Doctor Billions | 3. Rat’s Nest

It’s not just Drobot. As the FBI caught on to the breathtaking scope of the fraud, they expanded their investigations all over Southern California. And they started turning one doctor after another into wire-wearing informants. Want the full story? Binge every episode of Doctor Billions ad-free now by subscribing to The Binge+. You’ll unlock over 60 true crime series instantly, get early access to drops on the first of every month, and hear exclusive bonus episodes. Search for the channel on Apple Podcasts or head to GetTheBinge.com. For behind-the-scenes details, join our free newsletter at Patreon.com/TheBinge. Doctor Billions is a production of Sony Music Entertainment and Western Sound. Follow @sonypodcasts and discover more at sonymusic.com/podcasts. Learn more about your ad choices at podcastchoices.com/adchoices. The Binge — feed your true crime obsession. Learn more about your ad choices. Visit podcastchoices.com/adchoices

• 0:02Speaker 00

  Fall never arrives all at once. First the air, then the light. And slowly, the things you love begin to find each other. A jacket meets a dress. A hoodie slips beneath a blazer. An old cap finds a new scarf. Because you don't simply step into the season. You create it, layer by layer, until it finally feels like fall. Find fall your way at Ross.

• 0:31Speaker 01

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• 1:06Speaker 01

  How do you turn a doctor into a rat? Sorcery? Maybe a magic word or two? In order to bring down a billion-dollar fraud, the FBI was going to need to think outside the usual white-collar crime playbook.

• 1:22Speaker 02

  I think part of what we were shocked at was just the scale of the entire thing.

• 1:28Speaker 01

  This is Special Agent John Haben. He's been with the Bureau 22 years.

• 1:32Speaker 02

  We knew it was big, but once you get through it, it just seems, it's bigger than you can even imagine. You know, when you're looking at billions, it's just a number that we can conceive of when you're talking about money.

• 1:43Speaker 01

  The FBI had launched not one, but two investigations. One in LA, headed up by Special Agent Haben, and one in San Diego, headed up by former Special Agent Jeff Horner.

• 1:53Speaker 03

  These guys, all of them, were very paranoid.

• 1:56Speaker 01

  This is Jeff.

• 1:57Speaker 03

  They would meet out in the ocean. They would get on surfboards and go out into the ocean so they could talk. They would turn off their phones, leave your phone in a Faraday bag if you want to meet with me, all those different things.

• 2:08Speaker 01

  The agents knew they couldn't just send in an undercover to try to bribe a doctor or buy or sell them a patient.

• 2:15Speaker 02

  We need someone who's sort of vetted already with the people we're targeting. And so introducing an undercover agent into a scenario like this doesn't necessarily make sense because--

• 2:29Speaker 01

  They're new, nobody trusts them. Who is this guy? He must be a cop.

• 2:33Speaker 02

  Exactly. So if you have somebody who's already committed fraud with them, they're a little bit more comfortable with them to be able to talk about the fraud they're doing and potentially engage in new fraud going forward.

• 2:45Speaker 01

  So how do you get a doctor, lawyer, or medical marketer to betray his co-conspirators and tell everything they know to the FBI? Turns out, it's a four-step process. Step one: Get the dirt.

• 2:59Speaker 02

  We have recordings of you, or we have checks, or this person is said that you received a kickback.

• 3:07Speaker 01

  Step two, and this might be the trickiest step, make the approach.

• 3:11Speaker 02

  It's a calculated decision we have to make because if this person says no, they're on the phone telling all their network, hey, the FBI is out here investigating us. Don't talk to anybody. And it shuts us down.

• 3:24Speaker 01

  So the dirt's gotta be really good. But when? Where?

• 3:29Speaker 02

  We showed up at doctors' offices. Obviously, that's, it's a little weird for cops to show up. It kind of raises some red flags with the staff. And so we have some plausible stories of why we're there, for some billing or something like that, or another patient. And it gets us a loan. Getting to their house is not necessarily a good answer either because there's family members there and things like that.

• 3:51Speaker 01

  Step three: Make the ask, which could also be read as threaten the daylights out of them.

