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The federal courthouse in Camden, New Jersey. Credit: U.S. Department of Justice/DAMS

Regulation and Compliance > Federal Regulation

Ex-Wells Fargo Advisor Defrauded Health Plans, Jury Finds

By Allison Bell

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What You Need to Know

  • The case in New Jersey involves custom-made prescription medications, according to the indictment.
  • Prosecutors say the expensive prescriptions were not medically necessary.
  • Kaival Patel maintains that he was used by others and was unwittingly involved in their scheme.

A jury at a federal court in Camden, New Jersey, last week found that a former investment advisor worked with a physician and others to defraud state and local public employee health plans in New Jersey.

Prosecutors allege that the former advisor, Kaival Patel, created a company, ABC Healthy Living, that caused plan enrollees to buy expensive, medically unnecessary compound medications, or custom-made prescription drugs, through the physician, according to an indictment filed with the U.S. District Court for New Jersey in 2022.

The health plans made about $4 million in extra benefits payments through their pharmacy benefits administrator as a result, U.S. Attorney Philip Sellinger said Friday.

The pharmacy rewarded Patel by paying ABC Healthy Living about $490,000, according to the 2022 indictment.

About 47 people in New Jersey have been convicted of wrongdoing or pleaded guilty in connection with a federal investigation of compound prescription claims there, officials said.

What it means: Any advisors with clients involved with pharmacies, health plans or the practice of medicine in New Jersey should be aware that federal prosecutors there are interested in health care fraud.

ABC Healthy Living: ABC Healthy Living was formed in 2015 and dissolved in 2021, according to New Jersey state records. Prosecutors allege in the indictment that the company was active from 2015 through 2017.

Patel was a financial advisor with Wells Fargo Advisors from 2010 through 2018. He joined Stifel Financial as a senior vice president and worked there from 2018 through 2022.

Patel’s wife formed ABC Healthy Living in her name to conceal Kaival Patel’s connection because “Kaival Patel was precluded by his employer from engaging in certain outside business activities,” according to the indictment.

Stifel told the Financial Industry Regulatory Authority in 2022 that it had discharged Patel because of a loss of confidence related to the filing of the indictment.

FINRA prohibited Patel from associating with FINRA member firms in May 2022, after finding that he had not complied fully with a request for information.

Patel agreed to FINRA’s sanctions without admitting or denying FINRA’s findings.

A representative for Wells Fargo declined to comment. Stifel could not immediately be reached for comment.

The trial: U.S. District Judge Robert Kugler presided over the trial, which lasted 11 days.

The jury convicted Patel of one count of conspiracy to commit wire fraud and health care fraud, one count of conspiracy to commit money laundering by transacting in criminal proceeds, four counts of health care fraud, and five counts of money laundering by transacting in criminal proceeds, officials in Sellinger’s office said.

Sentencing is scheduled for April 10. The charge for conspiracy to commit wire fraud and health care fraud could lead to up to 20 years in prison and a $250,000 fine.

Patel’s response: Robert Stahl, Patel’s attorney, said in an email that his client is disappointed and is exploring all options, including the possibility of filing an appeal.

“He is heartened by the unwavering support of his family and friends,” Stahl said.

Evidence presented during the trial showed that other people devised the prescription reimbursement scheme, and “Kaival Patel maintained throughout the trial that he was unwittingly involved in their scheme and was used by these others,” Stahl said.

The federal courthouse in Camden, New Jersey. Credit: U.S. Department of Justice

Allison Bell

Think_Allison

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