'Medical mafia' don pleads guilty

LAS VEGAS (Fortune) -- A medical consultant accused of orchestrating a conspiracy among top Las Vegas doctors and lawyers to inflate personal injury settlements by many millions of dollars, has pleaded guilty to concealing knowledge of a felony, a charge known as misprision. The consultant, Howard Awand, 65, faces up to three years in prison and a $250,000 fine.

Awand's guilty plea represents just the latest twist in a colorful, long-running prosecution -- dubbed the "Medical Mafia" case -- that had seemingly stymied federal prosecutors only to turn their way in recent months. Last month, personal injury lawyer Noel Gage pleaded guilty to obstruction of justice; and in November, spine surgeon Dr. Mark Kabins pleaded guilty to misprision of a felony.

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Howard Awand

"It's very significant that each and every defendant who was charged as part of the investigation has now been convicted of a felony," says Gregory Brower, the former U.S. Attorney for Nevada, who oversaw much of the case and is now in private practice. "I am happy for my guys who have been slogging through this for the last four years."

The case began with dramatic allegations that plaintiffs lawyers and surgeons in Las Vegas had conspired to inflate numerous insurance settlements, allegedly by convincing plaintiffs to undergo needless surgery. According to government witnesses, the group called itself the Medical Mafia and was led by Awand, a charismatic, Bentley-driving medical consultant, who told people he used to be an Army medic and even liked to claim that he had top-secret government clearance.

Prosecutors charged that Awand recruited top doctors to serve as expert witnesses and to treat injured plaintiffs by arranging kickbacks and using his sway over lawyers to offer the doctors protection from malpractice suits. The doctors allegedly performed complex and sometimes unnecessary spine surgeries that in several cases left patients paralyzed. Fortune first brought the case to national attention last August.

After Awand was indicted in 2007 on charges of conspiracy and fraud, he moved to Vevay, Ind. and reinvented himself as the proprietor of a Victorian bed-and-breakfast, the Rosemont Inn, with his wife Linda. (Awand was separately convicted in January on four counts of failing to pay federal taxes.)

The government's medical mafia investigation began as the result of an odd fender-bender in 2002. A federal prosecutor driving to the airport in Las Vegas accidentally rear-ended an office manager on her way to work. The office manager was referred by Awand to a spine surgeon and a personal injury lawyer, who, despite the minor case, made a large settlement claim against the U.S. government. A lawyer for the Feds grew suspicious. Her investigation turned up a pattern of big settlements in cases where Awand had consulted for the plaintiff lawyers, and the same group of doctors repeatedly testified as expert witnesses.

But prosecuting the case was never simple. While the government alleged that top doctors and lawyers had conspired against the patients and clients they were sworn to serve and had deprived them of honest services, the defendants argued that they had used their best professional judgment in murky cases.

The prosecutors suffered numerous reversals throughout the long-running case. At one point, a judge threw out the indictments against both Noel Gage and Awand, but the Feds got them reinstated after appealing to the Ninth Circuit Court of Appeals.

Ultimately, the government saw its conspiracy allegations whittled down to that of a single patient, Melodie Simon, a former Olympic volleyball player who underwent spine surgery and became a paraplegic. Still, in the the guilty plea Awand admits that core allegation: He acknowledges that he conspired with the patient's lawyer Gage and the surgeon Kabins to falsely pin the blame for her botched care on an anesthesiologist.

The guilty pleas, which center on Simon's case, may be neither a bang nor a whimper, but rather a "muddle," says Awand's lawyer Harland W. Braun in Los Angeles. Indeed, although Awand faces a maximum of three years, Braun is expected to request a sentence of four to 10 months. A plea deal is "always a compromise," says Braun. "You don't have to go through a trial, you don't have to go through the anguish, and he's 65 years old so it's a muddle. They didn't get what they wanted. We didn't get what we wanted."

First Assistant United States Attorney Steve Myhre says his office is pleased with the result. "These cases are very difficult," he says. "To root out fraud in the medical-legal community, that's what our goal was." At the end of the day, his office got three felony convictions. They got restitution for the victim Melody Simon of close to $5.7 million, plus a forfeiture of $3.5 million.

Myhre declined to say whether prosecutors are closing their investigation. At least one local reporter thinks there could be more cases brought, though there was nothing in Awand's guilty plea to suggest he will become a cooperating witness.

You can hear Katherine Eban discuss the case on Nevada Public Radio.