Co-Owner of NC Durable Medical Equipment Co: Sentenced to Prison

RALEIGH -- FOR IMMEDIATE RELEASEDepartment of Justice U.S. Attorney’s Office Eastern District of North Carolina  Friday,

August 27, 2021

Co-Owner of North Carolina Durable Medical Equipment Company Sentenced to Prison for Role in Defrauding Medicaid
RALEIGH, N.C. – A Morehead City woman was sentenced today to 30 months in federal prison, followed by three years of supervised release on a charge of Making Material False Statements Relating to Healthcare Matters, in violation of Title 18, United States Code, Section 1035(a)(2).  Shelly Phillips Bandy, 41, was also ordered to make restitution of $374,809.92, jointly and severally with her company, A Perfect Fit For You, Inc. (APFFY).  Bandy is also liable for a civil judgment of $34,708,945.42 arising from the same conduct.

According to court documents, APFFY was a durable medical equipment provider located in Morehead City, North Carolina.   Durable medical equipment includes items such as powered wheelchairs, orthotic braces, diabetic shoes, powered air flotation beds, osteogenesis stimulators, pneumatic compressors, etc.  Between March 2015 and November 2016, one or more employees of APFFY submitted fraudulent billings claims to Medicaid for providing durable medical equipment to Medicaid recipients.  These fraudulent claims contained the personal identifying information of Medicaid recipients who had never ordered nor received any durable medical equipment from APFFY.   In fact, some of the patients had been deceased years before the false claims were even submitted.  This scheme resulted in an estimated loss to Medicaid of approximately $10,069,361.35.

After appointment of a receiver, APFFY self-reported suspected fraudulent activity to the North Carolina Medicaid Investigations Division.  Thereafter, the company cooperated throughout the investigation.

On December 13, 2017, and based on the conduct described above, the United States and State of North Carolina filed a civil complaint under the federal and state False Claims Acts against APFFY and its owners Margaret Gibson, and Bandy. The federal and North Carolina False Claims Acts mandate that the Governments recover triple the money falsely obtained, plus substantial civil penalties for each false claim submitted.  To resolve those claims, the APFFY agreed to pay $20,138,722.70, while Gibson has agreed to pay $4,000,000.  As for Bandy, the United States and State of North Carolina obtained a $34,708,945.42 default judgment against her in the civil action.  It should be noted that the civil claims against A Perfect Fit for You, Inc. and Gibson are allegations only and were resolved by settlement.  There was no judicial determination or admission of liability as to them in the civil case.

In addition to the civil case, APFFY pled guilty to a Criminal Information charging Health Care Fraud, in violation of Title 18, United States Code, Section 1347.  On March 2, 2021, the company was sentenced to 5 years’ probation and ordered to pay a $2,000,000 fine in addition to paying $10,069,361.35 in restitution to the North Carolina Medicaid Program on a charge of Healthcare Fraud, in violation of Title 18, United States Code, Section 1347. 

On December 29, 2020, Bandy pled guilty to making false statements relating to health care matters in violation of Title 18, United States Code, Section 1035.  Bandy admitted to submitting fraudulent claims to Medicaid on behalf of APFFY.  Specifically, Bandy admitted that on January 1, 2016, she billed Medicaid for 43 fraudulent claims, totaling $626,773.79.  Medicaid subsequently paid $374,809.92 for those claims.

Today, in ordering Bandy to serve 30 months in federal prison, the court noted that as a society, citizens have decided to provide healthcare for the very poorest among us.  In doing so, the Court noted that the Medicaid program is a system of trust.  “The whole system is built on honesty,” the court stated.  “If you break faith with the honor system that we built to care for the least among us, a person who does that needs to know … you will go to a penitentiary.”  In stating this, the Court expressly rejected the defendant’s argument for a probationary sentence.

G. Norman Acker, III, Acting United States Attorney for the Eastern District of North Carolina made the announcement after sentencing by U.S. District Judge James C. Dever III.  The investigation of this case was conducted by the North Carolina Department of Justice’s Medicaid Investigations Division (MID) and the United States Department of Health and Human Services Office of the Inspector General.   Assistant United States Attorney William M. Gilmore is the prosecutor on the criminal case, while Assistant United States Attorney C. Michael Anderson represented the United States in the civil case.  Special Deputy Attorneys General F. Edward Kirby, Jr. and Michael M. Berger, who also serve as a Special Assistant United States Attorneys, represented the United States and the State of North Carolina in the civil case.

The MID investigates and prosecutes health care providers that defraud the Medicaid program, patient abuse of Medicaid recipients, patient abuse of any patient in facilities that receive Medicaid funding, and misappropriation of any patients’ private funds in nursing homes that receive Medicaid funding.  To report Medicaid fraud or patient abuse in North Carolina, call the MID at 919-881-2320.

The MID receives 75 percent of its funding from the U.S. Department of Health and Human Services under a grant award totaling $6,160,252 for Federal fiscal year (FY) 2020. The remaining 25 percent, totaling $2,053,414 for FY 2020, is funded by the State of North Carolina.
Topic(s): 
Health Care Fraud
Component(s): 
USAO - North Carolina, Eastern
Updated August 27, 2021