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Case 7:18-cr-00625-KMK Document 50 Filed 05/13/20 Page 1 of 31

U.S. Department of Justice

United States Attorney


Southern District of New York

United States District Courthouse


300 Quarropas Street
White Plains, New York 10601

May 4, 2020

The Honorable Kenneth M. Karas


United States Courthouse
Southern District of New York
300 Quarropas Street
White Plains, NY 10601

Re: United States v. Spina,


18 Cr. 625 (KMK)

Dear Judge Karas:

The Government respectfully submits this memorandum in connection with the sentencing
of James Spina, the defendant. For the reasons set forth below, the Government submits that a
sentence of 120 months’ imprisonment–the applicable Sentencing Guidelines range–would be
sufficient but not greater than necessary to achieve the aims of sentencing.

BACKGROUND

I. Offense Conduct

From in or about 2011 through in or about 2017, Dolson Avenue Medical (the “Practice”
or “DAM”) provided a variety of pain management and rehabilitation services, including
physical medicine and rehabilitation, chiropractic services, physical therapy, diagnostic testing,
and acupuncture. The Practice primarily provided treatment services from its clinic located at
201 Dolson Avenue, Middletown, New York. The Practice’s billing office was located down the
street, at 41-45 Dolson Avenue.

In addition to DAM, at least nine other corporations billed from the 201 Dolson Avenue
location during the relevant time period. 1 Those other corporations are: Middletown
Chiropractic, d/b/a “ChiroCare”; Catskill Medical Care PC, d/b/a “Middletown Physical Therapy
and Pain Management”; Middletown Physical Medicine & Rehabilitation, PC; Middletown
Physical Therapy, PC, d/b/a “Physical Therapy of Orange County”; Physical Medicine and
Diagnostic; Mid Hudson Acupuncture, PC; Advanced Oxy-Med Services; Orange County
Neurology, PC; and Hudson Valley Chiropractic (collectively referred to as the Practice’s
1
The different corporations used variations of the 201 Dolson Avenue address by, for example,
adding a suite number, or, in some instances, they used an adjacent address like 203 Dolson
Avenue. Each of the above listed corporations, however, provided treatment from 201 Dolson
Avenue.
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the associated businesses); Ex. 5 (email from Grossman to Jay Spina discussing plans to “lease”
employees from DAM to Dr. s corporation); Ex. 6 at p.9 (transcript of recording in which Dr.
states, in substance and in part, he does not know how many employees are billed under his
corporation). Further, Jay and Jeff Spina were the financial beneficiaries of the Practice and its
associated businesses.

Jay and Jeff Spina, however, went to great lengths to conceal their control and ownership
of DAM and the associated businesses. In particular, Jay and Jeff Spina recruited medical doctors
and other professionals to serve as the nominal owners of DAM and the associated businesses,
when in reality, Jay and Jeff Spina, both doctors of chiropractic, were the true owners and operators
of DAM and the associated businesses. See, e.g., Ex. 7 (12/2/12 email from Grossman regarding
setting up a new medical corporation). For example, in or about June 2017, Dr. ,a
medical doctor whom the Spinas had used as a nominal owner of DAM and Catskill Medical, died.
Notwithstanding that had been ill for months and the Spinas had been discussing plans for
what to do when he retired or passed away, at the time Dr. passed away, he was still the
listed owner of both medical corporations. See Ex. 8 (6/16/17 email from Jay Spina to Dr.
discussing setting up a new corporation to take over physical therapy billing once Dr. , the
nominal owner of the physical therapy corporation and who was then ill, passed away); Ex. 9
(emails from Jay Spina to billing staff discussing setting up a new medical corporation for when/if
Dr. retires or dies). Following his death, Jay and Jeff Spina panicked. In a June 29, 2017
email from Jeff Spina to Jay Spina and Grossman, Jeff wrote:

I DON’T WANT TO BE IN FEAR, BUT I DO WANT TO LOOK FROM THE


FAMILIES VIEWPOINT . . . TO THEM THE OFFICE IS AN ASSET. . . LET’S
PROTECT OURSELVES SO WE CAN SURVIVE . . .BOOKKEEPING
SHOULD BE DONE FROM THE VIEWPOINT OF SOMEONE ELSE
LOOKING AT THINGS[.] WATCH WHAT GOES INTO THE ACCOUNTS[.]
NO MORE PRODUCTION IN HIS CORP. . . . MAKE IT OWE MONEY
INSTEAD OF SHOWING A PROFIT . . .

Ex. 10 (all capitals in original); see also Ex. 11 (6/28/17 email from Jeff Spina to Jay and Grossman
explaining that, in light of ’s death, they need to decrease services and monies in each corp.
and warning them to “BEWARE AND PREPARE NOW”).

Ultimately, to continue billing Insurance Providers after ’s death, Jay and Jeff Spina,
along with Grossman, concocted a scheme to fraudulently transfer the medical businesses in
name to Dr. Charles Bagley, another medical doctor who would act as a nominee.
Specifically, they used blank stock transfer forms, backdated to sometime in late 2016, when
had reduced his hours and became ill, and forged ’s signature onto the forms as the
seller, to give the false appearance that had previously transferred the stock to Bagley before
he died. Grossman then sent the fraudulent documents to daughter, thus enabling Jeff
and Jay Spina to retain control over all of the funds in the corporate bank accounts and to continue
billing under those corporations as well. See Ex. 12 (email from Grossman to Jay Spina asking
him “to think about what you are asking me to do. . . .To notarize something a year later, is a
crime.”); Ex. 13 (7/26/17 email from Grossman to Jay Spina attaching documents sent to ’s
daughter and noting that the transfer forms do not, in fact, require a notary); Ex. 14 (7/26/17 email

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and the associated businesses by transferring revenues of these companies into other companies
they owned. To further disguise these transfers, the Spinas drafted phony lease and marketing
agreements between DAM and the associated businesses and purported real estate and marketing
companies they owned -- including JJMJ Realty, Roswell Realty, and Effective Marketing -- and
referred to the payments as “rent” or “marketing fees.” In a July 2013 email from Grossman to
Jay Spina, Grossman wrote:

I know you dont[sic] want anything to have Jay Spina on it. Effective Marketing
is where each Corp pays their PR expenses to. If what you say is t[r]ue, they are
going to find out, that Effective Mktg is Jay Spina, and JJMJ is Jeff and Jay Spina.
So, what do you think we can do about this?? Even if we change what the
contract/lease says, the checks are payable to Effective, JJMJ, so they will know,
and if they look into it further, they will see who owns what.

Ex. 20.

The amounts charged and square footage in the leases were a complete sham. Indeed, in
an April 2013 email from Jay Spina to Grossman, Jay expressed concern about potential inquiries
of Dr. and Dr. by Insurance Providers, stating the “lease[s] will need to be made that
reflect fair market value for each company so that if asked for them we can provide lease
agreements that reflect fair market value.” Ex. 21. And in an August 2013 email exchange among
Jay Spina, Jeff Spina, and Grossman, Jay advised Grossman “to divide the entire amount of space
up who has what,” because “I am thinking if they get 4 leases and they see we leased the same
space 4x’s to different practices that will be a RED FLAG.” Ex. 22. Further, in a November 2014
email to Grossman, Jay Spina directed her to set lease amounts for the corporations so as to achieve
profits for himself and Jeff. He wrote, “The leases need to be put in place to pay for these expenses
($25,000) as well as profit to Fidelity[.] The current profit to 30,000 a month from the leases to
Jeff and Jay[.] In order to achieve that profit the leases need to be the expenses plus the profit of
30,000 is total of 60,000 a month[.]” Ex. 23.

As with the leases, the agreements between the businesses and Effective Marketing, Jay
Spina’s marketing company, were also a total fabrication. Although Effective Marketing did do
some marketing for the Practice, such as billboard advertisements, the fees in the agreements had
no basis in fact and were, as Grossman told Jay Spina in an August 25, 2011 email, completely
“arbitrary.”

