendants do not perform the underlying NCVs in the first instance. 3. The Fraudulent EMGs 85. EMGs involve insertion of a needle into various muscles in the spinal area ("paraspinal muscles") and in the arms and/ or legs to measure electrical activity in each such muscle. The sound and appearance of the electrical activity in each muscle are compared with well-defined norms to identify the existence, nature, extent, and specific location of any abnormalities in the muscles, peripheral nerves, and nerve roots. 86. According to the Recommended Policy, the maximum number of EMGs necessary to diagnose a radiculopathy in 90 percent of all patients is EMGs of two limbs. 87. Though the Defendants purport to provide and/ or perform EMGs to Insureds in order to determine whether the Insureds suffer from radiculopathies, virtually none of the 33

34 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 34 of 50 PageID: 318 Insureds actually present with any radiculopathy symptoms or any other medical problems arising from any automobile accidents. In actuality, the Defendants purport to provide and/or perform EMGs to Insureds as part of their pre-determined, fraudulent treatment protocol designed to maximize the billing that they can submit for each Insured. 88. Like all of the other Fraudulent Services that the Defendants purport to provide, the charges for the EM Gs are fraudulent in that the EM Gs are medically unnecessary and are performed to the extent that they are performed at all pursuant to the kickbacks that the Defendants pay to the referring providers. 89. There are many different muscles in the arms and legs that can be tested using EMGs. The decision of how many limbs and which muscles to test in each limb should be tailored to each patient's unique circumstances. In a setting, this decision is based upon a legitimate clinical history and physical examination of each individual patient, as well as the real-time results obtained from the EMGs as they are performed on each specific muscle. As a result, the number of limbs as well as the nature and number of the muscles tested through EMGs should vary from patient-to-patient. 90. The Defendants do not tailor the EMGs they purport to provide and/or perform to the unique circumstances of each 34

35 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 35 of 50 PageID: 319 patient. Instead, they routinely purport to test the same muscles in the same limbs over and over again, without regard for individual patient presentment. 91. Furthermore, even if there were any need for any of the EMGs, the nature and number of the EMGs that the Defendants purport to provide and/or perform frequently grossly exceed the maximum number of such tests - i.e., EMGs of two limbs - that should be necessary in at least 90 percent of all patients with a suspected diagnosis of radiculopathy. In the vast majority of cases, the Defendants purport to provide and/or perform EMGs on four limbs, in contravention of the Recommended Policy, in order to maximize the fraudulent billing that they can submit or cause to be submitted to GEICO and other insurers. 92. More specifically, if all other conditions of coverage are satisfied, the Fee Schedule permits lawfully licensed healthcare professionals in the northern New Jersey area to submit maximum EMG charges of: (i) $ under CPT code if an EMG is performed on at least five muscles of one limb; (ii) $ under CPT code if an EMG is performed on at least five muscles in each of two limbs; (iii) $ under CPT code if an EMG is performed on at least five muscles in each of three limbs; and (iv) $ under CPT code if an EMG is performed on at least five muscles in each of four limbs. 35

36 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 36 of 50 PageID: The Defendants purport to provide and/or perform EMGs on muscles in all four limbs for the vast majority of Insureds solely to maximize the profits that they can reap from each such Insured. 4. The Fraudulent Radiculopathy Diagnoses 94. Radiculopathies are relatively rare in motor vehicle accident victims, occurring in - at most - only 19 percent of accident victims according to a large-scale, peer-reviewed 2009 study conducted by Randall L. Braddom, M.D., Michael H. Rivner, M.D., and Lawrence Spitz, M.D. and published in Muscle & Nerve, the official journal of the AANEM. 95. Furthermore, the cohort of accident victims considered in the study by Ors. Braddom, Rivner, and Spitz had been referred to a tertiary EDX testing laboratory at a major university teaching hospital, and therefore represented a more severely injured group of patients than the Insureds whom the Defendants purportedly treat. As a result, the frequency of radiculopathy in all motor vehicle accident victims - not only those who have relatively serious injuries that require referral to a major hospital EDX laboratory is likely to be significantly lower than 19 percent. 96. Virtually none of the Insureds whom the Defendants purportedly treat suffer any serious medical problems as the result of any automobile accident, much less any radiculopathy. 36