• 3:57Speaker 02

  So we'll sit them down and say, here's the situation you're in right now. And for helping us out, maybe you can get a reduced sentence. We, as the FBI agents, we're not allowed to promise anything as far as getting a reduced sentence. But what we can do is ensure that at sentencing, the judge has all of the information of the cooperation that they did. So we've met people at houses. We've met doctors at doctors' offices, said, hey, here's, here's the deal. We have a search warrant ready right now that we are going to implement on your office right now with your entire staff. Everybody will know exactly what's going on.

• 4:42Speaker 02

  Or we can wait, not do that, if you will agree to work with us.

• 4:47Speaker 01

  Step four: Roll the tape, which is actually the new step one for all the other doctors, lawyers, and other people that this guy is about to mention.

• 4:57Speaker 02

  Ultimately, then they would give us the information. You know, they, we either give them a search warrant, or we do it, you know, sort of under the cover of darkness, and we get what we need. But we can do it sort of in a, in a way that keeps us a little bit more covert.

• 5:10Speaker 01

  And repeat, and repeat, and repeat. Soon, the biggest workers' comp medical scam in California history would be riddled with rats. I'm Ben Adair. From Sony Music Entertainment and Western Sound, you're listening to Dr. Billions.

• 5:46Speaker 01

  This is episode three, Rat's Nest.

• 5:55Speaker 01

  Twice every year, lawyers representing injured workers under California's workers' compensation program gather at an event called the California Applicant Attorney Association Conference.

• 6:08Speaker 01

  And that may be the most boring sentence in podcast history. But hang on. Because the FBI had a problem. They knew about this ever-increasing fraud operation, pulling in more and more doctors across Southern California. But they didn't quite have the goods. So this conference, where lawyers all get together to go over the latest info about their workers' compensation system, it presented an opportunity. Not everybody there was a bad guy, certainly not. But all the bad guys would be there. So how do you tell one from the other? How do you get them all together and get them to give up the goods? It took a little creative thinking.

• 6:49Speaker 03

  They're a very tight-knit group. This is not something that, you know, people speak freely about on the phone. It's very relationship-driven.

• 6:59Speaker 01

  Former FBI Special Agent Jeff Horner got to thinking. What's the one thing these guys all have in common?

• 7:06Speaker 03

  I kind of thought to myself, well, what's the biggest weakness of an attorney? I thought to myself, well, attorneys love to talk, right?

• 7:15Speaker 01

  The FBI had learned from an informant in Los Angeles that there was this one lawyer in San Diego who seemed to be at one particular nexus of this giant web. According to the LA informant, this guy was paying kickbacks to marketers who brought him injured workers and then receiving kickbacks from the medical providers that he referred the patients to. Essentially, he was buying and selling patients.

• 7:39Speaker 03

  They were treated like cattle in many ways.

• 7:42Speaker 01

  In January 2012, the big conference was taking place at the San Diego Sheraton Hotel and Marina. Jeff Horner got a big idea.

• 7:51Speaker 03

  What we decided to do was rent out a ballroom at the Sheraton Hotel Marina in San Diego, a nice hotel right there on the, on the bay, and invite a whole bunch of our suspect doctors.

• 8:04Speaker 01

  A very exclusive dinner.

• 8:06Speaker 03

  The best doctors and the best attorneys, an exclusive club, so to speak. Again, so they kind of felt like they were, they were special.

• 8:14Speaker 01

  And the lawyer they wanted as a target, whose name was Sean O'Keefe, they invited him to give the keynote.

• 8:20Speaker 03

  We thought that would be the best way because these doctors, we knew, we had intel that they were involved in illegal activities. We had intel that Sean O'Keefe was. And so I thought, what better way to get them to start talking about that than have Sean O'Keefe get out in front of a ballroom of dirty doctors, many of whom he already had relationships with? Encourage them to give a presentation and have a question and answer center.

• 8:47Speaker 01

  Female FBI agents cosplayed as pharmaceutical reps and worked the room.

• 8:51Speaker 03

  So if you can imagine the traditional pharmaceutical rep, right? They fit a certain profile. Attractive female marketer with great personality, highly intelligent. And so we put five female FBI agents in the room, wired them up for recording devices, placed recording devices around the ballroom, and just sat back and, and let these doctors and attorneys talk about how much money they made doing all these bad things. We rented a room in the hotel, and pretty much the entire night, the undercover agents were coming back in, swapping recording devices. And it was quite an adventure. It was a lot of fun.

