Penal Code 550



California Penal Code Section 550 allows almost any conduct to be deemed felony billing fraud.   Honest medical doctors can be charged with this crime when they don’t effectively police their own patients or make referrals for testing, physical therapy or other outside services to dishonest practitioners.  We have seen this statute as a catch all so that physicians, attorneys and chiropractors are charged with a crime when they have a financial dispute with an insurance company.  The Horowitz office tis truly expert in defending these State of California Insurance Fraud cases.

Penal Code section 550 walks a line where gross or continued mistakes can be deemed fraudulent.   “Willful blindness” can be deemed “criminal intent”.   For example, if  a doctor makes a referral of a patient for testing at a facility that routinely overcharges,  the physician could be guilty of fraud.    This is particularly dangerous when the doctor gets reports from that entity and bills for reviewing the reports or gets referrals from that entity or facility.   If you are an orthopedist and you refer a patient to a physical therapist who routinely upcodes, the “negligent” referral label may be attached and your overall relationship with that entity will be under scrutiny.

With 100% legitimacy you may argue that “they are expensive but they are the best”.  However, that type of defense is often an after arrest assertion and does NOT lead to the dismissal of charges at the early stages.  It is ultimately a TRIAL defense which may lead (eventually) to dismissal or may need to be asserted at trial.

Stark Violations & Other Physician Self Referral Charges

Stark violations and other self-referral criminal charges against physicians are easier to see (in advance).

For example, Urology groups that prescribe catheters and then fulfill the orders themselves via unrelated third parties are at risk.  Fancy “medical lawyers” will fashion medical DME groups that on the surface survive scrutiny but in our view, mostly fail when objectively analyzed.  If you undertake a DME  project, you should weigh the benefits ($) vs. the risks (your license).  As lawyers for doctors for over 40 years, we have seen almost any ancillary service be challenged and deemed criminal.  In most cases the practice attorneys have structured the referral process and ownership structure to avoid legal problems.  But in grey areas where there is a criminal investigation pending against a medical group, our experts can help.


Locums companies are now referring files to MD’s for DME or Genetic Testing review.   The files are often partial and the genuine need for the devices or testing, dubious.  They pay $ 10-$20 per file.  The companies that hire the locums referrer are often fly by night marketing firms.  There is a major federal push to prosecute these companies and the physicians who review the files.  The pivotal question is often this, “Doctor, did you really think that an 85 year old patient needed a genetic test because her cousin had breast cancer 20 years ago?”   Or, weren’t you concerned that the same patient needed 4 DME devices ?”   “Did you ever call a patient?”   “Did you wonder why the treating doctor didn’t make the assessment ?”  “Do they have a PCP ?”

Physician Insurance Fraud Charges

To prove Insurance Fraud in California under Penal Code section 550   the prosecution has to establish knowledge by the defendant doctor. The knowledge element requires at least some understanding that the conduct that the doctor engaged in was wrong.  But “wrong” is defined as any conduct leading to an unwarranted insurance claim.  Think about the number of disagreements the average physician has with insurance companies over appropriate treatment.  If a physician engages in a PATTERN of TREATMENT that conflicts with established insurance reimbursement policies the PROFIT MOTIVE in that medical choice will (often) be scrutinized.    If the published literature does not strongly support a treatment choice, a fraud investigation is possible.

 Insurance Fraud requires a Criminal Mental State

The mental state element  for Worker’s Compensation fraud (which is a subset of Insurance Fraud) is that the person made the claim or presented some documentation separate from the insurance claim itself with the intention of supporting a false claim. See: People v. Scofield (1971) 17 Cal.App.3d 1018, 1025–1026

This means that medical records, a report, a document taking a person off work for a month, an inaccurate bill – can all support an insurance fraud claim. This is true even if the documents are sent to an attorney for an injured person rather than to the insurance company itself.   In a recent case a doctor certified a patient as disabled.  When the patient appeared to be more physically able than the doctor realized, both the patient and doctor were charged with insurance fraud and worker’s compensation fraud.  (We represented the doctor and charges were dismissed as he did not have a “culpable mental state”.  In other words, the doctor did not commit fraud.  However, fraud charges expose the innocent medical doctor to millions of dollars in fines and penalties.  (Read U.S. government Press Release Here)

The cases are often hard to understand in terms of what is being charged. A count of insurance fraud might have a date range of many years. If that is the case, the defense should ask the court to instruct the jury that there must either be one, unbroken and continuing course of conduct or they must unanimously agree on at least one single wrongful act. (See People v. Dieguez (2001) 89 Cal.App.4th 266, 274–275 In other words, there might have been thousands of documents submitted to an insurance company but the jury has to find one document that was fraudulent, transmitted for the purpose of promoting a fraud and that this transmission was done by the defendant (or someone working with the defendant) and on purpose.