37 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 37 of 50 PageID: Even so, Schwartz purports to diagnose radiculopathies in the vast majority of the Insureds that receive EDX testing from the Defendants. 98. Schwartz purports to arrive at his pre-determined radiculopathy diagnoses in order to create the appearance of severe injuries and thereby provide a false justification for the medically unnecessary Fraudulent Services provided through the Defendants, and a false justification for the laundry-list of other medically unnecessary services rendered by the providers who refer Insureds to the Defendants in exchange for kickbacks from the Defendants. III. The Fraudulent Billing the Defendants Submitted to GEICO 99. To support their fraudulent charges, the Defendants systematically have submitted or caused to be submitted hundreds of HCFA-1500 forms and treatment reports through MLS to GEICO seeking payment for the Fraudulent Services for which the Defendants were not entitled to receive payment The HCFA-1500 forms and treatment reports were false and misleading, and in violation of the Insurance Fraud Prevention Act, in the following material respects: (i) The HCFA-1500 forms and treatment reports submitted by and on behalf of the Defendants uniformly misrepresented to GEICO that the Fraudulent Services were medically necessary and, in many cases, misrepresented to GEICO that the Fraudulent Services actually were performed. In fact, the Fraudulent Services frequently were not 37

38 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 38 of 50 PageID: 322 performed at all and, to the extent that they were performed, they were not medically necessary and were performed as part of a pre-determined fraudulent treatment and billing protocol designed solely to financially enrich the Defendants, not to benefit the Insureds who supposedly were subjected to them. (ii) The HCFA-1500 forms and treatment reports submitted by and on behalf of the Defendants uniformly misrepresented and exaggerated the level of the Fraudulent Services and the nature of the Fraudulent Services that purportedly were provided. (iii)the HCFA-1500 forms and treatment reports submitted by and on behalf of the Defendants uniformly fraudulently concealed the fact that the Fraudulent Services were performed - to the extent that they were performed at all - pursuant to illegal kickback arrangements between the Defendants and the referring providers. IV. GEICO's Justifiable Reliance 101. The Defendants legally and ethically are obligated to act honestly and with integrity in connection with the billing that they submit, or cause to be submitted, to GEICO To induce GEICO to promptly pay the fraudulent charges for the Fraudulent Services, the Defendants systemically have concealed their fraud and have gone to great lengths to accomplish this concealment Specifically, the Defendants knowingly have misrepresented and concealed facts in order to prevent GEICO from discovering that the Fraudulent Services are medically unnecessary and are performed to the extent that they are 38

39 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 39 of 50 PageID: 323 performed at all pursuant to a fraudulent pre-determined protocol designed to maximize the charges that can be submitted, not to benefit the Insureds who supposedly are subjected to them Likewise, the Defendants knowingly have misrepresented and concealed facts in order to prevent GEICO from discovering that the Fraudulent Services frequently never are performed in the first instance In addition, the Defendants knowingly have misrepresented and concealed facts in order to prevent GEICO from discovering that the Fraudulent Services are performed, to the extent that they are performed at all, pursuant to illegal kickback arrangements between the Defendants and the referring providers The Defendants have hired law firms to pursue collection of the fraudulent charges from GEICO and other insurers. These law firms routinely file expensive and timeconsuming litigation against GEICO and other insurers if the charges are not promptly paid in full GEICO is under statutory and contractual obligations to promptly and fairly process claims. The facially-valid documents submitted to GEICO in support of the fraudulent charges at issue, combined with the material misrepresentations and omissions described above, were designed to and did cause 39

