Psychiatric CEO sentenced to 25 years prison for Medicaid fraud
September 17, 2013
When she learned she would have to surrender immediately to federal marshals Tuesday, Karen Kallen-Zury leaned over to her husband, Tamir, whispered into his ear and gave him a kiss.
Then, as she turned away in the Miami courtroom, the former CEO of the Hollywood Pavilion psychiatric facility placed her hands over her heart, as if the blow of a judge’s 25-year prison sentence for Medicare fraud had finally struck the 60-year-old Lighthouse Point woman.
U.S. District Judge Jose Martinez revoked Kallen-Zury’s $3 million bond and ordered her to repay about $40 million to the taxpayer-funded Medicare program, calling her offense a “terrible crime.”
The judge also delivered lengthy prison sentences to two other Hollywood Pavilion executives who were convicted this summer along with Kallen-Zury. Martinez gave Daisy Miller, 44, of Hollywood, a 15-year sentence, and Christian Coloma, 49, of Miami Beach, a 12-year term. He ordered Coloma, a former therapist/administrator, to surrender immediately, but allowed Miller, the Pavilion’s former inpatient clinical director, to remain free on bond while she pursues an appeal because she is the mother of two young girls.
Although the prison terms were substantial, Justice Department prosecutors had sought harsher sentences for all three defendants: 40 years for Kallen-Zury, 30 years for Miller and 25 years for Coloma. Kallen-Zury’s attorney sought house arrest at her waterfront home, but was denied. The others’ attorneys also sought house arrest or much shorter sentences, to no avail.
Justice Department prosecutor Robert Zink called Hollywood Pavilion’s psychiatric hospital “something out of a horror movie,” in which Kallen-Zury led a bribery conspiracy to lure patients to “rooms infected with insects” and then “kicked them to the curb” after their Medicare benefits ran out.
Kallen-Zury’s attorney Michael Pasano scoffed at the prosecutor’s characterization, calling it an “exaggeration.”
“Mrs. Kallen-Zury did not throw patients into a cell and lock the door,” Pasano said, challenging the government’s portrayal of Hollywood Pavilion, which is across the street from Memorial Regional Hospital, as a “horror show.”
Pasano submitted an array of letters from family members, friends, colleagues and employees, noting that “the sentiments in these letters are consistent and strong: Mrs. Kallen-Zury is a good, honest person who should not go to jail.” Many of those supporters packed the judge’s courtroom for her sentencing.
Kallen-Zury herself sought mercy from Martinez, depicting herself as a woman whose imprisonment would also destroy the lives of those close to her.
“I am the mother of a 16-year-old son and the daughter of a 90-year-old mother, who both need me, each in their own special way,” said Kallen-Zury, whose late father founded Hollywood Pavilion. “I am worried what will happen to them.”
In June, a federal jury found that Kallen-Zury conspired with the other defendants to submit false Medicare claims for $67 million over almost a decade. The 12-person jury also found that Medicare was tricked into paying almost $40 million to Hollywood Pavilion, whose CEO and others covered up the scheme by falsifying the records of ineligible patients and fabricating marketing contracts with patient recruiters. The recruiters, many of them convicted felons, were paid more than $1 million for the patient referrals.
The jury found most of the defendants guilty of conspiracy, healthcare fraud, wire fraud and kickback offenses.
The prosecution of Hollywood Pavilion’s executives was the latest federal crackdown against operators of mental-health facilities accused of bilking the vulnerable Medicare program by charging for the purported treatment of mostly alcoholic and drug-addicted patients who did not need the therapy or receive it. The prison sentences for convicted operators in other cases ranged from 20 to 50 years, so the odds against Kallen-Zury were particularly daunting.
“In this case, the fraud scheme is a derivative of a larger crime — the exploitation of human beings to obtain unfettered access to their taxpayer-funded, government-administered insurance benefits, all for personal gain,” Zink wrote in a court filing. “Kallen-Zury was the mastermind.”
At trial, Kallen-Zury was convicted of conspiring with Miller to file false Medicare claims. But Miller, who was represented by attorney Daniel Rodriguez, told the judge that she “never knew anything criminal was going on at Hollywood Pavilion.”
“If anyone was hurt, I am truly, truly sorry,” said a sobbing Miller, who is a state-licensed social worker.
Kallen-Zury was also convicted of conspiring with Coloma to pay $1 million in bribes to recruiters to supply Medicare patients from South Florida and out of state to Hollywood Pavilion — a scheme that Justice Department prosecutor Andrew Warren called a “linchpin” of the overall healthcare fraud.
Coloma’s defense attorney, Ronald Gainor, accused the government of “demonizing” his client.
A fourth defendant, Michele Petrie, 64, former director of Hollywood Pavilion’s outpatient facility, was found guilty of conspiracy and healthcare fraud. But she was also the only defendant acquitted of any charges, namely two wire-fraud counts.
Petrie’s sentencing is scheduled for Dec. 18.
The Hollywood Pavilion case, bolstered by Tamarac psychiatrist Alan Gumer and other cooperating witnesses convicted in similar mental-health fraud schemes in South Florida, was investigated by agents with the FBI and the U.S. Department of Health and Human Services’ Office of Inspector General.
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