FYI: The agreements we have with Effective Mktg total 60K a month 30K for you
and 30K for expenses. Now you are telling me 80K.
These arbitrary numbers are going to be a problem. We dont [sic] have any
advertising under any name except Dolson Avenue Medical, yet, all the companies
are charged a fee for advertising.
Now, you want to increase it by another 20K a month to cover your american
express bill, etc.
I am trying to keep your ethics in where this is concerned.
So, you just want me to increase the numbers again???

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Ex. 24.

In addition to the phony leases and marketing agreements, Jay and Jeff Spina also used
fake and non-existent addresses for the different corporations to conceal their ownership of DAM
and the Associated Businesses so that it would appear that DAM and the Associated Businesses
were operating out of separate locations. For example, when the Practice moved to the 201 Dolson
Avenue location in 2016, Jay Spina directed the billing manager, Cory Rivera, to send out change
of address forms for DAM and the Associated Businesses. He cautioned, “These cannot all go out
at the same time as that will raise red flags especially with NF carriers and SIF.” Ex. 25. He
further directed Rivera to use different iterations of the 201 Address, such as different suite
numbers or a neighboring, non-existent address – 203 Dolson Avenue. See Ex. 26.

Jay Spina also prepared scripts for the nominal owners of DAM and the Associated
Businesses, so that when the supposed owners were questioned by the Insurance Providers, they
would know basic information about the corporations, such as the amount of rent paid or the
number of people employed by the corporation. For example, in one script for Dr. which
was recovered during a search of Jay Spina’s office, the script states, “Will discuss who the Spinas
are. Because the Spina’s and ‘what’s her name’ made a big deal about the Spina’s are all over
everything. . . Should have that Jay and Jeff were employees. . .they now have their own company
and he doesn’t bill out chiropractor care anymore.” Ex. 27 at p.2. Regarding how much DAM
pays in rent, the script states, “Does not have to know exact amount. Will help to know
approximately . . . I pay approximately $2400, 2500 a month in rent.” Id. at p. 3. Similarly, Jay
Spina created potential questions for , the nominal owner of the acupuncture business,
which included a list of the corporation’s employees and the lease arrangements. See Ex. 28.

By spreading out multiple medical services for a single patient among the different
Corporations they controlled, the Spinas were able to avoid raising red flags with Insurance
Providers because of too much volume in any one corporation. Moreover, by making it appear
that other individuals owned and controlled the different corporations, the Spinas were able to
refer patients from one corporation to another, without obviously implicating the anti-referral
laws and while reaping all of the financial benefits from the multiple billed services. Indeed, as
the attached chart showing the highest debits for several of the corporate accounts makes plain,
Jay Spina was the primary beneficiary of the fraud. Not only did he receive significant
disbursements from JJMJ Realty and Roswell Realty – the real estate companies in which he and
Jeff Spina had ownership interests and to which the corporations paid “rent” – but over an
approximately five-year period, Jay Spina and his wife received more than $4 million in
disbursements from Effective Marketing. See Ex. 29 (chart showing highest debits from the
bank accounts of DAM and some of the associated businesses, as well as JJMJ, Roswell, and
Effective Mktg). Further, in addition to the rent and marketing fees, Jay Spina used the bank
accounts of DAM and the Associated Businesses as his personal piggy bank, shifting money
from one corporate account to another to cover his own personal expenses. See, e.g., Ex. 30
(December 2011 email from Grossman to Jay Spina: “The 16890.00 that I am sending to your
American Express (Effective Mktg) I wrote the check from Dolson Avenue Medical, perhaps, I
should put that money into Effective Mktg and have effective mktg write the check, because it is
a PR expense.”); Ex. 31 (March 2013 email from Grossman to Jay and Jeff Spina: “Paying for
your own personal bills would certainly help when finances need to be tightened. . . . Maelien

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and Katherine both received flowers (for valentines DAY) on the corp. account.”); Ex. 32
(March 2016 email from Grossman to Jay Spina advising him that she told the accountant that a
$25,000 charge of Jay’s on the Catskill AMEX account was for training so it could qualify for a
tax deduction and result in no tax due and owing for the corporation, and asking Jay to “please
stick to the story” if asked by the accountant).

B. Specific Fraudulent Billing Practices

In addition to the fraudulent structure of the Practice and its associated businesses
Jay Spina and his co-conspirators engaged in various fraudulent billing practices to maximize
the Practice’s reimbursements from insurers and ultimately his own profits. 4

1. Billing for Medically Unnecessary Services Procedures

Jay Spina placed a premium on meeting particular billing targets and encouraged doctors
and other providers to prescribe and/or schedule services if the services resulted in income to the
Practice, regardless of whether such treatments were medically necessary. See, e.g., Ex. 33
(“Weekly Bonus Plans” for employees listing rewards, such as movie tickets or lunch if certain
billing targets were met). Frequently prescribed procedures or services included: MRIs; braces
and other durable medical equipment (“DME”); osteopathic manipulative therapy (“OMT”), a
type of therapy performed by physicians, defined as “therapeutic application of manually guided
forces by an osteopathic physician to improve physiologic function and/or support homeostasis
that has been altered”; electromyograms (“EMGs”), tests used to record the electrical activity of
muscles; and facet injections, nerve block injections into the facet joints in the spine. Jay Spina
created incentives for doctors and administrative employees, such as monetary bonuses, to
recommend these services. See, e.g., Ex. 34 (April 2017 email from employee
to Jay Spina discussing the “trifecta” – 25 ortho, 20 emgs, and 20 IE for her bonus); Ex. 35
(handwritten notes regarding the number of exams and EMGs for “ ’s bonus”); and Ex.
18 (email between Grossman and Jay Spina describing discussions with Dr. Bagley and noting a
bonus plan for EMGs and facets).

a. MRIs and DME

Some of these services, like the MRIs and DME, were outsourced to third party
providers. The Spinas still profited from these services, however, because they had financial

4
Spina maintains that his fraudulent conduct is limited to his fraudulent ownership and control
of the various medical corporations. See Defendant’s Memorandum (“Mem.”) at 29. Although
such conduct, by itself, constitutes healthcare fraud (and thus Spina’s plea allocution was legally
sufficient), as defense counsel is aware, the Government’s view of the fraud – which is
overwhelmingly supported by the record – is much broader and includes numerous fraudulent
billing practices engaged in by the defendant and his co-conspirators. These fraudulent practices
are set forth in the Indictment and described in the PSR. Further, in this letter, the Government
provides documentary support for the fraudulent billing practices. The Government thus contends
that the defendant should be sentenced for the entirety of his fraudulent conduct, not just the
fraudulent incorporation.

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4. In addition, in some instances, rather than pay “rent,” Jay Spina had buy its supplies
and pay their vendors, like WB Mason and PMR Newkirk, directly and then had Grossman
concoct fake invoices for the supplies. See, e.g., Ex. 43 (June 2013 email exchange entitled
“ checks” from Grossman to Jay Spina discussing checks from to Dolson
vendors, such as PMR Newkirk and WB Mason, and listing amounts).

b. OMT, EMGs, and Physical Therapy

Other overprescribed services or treatments such as OMT, EMGs, physical therapy, and
facet injections were performed at the Practice by its own providers. Jay and Jeff Spina made
money on these services because of the high rate at which the Insurance Providers reimburse
many of these services.

Regarding physical therapy or “PT,” Jay and Jeff Spina used fraudulent means to ensure
that each patient of the Practice received the maximum number of physical therapy services
authorized by their Insurance Providers. In particular, they routinely pushed medical providers
to produce exaggerated or false medical reports to support continued physical therapy. In a
November 2013 email to one such provider, Dr. , Jay Spina told him, “You give
us th[e] information we outlined and you will get more visits . . . you give us anything else then
[sic] this and we send it back to you with a note that says NO BURDEN OF PROOF. . . . Get the
point . . . It is not how much tim[e] [you] enjoy spend[ing] with patients it is what you
communicate to the adjustor [sic] on paper.” Ex. 44. Less than a year later, Dr.
expressed his frustration about the pressure to produce exaggerated reports to Jeff Spina. He
wrote:

I would greatly appreciate if you could counsel your brother Jay


and Sister Kim to stop harassing me by emails three or four times
per week and to stop threatening to sit me down to force me to sign
papers promising to produce exaggerated reports that will
“guarantee” Dolson unlimited physical therapy approvals, etc.
They are completely out of hand. . . . I bend over backwards to
accommodate your PT service documentation needs – but there are
lines of honesty and professionalism in producing documentation I
will not cross and I want the threats of being fired unless I do so, to
stop immediately.