• 9:30Speaker 01

  It went better than anyone could have imagined.

• 9:33Speaker 03

  It's amazing. I mean, some of the, the things that these doctors would brag to the agents about, just trying to flirt or what have you, they just love to talk. I recall one hospital executive bragging about how the hospital was getting paid for putting the implants, the spinal implants, in these poor patients, and then taking them out because the implants were bad, and then putting more implants in. And that, that really kind of shocked me. And Sean O'Keefe in particular, very intelligent, bright attorney, one of the top attorneys. But you put him in front of an audience of doctors that he knows is dirty, and that's, that's really kind of how things kicked off for us.

• 10:18Speaker 01

  The operation was so successful, a few years later, the FBI did it again. And very soon, all these doctors who'd made millions exploiting patient trust would be having trust issues of their own.

• 10:35Speaker 01

  Don't want to wait for the next episode? You don't have to. Unlock all episodes of Dr. Billions ad-free right now by subscribing to The Binge. And it doesn't stop at Dr. Billions. Subscribers get a binge drop of a brand-new series on the first of every month. That's all episodes, all at once, all ad-free. Search for The Binge on Apple Podcasts and hit Subscribe. If you're not on Apple, head to getthebinge.com to subscribe directly.

• 11:09Speaker 00

  Fall never arrives all at once. First the air, then the light. And slowly, the things you love begin to find each other. A jacket meets a dress, a hoodie slips beneath a blazer, an old cap finds a new scarf. Because you don't simply step into the season. You create it, layer by layer, until it finally feels like fall. Find fall your way at Ross.

• 11:39Speaker 01

  By mid-2012, there was not one, but two major FBI investigations into how doctors were illegally making money off workers' comp patients in Southern California. And this was in addition to Bill Reynolds' parallel investigation with Mark Cerzanski. In LA, the FBI had Operation Spinal Cap, which focused around Paul Randall, Michael Drobot, and spinal surgeries out of Pacific Hospital in Long Beach. The San Diego office called their investigation Operation Backlash, which focused on a huge web of marketers, doctors, and lawyers paying money for things like MRI referrals, toxicology, psych tests. Get it? Spinal cap backlash.

• 12:20Speaker 03

  Interestingly enough, backlash is really kind of one word, but FBI undercover operations have to have two words, so I just kind of broke it apart and we kept it as backlash.

• 12:31Speaker 01

  That's like a rule, that they have to have two words?

• 12:33Speaker 03

  Yeah, I'm not sure. I was just told that it had to be two words, and so that's kind of what we went with.

• 12:39Speaker 01

  Fun fact. Like Bill Reynolds, who was a former cop turned insurance investigator, former Special Agent Jeff Horner brought a special skill set to this investigation. He had a background investigating gangs in San Diego, then he went to work at the Security and Exchange Commission. When he returned to the FBI office in San Diego, he thought he'd be put back on gangs, or maybe securities fraud? Something sexy. But instead, he was assigned healthcare. Wow.

• 13:08Speaker 03

  Yeah, traditionally, healthcare fraud, it's very document-intensive, and they're very long cases, slow-moving.

• 13:18Speaker 01

  But he was all, hmm, maybe we can do this different.

• 13:22Speaker 03

  It was really quite fascinating, because I was able to work healthcare fraud cases from a gang perspective, very heavy on recordings and informants and undercover operations, and then also leverage some of my experience working financial investigations.

• 13:39Speaker 01

  What Jeff Horner was seeing in San Diego, and what FBI Special Agent John Hobbin was seeing in Los Angeles, was very different than your typical healthcare fraud, where you might have a single doctor radically overbilling, or patients faking injuries for cash. What was happening here was extremely coordinated. You might even say organized.

• 14:01Speaker 03

  I think that's a very accurate description of how they work. It's amazing how integrated these organizations were, and in some cases, even tied to organized crime.

• 14:12Speaker 01

  And the scams, as we heard last episode, were very well-papered. High-priced lawyers drew up contracts to make everything seem legit. Everyone from the administrators at the top, to the doctors on down, had a high degree of plausible deniability.

• 14:30Speaker 03

  And so if you can't get the subjects in their own words, they're very difficult cases to prove.

