Case 8:09-cv-00818-DOC -RNB Document 315-1 Filed ... - Waverton

Case 8:09-cv-00818-DOC -RNB Document 315-1 Filed 06/25/10 Page 1 of 35 

enterprise, necessary only for the fact that SHER himself is nota-licensed 

radiologist. 

HILLEL SHER TRANSFERRED OWNERSHIP OF THE ACCOUNTS RECEIVABLE 

OF THEPCs TO MCC and MEDTRX CAPITAL/MEDTRX PROVIDER, WHICH 

FULLY FUND THE PCs 

169. The only potential asset of each of the PCs is its accounts receivable. 

170. Yet, the PCs do not own their accounts receivable. 

171. Dr. SCHEPP does not own the accounts receivable of DEAJESS, 

PREFERRED and BOSTON POST. 

172. Dr. CAROTHERS does not own the accounts receivable of CAROTHERS 

173. Rather, MCC, owns the accounts receivable of DEAJESS, PREFERRED 

and BOSTON POST, pursuant to written Purchase Agreements. 

174. Likewise, MEDTRX CAPITAL owns the accounts receivable of 

CAROTHERS PC, pursuant to a Loan and Security Agreement. 

175. Upon information and belief, MEDTRX PROVIDER has an ownership 

interest in the accounts receivable of CAROTHERS PC. 

176. Upon information and belief, ADVANCED HEALTH CARE SOLUTIONS, 

LLC has an ownership interest in the accounts receivable of CAROTHERS Pc. 

177. Pursuant to each agreement, the PCs are funded up front by MCC and 

MEDTRX. 

178. Pursuant to said agreements, the PCs have already been compensated 

for the billing they generated to be submitted to plaintiffs. 

179. Pursuant to said agreements, the PCs have already been compensated 

at a flat rate for the billing they generated to be submitted to plaintiffs. 

180. Pursuant to said agreements, HILLEL SHER through companies under 

his direction and control, dictated the compensation, earnings and profits of the 

PCs. 

181. The funding received by DEAJESS, PREFERRED and BOSTON POST 

from MCC pays the compensation of Dr. SCHEPP. 

182. The funding received- by the CAROTHERS PC from MEDTRXCAPITAL 

pays the compensation of Dr. CAROTHERS. 

23


1'83; The funding received-by-the-CAROTHERS PC from MEDTRX PROVIDER- --, 

pays the compensation of Dr. CAROTHERS. 

184. The funding received by the CAROTHERS PC from ADVANCED HEALTH 

CARE SOLUTIONS, LLC pays the compensation of Dr. CAROTHERS. 

185. The funding received by the PCs pursuant to these agreements pays 

the compensation to all of the technicians who perform radiology services in the 

name of the PCs. 


for the "management services" provided by HILLEL SHER and/or entities under his 

control and direction. 

----~t87-:---The fu n d i n-g-received byi:he-PC--s-pursuantto-ttresEnrgre-ements-paYs-- - -- - 

for the equipment rental provided to the PCs by HILLEL SHER and/or entities under 

his control and direction. 


for the site rental provided to the PCs by HILLEL SHER and/or entities under his 

control and direction. 

189. Thef'8nding=Feceived by the PCs pursuant to these agreements is the 

sole source of income of these PCs. 

190. That HILLEL SHER directed that the funding of the PCs be made and 

continued pursuant to these agreements establishes that the true existence of the 

PCs is to funnel money into the hands of non-licensed medical professionals. 

191. The accounts receivable of DEAJESS, PREFERRED and BOSTON POST 

are owned and controlled not by a licensed medical professional, but by lay 

persons. 

192. The accounts receivable of CAROTHERS, PC are owned and controlled 

not by a licensed medical professional, but by lay persons. 

193. A "factoring agreement" has been defined as "the sale of accounts 

receivable of a firm to a factor at a discounted price" In re Metropolitan 

Environmental, Inc., 293 B.R.893 (Bkrtcy.N.D.Ohio 2003), citing Black's Law 

Dictionary 592 (6th Edition, 1990). It has also been defined as "the purchase of 

accounts receivable ·from a business by a ·factor who thereby assumes the risk of 

loss in return for some agreed discount." Carter v. Four Seasons Funding 

Corporation, 351 Ark. 637, 97 S.W.3d 387, 395 (2003). 

24


-194." In separate Purcha-seAgreements, all right, title 'and interest that 

DEAJESS, PREFERRED and BOSTON POST ever had in their OWn accounts receivable 

was transferred by HILLEL SHER through GLOBAL to MCC. 