Ex. 45. Jeff forwarded the email to Jay and Kim Spina, writing, “fyi . . . try some sugar.” Id.;
see also Ex. 46 (May 2013 email from Jay Spina regarding how best to use Dr. , noting
“The goal is not to keep Dr busy with patient[s] who have older closed cases where we
receive no reimbursement . . . The goal is to have Dr see qualified patient with open cases
who need an updated reports showing the need (burden of proof) for more treatment[.]”).

With respect to OMT, Jay and Jeff Spina made sure that any patients whose Insurance
Provider covered the lucrative therapy, like New York State’s Empire plan (referred to by the
defendants as “MPN”) or Medicare, received the treatment, regardless of whether the patient
needed it or would benefit from it. And as with PT, they maximized the number of treatments.

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billed under Dr. Indecs pays $6.00, but if billed under Dr. Indecs pays $60.00).

c. Facet Injections

Dr. Bagley, a neurologist who worked at the Practice (and who has since pled guilty to
healthcare fraud for his participation in this scheme), introduced facet injections to the Practice
when he joined in 2016. A facet joint block or injection is a minimally invasive procedure in
which a physician injects a small amount of local anesthetic and/or medication to numb a facet
joint and provide pain relief. The majority of practitioners who administer facet injections use
fluoroscopy, real time X-ray with dye, or CT scan, to guide the placement of the needle into the
facet joint. Because the facet joints are near the spinal cord, facet injections are high risk and there
is a very small margin of error. Facet injections are generally only administered after a patient has
exhausted some combination of conservative care options, such as anti-inflammatory medications,
physical therapy, massage, and/or home exercises, and usually a patient would receive no more
than 6 injections a year, with a maximum number of 8 and even then, such a high number would
only be done where the patient has no other viable option to alleviate pain. See Ex. 52 at p. 3
(HHS-OIG report of interview of expert Dr. Christopher Gharibo).

Dr. Bagley was the only physician at the Practice who administered facet injections.
He viewed the lucrative injections, as well as the fact that he was the only doctor at Practice to
perform them, as job security. Notably, Dr. Bagley had no formal training in performing facet
injection procedures, but instead taught himself by shadowing other doctors and watching
YouTube videos. See Ex. 52 (noting that the majority of pain management specialists receive one
year of training with a fellowship and the minimum amount of training a doctor would receive in
order to perform facet injections is three months of daily and direct training).

Given Dr. Bagley’s lack of expertise in this highly technical area, it is no surprise
that when Dr. Christopher Gharibo, a pain management expert, reviewed three files for Practice
patients, each of whom had each received numerous facet injections from Dr. Bagley, Dr. Gharibo
opined that in each case, Dr. Bagley performed excessive and/or unnecessary facet injections and
that the system of overall care for each patient was administered with no apparent benefit to the
patient. See Ex. 53 (HHS-OIG report memorializing Dr. Gharibo’s findings).

Although Dr. Bagley actually performed the procedures, as with all other aspects of the
Practice, Jay Spina was intimately involved with the injections. He kept a close eye both on 1)
the number of facet injections patients received; and 2) whether, and at what rate, Insurance
Providers reimbursed for then injections. See, e.g., Ex. 54 (August 2016 email from Jay Spina to
billing staff, advising “We need to go over injections today. Some have had 2 or 3 facet injection.
Means the code is used 2 or 3 times. . . .”); Ex. 55 (August 2016 email from Jay Spina to billing
staff discussing the need for a follow up evaluation each time a facet injection is performed,
explaining that “[t]his will show why the patient needs the facet injection for her second or third
visits and assessment of patient’s current status before the injection” and thus help show medical
necessity for the injections); Ex. 56 (email chain in which Jay Spina is inquiring about the number
of facet injections for which they received payments and which insurance companies will actually
reimburse for them). For example in a January 2017 email chain with one of the Practice’s billing
employees, Jay Spina inquired about a high outstanding balance for a particular Worker’s

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Compensation patient. The employee responded, explaining, “4,500 is facets that were denied but
have been appealed pending processing, these will pay[;] 326.19 chiro balance has the PPOs,
payments are sent just pending being applied the rest are current (December)[;] 3697.00 on PT is
Shoulder, not yet est[ablished] attorney has been fighting most recent news is hearing coming in
Feb. . . .” Jay Spina followed up, “So we can get money[?]” The employee stated, “Were [sic]
getting facets and Chiro. PT we will see in feb if carrier is paying or if im billing [the patient] for
it.” Jay Spina replied, “Ok . . . Can we do more facet injections[?]” Ex. 57. Notably, Jay Spina
is a trained chiropractor with no formal medical training and certainly no specialized knowledge
in facet injections.

In early 2017, several patients suffered serious, adverse effects after receiving injections.
At least one patient was so sick she had to go to the emergency room. And there is no question
that, at least as of early March 2017, Jay Spina was aware of these issues with the injections.
Indeed, in a March 10, 2017 email entitled “FYI ,” Jeff Spina advised Jay Spina about a
patient’s adverse reaction: “Passed out after his neck injection[.] Got quite bad for a bit[.] We
need to look into this[.] We can agree too frequent[.]” Ex. 58. However, Jay Spina continued to
encourage Dr. Bagley to perform injections, and just seven days later, on March 17, 2017, another
patient passed out after receiving a facet injection. The patient, , was rushed by
ambulance to the hospital, where she died several days letter. The medical examiner ultimately
concluded that the patient’s cause of death was complications of brain injury due to
cardiopulmonary arrest following a cervical facet injection. Ex. 59.

2. Billing for Services Not Provided

In addition to billing for medically unnecessary procedures, Jay and Jeff Spina also
routinely billed for medical procedures, or services, that were not actually rendered. This was
done in several ways. In some instances, they billed for services that were never actually provided.
For example, in or about Fall 2016 and Winter 2017, several law enforcement officers acting in an
undercover capacity sought treatment at the Practice. On or about November 8, 2016, one of the
undercover law enforcement officers who was supposedly seeking treatment for injuries after a car
accident (“UC-1”), spent a total of approximately four minutes at the clinic (in the bathroom) and
received no treatment or services. The Practice, however, submitted claims to UC-1’s No-Fault
insurance provider for at least two different services or procedures supposedly rendered on
November 8, 2016.

Similarly, the co-conspirators caused a claim to be submitted to an Insurance Provider for


treatment of another undercover law enforcement officer (“UC-2”) on January 18, 2017. The CPT
code listed on the claim was for an office visit and the diagnosis was low back pain. UC-2 was
not at the clinic on January 18, 2017 and he/she never complained of low back pain, but instead
reported that he/she was not able to run as fast as he/she used to run.

In other instances, the patient received some type of bogus treatment, like a five minute
massage, and the insurance provider was billed for another, higher paying treatment, like OMT.
For example, on April 6, 2017, UC-1 was seen by one of the Practice’s physician assistants.
Although UC-1 was with the physician assistant for only seven minutes, the Practice submitted a
claim to the Insurance Provider for an established patient level 4 exam – one of the highest level

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office visits, typically lasting 25 minutes.

Similarly, in or about 2013, a confidential source working with the FBI (the “CS”) sought
treatment at the Practice and recorded his visits. Agents debriefed the CS about his visits and
reviewed the billing submitted by the Practice to Medicare for the CS. The billing revealed,
among other things, that the Practice billed Medicare on behalf of the CS, for various services
and treatments, such as OMT that, according to the CS, he never received.

