Sentencing of LI medical biller in $600 million health care scheme put off
Mathew James, right, arrives at federal court in Central Islip on Tuesday for sentencing after being convicted of operating a multi-million dollar health insurance fraud scheme. Credit: James Carbone
A federal judge took the unusual step of adjourning a sentencing more than four hours into the proceeding Tuesday after a defense attorney objected to her adding two years to the sentence she proposed for an East Northport man accused of defrauding insurance companies out of more than $600 million.
U.S. District Court Judge Joanna Seybert said she changed the sentence she intended to give Mathew James from 10 years to 12 after being reminded by prosecutors that the 56-year-old medical biller may be eligible for a federal program that would allow for a sentence reduction if given 10 years.
Defense attorney Paul Krieger, who made a litany of objections to the prosecution's sentencing memo, told the judge adding two years onto a sentence would change his client’s ability to qualify for certain programs and housing.
“I’m confused and disconcerted by this,” Krieger told Seybert. “Two years of a man’s life seems too important.”
The judge agreed, adjourning the sentencing to Jan. 31 to further research the issue.
“The matter is too important to skip over,” Seybert told the crowded courtroom, which included more than two dozen of James’ friends and family members. “I was intending to give him 10 years, but that was based on the court’s misunderstanding of the ability of the defendant to engage in programs.”
James, who operated the medical billing company Leale Inc. out of the basement of his East Northport home for more than six years, was convicted by a jury in July 2022 of health care fraud, wire fraud and identity theft scheme. A jury found James billed patients for a series of more expensive procedures different from those his doctor-clients performed and had the patients schedule elective surgeries through an emergency room so insurance companies reimbursed at a higher price, prosecutors said.
When insurance companies denied reimbursement, James posed as patients, including a top NFL executive and NBA star, and demanded the companies pay the balance, which was tens or hundreds of thousands of dollars in each instance, prosecutors said at trial. James then pocketed from 10% to 12% of the proceeds as part of his business practice, netting nearly $63 million, prosecutors said.
The scheme ran for about six years before James was indicted in 2019, prosecutors said, and James used the ill-gotten gains to buy and renovate properties on Long Island, as well as to purchase a red Ferrari and lease multiple Porsches.
“There’s a reason why we don’t have medical billers across this country sitting in the basements of their homes, making more than $63 million off medical billing,” said Assistant U.S. Attorney Catherine Mirabile, who is seeking a prison sentence of 25 years. “When something’s too good to be true, it probably is, because it’s fraud.”
Mirabile played for the judge excerpts of recordings played at trial that showed James berating insurance company customer service representatives while pretending to be patients. In other recordings, he sexually harassed female insurance company representatives who called him to question his billing practices, saying he wouldn’t answer their questions unless they were willing to sleep with him.
The prosecutor said James also paid meager wages to female employees who worked for him and were trained to impersonate female patients.
Patients James impersonated include NFL executive Jeff Pash and Memphis Grizzlies guard Marcus Smart, both of whom testified at trial.
Mirabile said Smart testified that the embarrassment of learning how James treated insurance company employees while pretending to be him shamed him and impacted his performance on the court.
In presentencing reports, officials with the U.S. Department of Probation said James’ “aggressive opportunism as an entrepreneur morphed into outright greed.”
Mirabile called it ' “one of the largest health care fraud cases in this country.”
Krieger, who argued for a mandatory minimum sentence of two years, questioned how prosecutors could categorize it as such a massive fraud without ever charging any of the approximately 150 doctors alleged to have participated in the scheme.
Dan Lyons, in-house counsel with Aetna, testified at the sentencing hearing that the biggest victim in the case was self-funded plan sponsors. He explained that one small California pest control company had to pay $56,000 to cover what should have been a $1,000 claim filed by one of its employees.
Brittany Fritz, a fraud investigator with Cigna, said James once told a customer service representative at her company who questioned his practices that “I can do whatever I want.”
With his wife and two children watching, James apologized for his conduct Tuesday.
“I know my approach was deeply flawed … and misguided,” James said. “I lost my way and I’m still dealing with the consequences.”
Seybert said she will also decide on restitution when the sentencing concludes next week.
CORRECTION: : Manhattan defense attorney Paul Krieger’s last name was misspelled in an earlier version of this story.
A federal judge took the unusual step of adjourning a sentencing more than four hours into the proceeding Tuesday after a defense attorney objected to her adding two years to the sentence she proposed for an East Northport man accused of defrauding insurance companies out of more than $600 million.
U.S. District Court Judge Joanna Seybert said she changed the sentence she intended to give Mathew James from 10 years to 12 after being reminded by prosecutors that the 56-year-old medical biller may be eligible for a federal program that would allow for a sentence reduction if given 10 years.
