United States District Court, E.D. North Carolina, Western Division
UNITED STATES OF AMERICA, and STATE OF NORTH CAROLINA, Plaintiffs,
A PERFECT FIT FOR YOU, INC., MARGARET A. GIBSON, and SHELLEY P. BANDY, Defendants.
C. DEVER III UNITED STATES DISTRICT JUDGE
September 17, 2019, plaintiffs United States of America and
the State of North Carolina ("plaintiffs") moved
for a default judgment in the amount of $37, 513, 156.42
against defendant Shelley P. Bandy ("defendant" or
"Bandy"). See [D.E. 71]; Fed.R.Civ.P.
55(b). Bandy failed to appear, plead, or otherwise defend
this action. On June 26, 2019, the Clerk of Court entered
default [D.E. 68]. As explained below, the court grants the
motion and awards plaintiffs $34, 708, 945.42.
court makes the following findings of fact based on the
plaintiffs' complaint and on the declaration attached as
Exhibit A to plaintiffs' memorandum in support of their
motion for default judgment.
16, 2016, Bandy filed an action in Carteret County Superior
Court against A Perfect Fit for You, Inc. ("APF4Y")
and Margaret Gibson asserting partial ownership in APF4 Y
(Bandy v. A Perfect Fit for You. Inc, (16 CVS 456)).
Bandy asked the Carteret County Superior Court to appoint a
receiver and issue an injunction to prevent Gibson from
disposing of company assets. The Superior Court appointed a
receiver ("Receiver") to manage A Perfect Fit for
You, Inc. ("APF4Y" or "the company")
until the court resolved the ownership issue, enjoined the
company, Gibson, and Ronald Gibson (Margaret Gibson's
husband) from transferring or disposing of assets traceable
to the company (except for company assets used by the
Receiver in the ordinary course of business), and transferred
the case to the North Carolina Business Court. The court
refers to this action as the "Business Court
Action." [D.E. 1] ¶ 27.
Receiver hired an auditor to perform a coding and billing
audit of APF4Y's records. The auditor estimated that
APF4Y had received over $ 12, 000, 000 of Medicaid payments
for services or products in violation of Medicaid policy,
because APF4Y did not have the necessary paperwork to support
the medical necessity or delivery of the durable medical
equipment ("DME") products for which it submitted
claims to Medicaid. The State intervened in the Business
Court Action to seek recoupment of the monies the State paid
to APF4Y for products APF4Y inappropriately billed to the
Medicaid Program. [D.E. 1] ¶ 28.
filed cross-claims in the Business Court Action against
Gibson and Bandy wherein APF4Y admitted that it never
"ordered, purchased, or delivered" any cough
stimulators, pneumatic compressors, specialized air
mattresses, osteogenesis stimulators, or knee/ankle/foot
orthotics. (Business Court Action, APF4Y Cross-Claim, ¶
37). APF4Y also admitted that it billed the Medicaid Program
and was paid for these products (Id. ¶¶
34, 35), but does not have any of the "required medical
or fiscal records in its possession" to support these
billings (Id. ¶¶ 35, 36). [D.E. L]¶
company's lack of payments, orders, or delivery documents
for cough stimulators, pneumatic compressors, specialized air
mattresses, osteogenesis stimulators, or knee/ankle/foot
orthotics "would have been evident to anyone who
reviewed the [c]ompany's financial books and
records." (Business Court Action, APF4Y Cross-Claim
¶ 37). APF4Y's financial records did not list
payments to "any vendor or third-party entity" for
these products. Id. at ¶ 38); [D.E. 1] ¶
31. APF4Y's Medicaid claims for cough stimulators,
pneumatic compressors, specialized air mattresses,
osteogenesis stimulators, or knee/ankle/foot orthotics were
"wholly false and fictitious." (Business Court
Action, APF4Y Cross-Claim ¶ 40). [D.E. 1] ¶ 32.
interviewed, Bandy admitted that APF4Y did not provide
osteogenesis stimulators or cough-stimulating devices to
patients. [D.E. 1] ¶ 33. Additionally, Bandy admitted
that she was only aware of APF4Y ever providing one air
flotation bed or powered pressure-reducing air mattress to a
patient. (Declaration of Andrew LeFaivre, ¶ f).
was APF4Y's primary salesperson, DME fitter, and Medicaid
biller before she filed the Business Court Action alleging
partial ownership of the company. Bandy submitted some or all
of APF4Y's Medicaid claims, including those for powered
air flotation beds, osteogenesis stimulators, power
wheelchair accessories, knee-ankle-foot orthoses, and
cough-stimulating devices. Bandy also submitted Medicaid
claims for dually-eligible Medicare/Medicaid patients without
obtaining the necessary prior approvals or billing the
Medicare program for the claims. Bandy acted with actual
knowledge, reckless disregard, or deliberate ignorance of the
falsity of APF4Y's Medicaid claims submissions for
products APF4Y never provided to its Medicaid patients.
[D.E.1] ¶ 52.
Agent LeFaivre and other investigators interviewed
individuals associated with APF4Y who all stated that Bandy
was the individual responsible for submitting the
company's DME claims to Medicaid. During the
investigation, the investigators obtained numerous emails
sent from referral sources directly to Bandy's email
address regarding prospective new patients. APF4Y submitted
false claims for DME to Medicaid on behalf of a vast majority
of those patients listed in emails sent directly to Bandy.
Furthermore, many claims that APF4Y submitted to Medicaid on
behalf of these patients listed dates of service that were
almost one year before the patients were referred to APF4Y.
[D.E. 1] ¶ 39 a, b.
the investigation, investigators obtained and reviewed the
contents of Bandy's Google account. An electronic
document stored in Bandy's account appeared to be a
client list from her former employer, Medical Park Pharmacy.
The document listed the names, demographic information, and
Medicaid identification numbers of numerous Medicaid
beneficiaries on whose behalf APF4Y submitted false claims to
Medicaid for DME. Included among those beneficiaries were
several who were deceased on the dates of service listed on
claims for DME submitted on their behalf to Medicaid by
APF4Y. (Declaration of Andrew LeFaivre, ¶ f).
seek damages against Bandy for false claims submitted, and
false records and statements created or used, from March 201S
until June 2016. The first payment to APF4Y from Medicaid for
false claims was on or about March 17, 2015. Plaintiffs also
seek any money paid from Medicaid to APF4Y for claims for DME
that the investigation found was not received by the Medicaid
beneficiary, was not purchased by APF4Y, or was not ordered
by the medical provider listed on the claim as the ordering
provider. Those claims include, but are not limited to,
claims for the following DME equipment: powered air flotation
beds (billed using Healthcare Common Procedure Coding System
[HCPCS] code (E0193)); osteogenesis stimulators (E0748);
power wheelchair accessories (E1008); knee-ankle-foot
orthoses (L2005); and cough-stimulating devices (E0482).
early 2016, Bandy began submitting an increasing number of
claims to Medicaid that listed HCPCS codes with which she was
unfamiliar. The codes began with "E" and
"K." Bandy stated that she continued submitting
claims listing these HCPCS codes even though she did not know