chris phillips information
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U.S. DISTRICT COURT UNITED STATES DISTRICT COUftff TRICT OF N.H.
DISTRICT OF NEW HAMPSHIRE FILED
UNITED STATES OF AMERICA
v.
CHRISTOPHER PHILLIPS,
Defendant.
The United States Attorney charges:
2010 JAN I 2 A 10: U2
CRIMINAL NO. 10- (iiS.-3.-ol BBu
UNDER SEAL
INFORMATION
COUNT 1 CONSPIRACY
(18U.S.C. §371)
1. From approximately October 2008 to January 2009, in the District of New
Hampshire and elsewhere, the defendant,
CHRISTOPHER PHILLIPS,
knowingly and willfully agreed and conspired with other people to commit an offense against the
United States, to wit, to knowingly and willfully devise a scheme or artifice to defraud and to
obtain money from insurance companies by means of false or fraudulent pretenses,
representations or promises, and in furtherance thereof transmitted or caused to be transmitted in
interstate commerce, by means of wire, certain signs, signals, or sounds in violation of Title 18,
United States Code, Section 1343.
In addition, PHILLIPS committed one or more acts to effect the object of the
conspiracy.
2. At all relevant times, PHILLIPS was the managing director of VICIS Capital,
LLC (VICIS), a hedge fund with a principal place of business in New York.
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3. As part of its investment strategy, VICIS invested in start-up companies. These
companies included Medical Supply Management, Inc. ("MSMI"), a Massachusetts company
primarily engaged in the durable medical equipment business and MDWerks, a Florida company
engaged in the business of offering electronic medical claims processing and claims management
services for health care providers.
4. In February 2007, VICIS provided funds to MSMI to purchase from Deutsche
Medical Services, Inc. ("DMS"), a California company, the assignment of health insurance
claims for transdermal compound creams purportedly dispensed to California workers
compensation patients by doctors (the "DMS receivables"). MSMI purchased the DMS
receivables at 60 percent of the face value of each claim.
5. VICIS invested approximately $7,540,981 in MSMI's purchase of the DMS
receivables between February 2007 and April 2008. In April 2008, VICIS also provided
approximately $788,269 to MDWerks to purchase DMS receivables. In total, VICIS invested
approximately $8,329,250 in the purchase of DMS receivables.
6. Initially, MDWerks/MSMI/VICIS achieved a very unfavorable collection rate on
the DMS receivables. Two steps were taken to improve the collections. First, MSMI stopped
billing the DMS receivables itself and hired a New Hampshire medical claims billing company
("Billing Company") to bill the receivables to insurance companies. Second, MSMI/VICIS
placed MDWerks in charge of filtering defective claims and otherwise managing the processing
of the DMS receivables by the Billing Company. These steps failed to improve the collections to
the degree necessary for VICIS to profit on its investment.
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7. In July 2008, Conspirator A received information from the Billing Company's
president that the collection rate on the DMS receivables was so low because the receivables
were fraudulent and that many doctors had never in fact dispensed the transdermal compounds on
which the receivables were based. Throughout early August 2008, the Billing Company's
president provided Conspirator A with additional information regarding the non-dispensing of
the transdermal compounds on which the DMS receivables were based.
8. On or about August 14, 2008, Conspirator A met with PHILLIPS and told him
that the DMS receivables appeared to be fraudulent. Between August 14, 2008 and October
2008, Conspirator A and PHILLIPS had additional conversations in which Conspirator A
reiterated that the DMS receivables were fraudulent.
9. On or about September 23, 2008, the Federal Bureau of Investigations ("FBI")
began investigating the DMS receivables and their handling by MDWerks/MSMI/VICIS.
10. On October 24, 2008, as part of the FBI investigation and at the FBI's direction,
the Billing Company's president explained to Conspirator A a potential billing method by which
the collection rate of the DMS receivables could be vastly increased. This method involved
adding a fraudulent date of service to the claims to serve as a date for when the transdermal
creams underlying the DMS receivables purportedly would have been dispensed.
11. On October 29, 2008, Conspirator A met with PHILLIPS in New York to explain
the scheme to use fraudulent dates of services (the "scheme") to increase collections and to
obtain PHILLIPS' agreement to pay for expenses associated with the scheme. At the conclusion
of the meeting, PHILLIPS placed an interstate telephone call to the Billing Company's president
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in New Hampshire to authorize proceeding with the scheme and to promise to pay the Billing
Company's costs associated with the scheme.
12. On November 3, 2008, PHILLIPS spoke again with the Billing Company
president by telephone in New Hampshire to further discuss executing the scheme.
13. Shortly after the November 3, 2008 telephone conversation, PHILLIPS instructed
Conspirator B to act as an intermediary between himself and the Billing Company's president
concerning the execution of the scheme. PHILLIPS thereafter communicated about the scheme
to the Billing Company's president primarily through Conspirator B.
14. On November 11, 2008, PHILLIPS sent, by means of interstate wire, an e-mail to
the Billing Company's president in New Hampshire in which he confirmed that he wanted to
continue with the scheme.
15. On December 2, 2008, PHILLIPS sent an additional e-mail to the Billing
Company's president in New Hampshire in which he promised the Billing Company's president
that the Billing Company would be compensated for completing the scheme.
16. On December 16, 2008, PHILLIPS conducted an interstate telephone call with the
Billing Company's president in New Hampshire, during which PHILLIPS and the Billing
Company's president discussed more of the logistics for completing the scheme. During the call,
PHILLIPS instructed the Billing Company's president to submit the fraudulent claims as soon as
possible in order to hasten the speed of collections for MSMI/VICIS.
17. On December 17, 2008, PHILLIPS met with Conspirator A in Tampa, Florida to
discuss progress in completing the scheme. During this conversation, Conspirator A told
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PHILLIPS that VICIS would have to make a special payment to the Billing Company related to
the scheme, and PHILLIPS agreed to facilitate the payment.
18. On December 3 0, 2008, PHILLIPS authorized the payment of $260,000 to the
Billing Company for costs associated with the scheme and wired $260,000 to Conspirator B for
this purpose.
19. On December 31, 2008, PHILLIPS emailed Conspirator B to make sure that
payment to the Billing Company had been made. Conspirator B confirmed that he had made the
payment to the Billing Company.
20. On January 1, 2009, Conspirator B emailed PHILLIPS to inform him that the
Billing Company's president reported that the company had completed adding the fraudulent
dates of service to the claims and had transmitted them by wire to an out-of-state claims
clearinghouse for submission to insurance companies, thereby completing the scheme.
In violation of Title 18, United States Code, Section 371.
Dated: January 12, 2010
MICHAEL J. GUNNISON Attorney for the United States, Acting Under Authority Conferred by28U.S.C. §515
By:
Assistant United States Attorney
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