Margate, Shore towns brace for impact of federal inquiry into firefighters, city workers

MARGATE, N.J. — Mayor Michael Becker says that his city has complied with an FBI subpoena asking for information on Margate city employees and prescription plans and that he is concerned about the possible disruption that may result from a wide-ranging grand jury investigation.

In nearby Ventnor, meanwhile, Mayor Beth Holtzman said Monday her city is also cooperating, though she declined to say whether there had been any subpoena issued.

“We are cooperating fully with the FBI and its investigation,” she said. “Until we have more information we can’t comment. It’s an open investigation.”

And in Atlantic City, Mayor Don Guardian said his city received a federal subpoena June 5 asking for “all city employees, contact information and health benefits provided,” and immediately sent the requested information.

The investigation, the subject of relentless rumors in Margate, Ventnor, Atlantic City, and some nearby mainland towns for months, appears to be centered on the misuse of health-insurance plans by municipal employees, including firefighters, police, and other employees with public health plans.

“If it involves Margate at all, I’m very concerned,” Becker said in an interview Sunday. “Our hands are tied. I’m worried, is there going to be an impact?”

But while Becker says “I guess we wait,” some local fire departments have been consulting with Atlantic City to discuss possible reinforcements and coverage should any future federal indictments result in staffing issues in Margate or elsewhere, according to sources.

Guardian said Monday that Chief Scott Evans of the Atlantic City Fire Department is “in communications with neighboring municipalities discussing mutual aid.”

The investigation broke out of the rumor mill Friday evening when NBC10 reported it had obtained a federal subpoena of Margate city records, in addition to obtaining records of Margate city employees’ prescription use, which showed a dramatic increase in the cost of brand-name prescriptions for Margate’s 126 city workers.

The U.S. District Court grand jury subpoena issued last month requests a list of all police, fire, and other employees “that have Express Scripts, Medco and/or NJ Direct as part of their health insurance plans” by June 21, according to the report, which showed a copy of the subpoena. The grand jury is meeting in Camden, according to the subpoena.

Becker says he is personally aware of people who have been interviewed by the FBI, but has no other direct information beyond the subpoena. As for the reach of the investigation, Becker says he’s heard rumors ranging from “three to 300” possible indictments.

Several Shore-area doctors’ offices have reportedly been raided by the FBI in recent months, including one belonging to James Kauffman, an endocrinologist currently in jail after brandishing a gun when the search warrant was executed last month.

Kauffman is the widower of April Kauffman, who was shot to death in their Linwood home in 2012. Atlantic County Prosecutor Damon Tyner described the search warrant as part of a wide-ranging, multi-jurisdictional investigation.

Kauffman’s attorney, Ed Jacobs, said at the time that the search warrant specified health-care fraud as a possible basis. Authorities have not commented on whether the Kauffman investigation is related to any other federal or local investigation.

William Skaggs, a spokesman for the office of the U.S. attorney in New Jersey, declined to comment on questions or confirm or deny any investigation involving the Shore towns.

In recent weeks, federal investigations in other jurisdictions have led to hundreds of indictments related to health-insurance fraud. These investigations ensnared physicians, nurses, pharmacists, and other medical professionals in what Attorney General Jeff Sessions said encompassed more than $1.3 billion in fraudulent transactions across more than 20 states, none of them New Jersey.

Federal probes in other jurisdictions have previously focused on kickback schemes involving compounding pharmacies filling prescriptions for costly topical pain creams. USA Today reported this year that federal spending has spiraled on these expensive drugs, with the U.S. Department of Health and Human Services reporting that Medicare spending on compounded topical drugs surging 3,400 percent since 2006.

The information obtained by NBC10 from Margate showed a fourfold jump in prescription-drug costs from $714,000 in 2014 to $3.35 million in 2015.

Margate Mayor Becker said that he was bracing for the impact of any charges resulting from the investigation and that he would suspend any city employee who is indicted.

Asked what he would do in the event that the investigation disproportionately affects his city’s 30-something-member fire department, he said, “Panic.”

“You have no idea how the feelings I’ve gotten are,” he said. “Not good feelings. We will deal with what comes down the pike quickly.”

In Ventnor, Mayor Holtzman said the city pays premiums and would not see specific spikes in prescription costs. She said she was concerned about the impact on the Shore town itself. “Any investigation you have a concern for the city as a whole,” she said. “The residents, taxpayers, you’ve got to look at everyone that’s involved.”

Officials in Brigantine, Longport, and Egg Harbor Township said Monday that their towns had not received any similar notice of an FBI inquiry or any order to produce information on employees.