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Legal Mess Includes Doctored Emails

7 min read

Hunter Burroughs, the Rogers businessman at the heart of a federal fraud indictment, admitted more than a year ago to faking emails he submitted in a Florida civil lawsuit.

“I did personally ‘doctor’ the emails … and lied that they were true emails …, ” Burroughs confessed in a court filing in December 2020.

Now the Florida dispute, a suit in the wake of Burroughs’ 2017 sale of two medical supply and billing companies, is entwined with the federal criminal action in Arkansas.

Common Compounds Inc., known as CCI Billing, one of the two companies Burroughs sold nearly five years ago to Health-Right Discoveries Inc. of Aventura, Florida, is the centerpiece of the 12-count indictment, issued Feb. 28. The charges against Burroughs and Stephen Keith Andrews, the former chief executive officer, accuse them of running a kickback scheme involving several doctors and medical clinics. Burroughs also faces a wire fraud count over his dishonesty in the Florida lawsuit.

Troubles brewed not long after Burroughs sold CCI and EzPharmaRX LLC for $6.1 million to Health-Right in 2017.

By 2018, Burroughs was suing the president of Health-Right, David Hopkins, and Health-Right was suing Burroughs, accusing him of trying to “swindle” about $1 million more out of the deal than he was entitled to, according to documents filed in Miami-Dade County Circuit Court.

An attorney for Health-Right, Simon Ferro, asked a judge to throw out Burroughs’ lawsuit and rule for Health-Right. “Burroughs has perpetrated a brazen fraud on the Court,” the Coral Gables-based attorney wrote in his motion in November 2020. Circuit Judge Michael Hanzman agreed.

“In short, Mr. Burroughs’ fraud was not limited to Health-Right’s claims against him,” Hanzman wrote in an order filed Dec. 28, 2020. “His fraud was pervasive, and it permeated the entire case.” A pending trial will determine the damages Burroughs owes to Health-Right, and other legal issues are looming.

Indicted in Kickback Scheme

On Feb. 28, Burroughs, 42, was indicted by a federal grand jury in connection with a kickback scheme involving several doctors and medical clinics.

Burroughs and Stephen Keith Andrews, 48, of Benton County, CCI’s former CEO, were charged with one count of conspiracy to commit health care fraud, two counts of conspiracy to commit wire fraud and eight counts of wire fraud. Burroughs also is charged with another wire fraud count in connection with the Health-Right lawsuit.

Burroughs and Andrews allegedly defrauded both federal and private workers’ compensation insurers in schemes that ran until 2017, according to a news release from the U.S. attorney for Arkansas’ Western District.

Burroughs, Andrews and other people tied to the company are accused of recruiting physicians to prescribe pain creams and patches to their workers’ compensation patients by offering them a split of the profits from billing insurers, typically 50%, the news release said.

Burroughs, who pleaded not guilty, didn’t return emails and calls to his cellphones. Burroughs’ criminal defense attorney, Shane Mitchell Wilkinson of Bentonville, didn’t return a call.

Andrews also pleaded not guilty. His attorney, Andrew R. Miller of Keith Miller Butler Schneider & Pawlik of Rogers, declined to comment on the indictment.

In the meantime, others involved in the alleged scheme have pleaded guilty.

Dr. Robert Clay Smith, 60, of Alexandria, Louisiana, waived indictment by a grand jury and pleaded guilty last week to charges of conspiracy to commit health care fraud, wire fraud and taking kickbacks. He made more than $650,000 from the scheme, according to a news release from U.S. Attorney David Clay Fowlkes of the Western District of Arkansas. Smith faces up to five years in federal prison.

In July, Dr. Robert Dale Bernauer Sr., who ran a clinic in Lake Charles, Louisiana, pleaded guilty in the conspiracy. He has not been sentenced.

CCI’s former billing director, Amanda Dawn Rains, pleaded guilty in October to participating in criminal conspiracies with the two doctors, and others, the news release said. She is scheduled to be sentenced on Aug. 19.

Becoming an Entrepreneur

After graduating from Ouachita Baptist University in Arkadelphia in 2002, Burroughs started selling insurance and was in the financial industry for seven or eight years.

Around 2010, Burroughs became a part owner of two medical clinics in Oklahoma that helped patients with their feet. Burroughs was involved in the daily operations of Feet Plus and helped expand the business, he said in a 2019 deposition for the Health-Right case.

