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Hospital chief, shelter director used homeless for fraud, says FBI

  • Story Highlights
  • FBI arrests L.A. County hospital executive, homeless shelter operator Wednesday
  • They allegedly promised to pay homeless who acted like patients
  • Medical treatment allegedly performed; government billed for services
  • Rudra Sabaratnam and Estill Mitts were both charged in 21-count indictment
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(CNN) -- A top Los Angeles, California, hospital executive and the operator of a homeless facility were arrested Wednesday, accused of using homeless people to commit insurance fraud.

L.A.'s homeless may have been used in an insurance scheme by a top hospital executive and shelter director.

FBI agents arrested Rudra Sabaratnam, 64, the owner and top executive of a hospital, and Estill Mitts, 64, the operator of a homeless "assessment center" in the city's Skid Row area.

They enticed homeless people with the promise of payments to act as hospital patients, an indictment alleges. The homeless people are said to have received medical treatment, and the government was billed for the services.

The unnecessary hospital treatments were then billed to Medicare and Medi-Cal in a scheme that began in August 2004 and lasted until about October 2007, the indictment states.

Sabaratnam is the CEO of the City of Angels Medical Center, according to FBI spokeswoman Laura Eimiller.

The 21-count indictment, unsealed Wednesday, jointly charges the two men with conspiring to exchange kickbacks for patient referrals and to commit health-care fraud.

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  • L.A. Times: Thousands of homeless allegedly used in scheme

Sabaratnam is also charged with eight counts of paying kickbacks. Mitts is charged with four counts of receiving kickbacks, six counts of money laundering and two counts of tax evasion for allegedly failing to report more than $479,000 in income in 2005 and more than $620,000 in income in 2006.

If convicted of all counts, Sabaratnam would face a maximum penalty of 50 years in federal prison, and Mitts would face a maximum sentence of 140 years in prison, the U.S. attorneys office in Los Angeles said in a statement.

Mitts made his first court appearance Wednesday and posted $25,000 bail, Eimiller said. Sabaratnam was being held in federal custody in the Metropolitan Detention Center pending a hearing Thursday, Eimiller said.

Also Wednesday, federal agents raided Sabaratnam's hospital and two others: Los Angeles Metropolitan Medical Center and Tustin Hospital and Medical Center, Eimiller confirmed. A number of groups are working with the FBI in this investigation, she said, including the Internal Revenue Service, the Department of Health and Human Services, and the California Department of Justice.

Also, Los Angeles City Attorney Rocky Delgadillo announced Wednesday that he has filed a civil suit against those hospitals, their executive officers and their "co-schemers."

Mitts and Sabaratnam are among those listed in the suit.

"These criminals thought they could get away with this scheme because they figured no one cares about the homeless on Skid Row. They were dead wrong," Delgadillo said in a news release.

His office said the scheme was discovered in October 2006 by police officers who initially believed that they were witnessing homeless patient dumping, a common practice of temporarily removing homeless people from an area to a hospital or another location.

The Associated Press identified Mitts' lawyer as John Vandevelde and Sabaratnam's as Dominic Cantalupo. Individuals by those names listed in California did not immediately return CNN's calls for comment.

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