Insurance Executives Sentenced to 20 Years for $233 Million ACA Enrollment Fraud Scheme

Insurance Executives Sentenced to 20 Years for $233 Million ACA Enrollment Fraud Scheme

On February 18, the US Department of Justice (DOJ) announced that two insurance industry executives — the president of an insurance brokerage firm and the CEO of a marketing company — were each sentenced to 20 years in federal prison for orchestrating a multi-year scheme that defrauded the Affordable Care Act (ACA) program of approximately $233 million. According to the government, the defendants, Cory Lloyd and Steven Strong, conspired to improperly enroll tens of thousands of low-income individuals — including those experiencing homelessness, addiction, and mental health challenges — into fully subsidized ACA health care insurance plans in exchange for millions of dollars in commission payments from insurance carriers. The scheme allegedly caused the federal government to pay out at least $180 million in fraudulent subsidies. 

The government alleged that the defendants utilized “street marketers” who, in some instances, offered bribes to induce vulnerable individuals to enroll in health plans for which they did not qualify. According to court documents, the defendants employed deceptive sales tactics and misleading scripts to encourage consumers to falsely represent that they would earn sufficient income to meet ACA subsidy requirements. The government further alleged that the defendants deliberately circumvented federal income verification measures and submitted fraudulent Medicaid applications designed to be denied, thereby enabling year-round enrollment outside the standard open enrollment period and maximizing commission revenue. 

Both defendants were convicted in November 2025 on charges including conspiracy to commit wire fraud, wire fraud, and conspiracy to defraud the United States. In addition to their 20-year sentences, the defendants were ordered to pay $180.6 million in restitution. 

The case is United States v. Lloyd et al., No. 25-cr-80016 (S.D. Fla). Read the DOJ’s press release here.

Former US Coal Executive Found Guilty of Authorizing Foreign Bribes 

On February 18, a Pennsylvania federal jury found Charles Hunter Hobson, a former vice president at Corsa Coal Corp., guilty of multiple felony counts stemming from his role in a bribery scheme targeting an arm of the Egyptian government. The charges included two counts of violating the Foreign Corrupt Practices Act (FCPA), conspiracy to violate the FCPA, money laundering, conspiracy to commit money laundering, and conspiracy to commit wire fraud. 

Prosecutors alleged that Hobson knew his agent in Egypt was passing along portions of the agent’s commissions as bribes to officials at Al Nasr Co. for Coke and Chemicals, an Egyptian government-affiliated entity. In exchange for the bribes, Corsa Coal was awarded approximately $143 million in contracts between 2016 and 2018. Hobson allegedly received more than $200,000 in personal kickbacks. The case was initially paused after President Trump signed an executive order calling for a review of existing FCPA cases. After the case resumed, prosecutors leaned on testimony from Hobson’s successor, who pleaded guilty to similar charges and agreed to cooperate, and dozens of messages between Hobson and his agent discussing commissions and payments. 

Hobson is scheduled to be sentenced on June 25. The case is United States v. Hobson, No. 2:22-cr-00086 (W.D. Pa).

Medical Device Company Agrees to Non-Prosecution Agreement Over Health Care and Securities Fraud

On February 17, the US Attorney’s Office (USAO) for the District of Rhode Island announced that Zynex, Inc., a Colorado-based medical device company, agreed to enter into a non-prosecution agreement (NPA) and admit to participating in a conspiracy to commit health care fraud, securities fraud, mail fraud, and other violations. 

Zynex admitted that, from 2017 through August 2023, at the direction of its prior executives, it routinely shipped excessive and unnecessary medical supplies to patients and submitted claims for those supplies to government and private health care payors and patients. This scheme allowed Zynex to collect more than $873 million for its products, including more than $600 million for supplies, and more than $273 million for its devices. Zynex also admitted that it misled investors by concealing that its revenues were driven by fraudulent billing practices and by making other misleading statements. Former CEO Thomas Sandgaard and former COO Anna Lucsok were previously indicted for related conduct. 