195. The law firm of Fazio, Rynsky & Associates represents DEAJESS, 

PREFERRED and BOSTON POST in numerous claims pending in arbitration and in 

civil court actions. Said law firm also initially represented all plaintiffs in the MCC 

Action, including Dr. SCHEPP, DEAJESS, PREFERRED and BOSTON POST and MCC. 

196. A partner of the Fazio firm, Tom Fazio, Esq., was named as an 

"Additional Defendant" in the MCC Action. 

197. Mr. Fazio, acting as a party to the MCC Action, and when describing 

-tnePurchase 7S.greements covering the accounts receivable of De-AJESS,---~---~-'-""-' 

PREFERRED and BOSTON POST, swore in a March 22, 2005 Affidavit filed in the 

MCC Action at paragraph "16" as follows: 

It is similar to a traditional factoring arrangement except that 

it is a true sale of receivables, where such sales are allowed by 

applicable law. 

198. The separate Purchase Agreements involving the accourits-re'ceivabie 

of DEAJESS, PREFERRED and BOSTON POST contained substantially identical terms. 

199. Under said Purchase Agreements, GLOBAL was obligated to transfer to 

the MCC entity all tangible evidence of each account, including but not limited to 

patient records, reconciliations, insurance information[ provider information and all 

documentation to allow the MCC entity to collect on the accounts purchased. 

200. A subsequent Purchase Agreement was entered into between FORUM 

and MEDICAL CAPITAL HOLDINGS for the purchase of the accounts receivable of 

PREFERRED, under the same terms and conditions as set forth in the previous 

Purchase Agreements. 

201. HILLEL SHER personally guaranteed the representations, warranties 

and performance of the obligations of GLOBAL and FORUM under each of the 

respective Purchase Agreements. 

202. Under each of said Purchase Agreements, HILLEL SHER, as the sole 

shareholder of FORUM and GLOBAL, was required to execute'and-to deliver to he 

respective buyers of all documents requested by such buyer in order to vest in that 

25


buyer all right, title and in~erest"in·he accounts receivable once the accounts 

receivable were sold. 

203. Pursuant to the Purchase Agreements, a MCC entity purchased the 

accounts receivable from GLOBAL and FORUM on a weekly basis. 

204. The purchase price of the accounts receivable resulted in 

approximately 80 per cent of the value of the accounts receivable being 

immediately released to SHER and SCHEPP. 

205. If the full value of the account was not collected within an agreed-upon 

time frame, the seller was obligated to remit to the MCC entity the difference, 

either in funds, or by providing the buyer with other accounts receivable of equal 

- ····----·--am:otiene-dVCflmnvtthtn an agreed upon ti1Tie:"-----.----------.-----.-----.- 

206. In practice, each week GLOBAL or FORUM would present to the 

respective MCC entity, as the buyer, several hundred accounts for purchase. After 

the accounts were analyzed by the buyer, the buyer would transmit a bill of sale to 

GLOBAL or FORUM to be signed by HILLEL SHER. 

207. Once the bill of sale was signed and returned to the MCC entity as 

buyer, payment was rendered, and the actuaH-;iles,·ef:DEAJESS, PREFERRED and 

BOSTON POST, containing all supporting documents necessary for billing, would be 

transferred by HILLEL SHER through GLOBAL or FORUM for collection. 

208. The duties of collection were assigned by HILLEL SHER and MCC to 

HCFMA as of May 2004. 

209. In the same MCC Action/ the Fazio firm filed an Affidavit dated 

December 16, 2004/ and signed by Joseph Lampariello. 

210. Joseph Lampariello signed said Affidavit as the President and Chief 

Operating Officer of MEDICAL CAPITAL HOLDINGS, INC., MEDICAL CAPITAL 

CORPORATION/ HEALTHCARE FINANCIAL MANAGEMENT & ACQUISITIONS and 

CARLMONT CAPITAL SPECIAL PURPOSE CORPORATION II, and as Secretary and 

Chief Operating Officer of MEDICAL CAPITAL MANAGEMENT, INC. 

211. At paragraph "15" of said Lampariello Affidavit, it was stated that 

[o]nce the Bill of Sale is signed - even before the physical files 

are transferred into the Buyer's possession - the accounts 

receivable are' conSidered the property of "the Buyer:" 

26


212. Under the Collection Agreements, either GLOBAL or FORUM is 

required to provide HCFMA with all tangible evidence of the accounts, including all 

documents that will allow HCFMA to collect on these accounts. 

213. In the event that HILLEL SHER, GLOBAL or FORUM received any 

payment from an insurance company, such payment must be sent to a "Lock Box", 

controlled by MCC. 