3. Double Billing

Another fraudulent practice engaged in by the co-conspirators was “double billing” –


billing two insurance providers for the same service. In particular, Jay and Jeff Spina regularly
billed a private insurer or Medicare, as well as Workers’ Compensation or No-Fault insurance
for what was essentially the same treatment or procedure. (Of course, they were able to do this,
in part, because of the multiple different medical corporations and providers operating out of the
same location.) Although in some instances, a medical provider may bill both a private insurer or
Medicare in conjunction with No-fault or Workers’ Compensation for a patient’s care on the
same day, both insurers should not both be billed for the total cost of the same procedure or
treatment for the same injury. The defendants, however, routinely billed both No-fault or
Workers’ Compensation insurance, as well as private insurance or Medicare.

To avoid detection for this double billing, which the defendants referred to internally as
“congruent care,” Jay Spina simply changed the diagnosis code or body part on file with one of
the Insurance Providers, so, at least on paper, it appeared as if the Insurance Providers were
being billed for two different injuries. Indeed, as at least two of the Practice’s billing employees
explained, Jay Spina regularly asked them to run “queries” in the billing system to locate patients
for whom the Practice was submitting claims to two different Insurance Providers. Jay Spina
then directed the employees to identify any patients for whom both providers were being billed
on the same day for the same diagnosis and to change one of the diagnoses to avoid any issues.
See, e.g., Ex. 60 (7/25/13 email from Jay Spina to Jeff Spina, Jay advising Jeff of the
outstanding balances for three patients and noting that claims for two of the patients were being
submitted to two different Insurance Providers, Empire (referred to as MPN) and Worker’s
Compensation (WC) or No-fault (NF): “Brandon has NF and MPN (Empire) . . .Hugh has WC
and MPN . . . Seems like they have the same Dx (diagnosis) and for both [sic]. . . We have a
problem here.”); see also Ex. 61 (8/25/14 email from Jay Spina to billing employee directing her
to change diagnoses); 62 (8/9/17 email from Kim Spina to Jay Spina regarding a particular
patient, stating, “It appears we never opened the date of injury and we used her mpn. There is
some congruent care going on and [she] has an 11/13/14 workers comp case please advise”).

Many patients of the Practice were not even aware that their private insurer was being
billed, in addition to WC or NF, until they received explanations of benefits (“EOBs”) from their
private insurer. Indeed, in a June 2014 email from Jay Spina to Jeff, attaching a newsletter
entitled “How to Resolve Problems with Customers,” Jay wrote: “Read this and apply it to [a
particular patient]. She was pretty upset over her WC and MPN[.] She wants to be heard and
not rip up her EOB’s. She wants to report us to MPN (Empire Insurance)[.] PLEASE HANDLE
THAT ASAP[.]” Ex. 63. This lack of knowledge or awareness on the part of the patient,

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regarding both insurers being billed underscores the fraudulent nature of the Practice’s
“congruent care.”

4. Altering and Falsifying Medical Records

Given how pervasive fraudulent billing practices were at the Practice, it is no surprise that
the co-defendants routinely altered and falsified records to conceal the fraud. Indeed, they falsified
records for all sorts of reasons – to receive authorization for some of the unnecessary services
described above, like MRIs or OMT; to make it look like they actually provided services that they
never, in fact, provided; and to avoid red flags for double billing. In addition, Jay Spina regularly
altered medical records (or directed others to do so) so that the Practice could continue treating
patients and maximize reimbursement. For example, Jay Spina regularly directed Kim Spina to
prepare fake medical reports so that patients could continue to receive physical therapy or
acupuncture. In particular, Workers Compensation requires a medical exam referred to as an MG-
2, for authorization for a certain number of physical therapy visits. If, as often happened, a patient
maxed out on the number of authorized PT visits, but had yet to have a medical exam
demonstrating the necessity for more PT treatment, Jay Spina had Kim Spina use old notes in the
patient file to make up a medical exam and then had Kim fax that fake exam over to the Workers’
Compensation Board. In requesting a special bonus, Kim Spina described her work as follows:

I have just completed getting notes and authorization from 2008 to


2012, faxed to carrier to get $5,000 in the door on one patient, I have
another $3-4 thousand notes to create to get paid for bills that went
out with no notes, adjuster said if we provide a note they will pay. I
do this on a weekly bases [sic], and the W. Comp team gives me all
unpaid bilsl without notes to create or find.

Just to explain my input on getting $$ in the door weekly, as well as


creating reports, sending all MG2s, and completing MG2 cycle frm
start to end[.]

Ex. 64; see also Ex. 65 (7/7/16 email from Jay Spina to Kim Spina advising her that a particular
patient needed “more visits on both [WC] cases,” and directing her to “Use older reports for now”).

Similar to PT, Jay Spina also had Kim Spina make up notes so that patients could continue
to receive acupuncture. For example, in an October 27, 2014 e-mail from JAMES SPINA, the
defendant, to KIMBERLY SPINA, the defendant, JAMES SPINA wrote, in substance and in part:

I have 3 reports . . . to be typed up . . . They are for MPN and the


medical necessity for continued acupuncture care . . . I will go over
them with you tomorrow and we can make some reports for this . . .
There is no template for this right now as he did not see the patient
and a re-exam was not done. But he did go through the chart and
write up a report. It just needs to be typed in some format.

Ex. 66.

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5. Obstructing and Impeding Audits by Medicare and Other Insurance


Providers

Jay and Jeff Spina also routinely obstructed and impeded insurance audits by
fabricating records so as to conceal their fraud. Over an approximately five-year period, the
Practice was audited several times by multiple different insurers, including Medicare and the
Office of the New York State Comptroller (“OSC”). To prepare for the audits, Jay Spina
assembled an “audit team,” and assigned different tasks to different employees. Jay had Rivera
review all of the files requested by the auditors and make notes on what was missing from the
file. He and Jeff then directed employees, such as Kim Spina, to create missing medical
examinations, and he tasked another employee, Jonathan Lew, with creating the electronic
documents.

Regarding an audit of the Practice by Medicare in 2015, one of the investigating agents
reviewed copies of certain patient files as the files existed before the audit (which were provided
by Rivera) and compared those to files that Jay Spina had created and ultimately provided to the
Medicare auditors. Consistent with employees’ descriptions of how Jay Spina handled audits,
the after files contained numerous handwritten exams that were made up by Jay Spina.
Significantly, even with the false reports and documents, the Practice performed abysmally. The
Medicare auditors reviewed a total of 27 patient files associated with Dr. Their review
resulted in denied claims at a rate of 96% for 20 patient files associated with DAM and 86.4% for 7
patient files associated with Catskill. The reasons for the denials included: inappropriate selections
of procedure codes for the service(s) billed; claim submitted with an unusual frequency in the
absence of supportive documentation; there was an over utilization of beneficiaries; the majority of
the services were not medically necessary; and the documentation did not support that the services
were medically necessary.

Regarding the OSC audit, multiple employees describe how, in preparation for that audit,
Jay Spina had employees create entirely new paper files for a years’ worth of records and hid the
actual files at a storage unit, Jeff Spina’s house, a local pest control company, and a
photocopying company. Further, when the auditors showed up on site, Jay Spina introduced
himself by a fake name and told the auditors that Cory Rivera, the billing manager, was his boss
and that she was in charge of the office. And when the auditors immediately realized that the
newly created files were fake – the files were all similar to one another and on fresh paper – they
requested access to the original paper files, which they ultimately discovered at the storage unit,
amongst other places.

II. Spina’s Arrest and Guilty Plea

On August 29, 2018, a grand jury returned Indictment 18 Cr. 625 (the “Indictment”),
charging Jay Spina and his co-conspirators, Jeffrey Spina, Kimberly Spina, and Andrea Grossman,
with one count of conspiracy to commit healthcare fraud, in violation of Title 18, United States
Code, Section 1349, and one count of substantive health care fraud, in violation of Title 18, United
States Code, Section 1347. Jay and Jeffrey Spina were also charged with one count of obstructing
a federal audit, in violation of Title 18, United States Code, Section 1516. The defendant and his
co-conspirators were arrested on the Indictment on August 30, 2018.