Under the agreement, which is subject to approval of the bankruptcy court in Zynex’s ongoing Chapter 11 proceedings, the company will pay between $5 and $12.5 million depending on earnings and profit over the agreement period and will forfeit all unpaid claims submitted prior to September 1, 2025. The forfeiture will include the more than $85 million billed to TRICARE during a suspension period and more than $13 million billed to other payors and patients. As part of the resolution, Zynex agreed to implement enhanced compliance and corporate governance reforms and to fully cooperate with the government’s continuing investigations. The NPA notes that Zynex did not voluntarily disclose the criminal conduct to which Zynex admits, but that Zynex was credited for its cooperation with the government’s investigation. 

Read the USAO for the District of Rhode Island’s press release here.

Texas Federal Court Dismisses Kickback Scheme Indictment Against Physicians and Pharmacists

On February 13, US District Judge Karen Gren Scholer dismissed an indictment against multiple physicians and pharmacists accused of operating a patient referral-for-kickback scheme, after the government moved to dismiss the case as legally flawed. The government alleged that pharmacies paid doctors kickbacks in exchange for directing expensive prescriptions to specific pharmacies.

According to the original indictment, several pharmacies identified profitable prescriptions, recruited physicians to write them, and then shared the profits with those doctors. The pharmacies allegedly used various business arrangements to conceal the kickback payments, including granting doctors ownership interests in specific pharmacies for nominal fees. The government filed a superseding indictment after the original indictment presented a duplicity problem — potentially referring to two different conspiracies. Defense counsel then moved to dismiss the superseding indictment arguing that the statute of limitations had expired, because the original indictment did not toll the limitations. One week later, the government moved to dismiss the charges “in the interests of justice.” Judge Scholer granted the government’s motion that same day. 

The case is United States v. Mortazavi et al., No. 3:24-cr-00049 (N.D. Tex.). 

Former Sales Director Sentenced to Eight Months for Anti-Kickback Scheme

On February 13, James Rausch, a former sales director for the Northeast region of a mobile medical diagnostics company, was sentenced to eight months in prison and ordered to pay over $17.5 million in restitution for conspiring to violate the federal Anti-Kickback Statute (AKS). According to the government, Rausch and his co-conspirators entered into kickback agreements with various doctors between March 2015 and at least September 2020, offering and paying doctors cash and checks based on the number of transcranial doppler (TCD) brain scans the doctors ordered. The co-conspirators allegedly concealed the illegal payments through sham rental and administrative service agreements that made it appear doctors were compensated based on fair market value rather than the volume or value of referrals. The scheme resulted in fraudulent bills of approximately $70.6 million to Medicare, of which Medicare paid approximately $27.2 million to the TCD company.

Rausch pleaded guilty in May 2025 to one count of conspiracy to violate the AKS. In addition to eight months in prison, he was sentenced to one year of supervised release and ordered to pay $17,573,642 in restitution, forfeiture of $408,437, and a $20,000 fine. 

The case is United States v. Rausch, No. 1:25-cr-10189 (D. Mass.). Read the DOJ’s press release here.

Asphalt Companies Pay $30 Million to Settle FCA Allegations Over Fraudulent Test Results

On February 11, the USAO for the Southern District of Ohio announced that Kokosing Materials, Inc. and Barrett Paving Materials, Inc. agreed to pay a combined $30 million to resolve allegations that they violated the False Claims Act (FCA) in connection with federally funded projects in Ohio. 

Ohio regulations require that, before beginning work on federally funded projects, asphalt companies conduct mix design testing of their mixtures, which is known as Job Mix Formulas, and submit the test results to the Ohio Department of Transportation (ODOT) for approval. Companies must also conduct regular quality control tests as asphalt is being laid on Ohio roadways. The settlements resolve allegations that, rather than performing these required mix design tests, the companies repeatedly submitted results to ODOT containing data copied from prior tests and submitted false quality control test results. Specifically, Kokosing resolved allegations that it submitted false or fraudulent asphalt test results from 2012 through 2024. Barrett resolved allegations for similar conduct that took place from 2013 through 2025. 

Read the USAO for the Southern District of Ohio’s press release here.

The claims resolved by the settlements are allegations only, and there has been no determination of liability.