• 14:37Speaker 01

  And so for both FBI operations, Backlash and Spinal Cap, informants were the beating heart of the investigations. After the exclusive dinner event, the FBI knew how the whole scam was working in San Diego, and it was a little different than what was going on in LA. In San Diego, independent operators would comb swap meets, restaurants, bars, parks, all the places they'd find Latino immigrant workers. These workers, who often had fewer legal protections, they were the targets. A man would approach, strike up a conversation, and ask, hey, you been injured on the job lately? There might even be a wink, wink.

• 15:20Speaker 03

  Yes, they would give him a card with a 1-800 number, and it would go to a call center. And those call centers were manned by operators who then would tell the injured worker, hey, you need to go see Sean O'Keefe. He's a great attorney, he'll take care of you.

• 15:40Speaker 01

  O'Keefe, who passed away since all this went down, he would get the call from the worker and say something along the lines of, there's a whole system here to help you. I'm gonna take care of you, and you're gonna get care, and you're gonna get paid. What the worker didn't know was that O'Keefe, all the medical companies and the doctors, were gonna get really paid.

• 16:01Speaker 03

  And so these doctors just needed the patients, and they would do everything they could to get those patients, and if it meant referring somebody that came in for a sore right knee, to get an MRI for a right knee, left knee, left ankle, right ankle, elbows, cervical spine, lumbar spine. Oh, by the way, you need a mouth guard. Oh, by the way, you need a sleep study. And oh, let's give you some of these topical pain-relieving creams.

• 16:28Speaker 01

  Just because my knee's a little sore, you'd suddenly have all those things?

• 16:32Speaker 03

  Yep.

• 16:33Speaker 01

  And then, when the care had run its course, O'Keefe had one more trick up his sleeve. Because he was a lawyer.

• 16:41Speaker 03

  You receive this medical treatment, and then when that treatment is done, and you're essentially not cured, but you're essentially brought back to be able to work again, the applicant attorney will sit down with the insurance company and say, okay, well, thank you for paying the medical bills of this person, but this person suffered pain and suffering, and his knee's never gonna be the same, his back's never gonna be the same, so we're now gonna settle that potential legal suit for his injuries.

• 17:11Speaker 01

  The more money the doctors made off the patient's care, the more money O'Keefe would go after in his lawsuits.

• 17:17Speaker 03

  Sean O'Keefe sits down across the attorneys for the insurance companies and say, by golly, my poor patient here got $50,000, $60,000 worth of medical treatment. If you want to settle this, we're gonna do three times that for a settlement. The settlement is more likely to be higher if there's a whole bunch of medical procedures that were referred.

• 17:39Speaker 01

  The money rained down on everyone. The doctors, patients, and Sean O'Keefe.

• 17:45Speaker 03

  It was astonishing how sophisticated. They monetized every aspect of an injured worker, from the point that they're injured, all the way through treatment and settlement.

• 18:01Speaker 01

  Using one of their sources in the LA investigation, the San Diego team introduced an undercover agent to O'Keefe, posing as a rep, who wanted to bring spinal surgeries to Pacific Hospital in Long Beach. It was a slow roll. They needed to make a relationship, and then make an ask.

• 18:19Speaker 03

  As those relationships developed, as O'Keefe took our undercover agent around to meet doctors, and we started to kind of get our hooks into things.

• 18:28Speaker 01

  Eventually, they set up a meeting between the undercover and O'Keefe in Coronado, the super-fancy part of San Diego, right on the ocean.

• 18:35Speaker 03

  That's where he lived. He had a couple of yachts. He loved yacht racing. In fact, he was a judge for many large racing events throughout the world. And we met at a tiny little diner in Coronado. We paid him money in exchange for 10 patients that needed spinal surgeries.

• 18:53Speaker 01

  Was it like a briefcase full of cash?

• 18:56Speaker 03

  It was an envelope full of cash.

• 18:59Speaker 01

  It all happened on videotape. O'Keefe handed over the patient files, the undercover gave him several thousand dollars. The patients were sold for money. A short time later, they called O'Keefe and said, hey, that was great, let's do it again. Only this time, there was no envelope.

• 19:18Speaker 03

  It was almost kind of a rendition in that I pulled up the car right onto the sidewalk in front of the diner. John and another agent grabbed him, and we threw him in the back of the car to arrest him, and we drove off to the FBI office.

• 19:33Speaker 01

  They'd gotten the dirt, they'd made the approach, time to make the ask.

