East Northport man sentenced to 12 years in prison for $600 million medical insurance scam

An East Northport man who pretended to be NBA point guard Marcus Smart, an NFL executive and others in order to perpetrate a $600 million medical insurance fraud scheme was sentenced to 12 years in federal prison Friday.

This was the second time Mathew James, 56, stood before U.S. District Court Judge Joanna Seybert to receive his punishment after a jury convicted him on July 14, 2022, of identity theft, wire fraud and health care fraud charges.

During a hearing last month in Central Islip federal court, the judge told James she intended to give him 10 years behind bars, but then upped the stretch to 12 years after prosecutors told her James could get out after only five years for good behavior.

James could have gotten as much as 25 years for the fraud, but the judge said she looked at a number of factors, including his lack of criminal history and strong community and family support, before sentencing him to half that time.

“He also stole a huge amount of money and he abused people to do that,” Seybert said.

The businessman impersonated thousands of people, prosecutors said, and made phone calls berating insurance companies to compel them to pay for treatments that were never provided.

“Those calls were inexcusable,” the judge said. “They were really horrible. To ruin people's reputations. To do all that for wealth is really something.”

Though James was found to have earned $63 million from his part in the crime, the judge ordered him to pay $337 million, as recommended by prosecutors to cover restitution and other sanctions.

“There's no prospect of recovering all these monies,” Seybert said, referring to the total $600 million in losses. “There's a need for deterrence. I have to protect the public from these types of crimes.”

James ran his business Leale Inc. out of his basement in East Northport, and, prosecutors say, inflated medical costs by billing patients for procedures different from those his doctor-clients performed. He also had doctors schedule elective surgeries through an emergency room so insurance companies would reimburse at a higher price, prosecutors said.

James impersonated Smart, who now plays for the Memphis Grizzlies, and Jeff Pash, the NFL’s general counsel, to demand payment from Cigna, Aetna and other companies.

In Pash’s case, prosecutors said James squeezed $35,628.30 out of Lenox Hill Hospital in Manhattan for stitches for the NFL executive’s wife after she cut her chin while jogging. Pash was never billed for the procedure, but in a recording played during the trial, James could be heard calling the hospital claiming to be the husband, swearing and yelling at a customer service representative to extract the insurance money.

James pocketed between 10% to 12% of the ill-gotten gains from thousands of similar phone calls, eventually netting $63 million for himself.

The rest of the fraud money went to doctors and others involved in the fraud, but his lawyer pointed out prosecutors did not go after them.

Smart, who was then playing for the Celtics, said being drawn into the scheme even through the impersonation had hurt his standing with fans.

The ballplayer told the court during testimony about the “damage to his reputation as a role model and how listening to the defendant impersonate him impacted his playing because his mother did not raise someone who would treat others as the defendant did.”

James’ lawyer Paul Krieger said his client had grown up struggling financially in India and then Germany, where his family moved, and worked his way up to earn his nursing degree and start his own business. He took care of his elderly parents and worked hard to raise two children with his wife. The lawyer also said his client struggled with alcohol dependency.

“These 'impersonation' recordings and communications — which were a small part of his work as a medical biller and an even smaller fraction of his lifetime of good deeds — are an aberration to who Mr. James is as a person,” Krieger wrote in his presentence report.

But prosecutors painted James’ long-running fraud as the American dream run amok.

“The defendant was convicted of carrying out an audacious scheme in which he used insurance companies to steal hundreds of millions of dollars, and his aggressive opportunism as an entrepreneur morphed into outright greed,” said Catherine Mirabile, an assistant U.S. attorney for the Eastern District of New York.

The feds said he continued with the scheme while out on bail awaiting his trial.

His defense lawyer’s protests about forfeiting $337 million of his client’s money shows how little contrition he has, according to the feds.

“These objections amount to a total denial of the crimes for which he was convicted — a position that the defendant unabashedly still promotes,” Mirabile said.

Ultimately, the scheme also cost insurance customers, the prosecutor said.

“The defendant’s orchestration of one of the largest health care fraud cases in this country significantly harmed the victim insurance companies — which, ultimately, passed along to the public in the form of higher premiums,” Mirabile said in court papers.