Desai, partner face allegations of conspiracy, health care fraud in federal indictment

Desai and his former chief operating officer, Tonya Rushing, were indicted by a federal grand jury Wednesday on conspiracy and health care fraud charges, some of which mirror state charges filed against Desai last year.

The indictment comes as medical officials are trying to determine whether Desai can ever face the state charges. He is under evaluation at Lakes Crossing, the state’s mental hospital in Sparks.

Desai attorney Richard Wright was baffled by federal prosecutors’ pursuit of some of the same charges filed in state court, especially after the finding of incompetency.

"The federal indictment doesn’t render him competent," he said.

The lawyer said he knew about the federal investigation but did not know until Tuesday that prosecutors planned to indict Desai.

"Are we going to go forward anyway and litigate his competency all over again?" Wright asked.

FEDERAL PROSECUTORS SEEK $8.1 MILLION

In all, Desai, 61, and Rushing, 43, are charged in the federal indictment with one count of conspiracy, 25 counts of health care fraud and a forfeiture count seeking to seize $8.1 million.

Rushing, a prosecution witness against Desai in the state case, has a May 6 arraignment on the new charges. Desai’s arraignment had not been set.

The indictment alleges the pair carried out a scheme from January 2005 through February 2008 to inflate the length of medical procedures and overbill health insurance companies for anesthesia.

The insurers included Medicare, Medicaid and private entities such as Blue Cross/Blue Shield, United Healthcare and the Culinary and Teamsters union health funds.

At two of Desai’s clinics, the Endoscopy Center of Southern Nevada and the Desert Shadow Endoscopy Center, nurse anesthetists were instructed to falsify anesthesia times for endoscopies and colonoscopies, the indictment alleges.

The nurses were ordered to list 31 minutes of anesthesia time for each procedure, even though they rarely required that much time, according to the indictment.

"Desai imposed pressure on all (clinic) employees to schedule and treat as many patients as possible in a given day," the indictment states.

At Desert Shadow, nurse anesthetists saw between 60 and 80 patients a day, making it impossible to spend 31 minutes with each patient, the indictment alleges.

Desai and Rushing in 2004 created a separate company, owned by Rushing, to handle the anesthesia billing at the clinics.

The company, Healthcare Business Solutions, received 9 percent of money collected for anesthesia services, giving Rushing "a financial incentive to inflate anesthesia time," the indictment states.

Between 2006 and 2007, the indictment charges, Rushing paid Desai $185,000 from money the company unlawfully earned.

U.S. Attorney’s office spokeswoman Natalie Collins declined to comment on the indictment.

IMPACT ON ROGER’S CASE UNKNOWN

District Attorney David Roger said he did not know how the federal indictment would affect the criminal case his office filed against Desai and two nurse anesthetists in June.

Desai, a gastroenterologist who gave up his medical license after the hepatitis outbreak at his clinics, and nurses Keith Mathahs and Ronald Lakeman face several felony charges, including racketeering, insurance fraud and neglect of patients.

The charges revolve around seven people whom authorities say were infected with the potentially deadly hepatitis C virus at Desai’s endoscopy clinics.

"It is unknown which prosecuting agency will take Desai to trial first," Roger said Wednesday after learning of the federal indictment.

He declined further comment.

But the charges against Rushing are likely to complicate Roger’s case. The district attorney did not charge Rushing, who has struck a deal to testify against Desai.

"Her indictment comes as a surprise to me because she’s been a cooperating witness with state and federal authorities," said Rushing’s attorney, Louis Schneider.

Schneider said he wasn’t sure now whether he would allow Rushing to take the witness stand in the state case, which is set to go to trial in March.

While state and federal prosecutors have the legal right to pursue the same charges, Wright said, "normally that’s not a judicious use of limited prosecutorial resources."

He said both jurisdictions have the same legal standards for competency, but he acknowledged that different judges can have different opinions on the issue.

A status check for Desai’s federal case was set for May 27. Wright said the defendant will not be expected to appear at that hearing.

U.S. CASE COULD GO FIRST, LAWYER SAYS

Douglas McNabb, a Washington, D.C., lawyer who specializes in federal criminal defense, said nothing would preclude a federal judge from finding Desai competent, despite the state court ruling to the contrary. The federal case then could proceed to trial during the delay of the state case.

"Is there something that the feds know that would allow the feds to argue that he is competent?" McNabb wondered aloud.

In March, under orders from District Judge Jackie Glass, Desai was taken to Lakes Crossing for observation. Two court-appointed medical experts from Las Vegas had found him incompetent to stand trial in the state case in light of two strokes in recent years.

Desai is being evaluated by state physicians, who will decide whether his competency can be restored. If Desai is deemed incompetent with no possibility of recovery, state law requires dismissal of the local charges.

The criminal investigation, which began shortly after health officials disclosed the hepatitis C outbreak in February 2008, was one of the largest by Las Vegas police.

Desai came under scrutiny after the Southern Nevada Health District linked cases of hepatitis C to his clinics. Officials notified more than 50,000 former clinic patients about possible exposure to blood-borne diseases because of unsafe injection practices.

As many as 250 former clinic patients infected with hepatitis have filed medical malpractice lawsuits. Thousands more have sued over the stress of having to be tested for hepatitis C.

Local health officials blamed the outbreak on nurse anesthetists reusing vials of the sedative propofol that were contaminated by syringes used on patients with hepatitis C.

Contact reporter Jeff German at jgerman@reviewjournal.com or 702-380-8135. Contact reporter Carri Geer Thevenot at cgeer@reviewjournal.com or 702-384-8710.