214. MCC and/or one of its wholly owned subsidiaries is the owner of the 

accounts receivable of DEAJESS, PREFERRED and BOSTON POST. 

215. Joseph Lampariello has admitted, on behalf of MEDICAL CAPITAL 

HOLDINGS, INC./ MEDICAL CAPITAL CORPORATION, HEALTHCARE FINANCIAL 

-----~Am-c;-EMEI\JT-&A_cqtJ1SITIOT\IS, CARlMON I CAPI t AL SPECIAL PURPOSE 

CORPORATION II, and MEDICAL CAPITAL MANAGEMENT, INC., that the purchasers 

of the accounts receivable of DEAJESS, PREFERRED and BOSTON POST are the 

"rightful owners" of said accounts receivable. 

216. Dr. SCHEPP has testified that all of the accounts receivable of 

DEAJESS, PREFERRED and BOSTON POST have been sold to MCC and/or one of its 

wholly owned subsidiaries; and the transfer of same constitutes further proof of 

SHER's illegal ownership of the PCs. 

AS AND FOR A FIRST CAUSE OF ACTION 

(Against All Defendants) 

(Common Law Fraud) 

217. Plaintiffs repeat and reallege the allegations set forth in paragraphs 1 

through 216 of this Complaint with the same force and effect as if set forth fully herein. 

218. The Defendants are jointly and severally liable for the acts and omissions 

set forth in paragraphs 1 through 209. 

219. The Defendants intentionally, knowingly, fraudulently, and with an intent to 

deceive Plaintiffs and the public, omitted material facts and made material 

misrepresent9tion~ _0) intending to hold out the PCs as legal and lawfully operating 

professional service corporations when they were not and (ii) intending to fraudulently 

induce plaintiffs to make payments to which Defendants were not entitled . 

.. 220. The Defendants intentionally, knowingly, fraudulently and with an intent to 

deceive Plaintiffs, patients and the general public, concealed the fact that unlicensed 

persons were the true owners of the PCs by making false representations of material 

27


facts,-lncluding but not limited to the following: (i) falsely setting forth the name of eachof 

the PCs as a professional corporation owned by a licensed healthcare professional in 

bills and reports intended to deceive and mislead the Plaintiffs into believing that the PCs 

were legal professional corporations; (ii) providing false and misleading statements and 

information regarding who owned, controlled and operated the PCs; (iii) providing false 

and misleading statements and information intended to mislead Plaintiffs into believing 

that the PCs were being operated by the licensed professional-shareholders indicated in 

their respective certificates of incorporation; (iv) providing false and misleading 

statements and information intended to circumvent the laws of New York State that 

prohibit ownership by individuals not licensed to practice the profession for which a 

------------professional-COTpuratiurr was irrcoTp-urate


turpitude and wanton dishonestyirtfplying a criminal indifference; which entitles plaintiffs 

to punitive damages. Plaintiffs are entitled to an award of punitive damages to protect 

the public by deterring the Defendants and others from engaging in similar conduct in the 

future. 

~~_~ __ ~~ __ 22~Z. 

AS AND FOR A SECOND CAUSE OF ACTION 

(Unjust Enrichment/Restitution) 

(Against all Defendants) 

226. Plaintiffs repeat and reallege each and every allegation contained in 

Paragraphs 1 through 216 with the same force and effect as if set forth fully herein. 

The Defendants, individllalb,ulncU:hrough their cor:por:atlons-wer:e-engag-ed-ir:l--- 

a common scheme designed to defraud insurance companies, including plaintiff. 

228. The Defendants are jointly and severally liable for the acts and omissions 

set forth in paragraphs 1 through 209. 

229. By reason of their wrongdoing, Defendants have been unjustly enriched at 

the expense of the plaintiff, in that they have received monies from Plaintiffs that are the 

result of unlawful conduct and that{ in equity g.n999()!=LS:9nscience, they should not be 

permitted to keep. 

230. Plaintiffs are entitled to restitution from Defendants in the amount by which 

Defendants have been unjustly enriched, in excess of $3,000,000.00 (Three Million 

Dollars), the exact amount to be determined at trial, plus interest and costs and such 

other relief as this Court may deem just. 

AS AND FOR A THIRD CAUSE OF ACTION 

(Declaratory Judgment) 

(Corporate Practice of Medicine) 


Paragraphs 1 through 216 of this Complaint with the same force and effect as if set forth 

fully herein. 