40 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 40 of 50 PageID: 324 GEICO to rely upon them. As a result, GEICO has incurred damages of more than $345, based upon the fraudulent charges representing payments made by GEICO to MLS Based upon the Defendants' material misrepresentations, omissions, and other affirmative acts to conceal their fraud from GEICO, GEICO did not discover and could not reasonably have discovered that its damages were attributable to fraud until shortly before it filed this Complaint. FIRST CAUSE OF ACTION Against MLS (Declaratory Judgment - 28 U.S.C and 2202) 109. GEICO incorporates, as though fully set forth herein, each and every allegation in paragraphs 1 through 108 above There is an actual case in controversy between GEICO and ENA regarding more than $1, 320, in pending fraudulent billing for the Fraudulent Services that has been submitted to GEICO MLS has no right to receive payment for any pending bills submitted to GEICO because the Fraudulent Services were not medically necessary and in many cases were not performed in the first instance MLS has no right to receive payment for any pending bills submitted to GEICO ordered and performed - because the Fraudulent Services were to the extent that they were performed 40

41 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 41 of 50 PageID: 325 at all - as part of a pre-determined fraudulent treatment and billing protocol designed solely to financially enrich the Defendants rather than to benefit the Insureds who were subjected to it MLS has no right to receive payment for any pending bills submitted to GEICO because the bills systematically misrepresent and exaggerate the level of the Fraudulent Services and the nature of the Fraudulent Services that purportedly were provided MLS has no right to receive payment for any pending bills submitted to GEICO because the Fraudulent Services were ordered and performed - to the extent that they were performed at all - pursuant to illegal kickback arrangements between MLS, Schwartz, and the referring providers Accordingly, GEICO requests a judgment pursuant to the Declaratory Judgment Act, 28 U.S.C and 2202, declaring that: (i) MLS has no right to receive payment for any pending bills submitted to GEICO because the Fraudulent Services were not medically necessary and in many cases were not performed in the first instance. (ii) MLS has no right to receive payment for any pending bills submitted to GEICO because the Fraudulent Services were ordered and performed - to the extent that they were performed at all - as part of a pre-determined fraudulent treatment and billing protocol designed solely to 41

42 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 42 of 50 PageID: 326 financially enrich the Defendants rather than to benefit the Insureds who were subjected to it. (iii) MLS has no right to receive payment for any pending bills submitted to GEICO because the bills systematically misrepresent and exaggerate the level of the Fraudulent Services and the nature of the Fraudulent Services that purportedly were provided. (iv) MLS has no right to receive payment for any pending bills submitted to GEICO because the Fraudulent Services were ordered and performed - to the extent that they were performed at all - pursuant to illegal kickback arrangements between MLS, Schwartz, and the referring providers. SECOND CAUSE OF ACTION Against All Defendants (Violation of New Jersey Insurance Fraud Prevention Act - (N.J.S.A.17:33A-1 et seq.)) 116. GEICO incorporates, as though fully set forth herein, each and every allegation in paragraphs 1 through 115 above In connection with the billing that they submitted or caused to be submitted to GEICO for the Fraudulent Services, the Defendants knowingly submitted or caused to be submitted HCFA forms and treatment reports to GEICO that were false and misleading in the following material respects: (i) The HCFA-1500 forms and treatment reports submitted by and on behalf of the Defendants uniformly misrepresented to GEICO that the Fraudulent Services were medically necessary and, in many cases, misrepresented to GEICO that the Fraudulent Services actually were performed. In fact, the Fraudulent Services frequently were not performed at all and, to the extent that they were performed, they were not medically necessary and were performed as part of a pre-determined fraudulent treatment and billing protocol 42