Burroughs later split with the other owners, resulting in Burroughs taking five Arkansas locations of the company and renaming them Prevention Plus. But that didn’t last long, and he closed the company. He then started doing pharmacy, medical equipment and consulting, “that kind of thing,” Burroughs said.

In 2011, he started Common Compounds Inc., a billing company for medications that doctors dispense in their offices to workers’ comp patients.

In 2015, he created EzPharmaRX, which sold pain patches and pain cream to doctors. The management team, location and employees of EzPharma were the same as CCI, according to the indictment. Both companies worked together to distribute pain relief medications to doctors and clinics and then helped those providers submit insurance claims, Health-Right said in its filing.

To encourage doctors to use its services, CCI sent them emails describing how they could make hundreds of thousands of dollars, the indictment said.

CCI said if the doctor entered a contract naming CCI as its billing agent for workers’ compensation claims, the doctor could then order manufactured compounds from CCI to prescribe to patients.

CCI would bill the doctors for the medications, but the payment would not be due for more than three months.

In the meantime, the physician would write a prescription and give the patient the medications in the doctor’s office.

“CCI bills and collects from Workers Comp and sends the physician 50% of what is collected,” according to CCI’s marketing material.

CCI said the clinic could on average “get $698 Net Profits per patient,” the indictment said. A profit forecast summary showed that by writing 200 scripts per month, a doctor’s organization could earn an annual profit of $732,000.

CCI said on its website that its business model was legal and not a violation of anti-kickback laws.

“All of our services work on behalf of the physician,” said the website, which was quoted in the indictment. “Therefore the physician is actually agreeing to pay us for the service we provide, not the reverse. We do not pay the physician for dispensing medications.”

But not all of the physicians CCI worked with had the proper dispensing licenses to prescribe the medications.

Between 2012 and 2017, the U.S. Department of Labor’s Office of Workers’ Compensation Programs paid CCI about $4 million for more than 5,400 claims, the indictment said.

In September 2017, Burroughs sold CCI and EzPharma to Health-Right. As part of the sale, Burroughs was to provide the companies with $263,400 in net working capital and agreed not to compete with Health-Right for five years, according to the filing by Ferro, Health-Right’s attorney. He also said the companies had not violated any federal laws.

“Between the date that Burroughs signed the agreement and the closing date, Burroughs set out on a scheme to swindle approximately $1 million more than he was due,” Ferro said. “Indeed, in just the four days before the closing, Burroughs raided the companies’ bank account to the tune of $727,000.”

Ferro also said that Burroughs didn’t disclose that CCI “had repeatedly violated federal laws and regulations by submitting false claims to the Department of Labor and over one hundred insurance companies,” Ferro said.

Ferro said CCI submitted bills totaling about $5 million to the U.S. Department of Labor and more than 100 insurance companies for prescriptions on behalf of doctors who CCI knew didn’t have the proper dispensing licenses.

And “almost immediately” after agreeing to sell CCI, Burroughs set out to form another company to compete with Health-Right in violation of his noncompete deal, Ferro’s court filing said.

In August 2018, Burroughs sued Health-Right in a Florida state court, alleging that the company and its owner still owed him money for the sale. Health-Right filed a counterclaim, accusing Borroughs of several misrepresentations and the net working capital shortfall.

During discovery, Health-Right asked Burroughs for emails in connection with the allegations. He turned over emails, but he “doctored several critical emails before producing them,” Ferro said.

‘I Plead the Fifth’

During a Sept. 24, 2020, deposition, Ferro asked Burroughs about the emails and asked if he had told the truth during the deposition. Burroughs said he had.

Then Ferro confronted Burroughs with the original emails.

“Where did this document come from?” Burroughs asked before seeking a short break. When he returned, he answered questions with “I plead the Fifth,” citing his Fifth Amendment right against self-incrimination.

“Burroughs’ misconduct was so egregious — and his fraud so obvious — that his counsel announced on the record that he would be immediately withdrawing as counsel for Burroughs,” Ferro’s filing said. After the transcript of the deposition was released, Burroughs made dozens of corrections to his statements.

“I lied because I didn’t want to confuse the real issues on this case which is Mr. Hopkins not paying what was agreed to be paid on the company,” Burroughs said. By then it was too late.

“Mr. Burroughs intentionally perjured himself at his deposition,” Judge Hanzman wrote. “Health-Right has established Mr. Burroughs’ fraud upon the Court by clear and convincing evidence.”

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