232. In order to be eligible to receive no-fault benefits, an assignee provider must 

adhere to all applicable New York statutes, which grant the authority to provide health 

services in New York State. 

29


CZ33; . The [jefendants ·submitted-assigned no-fault claims arising from the-PCs'-·'·' - -. 

services that were denied by the Plaintiffs or for which payment was delayed pending 

receipt of additional information and which, therefore, constitute outstanding claims. 

234. The PCs have not withdrawn the outstanding claims and on some claims have 

Instituted suit or arbitration. 

235. The Defendants continue to submit no-fault claims to Plaintiffs for services 

allegedly rendered by the PCs regardless of this fraudulent incorporation and continued 

violation of New York Law. 

236. Plaintiffs respectfUlly request that this Court issue a judgment declaring that 

the Plaintiffs are under no obligation to pay any of the no-fault claims of the PCs, past, 

pending or future, Because the pes are not wholly owned15y licensed professionals, and, 

are fraudulently incorporated, with licensed professionals acting as nominal owners with 

the true ownership by unlicensed persons concealed. 

237. Without such a declaration, the Defendants will continue to bill Plaintiffs for 

No-fault services arising from the PCs even though the PCs are not wholly owned by 

licensed professionals and are operating as illegal and fraudulent corporations. 

238. A justifiable controVersy exists between Plaintiffs and the PCs and the statute 

of limitations to challenge the denied claims has not yet run. 

239. Plaintiffs have no adequate remedy at law. 

AS AND FOR A FOURTH CAUSE OF ACTION 


(Fee-Splitting) 



fully herein. 

241. Only properly owned and licensed professional medical corporations may bill 

and seek recovery from a No-fault insurance carrier. There is no right to No-fault benefits 

where the provider is not properly incorporated (11 NYCRR 65.15 and Insurance Law 

§5108). A professional medical corporation must be owned and operated by licensed 

medical doctors (Business Corporations Law §1503(b) and §1507). 

242. Further; a licensed phYSician is prohibited from sharing fees with nonphysicians 

(8 NYCRR §29.1(b)(4); Education Law §6511 and §6530(19)). 

30


--243-. Pursuant to Sections -6530 and 6531 of the Education Law and 8 ..---- -~------ 

NYCRR § 29.1, a professional licensed pursuant to Title VIII of the Education Law is 

prohibited from permitting any person to share in the fees for professional services, 

other than another person or entity authorized to practice the same profeSSion, or a 

legally authorized trainee practicing under the supervision of a licensed practitioner. 

244. Under Sachs v. Saloshin, 138 A.D.2d 586 (2 Dept. 1988) and Baliotti 

v. Walkes, 115 A.D.2d 581, (2 Dept. 1985), the Second Department held that 

payment of a percentage of patient fees to non-professionals pursuant to a 

management agreement were illegal fee splitting arrangements in violation of 

Education Law. In Accident Claims Termination Corp. v. Durst, 224 A.D.2d 343 (1 

~-~na Greene v. Metropolitan Insurance,74 Mlsc.2cr932 (Buffalo Co. Ct., 

1973), it was held that claims for payment by individuals illegally engaged in the 

practice of medicine are unenforceable. In Operant v. N.Y.S. Department of Sdcial 

Services, 644 N.Y.S.2d 24 (1 Dept. 1996) and Schorr v. Bernard MacFadden 

Foundation. Inc., 5 A.D.2d 151 (4 Dept. 1958), the First and Fourth Departments 

held that a payment of a percentage of medical fees to a lay person billing company 

~,- "constituted unacceptable practice. See also Necula v. Glass, 231 A.D.2d 45L.,:u4r:: ' ' 

N.Y.S.2d 501 (1st Dept. 1996); Pomerantz v. New York Dept. Of Social Services, 

644 N.Y.S.2d 24 (1st Dept. 1996) (split of payment of less than 20% where a lay 

person was permitted to submit the bills on behalf of the provider with his provider 

number constituted unacceptable practice). 

245. Upon information and belief, Dr. SCHEPP and Dr. CAROTHERS, through 

the PCs, engaged in unlawful fee-splitting with Defendants SHER, GLOBAL, FORUM, 

MCC, MEDTRX CAPITAL, MEDTRX PROVIDER and ADVANCED HEALTH CARE 

SOLUTIONS, LLC. As such, the Dr. SCHEPP, Dr. CAROTHERS and the PCs do not 

have standing to submit claims for no-fault benefits nor do they have standing to 

receive payment for no-fault benefits under New York Law. 

246. The Defendants submitted assigned no-fault claims arising from the 

PCs' services that were denied by the Plaintiffs or for which payment was delayed 

pending receipt of additional information and which, therefore, constitute 

outstanding claims. 