43 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 43 of 50 PageID: 327 designed solely Defendants. to financially enrich the (ii) The HCFA-1500 forms and treatment reports submitted by and on behalf of the Defendants uniformly misrepresented and exaggerated the level of the Fraudulent Services and the nature of the Fraudulent Services that purportedly were provided. (iii) The HCFA-1500 forms and treatment reports submitted by and on behalf of the Defendants uniformly fraudulently concealed the fact that the Fraudulent Services were performed - to the extent that they were performed at all - pursuant to illegal kickback arrangements between the Defendants and the referring providers The Defendants' systemic violation of the New Jersey Insurance Fraud Prevention Act constitutes a "patternn of violations under the Act. See N.J.S.A. 17:33-A-7. As a result, GEICO is entitled to not only damages in the form of disgorgement of the PIP benefits paid in an amount to be established at trial, but exceeding $345, Dollars, but is also entitled to: (i) treble damages; (ii) the costs and counsel fees incurred in connection with the investigation conducted by GEICO; as well as (iii) reimbursement of the costs and counsel fees associated with the prosecution of this litigation. THIRD CAUSE OF ACTION Against Schwartz (Violation of RICO, 18 U.S.C. 1962(c)) 119. GEICO incorporates, as though fully set forth herein, each and every allegation in paragraphs 1 through 118 above. 43

44 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 44 of 50 PageID: MLS Medical Group LLC is an ongoing "enterprise", as that term is defined in 18 U.S.C. 1961(4), that engages in activities which affects interstate commerce Schwartz knowingly has conducted and/ or participated, directly or indirectly, in the conduct of MLS' affairs through a pattern of racketeering activity consisting of repeated violations of the federal mail fraud statute, 18 U.S.C. 1341, based upon the use of the United States mails to submit or cause to be submitted hundreds of fraudulent bills on a continuous basis for over four years seeking payments that MLS was not entitled to receive under the No-Fault Laws because the bills misrepresented and exaggerated the level and nature of the Fraudulent Services that were provided, and because the billedfor Fraudulent Services were not medically necessary, were performed and billed pursuant to a pre-determined, fraudulent treatment and billing protocol designed solely to enrich the Defendants, were performed pursuant to kickbacks that the Defendants paid to the referring providers, and in many cases were not performed at all. A representative sample of the fraudulent bills and corresponding mailings submitted to GEICO that comprise, in part, the pattern of racketeering activity identified through the date of this Complaint are described, in part, in the chart annexed hereto as Exhibit "1". 44

45 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 45 of 50 PageID: MLS' business is racketeering activity, inasmuch as the enterprise exists for the purpose of submitting fraudulent charges to insurers. The predicate acts of mail fraud are the regular way in which Schwartz operates MLS, inasmuch as MLS is not engaged in a legitimate medical practice, and acts of mail fraud therefore are essential in order for MLS to function. Furthermore, the intricate planning required to carry out and conceal the predicate acts of mail fraud implies a threat of continued criminal activity, as does the fact that the Defendants continue to attempt collection on the fraudulent billing submitted through MLS to the present day MLS is engaged in inherently unlawful acts, inasmuch as it continues to submit and attempt collection on fraudulent billing submitted to GEICO and other insurers. These inherently unlawful acts are taken by MLS in pursuit of inherently unlawful goals - namely, the theft of money from GEICO and other insurers through fraudulent No-Fault billing GEICO has been injured in its business and property by reason of the above-described conduct in that it has paid at least $345, pursuant to the fraudulent bills submitted through MLS By reason of its injury, GEICO is entitled to treble damages, costs, and reasonable attorneys' fees pursuant to 18 45

46 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 46 of 50 PageID: 330 U.S.C. 1964(c), and any other relief the Court deems just and proper. FOURTH CAUSE OF ACTION Against All Defendants (Common Law Fraud) 126. GEICO incorporates, as though fully set forth herein, each and every allegation in paragraphs l through 125 above The Defendants intentionally and knowingly made false and fraudulent statements of material fact to GEICO and concealed material facts from GEICO in the course of their submission of thousands of fraudulent bills seeking payment for the Fraudulent Services The false and fraudulent statements of material fact and acts of fraudulent concealment include: ( i) in every claim, the representation that the Fraudulent Services were medically necessary, when in fact they were not; (ii) in many claims, the representation that the Fraudulent Services were provided in the first instance, when in fact they were not; and (iii) in every claim, concealment of the fact that the Fraudulent Services were performed, to the extent that they were performed at all, pursuant to kickbacks that the Defendants paid to the ref erring providers The Defendants intentionally made the above-described false and fraudulent statements and concealed material facts in a calculated effort to induce GEICO to pay charges submitted 46

