A former Stifel, Wells Fargo and Morgan Stanley advisor will spend 3 1/2 years in prison for helping run a scheme that defrauded public health insurance plans of $4 million.
In addition to a 41-month prison term, a New Jersey federal judge sentenced Kaival Patel to pay $4.72 million in restitution to victims of his scheme. Patel was convicted last December of one count of conspiracy to commit wire fraud, health care fraud and several counts of money laundering.
“This defendant lined his own pockets by taking advantage of health insurance plans for New Jersey state and local government employees, defrauding them of millions of dollars by conspiring to obtain reimbursements for medically unnecessary compound prescription medications,” U.S. Attorney Phillip Sellinger said in a statement.
According to the Justice Department, Patel created a company with his wife to market compound prescription medications. Compound medications are specialty medications mixed by pharmacists for patients’ specific needs and require a physician’s prescription.
In 2015, Patel and several others learned that several New Jersey state insurance plans would reimburse government employees thousands of dollars for certain prescribed compound medications, including vitamins, scar, pain and libido creams, and acid reflux medications, according to the DOJ.
So Patel hatched a plan to prescribe compound medications to patients who didn’t need them so he could pocket the commissions on the meds.
But the conspirators needed a doctor, so Patel went to Saurabh Patel, a Newark-based physician (and relative of the defendant). Saurabh Patel agreed to sign the faulty prescriptions (and later pleaded guilty to insurance fraud, according to the DOJ).
Kaival Patel then paid a group of corrections officers to visit the doctor to get the faulty prescriptions. The defendant also conspired with a pharmacist to add unnecessary ingredients to the meds to boost the costs (and his profits) even more.
According to SEC records, Kaival Patel joined the industry in 2002 at AXA Advisors. After a brief stint at Morgan Stanley from September 2010 through June 2011, he moved to Wells Fargo in August 2011. He stayed until 2018, when he moved to Stifel. The firm fired him in January 2022 after “being named in an indictment in United States District Court,” and FINRA barred him in May 2022.
According to the DOJ, about 48 people have pleaded guilty or been convicted in relation to the conspiracy.