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On May 2, 2019, the defendant appeared before Judge McCarthy and pleaded guilty,
pursuant to a written plea agreement (the “Plea Agreement”), to Count One of the Indictment. In
the Plea Agreement, the parties agreed to a stipulated Guidelines range of 87 to 120 months’
imprisonment. This range arose from the following:

A base offense level of 6, pursuant to U.S.S.G. § 2B1.1 (a)(2), because the offense has a
statutory maximum of ten years.
At the time of the plea, the parties disputed loss amount. The defendant contended that the
loss was between $1,500,000 and $3,500,000 and thus sixteen levels were added pursuant
to U.S.S.G. § 2B1.1 (b)(1)(I). The Government argued that the loss was between
$25,000,000 and $65,000,000 (the total amount paid by Insurance Providers during the
relevant time period), thus twenty-two levels were added, pursuant to U.S.S.G. § 2B1.1
(b)(1)(L).
Because the offense involves ten or more victims, two levels are added U.S.S.G. § 2B1.1
(b)(2)(A)(1).
Because the defendant was convicted of a Federal health care offense involving a
Government healthcare program (Medicare) and the loss to Medicare is more than
$1,000,000, two levels are added pursuant to U.S.S.G. § 2B1.1 (b)(7). The defendant
disputes the loss to Medicare and thus each party reserved the right to argue the
applicability of this enhancement at sentencing.
Because the offense involved sophisticated means and the defendant intentionally engaged
in or caused the sophisticated means, two levels are added pursuant to U.S.S.G. §
2B1.1(b)(10)(C).
Because the offense involved conscious or reckless risk of death or serious bodily injury,
in particular with respect to the facet injections administered at the Practice, two levels are
added pursuant to U.S.S.G. § 2B1.1(b)(16)(A).
Because the defendant was an organizer or leader of a criminal activity that involved five
or more participants or was otherwise extensive, four levels are added pursuant to U.S.S.G.
§ 3B1.1(A).
Pursuant to U.S.S.G. § 3E1.1(a), there is a three-level reduction for acceptance of
responsibility.
Thus, the total offense level set forth in the Plea Agreement is 29 or 37.
The defendant has zero criminal history points and is therefore in Criminal History
Category I.
If the loss amount is $1,500,000 to $3,500,000, as the defendant argued, and the loss to
Medicare is found to be less than $1,000,000, the resulting range is 87 to 108 months’
imprisonment.
If the loss amount is $25,000,000 to $65,000,000, as the Government argued, and the
enhancement pursuant to U.S.S.G. § 2B1.1(b)(7) applies, the resulting sentencing range is
be 210 to 262 months’ imprisonment, yielding a total range of 87 to 262.
The statutory maximum for Count One, however, is 120 months. Thus, the total sentencing
range stipulated to by the parties in the Plea Agreement is 87 to 120 months.

At the plea proceeding, when asked by Judge McCarthy to describe his conduct, in his own
words, Spina stated:

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From 2011 to 2017, I did knowingly agree with others to participate with medical corporations for
services that were billed. These corporations were owned by medical doctors, however, the
finances were controlled by myself and my brother of which were not entitled to those monies.
We benefited financially from these corporations which otherwise, under the New York State Law,
we are not entitled to. And this was a violation of the law.

May 2, 2019 Plea Transcript (“Pl. Tr.), at 36.

Judge McCarthy asked a number of follow-up questions of the defendant, including, at the
Government’s request, a question regarding Spina’s understanding of the falsity of the bills he
caused to be submitted to the Insurance Providers. After a series of exchanges between counsel
and the Court, Spina stated, “Your Honor, here’s what I’d like to say. There’s monies that came
to me that were incorrect, that I knowingly go ahead and send and submit claims saying that the
services were now provided. Whoever provided the service, what it has the signature of is the
signature of the doctor who provided the services for that . . .” Pl. Tr. at 43.

Shortly thereafter, Judge McCarthy took a recess, to allow Spina to confer with his counsel.
After the break, Spina attempted to allocute again, stating:

In 2011 to 2017, I did knowingly and intentionally agree with others


to participate with medical corporations that billed medical
insurance companies for services rendered. These corporations
falsely appeared as they were owned by a medical doctor, but were
in fact controlled by myself and my brother, in which we exercised
control over the finances and the expenses of these corporations.

Claims were submitted to healthcare insurance companies to obtain


payment. We thereby financially benefitted from these
corporations, which were otherwise – which we were not otherwise
entitled to under the New York State Law. I knew what I was doing
was in violation of the law.

Plea Tr. at 44. Spina further confirmed that, at the time he submitted the claims, he knew that the
ownership information placed on the bills was fraudulent. Id.

III. The Presentence Report

Following the defendant’s guilty plea, the Probation Office prepared a Presentence
Investigation Report (the “PSR”). With respect to the Guidelines, the Probation Office adopted
the Government’s Guidelines calculation, and found a total offense level is 37 and a Criminal
History Category is I, yielding a Guidelines range of 120 months’ imprisonment (given the
statutory maximum term of imprisonment for Count One). PSR ¶¶ 40-59; 87-88.

The Probation Office recommends a sentence of 120 months’ imprisonment and 3 years’

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supervised release. PSR Sentencing Recommendation at 24. In recommending this sentence, the
Probation Office explicitly states that it considered both departures and variances, in particular
variances based on the defendant’s “charitable service and good works,” but was “unable to
identify any personal characteristics that could overcome the severity of the conduct.” Id. at 25.

Spina was the mastermind of a long-running sophisticated


conspiracy which appears to have caused extreme financial harm,
the loss of employment to Spina’s numerous employees, and most
significantly, medical malpractice, some of which resulted in
physical suffering, including one case that is linked to death. Spina
knew that his patients were getting harmed, yet he continued to
encourage his doctor to continue on with the damaging treatment.
The betrayal of Spina’s role as a medical practitioner and the harm
he caused are dispositive factors in this case. We believe a lengthy
prison sentence is warranted in order to provide justice to the
victims, punishment to the defendant, and to communicate a
message of general deterrence to others that this type of behavior is
intolerable.

Id. at 25.

IV. The Parties’ Post-Plea Agreement Regarding Loss

Following the defendant’s guilty plea and the preparation of the PSR, the parties reached
an agreement regarding the applicable loss amount. In particular, as set forth in defense counsel’s
letter of February 24, 2020, the parties have agreed that the applicable loss is more than $3.5
million but less than $9.5 million, resulting in an 18-level enhancement under U.S.S.G. §
2B1.1(b)(1)(J).

The Government ultimately agreed to this loss amount, given: (1) the difficulty of
determining with reasonable certainty the amount of claims paid by Insurance Providers during
the relevant time period which were false because of both the lies about ownership and one (or
more) of the reasons discussed above, (i.e., the services were not actually rendered, medically
unnecessary, and/or also billed to another Insurance Provider), see generally U.S.S.G. § 2B1.1,
Application Note 3E (discussing credits against loss); (2) the fact that the amount Jay Spina
personally earned during the relevant time period was approximately $9.3 million; and (3) the
applicable 120-month statutory maximum.

DISCUSSION

The Government respectfully submits that a Guidelines sentence of 120 months’


imprisonment would be sufficient, but not greater than necessary, to achieve the aims of sentencing
set forth in Title 18, United States Code, Section 3553(a).

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I. The Applicable Guidelines Range is 120 Months’ Imprisonment

In light of the parties’ above-described agreement regarding loss amount, the only
outstanding Guidelines issue relates to the applicability of a 2-point enhancement under U.S.S.G.
§ 2B1.1(b)(7) for a loss of more than $1,000,000 to a Government health care program (Medicare).
The Government submits that the enhancement should apply here.

