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Seth Logan Welsh, 26, of Forest Hill, MD, and John C. Devlin, 33, of Baltimore told a U.S. District judge in Trenton via teleconference that they hired a Red Bank bank man, among others, to carry out the scheme so they could collect referral fees from the rehab centers.
That man, Peter Costas, paid addicts several thousand dollars to use specific rehab centers in New Jersey and other states -- whether they needed treatment or not -- in order to “generate referral fees from those facilities,” U.S. Attorney Craig Carpenito said.
He and the others even arranged for cross-country travel to the drug treatment centers in California and other states, Carpenito said.
Welsh and Devlin collected $5,000 to $10,000 per referral, of which Costas and other recruiters got about half, he said.
The fraud cost health insurers millions.
Costas pleaded guilty to his role in the conspiracy in May and has been awaiting sentencing while the government pursued its case against his co-defendants.
Welch’s and Devlin’s marketing company “maintained contractual relationships with drug treatment facilities around the country and engaged a nationwide network of recruiters – including Costas in New Jersey – to identify and recruit potential patients, from New Jersey and other states, who were addicted to heroin or other drugs and who had robust private health insurance,” Carpenito said.
They often selected rehab facilities that they knew “provided ineffective drug treatment or actually fostered drug use on their premises” to keep the scheme going, he said.
Once a patient agreed to enroll in exchange for a payoff, the U.S. attorney said, Welsh, Devlin, and Costas “would arrange and pay for cross-country travel to the drug treatment centers in California and other states.
“Costas would stay in touch with the New Jersey patients at the facilities and specifically instruct them to stay at the facilities long enough to generate referral payments.”
He also forwarded information about the patients’ status at the facilities to Welsh and Devlin, Carpenito said.
Welsh and Devlin double-checked the information by speaking to other recruiters or to the owners and employees of the drug treatment facilities themselves, he said.
They also made sure they chose inferior facilities.
Costas texted Devlin that one of the patients sent to a rehab center in Los Angeles reported that “everyone’s high” and that “it’s a flop,” Carpenito said.
Devlin’s reply: “Lol.”
A few days later, Carpenito said, Welsh texted Devlin and Costas to report that the patient was “smoking meth” at the drug treatment facility.
Costas replied:Yes. [The patient is] freaking out at me. [He] said out of the 10 ppl. [people] in [the drug treatment facility] only 4 are sober. The rest are smoking meth and dope . . . . [The patient] said everyone’s high and it’s a complete flop and [he] tried to stay sober around it without ‘ratting’ as long as he could.”
Costas’s text “meant that the patient was trying to stay in drug rehabilitation long enough to trigger referral payments to Welsh’s and Devlin’s marketing company without relapsing,” the U.S. attorney said.
U.S. District Judge Peter G. Sheridan scheduled sentencings on Welsh’s and Devlin’s guilty pleas to conspiracy to commit health care fraud for Jan 11, 2021 in Trenton.
Carpenito credited special agents of the FBI with the investigation leading to the guilty pleas, secured by Assistant U.S. Attorney Jason S. Gould of his Health Care Fraud Unit in Newark.
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