Skip to main content

Leader of $50 Million Health Care Fraud Conspiracy Targeting State Health Benefits Programs Pleads Guilty

Camden Northfield

CAMDEN, N.J. – An Atlantic County man today admitted to leading a conspiracy that defrauded New Jersey health benefits programs and other insurers out of more than $50 million, U.S. Attorney Craig Carpenito announced.

William Hickman, 44, of Northfield, New Jersey, pleaded guilty by videoconference before U.S. District Judge Robert B. Kugler to one count of conspiracy to commit health care fraud and wire fraud and one count of conspiracy to commit money laundering.

“Properly prescribed medicines can be a vital part of a patient’s treatment, but they can also be costly,” U.S. Attorney Carpenito said. “This defendant orchestrated an elaborate scheme to submit prescriptions for unnecessary compounded medications on behalf of patients who had never seen a doctor. He did so to steal millions of dollars from medical health benefits systems that were intended to help employees get the treatments they needed and deserved.”

“This defendant made millions of dollars by enlisting patients and exploiting their medical insurance plans at the expense of New Jersey taxpayers,” Acting FBI Special Agent in Charge Douglas Korneski, Newark Division, said. “The FBI is committed to bringing to justice any profiteer who pursues fraud as an occupation with public monies as their paycheck.”

Hickman was charged in March 2019, along with Brian Pugh, Thomas Schallus, John Sher, Thomas Sher, and Christopher Broccoli.

Charges remain pending against those defendants, and their trial is scheduled to commence on Sept. 21, 2020.

“When you visit a doctor, you expect him or her to evaluate your symptoms and prescribe medication to best treat your condition,” Michael Montanez, Special Agent in Charge, IRS Criminal Investigation, Newark Field Office, said. “Mr. Hickman, who is a salesman, not a doctor, recruited patients to have prescriptions filled, not to better the health of the patients, but rather to financially line his own pockets.”

According to documents filed in this case and statements made in court:

William Hickman was a sales representative for a pharmaceutical company. He created a side business called Boardwalk Medical LLC in his wife’s name to sell medical products for other companies, an activity that was prohibited by his employer.

As part of his side business, Hickman started persuading patients to receive compounded medications, which are specialty medications mixed by a pharmacist to meet the specific medical needs of an individual patient.

Hickman learned that certain insurance plans administered by an entity referred to in the indictment as the “Pharmacy Benefits Administrator” would reimburse thousands of dollars for a one-month supply of certain compounded medications – including pain, scar, antifungal, and libido creams, as well as vitamin combinations.

He also learned that many New Jersey state and local government and education employees, including teachers, firefighters, police officers, and state troopers, had this insurance coverage. The Pharmacy Benefits Administrator would pay prescription drug claims and then bill the State of New Jersey for the amounts paid.

Hickman marketed compounded medications for several pharmacies, including the Louisiana pharmacy identified in the indictment as “Compounding Pharmacy.” His initial work for Compounding Pharmacy was through an intermediary who paid Hickman a commission if patients he found received compounded medications covered by insurance.

In early 2015, however, Hickman struck his deal to be a master distributor for Compounding Pharmacy. Under his deal, Compounding Pharmacy agreed to pay Boardwalk Medical 40 percent or more of the insurance payments received for prescriptions obtained by Hickman and the recruiters working for him.

Hickman then created a network of conspirators to work under him to find patients, including Michael Sher and Matthew Tedesco (both of whom have pleaded guilty to conspiracy to commit health care fraud) and Pugh.

The conspirators working for Hickman found additional patient recruiters and brought them into the conspiracy: Pugh recruited Schallus, Tedesco recruited Broccoli, and Michael Sher recruited John Sher and Thomas Sher. Hickman agreed to pay the conspirators working under him a percentage of the insurance reimbursement that he received from Compounding Pharmacy, and they paid recruiters working under them.

Hickman told his recruiters to find New Jersey public employees and other people with insurance coverage administered by Pharmacy Benefits Administrator. He gave them blank Compounding Pharmacy prescription forms and told them which medicines had the highest insurance reimbursement and to check off 12 months of refills.

Hickman also told his recruiters that he had a doctor who would sign prescriptions without seeing the patients. Dr. John Gaffney, who has pleaded guilty to conspiracy to commit health care fraud, signed numerous prescriptions at Hickman’s request without seeing the patients or determining that they had a medical necessity for the specially compounded medications.

Based on the instructions he gave them, Hickman’s conspirators recruited New Jersey public employees and others to fraudulently obtain compounded medications from Compounding Pharmacy that the patients did not need, often without a doctor seeing the patients or determining if the medications were necessary. Hickman and the conspirators working for him paid individuals for receiving Compounding Pharmacy prescription medications.

If the patients did not see their own doctor, recruiters would give Hickman prescriptions that were completed except for the doctor’s signature, and Hickman would have Dr. Gaffney sign the prescription. The completed prescriptions were faxed to Compounding Pharmacy, which filled the prescriptions and billed the Pharmacy Benefits Administrator.

Compounding Pharmacy paid Boardwalk Medical for each Hickman prescription filled and paid by Pharmacy Benefits Administrator. Pharmacy Benefits Administrator paid Compounding Pharmacy over $50 million for compounded medications, and Compounding Pharmacy paid William Hickman over $26 million for prescriptions obtained by Hickman and his conspirators.

Hickman paid a portion of that amount to his recruiters, and they paid the recruiters under them. Hickman admitted paying Pugh approximately $435,000 in criminal proceeds over five months. Those payments provided the basis for the money laundering conspiracy charge to which Hickman pleaded guilty.

The health care fraud and wire fraud conspiracy counts to which William Hickman pleaded guilty carries a maximum potential penalty of 20 years in prison and a $250,000 fine or twice the gain or loss from the offense. The money laundering conspiracy charge carries a maximum potential penalty of 10 years in prison and a $250,000 fine or twice the value of the property involved in the transaction.

In his plea agreement, William Hickman agreed to pay restitution of $53,037,639 and to the entry of a forfeiture money judgment for $26,241,327. Hickman also agreed to forfeit specific property obtained with criminal proceeds, including five investment accounts and four real estate parcels.

Sentencing for William Hickman is scheduled for Nov. 6, 2020.

1,000