Two S. Jersey drug reps plead guilty in widening Shore Rx scheme

The U.S. District Courthouse in Camden.

Two South Jersey pharmaceutical sales representatives pleaded guilty in federal court Monday in a widening $28 million kickback scheme, in which New Jersey municipal and educational employees with state prescription plans were used to fraudulently obtain payments for compounded medications.

The two men were described in court as recruiters of employees with these benefit plans who were given a percentage of the reimbursements made to the out-of-state pharmacy that filled the prescriptions for vitamins and scar, anti-fungal, and libido creams. Authorities have said the scheme involved firefighters, teachers, police, and other public employees, mostly centered around Atlantic County.

“Basically, it was a commission on a sale,” said lawyer Rocco Cipparone following the plea of his client, Judd Holt, 42, of Marlton. “He’s really just an ordinary guy who made a judgment error.”

The guilty pleas on Monday bring the total to eight in the conspiracy, including five drug representatives, a Margate physician, a retired Atlantic City firefighter, and a gym-floor installer.

Despite the pleas, Shore towns, including Ventnor and Margate, and school districts including Linwood-based Mainland are still waiting for the other shoe to drop. The governments of Margate, Ventnor, and Atlantic City have all been subpoenaed for records of employees holding the costly prescription plans. Atlantic County Prosecutor Damon Tyner has said the county’s role in the investigation could lead to hundreds of people being charged.

This summer, Tyner and the FBI raided the offices of endocrinologist James Kauffman in what Tyner called a health benefits fraud investigation. Kauffman was charged with weapons offenses after he brandished a gun and threatened to kill himself. He remains jailed in Atlantic County. Kauffman’s wife, April, a Shore radio host and veterans advocate, was murdered in their home in 2012, a crime that remains unsolved.

Since the summer, the prescription drug scheme has been the subject of relentless rumors and anxiety in Shore towns worried about the potential impacts on their public safety departments and schools.

On Monday, the two guilty pleas were entered separately in short hearings before U.S. District Judge Robert B. Kugler. As did the others, the men pleaded guilty to a charge of conspiring to commit health-care fraud and could face up to 10 years in prison plus restitution and fines.

Holt admitted his role in recruiting people to fill out preprinted prescription forms for the costly medications, which were then signed by a doctor who never examined the recipients or otherwise determined if they needed the drugs. The prescriptions were faxed to an as-yet-unidentified out-of-state compounding pharmacy. The compounded drugs, which are individually mixed based on alleged special needs or allergies, can fetch thousands of dollars a month in reimbursements.

Between January 2015 and April 2016, Holt netted about $95,000 for his role in the scheme, according to Assistant U.S. Attorney R. David Walk, based on about $769,000 in fraudulent reimbursements by the state-administered benefits programs. Walk is assigned to the Health Care and Government Fraud Unit of the U.S. Attorney’s Office in New Jersey.

Holt told the judge he resigned as a pharmaceutical representative last Friday.

The second man, George Gavras, 36, of Moorestown, netted more than $200,000 based on recruiting people for prescriptions worth $679,000, according to the court hearing.

The scheme’s admitted ringleader, Matthew Tedesco, 42, pleaded guilty in August to overseeing the scheme, which involved recruiting firefighters, teachers, and police officers whose benefit plans covered the expensive individualized prescriptions.  The money paid to the unidentified compounding pharmacy was then passed along to drug representatives and others who recruited for and were recruited to the scheme. He will be sentenced Dec. 4.