Defense attorney Paul Krieger, who made a litany of objections to the prosecution's sentencing memo, told the judge adding two years onto a sentence would change his client’s ability to qualify for certain programs and housing.
“I’m confused and disconcerted by this,” Krieger told Seybert. “Two years of a man’s life seems too important.”
WHAT TO KNOW
- The sentencing of Mathew James, 56, of East Northport was adjourned to Jan. 31 after a defense attorney questioned a judge's decision to change the sentence she intended to issue from 10 years to 12.
- U.S. District Court Judge Joanna Seybert said she had added the time after learning he may be eligible for an early release program. James' defense attorney said the decision would also impact other aspects of his incarceration, causing the judge to reconsider.
- The operator of a medical billing company, James was convicted in 2022 in a $600 million health insurance fraud. A jury found he billed patients for more expensive procedures different from those his doctor-clients performed and impersonated patients, including an NBA star and NFL executive, in phone calls to insurance companies.
The judge agreed, adjourning the sentencing to Jan. 31 to further research the issue.
“The matter is too important to skip over,” Seybert told the crowded courtroom, which included more than two dozen of James’ friends and family members. “I was intending to give him 10 years, but that was based on the court’s misunderstanding of the ability of the defendant to engage in programs.”
James, who operated the medical billing company Leale Inc. out of the basement of his East Northport home for more than six years, was convicted by a jury in July 2022 of health care fraud, wire fraud and identity theft scheme. A jury found James billed patients for a series of more expensive procedures different from those his doctor-clients performed and had the patients schedule elective surgeries through an emergency room so insurance companies reimbursed at a higher price, prosecutors said.
When insurance companies denied reimbursement, James posed as patients, including a top NFL executive and NBA star, and demanded the companies pay the balance, which was tens or hundreds of thousands of dollars in each instance, prosecutors said at trial. James then pocketed from 10% to 12% of the proceeds as part of his business practice, netting nearly $63 million, prosecutors said.
The scheme ran for about six years before James was indicted in 2019, prosecutors said, and James used the ill-gotten gains to buy and renovate properties on Long Island, as well as to purchase a red Ferrari and lease multiple Porsches.
“There’s a reason why we don’t have medical billers across this country sitting in the basements of their homes, making more than $63 million off medical billing,” said Assistant U.S. Attorney Catherine Mirabile, who is seeking a prison sentence of 25 years. “When something’s too good to be true, it probably is, because it’s fraud.”
Mirabile played for the judge excerpts of recordings played at trial that showed James berating insurance company customer service representatives while pretending to be patients. In other recordings, he sexually harassed female insurance company representatives who called him to question his billing practices, saying he wouldn’t answer their questions unless they were willing to sleep with him.
The prosecutor said James also paid meager wages to female employees who worked for him and were trained to impersonate female patients.
Patients James impersonated include NFL executive Jeff Pash and Memphis Grizzlies guard Marcus Smart, both of whom testified at trial.
Mirabile said Smart testified that the embarrassment of learning how James treated insurance company employees while pretending to be him shamed him and impacted his performance on the court.
In presentencing reports, officials with the U.S. Department of Probation said James’ “aggressive opportunism as an entrepreneur morphed into outright greed.”
Mirabile called it ' “one of the largest health care fraud cases in this country.”
Krieger, who argued for a mandatory minimum sentence of two years, questioned how prosecutors could categorize it as such a massive fraud without ever charging any of the approximately 150 doctors alleged to have participated in the scheme.
Dan Lyons, in-house counsel with Aetna, testified at the sentencing hearing that the biggest victim in the case was self-funded plan sponsors. He explained that one small California pest control company had to pay $56,000 to cover what should have been a $1,000 claim filed by one of its employees.
Brittany Fritz, a fraud investigator with Cigna, said James once told a customer service representative at her company who questioned his practices that “I can do whatever I want.”
With his wife and two children watching, James apologized for his conduct Tuesday.
“I know my approach was deeply flawed … and misguided,” James said. “I lost my way and I’m still dealing with the consequences.”
Seybert said she will also decide on restitution when the sentencing concludes next week.
CORRECTION: : Manhattan defense attorney Paul Krieger’s last name was misspelled in an earlier version of this story.
Grant Parpan covers Suffolk County courts and federal courts for Newsday. A Long Island native, he joined Newsday in 2022.
Doctor sentenced in child porn case ... Ed Kranepool, Mets Hall of Famer, dies at 79 ... West Nile virus case ... School bus cameras
Doctor sentenced in child porn case ... Ed Kranepool, Mets Hall of Famer, dies at 79 ... West Nile virus case ... School bus cameras