The prosecution usually focuses on the physician/chiropractor but staff are often drawn in on a conspiracy theory. Pressure is then applied to staff by law enforcement. “Cooperate against the doctor” and no charges will be filed.

The physician/chiropractor who is charged may escape liability by providing information against other medical practitioners. In those cases a corporation plea is often negotiated. This means that the medical corporation pleads guilty and pays a huge fine but the practitioner him/her self gets off.

We endorse the website ADJUSTER.COM as a good source of up to date information on the universe of insurance fraud and worker’s compensation fraud prosecutions.

Pharmacy Law



Our pharmacy defense lawyers work with the California State Board of Pharmacy to negotiate and resolve pharmacist complaints for relatively minor issues such as record keeping, storage and staffing.  More serious issues involving controlled substances (e.g. ephedrine, opioids) receive expert review and top legal representation.   One of the current hot button issues in pharmacy license law is discussed below.


Pain creams prescribed by physicians and fulfilled by third party pharmacies – the focus of major fraud investigations.

Skin remedies with a mix of barely tested ingredients – the focus of major fraud investigations.

Pharmacist license defense dovetails with physician defense as often the compounding pharmacy and the prescribing physicians are targeted.

Physicians are being prosecuted for dealings with compounding pharmacies. Consider the recent Orange County prosecution of  Tanya Moreland King and Christopher King, who owned the medical-billing and medical-management companies Monarch Medical Group, King Medical Management and One Source Laboratories.  The OCDA claimed that they billed for non-FDA approved creams and other products.

Doctors had agreements where the King’s would pay the doctors each time they prescribed a  cream or medication. The doctors were accused of hiding kickbacks by falsely labeling the payment kickbacks as “marketing expenses.”

Here’s how it works.

Take a $ 10 tube of a high quality topical antibiotic and mix it with your dog’s heartworm medicine and like magic you have a creme that is not available from a pharmaceutical company. The ingredients individually are indicated (although not FDA approved) for the treatment of certain skin conditions. The cost is low, perhaps $ 20 per month and if it works, that is bargain. Imagine that instead of buying the ingredients separately, they were custom mixed in a creme so that you don’t need to use two separate tubes but instead it is “all in one”.

That is the job of a compounding pharmacy and that function is both legal and ethical.

What if your doctor sells you the tube for $ 100 and bills your insurance company ? What if your doctor then gets $ 50 per tube profit making the sale ?  What if your doctor fully discloses this profit to you and to the insurance company?  But ask this question, even with disclosure is the prescription itself – the choice of treatment, truly the best for you?

There are many other issues to think about. First, drugs from a compound pharmacy may be individually FDA approved (or not) but their combination and the claims of effectiveness are usually not extensively tested through a rigorous FDA approval process. Of course neither are many over the counter remedies so this alone does not mean there is anything wrong. However, you have to trust the pharmacy to maintain rigorous standards of cleanliness and proper handling and mixing. This is something that even large pharma companies can fail with and smaller, compounding pharmacies have also at times provided tainted products. In 2017 pharmacist Barry Cadden, co-founder of the defunct New England Compounding Center, received a nine year prison sentence after 76 people died from meningitis after receiving contaminated injections of medical steroids prepared by his pharmacy.

A pharmacy license defense or physician defense attorney knows one reality.  If two are prosecuted, one is likely to point the finger at the other.  This can lead to an unfair result as the “big fish” gets away by cooperating with law enforcement and the “little fish” get caught and eaten.  Our California Pharmacy lawyers and Medical Defense Lawyers can also work together in the instance where a “stick together, we are both honest” defense is being pursued.