247. The PCs have not withdrawn the outstanding claims and on some claims have 

instituted suit or arbitration. 

31


--248. The Defendants continue to submit no-fault claims to Plaintiffs for servicesallegedly 

rendered by the PCs regardless of this unlawful and continued fee-splitting in 

violation of New York Law. 

249. Plaintiffs respectfully request that this Court issue a judgment declaring that 

the Plaintiffs are under no obligation to pay any of the no-fault claims of the PCsr pastr 

pending or future, because Dr. SCHEPPr Dr. CAROTHERS and the PCs are engaged in 

unlawful fee-splitting. 

250. Without such a declarationr the Defendants will continue to bill Plaintiffs for 

No-fault services arising from the PCs even though the PCs engaged in unlawful feesplitting. 

---------'725-1-. -A-justificrble-colltl oversy exists betweenl'"latntiffs-ancf DF:-SCHEPP~l)T.----- 

CAROTHERS and the PCs and the statute of limitations to challenge the denied claims has 

not yet run. 


AS AND FOR A FIFTH CAUSE OF ACTION 


(Transfer of Accounts Receivable) 



fully herein. 

254. ClearlYI only a patient or the patient's assignee has standing to be 

reimbursed for no-fault billingr and that right cannot be transferred to any other 

person or entity.A.B. Medical Services PLLC v. Liberty Mut. Ins. Co.( 9 Misc.3d 36, 

801 N.Y.S.2d 690 1 2005 N.Y. Slip Op. 25277 (N.Y.Sup.App.Term,2005). See also 

Rockaway Blvd. Medical P.e. v. Progressive Ins., 9 Misc.3d 52 r 802 N.Y.S.2d 302, 

2005 N.Y. Slip Op. 25278 (N.Y.Sup.App.Term, July 7,2005); A.B. Medical Services 

PLLC Royalton Chiropractic P.e. v. New York Cent. Mut. Fire Ins. Co., 8 Misc.3d 

132(A), 801 N.Y.S.2d 776 (Table), 2005 WL 1661990 (N.Y.Sup.App.Term), 2005 

N.Y. Slip Op. 51111(U) (N.Y.Sup.App.Term,2005). 

255. By virtue of the transfer of ownership of the accounts receivable of 

DEAJESS, PREFERRED and BOSTON POST, HILLEL SHER has removed the standing 

of DEAJESS, PREFERRED and BOSTON POST for no-fault reimbursement. 

32


2'56. By virtue of the transfer of ownership of the accounts receivable-of 

CAROTHERS PC, HILLEL SHER has removed the standing of CAROTHERS PC for nofault 

reimbursement. 

257. By divesting itself of this right to no-fault reimbursement, by virtue of 

the transfer of ownership of its accounts receivable, DEAJESS has removed its 

standing for no-fault reimbursement. 


the transfer of ownership of its accounts receivable, PREFERRED has removed its 



------~-ttTe-n-ansferof-own-ers-htpofitscrcc-ouf1ts--teceiVclole, BOSTON-POSTnas removeolts- 



the transfer of ownership of its accounts receivable, CAROTHERS PC has removed 

its standing for no-fault reimbursement. 

261. Under the No-fault Law and 11 NYCRR 65-3.11, the rights assigned by 

a patient to a healthcare provider are strictly circumscribed. The prescribed 

assignment of benefit form limits the assignment only to healthcare providers and 

the mandatory aSSignment language assigns only to the health care provider "all 

rights, privileges and remedies to payment for health care services provided __.under 

Article 51.. .... 

262. Under the No-fault Law and pursuant to 11 NYCRR 65-3.11, 

reimbursement for health care services under the No-fault Law to someone other 

than the applicant is limited to, upon assignment, providers of health care services 

covered under section five thousand one hundred two (a)(l) of the Insurance Law. 

A provider of healthcare services authorized to take an assignment under the Nofault 

law may not transfer such assignment to third parties. 

