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Dr. Melgen blew $177 million, leaving zip for fraud victims, feds say

A staggering $177 million Dr. Salomon Melgen raked in giving painful and unnecessary injections and laser treatments to hundreds of elderly patients over six years is gone - leaving nothing to reimburse government insurance programs or compensate those who were pawns in his scam, a federal prosecutor said Wednesday.

While Assistant U.S. Attorney Carolyn Bell insisted the spending habits of the once revered Palm Beach County ophthalmologist would help U.S. District Judge Kenneth Marra decide how to appropriately sentence Melgen on 67 charges of health care fraud, Melgen’s attorney disagreed.

“This is being done to dirty up Dr. Melgen - to show he lived an extravagant lifestyle,” defense attorney Matthew Menchel told Marra. “We didn’t say the money went to Mother Teresa.”

Marra agreed that no purpose would be served by letting an FBI forensic accountant testify that Melgen spent hundreds of thousands of dollars on vacations, artwork, jewelry and a private jet and socked millions away in trusts for his wife and two adult children.

His nearly $1 million in contributions to U.S. Sen. Robert Menendez, D-New Jersey, have been well publicized. They formed the basis of a trial in New Jersey on influencing-peddling charges against the two longtime friends - a trial that ended last month in a hung jury.

“It’s not going to have an impact on me that he spent money on vacations or that he gave Sen. Menendez $1 million,” Marra said. “That’s what all people who commit these types of frauds, these types of crimes, do - they spend it on themselves and their families.”

Instead, he allowed forensic accountant Nestor Mascarell only to detail how much Melgen made from patients who streamed into his retinal clinics in West Palm Beach, Delray Beach, Wellington and Port St. Lucie in hopes he could slow the progression of age-related wet macular degeneration that was slowly stealing their sight.

» RELATED: Dr. Salomon Melgen made millions from Medicare, FBI analyst says

Combing through Melgen’s bank records, Mascarell said, he discovered the 63-year-old retinal specialist received $102 million from Medicare and $10 million from Medicaid from 2008 through 2013. Private insurers paid him another $62 million. While friends and family who testified on Melgen’s behalf spoke about how he would often treat the poor for free, records showed patients wrote checks totalling $3 million for their treatment, Mascarell said.

In addition, Mascarell said Melgen earned roughly $7 million more from other sources, including unspecified settlements and wires the doctor, who was born in the Dominican Republic, received from outside the country.

“He takes in $184 million - 83 percent of which comes from his practice - and he spends all of it so nothing is available for restitution,” Bell said.

While other white criminals come to court waving checks they paid those they defrauded in hopes of winning lenient sentences, Melgen drained his accounts, she said. “Nothing was put aside,” said Bell, who is pushing for a 30-year sentence. While making it clear they consider 30 years too much, Melgen’s attorneys haven’t said how long they believe he should remain behind bars.

Marra listened to Mascarell’s abbreviated description of his findings but the judge was more interested in testimony from two statisticians, who offered vastly different views of how prosecutors figured out the extent of Melgen’s fraud. Because of the way federal sentencing guidelines work, the bigger the fraud, the longer the sentence.

During the roughly seven-month trial that ended in April with Melgen’s conviction, Menchel and defense attorney Kirk Ogrosky insisted prosecutors cherry-picked Melgen’s patient records, looking for the worst cases to shore up their claims that Melgen falsely diagnosed and treated hundreds of patients for eye diseases they didn’t have to drive up his Medicare billings.

One of the most egregious cases prosecutors cited was patient Kermit Foster. Melgen billed Medicare for treating Foster’s prosthetic eye.

Statistician Donna Mohr, a former University of North Florida professor who served as a consultant for Medicare billing and testified for Melgen, said it appeared Foster was added to a group that was supposed to be a random sample of 310 Melgen’s 1,600 Medicare patients. That, she said, would skew what was supposed to be the random sample prosecutors devised to determine how much of Melgen’s practice was legitimate and how much was fraudulent.

With the help of their own statistician, Radleigh Santos, prosecutors claim that 77 percent of Melgen’s practice was fraudulent - which would drive the total loss to nearly $100 million.

Pointing to the inclusion of Foster and other irregularities in the way the random sample was crafted, Mohr disputed prosecutors’ methods. “The potential for cherry-picking is so strong it’s discarded by statisticians,” she said. Prosecutors insisted Foster wasn’t included in the sample.

Marra quizzed both Santos and Mohr about their complicated calculations and what factors they considered when weighing the validity of the methods used to calculate how much of Melgen’s practice was fraudulent.

Afterward, he said, due to the complexities surrounding the issue and other factors he must consider, it’s unlikely he will sentence Melgen today when the three-day hearing concludes. Instead, he said, he will schedule another hearing to announce his decision.

Melgen, dressed in a blue prison jumpsuit and led to and from the courtroom in shackles by U.S. marshals, has showed little emotion. His eyes appeared to redden when Flor, his wife of 36 years, told Marra that her husband had been unfairly prosecuted.

“I know his passion for his patients. He worked nonstop 12 hours or more each day,” she said. “Maybe that is where he went wrong. Maybe if he hadn’t worked so many long hours, he wouldn’t have made mistakes. … But my husband is not the person prosecutors have described.”

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