During the relevant time-period, the Practice and its Associated Businesses submitted
claims totaling $7,414,523 to Medicare. Of the total claims submitted, Medicare paid out
approximately $2,678,882. See Ex. 67 (chart summarizing claims submitted and paid by Medicare
to DAM and Associated Businesses). Excluding claims paid to ChiroCare, which was lawfully
owned by Jeff Spina, a licensed chiropractor, 5 the remaining $2,145,079 of claims were fraudulent
because, at a minimum, the claims listed false information regarding the ownership of the
providing corporation. 6

In arguing that the enhancement should not apply here, Spina asserts that the vast majority
of the $2,145,079 paid out by Medicare was for physical therapy and other treatments prescribed
by physicians outside of DAM and the Associated Businesses. See Defendant’s Sentencing
memorandum (“Mem.”) at 36-37; Ex. J. He thus argues that the Court should assume that the
treatments for these patients was medically necessary and appropriate, and the amounts paid for
these services “should be reduced from or credited against the Medicare fraud loss number.” See
Mot. at 36-37.
The Court should reject this spurious argument. As, an initial matter, the defendant
does not explain – and it is not clear to the Government – how he determined that “the vast
majority” of the money paid out by Medicare was for patients referred to the Practice by outside
physicians. Mem. at 36. The defendant asserts that only approximately 100 of the Practice’s
patients were Medicare patients. According to the Government’s review of Medicare records,
however, there are 502 unique beneficiaries associated with the Medicare billing data for all Tax
identifications billed through DAM. Moreover, although the defendant has provided more than
100 PT scripts from supposedly independent physicians in his Exhibit J, he has provided no

5
Although the claims submitted by ChiroCare during the relevant time-period included accurate
information as to ownership, the Government submits that many of those claims were nevertheless
fraudulent because, for example, the claims were for unnecessary treatment or the billed services
were not provided. In any event, for the purpose of determining the applicability the enhancement
relating to the loss to Medicare, the Government will assume that all claims submitted by
ChiroCare to Medicare during the relevant time period were for legitimate services and properly
billed.
6
Spina further asserts that Government’s Medicare loss numbers erroneously include $143,832 of
payments to an unknown corporation not affiliated with Dr. or DAM. Mem. at 37. The
corporation is Middletown Physical Therapy and according to Medicare records, the listed address
for the corporation is 54 Dolson Avenue, Suite 200, and the contact is a former employee in the
Practice’s billing department. Thus, the information from this corporation is appropriately
included in the loss calculation.

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and get surgeries and we need PT requested with a good reports [sic] and able to send with an MG
2[.]” Ex. 71; see also Ex. 72 (Initial medical exam form used by the Practice listing with prefilled
out options of Drs. and as referring physician); Ex. 73 (email from employee to
Jay Spina relaying a message from Dr. that she does not want to see patients that had
already seen another orthopedist and had surgery). In light of these relationships, such referrals
can hardly be considered independent.

Second, there is reason to doubt the accuracy of the referral information provided by the
Practice to Medicare. The referral information is questionable, in general, given how frequently
the defendants falsified documents, but here there is specific reason to question the authenticity of
many of the referrals. In a February 26, 2016 recording covertly made by Rivera, she and Jay
Spina discuss how Medicare bills are being rejected at the clearinghouse because the claims have
the same physician listed as both the referring and rendering provider. To avoid this issue, they
decide to list Dr. as the rendering provider and the patient’s primary care physician as the
referring provider. See Ex. 74 (draft transcript of 2/26/2016 recording between Rivera and Jay
Spina).

Third, , the nominal owner of the PT corporation and one of the Practice’s
providing physical therapists, reported that prior to 2018, the majority of the PT prescriptions came
from internal providers. See Ex. 75 at p.5. Fourth, even if the majority of the referrals for PT for
Medicare patients were legitimate, and thus some form of PT was medically necessary, that does
not mean that the claims submitted by the Practice for the actual PT treatments were legitimate.
As discussed above, the claims submitted by DAM and the Associated Business, including claims
submitted to Medicare, were fraudulent in multiple ways, not just because they exaggerated
medical necessity.

Finally, even assuming that fifty percent of the amount paid by Medicare (i.e., half of
the $2,145,079) was for claims that were false only because of the ownership information– a
generous and conservative assumption given the pervasiveness of the fraudulent billing practices
and the results of the Medicare audit described above – the loss to Medicare would still be over
$1,000,000. The Court should therefore apply the two-point enhancement under U.S.S.G. §
2B1.1(b)(7).

With an 18-level enhancement for loss and a 2-level enhancement for a loss of more than
$1,000,000 to Medicare, the total resulting offense level, including all other calculations agreed
upon by the parties in the Plea Agreement, is 33. An offense level of 33, with a Criminal History
Category of I, yields a Sentencing Guidelines Range of 135 to 168 months. Because of the 120-
month statutory maximum, however, the Sentencing Guidelines range is 120 months.

II. The Court Should Impose a Guidelines Sentence of 120 Months’ Imprisonment

A sentence of 120 months’ imprisonment is sufficient but not greater than necessary, given
the 3553(a) factors, in particular, the nature and circumstances of the offense, the personal history
and characteristics of the defendant, the need for general and specific deterrence, and the need to
promote respect for the law.

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They were keenly aware of which treatments were covered by which Insurance Providers and how
many visits or treatments each provider covered. They used that information to determine patient
care. See Ex. 85 (document entitled “Treatment Plans for Cases and Insurance Plans” listing
number and type of X-rays and treatments covered by different insurance providers); Ex. 86
(12/31/16 email from Jay Spina explaining that “All MPN get neuro exam and x-rays for
deductible. Then can treat with acup. and OMT.”) If acupuncture was covered by the patient’s
provider, they made sure the patient received it. If PT was covered, they saw to it that the medical
doctors prescribed the maximum amount of PT visits. They had one corporation treat one body
part, and another corporation treat a different body part. Little, if any, regard was given to whether
the prescribed treatments were necessary or would better the patient’s condition.

A January 8, 2014 email from Jay Spina to Jeff Spina is just one example of how the
defendants used insurance coverage to guide treatment decisions. In the email, entitled “Indecs
Insurance,” Jay writes:

We are missing a huge population with Indecs Insurance


They pay roughly $90 to $120 an office visit
We can not bill with OMT
We can bill acupuncture and office visit
They will not pay for Acup but they will pay for the office visits
approx $100
We are missing the boat on a huge population . . .
You have to do these things creatively and do 1 diagnosis for 20
visits then 6 weeks and break and then another diagnosis for another
15 or so visits
This way it is not continuous on and on and for 2 year plus
You are asking for trouble and audit and refund these monies . . .
There is a whole large population out there that can benefit from
this. . .
These are the players and payers
Indecs OMT is acup $100 a visit and OMT is $100 a visit =$200 a
visit
MPN is $300 a visit.
So if comp and no fault is busting our balls and no fault too
Then go where the good coverage is . . .
So why not get them to come into a nice place and quit the hard work
with all these low payers and hard work when you can have the high
payers with little work . . . .
Ex. 87. As the email makes plain, for Jay Spina, it was profit above patient care.

Jay Spina’s emphasis on easy money was not without real and tragic consequences. As
described above, several patients suffered severe adverse reactions after receiving facet injections,
and one patient, , died as a result of the injection. Although Jay Spina did not
administer the injections, he still bears some of the responsibility for the issues with the injections.
Jay Spina was the person in charge of the Practice, the person to whom Dr. Bagely answered.
Further, Jay Spina was aware of the issues with the injections prior to ’s death, but he did

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not put a stop to the injections. Indeed, even after died, Jay Spina wanted to
continue offering the lucrative treatment. In a May 26, 2017 recorded call between Jay Spina and
Dr. Bagley, Dr. Bagley, who was then attempting to cooperate with the Government, expressed
reservations about continuing to provide the injections, and Jay told him that if he did not feel
comfortable doing them, “ gonna do them. You know what I mean.” Ex. 88 at p. 1 (portion
of transcript of recorded call). It is because of Jay Spina’s conscious or reckless risk of death or
serious bodily injury with regard to facet injections that the parties agreed to a two-level
enhancement pursuant to U.S.S.G. § 2B1.1(b)(16)(A). Notably, there is no discussion of this
enhancement, facet injections, or death in Jay Spina’s sentencing
memorandum.