263. This was clearly articulated in A.B. Medical Services PLLC v. Liberty 

Mut. Ins. Co., 9 Misc.3d 36,801 N.Y.S.2d 690, 2005 N.Y. Slip Op. 25277 

(N.Y.Sup.App.Term,2005) as follows: 

The applicable insurance regulations governing 

"direct payments" of no-fault benefits by the insurer 

provide that "an insurer shall pay benefits ... directly to 

33


the applicant or .00 upon assignment by the'applicant-••• 

[to.l the providers of services" (11 NYCRR 65.15[jl[11, 

now 11 NYCRR 65-3.11fal ). Pursuant to 11 NYCRR 

65.15(j)(1l, a provider's entitlement to seek recovery of 

no-fault benefits directly from the insurer is contingent 

upon an assignment of such benefits, and the assignment 

must be made to the "providers of services." The section 

further circumscribes the assignability of no-fault 

benefits to an assignment made "by the applicant" to the 

providers of services. There is no authorization under this 

section, or elsewhere in the insurance regulations, 

entitling the assignment of no-fault benefits by a 

provider. 

**692 It is undisputed on the record that both A.B. 

Medical and Dr. Collins are licensed providers of health 

---,..c-a-re-services.,-and-as-SOCh/buth-nray-be-ind-ep-en--dentlv-------- 

entitled to recover no-fault benefits for medical services 

they rendered. A.B. Medical r as the billing provider 

seeking recovery of assigned no-fault benefits for medical 

services which were not performed by it or its employees, 

but by an independent contractor identified as the 

"treating provider" on NF-3 claim forms, is not a 

"provider" of the instant services within the meaning of 

section 65.15(j){1) (now 11 NVCRR65-3.11fa] ), and is 

hence not entitled to recover "direct payment" of -,-~ ,,~. 

assigned no-fault benefits from the *38 defendant 

insurer. 

264. Standing involves a determination of whether "the party seeking relief 

has a sufficiently cognizable stake in the outcome so as to cast the dispute in a 

form traditionally capable of Judicial resolution." See In the Matter of John A. 

Graziano, et al. v. County of Albany, et al., 3 N.Y.3d 475, 787 N.Y.S.2d 689, Court 

of Appeals of New York, decided 11/30/04. 

265. Since the PCs' bills are purchased by a factor and the PCs are paid up 

front a percentage of the face value of the bills, the PCs, Dr. SCHEPP and Dr. 

CAROTHERS have no sufficiently cognizable stake in the outcome of the pending 

claims in litigation/ and as such lacks standing to bring said claims. Once the 

accounts receivable of the PCs were transferred, the right to collection of same 

vested in MCC and MEDTRX CAPITAL, MEDTRX PROVIDER and/or ADVANCED 

HEALTH CARE SOLUTIONS! LLC. 

266. MCC is neither a patient nor a proper assignee of a patient's no-fault 

benefits. 

34


267. MEDTRX CAPITAL is 'neither a -patient nor a proper assignee of a 

patient's no-fault benefits. 

268. MEDTRX PROVIDER is neither a patient nor a proper assignee of a 

patient's no-fault benefits. 

269. ADVANCED HEALTH CARE SOLUTIONS, LLC is neither a patient nor a 

proper assignee of a patient/s no-fault benefits. 

270. The Defendants submitted assigned no-fault claims arising from the 

PCs' services that were denied by the Plaintiffs or for which payment was delayed 

pending receipt of additional information and which, therefore, constitute 

outstanding claims. 

27-l-;----T-ne-pc-silave-rrot-withdrawfl the outstanding claim1nrn-cl-ollscrmeclalms nave 

instituted suit or arbitration. 

272. The Defendants continue to submit no-fault claims to Plaintiffs for services 

allegedly rendered by the PCs regardless of this transfer of those claims as accounts 

receivable to entities who cannot lawfully seek reimbursement of no-fault benefits under 

New York Law. 

273. Plaintiffs respectfully request that this Co_urt issue a judgment declaring that 

the Plaintiffs are under no obligation to pay any of the no-fault claims of the PCs, past, 

pending or future, because the Dr. SCHEPP, Dr. CAROTHERS and the PCs lack standing 

based upon the transfer of their right to reimbursement to third-parties. 

274. Without such a declaration, the Defendants will continue to bill Plaintiffs for 

No-fault services ariSing from the PCs and institute arbitrations and lawsuits for their 

attempted reimbursement even though the PCs lack standing to do so. 

275. A justifiable controversy exists between Plaintiffs and the PCs and the statute 

of limitations to challenge the denied claims has not yet run. 


AS AND FOR A SIXTH CAUSE OF ACTION 

(Reimbursement Against All Defendants) 

(Public Health Law Section 238-a) 



fully herein. 

35


~t18'. Public Health Law Section 238-a prohibits certain financial arrangements arrd~' . 

referrals, as stated, in part, as follows: 

1. (a) A practitioner authorized to order clinical laboratory services, 

pharmacy services, radiation therapy services, physical therapy 

services or x-ray or imaging services may not make a referral for such 

services to a health care provider authorized to provide such services 

where such practitioner or immediate family member of such 

practitioner has a financial relationship with such health care provider. 