47 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 47 of 50 PageID: 331 through MLS that were not compensable under New Jersey's No- Fault Laws GEICO justifiably relied on the Defendants' false and fraudulent representations, and as a proximate result has been injured in its business and property by reason of the abovedescribed conduct in that it has paid at least $345, pursuant to the fraudulent bills submitted by the Defendants through ENA The Defendants' extensive fraudulent conduct demonstrates a high degree of moral turpitude and wanton dishonesty that entitles GEICO to recover punitive damages Accordingly, by virtue of the foregoing, GEICO is entitled to compensatory and punitive damages, together with interest and costs, and any other relief the Court deems just and proper. FIFTH CAUSE OF ACTION Against All Defendants (Unjust Enrichment) 133. GEICO incorporates, as though fully set forth herein, each and every allegation in paragraphs 1 through 132 above As set forth above, the Defendants have engaged in improper, unlawful, and/ or unjust acts, all to the harm and detriment of GEICO When GEICO paid the bills and charges submitted by or on behalf of the Defendants for PIP Benefits, it reasonably 47

48 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 48 of 50 PageID: 332 believed that it was legally obligated to make such payments based on the Defendants' improper, unlawful, and/or unjust acts The Defendants have been enriched at GEICO' s expense by GEICO' s payments which constituted a benefit that Defendants voluntarily accepted notwithstanding their improper, unlawful, and unjust billing scheme The Defendants' retention of GEICO's payments violates fundamental principles of justice, equity and good conscience By reason of the above, the Defendants have been unjustly enriched in an amount to be determined at trial, but in no event less than $345, JURY DEMAND 139. Pursuant to Federal Rule of Civil Procedure 38(b), Plaintiffs demand a trial by jury. WHEREFORE, Plaintiffs Government Employees Insurance Co., GEICO Indemnity Co., GEICO General Insurance Company and GEICO Casualty Co. demand that a Judgment be entered in their favor: A. On the First Cause of Action against MLS, a declaration pursuant to the Declaratory Judgment Act, 28 U.S. C and 2202, that MLS has no right to receive payment for any pending bills submitted to GEICO; B. On the Second Cause of Action against all Defendants, damages in the form of disgorgement of the PIP benefits paid in an amount to be established at trial, but exceeding $345,000.00, 48

49 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 49 of 50 PageID: 333 as well as (i) treble damages, (ii) the costs and counsel fees incurred in connection with the investigation conducted by GEICO, and (iii) reimbursement of the costs and counsel fees associated with the prosecution of this litigation pursuant to N.J.S.A. 17:33A-7; C. On the Third Cause of Action against Schwartz, compensatory damages in favor of GEICO an amount to be determined at trial but in excess of $345,000.00, together with treble damages, to 18 U.S.C. costs, and reasonable attorneys' fees pursuant 1964(c) plus interest; D. On the Fourth Cause of Action against all Defendants, compensatory damages in favor of GEICO an amount to be determined at trial but in excess of $345, , together with punitive damages, costs, interest and such other and further relief as this Court deems just and proper; E. On the Fifth Cause of Action against all Defendants, more than $345, in compensatory damages, plus costs and 49

50 Case 2:12-cv SRC-CLW Document 16 Filed 12/19/12 Page 50 of 50 PageID: 334 interest and such other and further relief as this Court deems just and proper. Dated: Hackensack, New Jersey December 19, 2012 By :C-I-/J8'J(;;;~C:~~ Ll hn Ro 1 Main Street, Suite 158 Court Plaza South, West Wing Hackensack, New Jersey (201) vl 50

51 Case 2:12-cv SRC-CLW Document 16-1 Filed 12/19/12 Page 1 of 25 PageID: 335