Instead, Jay Spina offers patient testimonials and asserts that these testimonials
demonstrate that he was devoted to patient care and deserves a non-Guidelines sentence
substantially below 120 months. See Mem. at 11-17. While the Government does not dispute that
some patients may have been satisfied with the treatment they received at the Practice, numerous
patients interviewed as part of the Government’s investigation expressed starkly different views
of Jay Spina and the Practice. See, e.g., Exs. 89 (report of interview of DAM patient );
90 (report of interview of DAM patient ). Moreover, in considering the
testimonials, the Government notes that many patients receiving treatment at DAM, especially
those on Worker’s Compensation, had little incentive to question the necessity of the treatment
they received, and further, even patients who were more likely to question their treatment and the
billing, did not necessarily know the substance of the claims submitted to their Insurance
Providers. See, e.g., Ex. 91 (report of interview of who stated he was told by co-
workers that if you want to stay out of work, [DAM] will keep you out of work”). In any event,
the Government submits that the emails and documents cited throughout this letter – the majority
of which were authored by Jay Spina himself and shared with only a small group of trusted
associates– better demonstrate his true motivations and priorities in operating the Practice, rather
than the selected patient testimonials he has provided to the Court.

B. Jay Spina’s Personal History and Characteristics

Jay Spina argues that his history and characteristics are cause to sentence him to a
substantially below Guidelines sentence. He emphasizes his devotion to his patients and the
Practice, his selfless dedication to his family, and his charitable acts. Spina maintains that
“weighing [his] misconduct against the exemplary life he has otherwise led and the good he has
done, demonstrates that a sentence reflecting a substantial downward variance from the Guidelines
in sufficient but not greater than necessary to serve the purposes of sentences.” Mem. at 11.

Although Jay Spina may have shown compassion for some patients and family members
at various points in his life and career, the Government submits that a fuller examination of Jay
Spina’s personal history and characteristics supports a substantial incarceratory sentence here. In
support of his request for leniency, Jay Spina submits numerous letters of support to the Court,
from patients, his family and friends. As with the patient testimonials discussed above, these letters
of support are worthy of little, if any, weight at sentencing. The letters take little or no account of
Spina’s criminal conduct, let alone acknowledge its scope and duration. Spina defrauded
Insurance Providers of millions of dollars for more than seven years and as he has acknowledged

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in his plea, his fraud jeopardized the health and safety of patients. This truth – for which Spina is
to be sentenced – is not reconciled by his supporters with their claimed admiration for him and his
supposed selfless devotion to his patients and the community.

It also bears noting that Spina’s fraud involved many of his family members. 7 Indeed, two
of his co-defendants include his brother, Jeff, and his sister, Kim. And while both Jeff and Kim
Spina willingly participated in the fraud, there is little question that Jay Spina manipulated and
mistreated them, particularly Kim Spina. Jay Spina routinely belittled and ridiculed Kim, a
recovering alcoholic with few, if any, job prospects outside Dolson. Indeed, when Kim Spina
hesitated to produce a false medical report, Jay Spina threatened to fire her.

Further, many whom the Government interviewed during the course of the investigation
who knew and worked with Jay Spina, including some who worked with him on a daily basis,
uniformly described him negatively, often as manipulative and demeaning. One employee, for
example, who cleaned the office twice a week for extra money described how if Jay Spina did not
think she did a good enough job cleaning, he used a leaf blower to blow papers and debris all over
the office, so she would have to clean it again. Ex. 92 (report of 2/15/18 interview of
). And when Grossman proposed pay cuts for Jay and Jeff so that the Practice could pay
its bills, Jay Spina resisted, suggesting instead that they cut the salaries of administrative staff,
many of whom made less than $30,000 and had no benefits. “I am the founder and the owner. I
am the one who busts his ass . . . I am unaware of their care factor. Therefore my care for them is
not $60,000 worth. $30,000 to who is illiterate and has to do the same work 3 times.
Justify this for me please.” Ex. 93. Jay Spina was hardly compassionate and devoted to all of his
staff.

But perhaps one of the clearest examples of Jay Spina’s true character is his response to
death. Notwithstanding his initial efforts to contact and comfort the family,
Jay Spina quickly pivoted to protecting his own reputation and distancing himself from the
incident. He hired a reputation management service to remove bad reviews of the Practice
stemming from death, including posts made by her son. In explaining his need for the
service, Jay Spina falsely stated, “We got mixed up with some bad guy accusing us of harming his
mom[.] We did not even see the lady in our office[.] She saw a dr who rented space in our
office[.]” Ex. 94. He hired a lawyer and demanded that the family cease and desist making
negative statements about him or DAM, again falsely representing that Dr. Bagley’s practice was
“completely separate and apart from” him and DAM. Ex. 95. Jay Spina even went so far as to
have an employee research information on son, to try to “find out a bit more on his
motives regarding trying to destroy our office.” Ex. 96. When a patient is supposedly satisfied
with the treatment or care he or she received at DAM or one of the Associated Businesses, like the
patients cited in Spina’s sentencing memorandum, Spina deserves the credit and does not question

7
Although Maelin Spina did not serve any in any formal role at the Practice, she was involved in
aspects of its operations, serving as an advisor on certain things, including financial arragnements
and the fallout from death. See, e.g., Ex. 102 (Dec. 2015 from Grossman to Jay
and Maelin Spina forwarding communications between Grossman and Jeff Spina regarding Jay’s
income from the business and an upcoming meeting between Jay, Maelin, and Jeff).

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his control over, and or leadership of, the businesses. But when something goes wrong and
someone is tragically hurt, like , suddenly Jay Spina is not the one in charge.

Finally, although the Government acknowledges that Jay Spina has made many charitable
contributions and participated in various community programs throughout his lifetime, it bears
noting that his participation was not as altruistic as he portrays it. Spina routinely used food drives
and other local community events to recruit new patients to the Practice. For example, when an
employee reported to Jay that he had had an information session at the local YMCA and booked 7
appointments, Jay Spina replied, “Great JOB. . . I am looking forward to cutting you BIG bonus
checks!!!!” Ex. 97; see also Ex. 98 (discussing an event where there would be approximately 100
patients with Empire insurance, a lucrative insurance for the Practice). And if an event was not
going to attract enough patients to the Practice, the Spinas declined to participate. Ex. 99.
Moreover, it does not appear that he used his own, personal money to support many of these causes,
instead using the Practice’s fraudulent proceeds to sponsor events. Given these mixed motives,
Spina’s community involvement should bear little weight in the Court’s sentencing decision here.

C. Additional Sentencing Considerations

1. Need for Deterrence and to Promote Respect for the Law

A significant sentence is also needed to afford adequate deterrence and to promote respect
for the law. Spina’s greed and persistent efforts to skirt the laws regarding physician ownership
of medical corporations and the prohibitions regarding self-referrals and kickbacks, resulted in the
precise consequence the various laws were designed to prevent – an emphasis on maximizing
income over patients’ well-being. A substantial sentence here will send a message to the larger
community that such crimes are not merely technical crimes, resulting in little or no real harm to
patients. Rather such crimes can create, as they did here, very real risks for patients and as, such,
should result in serious and significant consequences for their perpetrators, like Jay Spina.

In addition, a significant sentence will send a much needed message to the defendant that
he is not above complying with the rules or the law. Defense counsel asserts that there is “simply
nothing about the offense or Dr. Spina’s background which indicates he poses any risk of
recidivism.” Mem. at 27. To the contrary. During the relevant time period, Jay Spina was
repeatedly put on notice that his billing practices were, at a minimum, deficient. On at least one
occasion, the Spinas hired an outside consultant to review some patient files for compliance issues.
See Ex. 100. Among other findings, the consultant found that the care for a chiropractic patient
supposedly receiving treatment after a car accident was “excessive” and the nature of the
documentation for the patient “extremely dangerous.” Id. In particular, the consultant noted that
between May 2011 and August 2012, the patient visited the Practice 173 times. The daily notes,
which were described as “cookie cutter,” indicated that the patient basically received the same care
for all 173 visits with no explanation as to why the care lasted so long, thus raising questions about
medical necessity of the treatment. Id. at p. 2.