(b) A health care provider or a referring practitioner may not present 

or cause to be presented to any individual or third party payor or other 

entity a claim, bill, or other demand for payment for clinical laboratory 

s.ervices.l-pharmacy servic~_s.1 radiation thet:ap¥: services, ph.y.slcaJ_~~ __ 

therapy services or x-ray or imaging services furnished pursuant to a 

referral prohibited by this subdivision. 

5. (a) For the purposes of this section, a compensation arrangement 

means any arrangement involving any remuneration between a 

practitioner, or immediate family member, and a health care provider. 

The term remuneration includes any remuneration, directly or 

indirectly, overtly or covertly, in cash or in kind. 

279. Any person or entity that collects any amounts that were billed in 

violation of Public Health Law Section 238-a is jointly and severally liable to the 

payor for any amounts so collected, as required as follows: 

7. If a referring practitioner or a health care provider furnishing clinical 

laboratory services, pharmacy services, radiation therapy services, 

physical therapy services or x-ray or imaging services or any other 

person or entity collects any amounts that were billed in violation of 

this section, such referring practitioner and health care provider and 

other person or entity shall be jointly and severally liable to the payor 

for any amounts so collected. 

280. Upon information and belief, in violation of Public Health Law Section 

238-a, a prohibited "compensation arrangement" existed between some or all of 

the Defendants and the health care providers who "referred" patients to the PCs. 

281. Upon information and belief, in violation of Public Health Law Section 

238-a, a prohibited "financial relationship" existed between some or all of the 

Defendants and the health care providers who "referred" patients to the PCs. 

282. Upon information and belief, Defendant HILLEL SHER individually and 

36


Defendants GLOBAL and FORUM used a portion of the millions"'of dollars in retained 

fees from the PCs, disguised as management services, equipment rental and rental 

of sites, to fund a "compensation arrangement" prohibited by Public Health Law 

Section 238-a. 

283. Upon information and belief, Defendant HILLEL SHER individually and 

Defendants GLOBAL and FORUM used a portion of the millions of dollars in retained 

fees from the PCs, disguised as management services, equipment rental and rental 

of sites, to ensure that a relationship existed between health care providers and the 

PCS, for purposes of continuing the flow of patients to the PCs, which amounted to 

a "financial relationship" prohibited by Public Health Law Section 238-a. 

--------'z-84-;--t1pon-infor r II atio r 1 cmdiJe:tiBf~ITe-D-efen-cla~r1rsLOo K pa Ftli1tfi IS 

"compensation arrangement" to inure to their financial benefit, including collecting 

amounts of money that were billed in violation of Public Health Law Section 238-a, 

which resulted in financial detriment to the Plaintiffs and the public. 

285. Upon information and belief, the Defendants took part in this 

"financial relationship" to inure to their financial benefit, including collecting 

amounts of money that were billed in violation of Public Health Law Section 238;..a, 

which resulted in financial detriment to the Plaintiffs and the public. 

286. The financial detriment which resulted to Plaintiffs is in excess of 

$3,000,000.00 (Three Million Dollars). 

287. Upon information and belief, each of the Defendants, pursuant to 

Public Health Law Section 238-a, is jOintly and severally liable to the Plaintiffs in an 

amount in excess of $3,000,000.00 (Three Million Dollars), the exact amount to be 

determined at trial, plus interest and costs and such other relief as this Court may 

deem just. 

WHEREFORE, Plaintiffs demands judgment against the Defendants named in each 

Cause of Action, jOintly and severallYt as follows: 

(a) On the First Cause of Action for fraud, the damages Plaintiffs have sustained 

as a result of Defendants' conduct, plus punitive damages, such amounts to be 

determined at trial, and Plaintiffs' costs, including reasonable attorneys' fees; 

(b) On the Second Cause of Action for unjust enrichment, the amount by which 

Defendants were unjustly enriched, such amount to be determined at trial; 

37


(c) On the Third Cause -ofAttion, a declaratory judgment decreeing that Plaintiffs 

have no obligation to pay any no-fault claims submitted to them 'by any of the defendants 

for services allegedly rendered by the PCs and that PCs lack standing as not wholly owned 

by licensed professionals, and are fraudulently incorporated under applicable New York 

State Laws and are ineligible for reimbursement of future claims and awarding Plaintiffs 

interest, costs and attorneys' fees; 

(d) On the Fourth Cause of Action, a declaratory judgment decreeing that 

Plaintiffs have no obligation to pay any no-fault claims submitted to them by any of the 

defendants for services allegedly rendered by the PCs ahd tnat Dr. SCHEPP, Dr. 