It is the job of the State Pharmacy Board to ensure that the compounding pharmacy that you use is clean and professional. The California State Pharmacy Board (California State Board of Pharmacy)  has an website that includes current and past accusations against Pharmacies.  (However it is a bit cumbersome as you must find a name in their accusation page and then look up the profile.  The short version is that compounding, opioid issues, bad storage and bad record keeping are key pharmacy license issues.

You can view that here  (July 2018 Accusations against Pharmacies filed by the Board) The Board has to ensure that a pharmacy complies with Section 503A of the Food Drug & Cosmetic Act and the Pharmacy Board’s own rules and regulations.

The scenario of the doctor prescribing a compounded drug and profiting on the sale invokes several potential criminal acts. The Anti Kickback Statute (AKS) prohibits a pharmaceutical company from providing anything value in exchange for an MD writing a prescription. Many big pharma companies publish specific rules about this.

Here as an example is what the Bayer company has on their website:


Bayer HealthCare LLC (“Bayer”) shall not offer or pay to any person “remuneration” or anything of value intended to induce, influence, encourage or reward that person’s order, referral, use, prescription or recommendation of a Bayer product. Where reasonably possible and practical, Bayer will attempt to structure arrangements with potential sources of sales or referrals in a manner that complies with an applicable regulatory “safe harbors.”

Bayer policy prohibits employees from offering anything of value – (for example, fee-for-service agreements, data purchases, educational grants, clinical research support, charitable contributions, business meals or educational items) – to a healthcare professional or other person (1) to encourage such person to prescribe, purchase, order, refer, use or recommend Bayer products, or (2) as a price term or in lieu of price discounts. Accordingly, Bayer has established the following policies and procedures consistent with the Anti-Kickback Statute, as well as its regulatory safe harbors, governmental guidance documents, and voluntary industry standards, such as the PhRMA Code on Interactions with Healthcare Professionals and the AdvaMed Code of Ethics on Interactions with Healthcare Professionals.

Now in the example in this article, the compounding pharmacy will say that it has no control over what the physician charges for the drug and that it simply provides a tube at $ 50 to the MD. The markup and profit disclosures are the responsibility of the doctor.

This is often a defense used in compounding pharmacy cases where criminal charges have been filed. However, many compounding pharmacies (and other pharmacies) will establish a relationship with the patient and mail the drugs on a regular, subscription basis. The pharmacy then sends checks to the MD for each tube sold. In that instance it is difficult for the pharmacy to claim that it is not kicking back money to the MD.

31 U.S.C. § 3729(a) is the False Claims Act and there are civil reimbursement lawsuits available under that statute.

Dan Russo


Dan Russo experienced jury trial attorney and criminal defense specialist featured at his law office in Vallejo california pink shirt and tie with law books from his vallejo office behind him.

Criminal Defense Specialist Dan Russo



Dan Russo is a trial lawyer extraordinaire !  Dan Russo been lead counsel has over 200 jury trials. 

Dan Russo is a Criminal Defense Specialist, certified by the State Bar of California Board of Legal Specialization for over 30 years.   Dan Russo has been a law school associate professor and a chapter reviewer for the leading criminal defense “bible” in California.

Physicians facing medical board accusations or medical-criminal investigations (e.g. medical fraud, Stark law violations) trust Daniel Russo to provide a defense that is well planned, forward thinking and aggressively applied.

Lawyers in Lafayette

Dan Russo works with a team of separate but affiliated lawyers at Lawyers in Lafayette.  Dan staffs each case with a custom team that is specifically designed to meet your needs.   If you have a business issue she has a paralegal with a high quality MBA.  If you have international issues, Daniel Horowitz has litigated cases throughout the world (including Ukraine, Israel, Cyprus, Canada, The Netherlands).

The team has two real estate brokers and two former top District Attorneys.   Whatever the issues are in your case, Carmela can lead a team that understands the issues and your concerns.

When Dan Russo takes your case you can be certain that the opposition knows that he will never back down from what is right.  With Lawyers in Lafayette on his team, Dan Russo has the advantage of incredible depth and experience to support his exceptional advocacy.

Trial Lawyer for Civil & Criminal Cases e, Call Dan Russo  (707) 644-4004

Dan Russo at press conference on high profile kidnap case

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