Further, throughout the pendency of the fraud, Insurance Providers regularly questioned
the billing practices of the Practice and/or its Associated Businesses, through both audits and
requests for EUOs in certain cases. The audits, in particular, identified recurring and pervasive

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problems with the Practice’s billing. And many EUOs raised questions regarding ownership of
the different corporations and which practitioners were actually providing the billed services. Far
from chastening his fraudulent conduct, however, the audits and EUOs only emboldened Spina,
who used the inquiries to refine his fraud, identifying red flags and determining how better to
conceal the issues so as to avoid such scrutiny in the future.

Moreover, law enforcement conducted a search of the Practice and the Associated
Businesses on August 23, 2017. Once again, Jay Spina did not heed the warning and cease his
fraudulent conduct. Instead, his first inclination was to lie. Indeed, on the day of the search, Jay
and Jeff Spina called an emergency meeting of some employees, including Rivera, to discuss the
search and what type of information law enforcement might be looking for and ultimately discover.
Rivera, who was then cooperating with law enforcement, surreptitiously recorded her conversation
with Jay and Jeff Spina. During that conversation, Jeff and Jay Spina surmised that law
enforcement was most interested in the “notes. Were the notes changed and/or altered or amended
or made up.” Ex. 101 at p. 2. Jay Spina continued, “And then it’s going to be, it’s going to be . .
. what medical decisions you and I [Jeff and Jay] are making?” Id. Jay Spina noted that the agents
would find medical reports and documentation in his handwriting and they needed to come up with
a solution, “How do we justify it? How do we handle it?” Id. Jeff proposed telling law
enforcement that Dr. was present in the room for the exams, but his handwriting was
illegible so Jay had to complete the forms for him. Jay responded, “That could be a possibility.”
And when Rivera reminded them that such a lie could only work for reports dated before June 26,
2017 – the date Dr. died – Jay said he would simply say he merely documented the patient
history. Id. Jay Spina’s response to the search, as well as the various inquiries from Insurance
Providers, demonstrates that far from being “non-existent,” Mem. at 28, specific deterrence is a
weighty factor here.

2. Need to Avoid Unwanted Sentencing Disparities

In urging the Court to sentence him to a below Guidelines sentence of 18 to 24 months,


Spina argues that similar cases suggest such a sentence is appropriate, and selects for this argument
numerous cases from the Southern and Eastern Districts where defendants convicted of healthcare
fraud received sentences ranging from probation to 38 months’ imprisonment. See Mem. at 28-
35. This argument is faulty, and the exercise essentially unhelpful in determining the appropriate
sentence for Spina, because the full circumstances of those other sentencings are not before the
Court here for purposes of comparison.

In any event, by selection of other cases, in particular cases with facts similar to those
present here, the opposite argument can be made, that to sentence Spina in fair proportion to others
requires that he serve a substantial prison sentence. See generally United States v. Sampson, 898
F.3d 287, 314 (2d Cir. 2018) (noting that Section 3553(a)(6) addresses the need to avoid
unwarranted disparities among defendants with similar records who have been found guilty of
similar conduct on a nationwide level). For example, in United States v. Ezukanma, 756 Fed.
Appx. 360, 2018 WL 6264232 (5th Cir. Nov. 28, 2018), the defendant, the medical director and
owner of a home health agency, was convicted of conspiracy to commit health care fraud and
health care fraud based on his scheme to bill Medicare for home visits by physicians that failed to
comply with Medicare regulations, were medically unnecessary, and/or overstated the services

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that were actually rendered. At sentencing, the district court found that the loss to Medicare was
approximately $34,000,000, resulting in a range of 188 to 235 months’ imprisonment, and
sentenced the defendant to 200 months. On appeal, the defendant argued that the district court
erred in calculating the loss amount because it did not give him credit for the fair market value of
services rendered. The appeals court rejected the defendant’s argument, concluding that where the
fraud is so pervasive it is difficult to separate out the legitimate claims form the non-legitimate
claims, the burden shifts to the defendant to show which claims are legitimate. In Ezukanma, the
court upheld the district court’s determination that the defendant failed to make such a showing.

As in Ezukanma, Jay Spina’s health care fraud was pervasive. Unlike in that case, however,
here the parties’ stipulated loss amount – between $3.5 and $9.5 million – specifically takes into
account that some of the claims paid by Insurance Providers (indeed more than 50% of the total
claims paid during the time period) may have been legitimate claims.

Further, in addressing potential disparities among similarly situated defendants, the Court
should look to other health care fraud cases where, like here, the defendant consciously or
recklessly disregarded the risk of death or serious bodily injury his conduct created. For example,
in United States v. Moran, 778 F.3d 942 (11th Cir. 2015), the defendants participated in a complex
and sustained fraudulent scheme involving partial hospitalization programs or PHP. PHP is a type
of program designed to provide intensive daily mental health treatment to certain eligible patients.
In Moran, the defendants submitted false and fraudulent claims for: 1) patients who were not
eligible for PHP treatment; 2) PHP services that were not medically necessary; and 3) PHP services
that were not actually provided. As part of the scheme, the defendants paid kickbacks and bribes
and falsified documents. Much of the patient population included chronic substance abusers or
elderly patients with dementia. The top defendant, who owned and operated the facility, faced a
Guidelines range of 292 to 365 months’ imprisonment, based on an actual loss of more than
$11,000,000 to Medicare. Like Spina, the defendant also received a 2-point enhancement for
conscious or reckless disregard of the risk of death or serious bodily injury, as well as 4 leadership
points. The district court sentenced the defendant to a Guidelines sentence of 360 months’
imprisonment. See id. at 969-70. In upholding the sentence, and in particular, the application of
the 2-point enhancement for conscious or reckless disregard of the risk of death or serious bodily
injury, the Eleventh Circuit noted that although no patients actually died or suffered serious bodily
injuries, the defendant’s program was not equipped to meet the needs of either the elderly patients
with dementia or the chronic substance abusers, many of whom suffered dangerous drug relapses.
Because the defendant knowingly failed to provide necessary treatments for the patients, the
appeals court found that his conduct created the risk of death or serious bodily injury. Id. at 977-
78. See also, e.g., United States v. Rodriguez, 491 Fed. Appx 65, 2012 WL 4465329 (11th Cir.
2012) (upholding 210-month sentence of owner of medical clinic that paid people to visit the clinic,
billed for unnecessary and unperformed procedures, and manipulated blood samples to support
billing who was convicted of healthcare fraud and money laundering; specifically upholding
application of 2-point enhancement for conscious or reckless risk of death or serious bodily injury
even though there was no evidence that the any patient was actually harmed); United States v.
Feldman, 647 F.3d 450 (2d Cir. 2011) (upholding 188-month sentence for defendant convicted of
health care and wire fraud and concluding that district court properly applied 2-level enhancement
for fraud involving conscious or reckless disregard of risk of death or serious bodily injury where

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the defendant used a website to solicit individuals to purchase organ transplants knowing they
suffered serious health problems).

To be sure, the circumstances of each of the above-cited cases are different than those
present here. But there are important similarities, such as the pervasive nature of the frauds, the
extensive efforts undertaken to conceal the fraud, and the reckless disregard of the risk of death or
serious injury posed by the fraudulent conduct. Further, the sentences in these other cases – all of
which are significantly longer than the 120-month Guideline range here – demonstrate that a
Guideline sentence or an otherwise substantial sentence here, would not be, as defense counsel
contends, an outlier or create an unwarranted disparity. Rather, such a sentence would account
for the particular and unique circumstances presented by this case and the defendant’s egregious,
long-lasting, and reckless conduct.

CONCLUSION

For the foregoing reasons, the Government respectfully submits that the Court should
impose on James Spina a Guidelines sentence of 120 months’ imprisonment.

Respectfully submitted,

GEOFFREY S. BERMAN
United States Attorney

By:_________________________
Kathryn Martin
Assistant United States Attorneys
(914) 993-1963

cc: Defense counsel (by email)

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