Two Orange County men who worked as sales representatives
for a medical supply company were arrested this
morning on charges that they caused their employer
to fraudulently bill Southern California hospitals
for approximately $3.5 million in spinal implant
products that never were used
during surgery.
Jason A. Koenig, 33, and Mark A. Crane, 45, both
of Huntington Beach, were indicted separately
on Wednesday by a federal grand jury in Santa
Ana. Koenig and Crane both worked for Depuy Acromed,
Inc. (DAI), a subsidiary of the Johnson &
Johnson company. The indictments allege 20 counts
of mail fraud against Koenig and 18 counts of
mail fraud against Crane.
Koenig and Crane were DAI sales representatives
specializing in spinal implant products from early
February 2000 to approximately October 2002. Their
combined sales territories included approximately
15 hospitals throughout Orange and Los Angeles
Counties, including St. Jude's Medical Center
in Fullerton and St. Joseph's Hospital in Orange.
As sales representatives, Koenig and Crane were
paid with commissions based upon the number of
spinal implant products sold by DAI to be used
in spinal surgeries. Koenig and Crane would be
present during the surgery to monitor what spinal
implant products were used and thereafter would
supply a list of
the spinal implant products purportedly used during
the surgery to the hospital and to DAI for billing.
Koenig allegedly caused hospitals to be overcharged
approximately $2 million, and Crane is allegedly
responsible for approximately $1.5 million in
overbilling, by falsifying the lists of spinal
implant products purportedly used during the surgeries.
These lists were fraudulent for
several reasons because the number of spinal implant
products billed were up to three and four times
the number of spinal products actually used during
the spinal surgery, and some of the spinal implant
products billed were for types of products that
the surgeon never used during the spinal surgery.
The investigation into Koenig's and Crane's
activities began when one hospital noticed an
extremely high bill for a spinal surgery. Another
hospital noticed that its spinal surgery costs
were way over budget, with the exception of one
month when Koenig was on vacation. These hospitals
then
compared hundreds of operative reports and patient
X-rays against the bills submitted by various
sales representatives. The hospitals determined
that only the bills submitted by Koenig and Crane
contained additional charges for spinal implant
products that never were used during surgery.
As a result of the inflated number of spinal
implant products being billed, Koenig was named
Salesman of the Year as the highest-billing salesman
of DAI's spinal implant products in 2001, and
received almost $700,000 in commissions. Crane
was the second-highest-billing salesman of
spinal implant products at DAI, receiving almost
$500,000 in commissions in 2001.
DAI does not appear to have known about the
activities of its two employees, and DAI was not
a target of the investigation. DAI has been cooperating
with the investigation.
An indictment contains allegations that a defendant
has committed a crime. Every defendant is presumed
innocent until and unless proven guilty beyond
a reasonable doubt.
Koenig and Crane are expected to make their
initial court appearances in United States District
Court in Santa Ana this afternoon.
Each mail fraud count in the indictments carries
a statutory maximum sentence of 20 years in federal
prison.
The case was investigated by the United States
Postal Inspection Service and the Federal Bureau
of Investigation.
CONTACT: Assistant United States Attorney Jeannie
M. Joseph (714) 338-3576
Release No. 03-158