CAROTHERS and the PCs lack standing based upon unlawful fee-splitting and awarding 

~-------Plo+nttffs-+ntel est, costs;-arrdattomeys' fees; 

(e) On the Fifth Cause of Action, a declaratory judgment decreeing that Plaintiffs 

have no obligation to pay any no-fault claims submitted to them by any of the defendants 

for services allegedly rendered by the PCs and that Dr. SCHEPP, Dr. CAROTHERS and the 

PCs lack standing based upon the transfer of their right to reimbursement to third-parties 

and awarding Plaintiffs interest, costs, and attorneys' fees; 

(f) On the Sixth Cause of Action for reimbtJrsement pursuant to Public 

Health Law Section 238-a an amount in excess of $3,000,000.00 (Three Million 

Dollars), the exact amount to be determined at trial, plus interest, costs and 

attorneys fees; and 

(g) Such other relief as the Court may deem just and proper. 

Dated: 

Garden City, New York 

August 16, 2006 

Yours, etc. 

~/r7L &fPFLS, /7' 

By: C-1V II ~ 

I~O~N if. McCORMACK, ESQ. 

~~torneys for Plaintiff 

401 Franklin Avenue 

Garden City, New York 11530 

(516) 328-3500 

Our File No.: PRO-0183(a)/AUO-105(a) 

38


Index No. : 

SUPREME COURT OF THE STATE OF-NEW YORK 

COUNTY OF WESTCHESTER 

THE PROGRESSIVE GROUP OF INSURERS, ONE BEACON INSURANCE GROUP, LLC and any 

and all of its subsidiaries and affiliates, including/ but not limited to AUTOONE INSURANCE COMPANY 

and GENERAL ASSURANCE COMPANY and ESURANCE HOLDINGS, INC., and its subsidiaries and 

affiliates, 

Plaintiffs, 

-against- 

ROBERT SCOTT SCHEPP/ M.D., PREFERRED MEDICAL IMAGING, P.C., DEAJESS MEDICAL IMAGING, 

P.C., BOSTON POST ROAD MEDICAL IMAGING, P.c., ROBERT SCOTT SCHEPP, M.D., P.C., HILLEL 

SHER, MRI GLOBAL IMAGING SERVICES,INC' I FORUM MEDICAL MANAGEMENT, P.C., MEDICAL 

CAPITAL CORPORATION, MEDICAL CAPITAL HOLDINGS/ INC., MEDICAL CAPITAL MANAGEMENT, 

INC., MCC SPECIAL PURPOSE COR'PORATION III, CARLMONT CAPITAL SPECIAL PURPOSE 

CORPORATION II, HEALTHCARE FINANCIAL MANAGEMENT & ACQUISITIONS, INC., SPECIALTY 

PRACTICE MANAGEMENT, ANDREW CAROTHERS, M.D., ANDREW CAROTHERS, M.D., P.c., 

-MEEfT-R7(-C-API=r-At;--I:;I:;e,M~Re\tfE)~ttJlit)NS;-L. L. C. an(jf(D\1A1\J"CED H EAtTt:tH--rC...."A:TlRn-E·~~-- 

SOLUTIONS, L.L.C./ 

Defendants. 

SUMMONS AND COMPLAINT 

McDONNELL & ADELS, p.e 

Attorneys at Law 

. __ .. , . Attorneys forPlaintiffs 

Post Office Address and Telephone 


Garden City, New York 11530 

(516) 328-3500 

CERTIFICATION PURSUANT TO 22 N.Y.C.R.R. §13()'l.1a 

JOHN E. McCORMACK, ESQ., hereby certifies that, pursuant 1022 N.Y.C.R.R. §130-1 

frivolous nor frivolously presented. 

AND COMPLAINT is not 

Dated: 

Garden City, New York 

August 16, 2006 

"""""""'-K f 

ESQ~ 

Service of a copy of the within" is hereby admitted 

Dated, 

Attorney(s) for 1\ 

Please take notice 

o Notice of entry 

that the within is a t;ertified) true copy of a "- 

duly entered in the office of the clerk of the within named court on A 

DNotice of Settlement 

that an order 1\ of wlich the within is a true copy will be presented for" settlement to the HON. A one of the judges 

of the within named court, at A 

on A 

Yours, etc, 

Dated. 

McDONNELL & ADELS, P,C 

Attorneys at Law 

Post Office Address 


Garden City, New York 11530


Fi 043 

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