• 19:38Speaker 03

  Mr. O'Keefe was very cocky and very, you don't have anything on me.

• 19:43Speaker 01

  Well, okay, then, let's just threaten the daylights out of them.

• 19:46Speaker 03

  Put Mr. O'Keefe back in the car, and drove him to the downtown federal holding facility, parked on the Sallyport, and he could hear all the people inside just kind of talking and catcalling and making these noises to him. And here's this high-end attorney, very intelligent man, and he turned around and said, I want a cooperative.

• 20:09Speaker 01

  They drove straight to the US Attorney's Office and signed him up. And then, put him to work. They started with a doctor named Stephen Rigler. Rigler was a chiropractor with three clinics, in San Diego, and nearby Calexico and Escondido. They set up a meeting between O'Keefe and Rigler. They'll discuss their business, and the FBI will get on tape, dirt on a crooked dock. Special Agent Horner was in the parking lot at O'Keefe's office, sitting in his car. He saw Rigler drive up, park, and go inside. He waited.

• 20:42Speaker 03

  Dr. Rigler comes out after the meeting, and everything's great, and I see him run back into Sean O'Keefe's office. And I'm like, what's going on here?

• 20:55Speaker 01

  Special Agent Horner had a broken foot at the time, so he crawled out of the car and hobbled his way into the building toward the elevator.

• 21:02Speaker 03

  Because I'm concerned that there's a safety issue, I call for backup. Dr. Rigler's a very large individual. I want to say he's probably 6'4", 6'5", 240, 250 pounds, and Sean O'Keefe is not that. He's kind of a small fella. I barge into Sean O'Keefe's office, Dr. Rigler's there yelling at Sean O'Keefe.

• 21:26Speaker 01

  Right after the meeting, O'Keefe had gotten a little excited. He texted Horner, just had a great meeting with Dr. Rigler. He gave up all the goods. It was awesome. I think we got him.

• 21:37Speaker 03

  But he sent it to Dr. Rigler instead of to me. And so...

• 21:44Speaker 01

  Oops, sorry, wrong window. Please ignore.

• 21:47Speaker 03

  You know, I take charge of the situation, have Dr. Wrigler sit down and basically told him that, "Dr. Wrigler, you're screwed. We've been meeting with you, we've been recording with you for a while. We know what you're doing. We know your connections to these doctors." And he sat down and he realized at that point, uh, it was best for him to start to cooperate.

• 22:12Speaker 01

  Poof. Just like that, Dr. Wrigler became a rat.

• 22:16Speaker 03

  You know, it's funny too, just as a side note, you spend a lot of time training these informants, right? Everything you say and do is being recorded. Now, try not to use profanity or don't make personal judgments or things like that. So you spend all this time training and on the very first meeting, he, uh, he sends it to the target. "Great recording. We got him. He's done. He's gonna start working for us."

• 22:40Speaker 01

  Oops, sorry, wrong chat. Meant to send that to my wife.

• 22:47Speaker 03

  Oh, man.

• 22:50Speaker 01

  The tapes these informants collected show a remarkably brazen scam.

• 22:53Speaker 04

  Yeah, I'm, I'm just here more as like the enforcer than anything else.

• 22:57Speaker 05

  Yeah, you just see if these numbers change. Everyone's changing.

• 23:00Speaker 04

  Then also, I don't understand.

• 23:01Speaker 01

  Basically, a menu with prices attached. Only, it's not what you pay, it's what you get paid when you order different procedures from specific companies.

• 23:11Speaker 04

  Ultrasound's $10, x-rays are $10, toxicology $75, comp's $200.

• 23:16Speaker 05

  That number, I'm assuming, would change based on.

• 23:18Speaker 04

  Toxicology, okay. And then, uh, psych's $100, MRI's, MRI's $25? I thought it was higher than that.

• 23:25Speaker 05

  It was $50 if we were to start working on the other stuff.

• 23:30Speaker 04

  Okay. If we started doing the comp stuff.

• 23:33Speaker 01

  No mention of patients. No thought about how much effort it takes a patient to show up to these procedures. Maybe take time off work, get childcare, all the time it takes to get to and from. Only money on the mind.

• 23:48Speaker 01

  In LA, Special Agent John Habin was up to his ears in contracts and financial statements. They were scrutinizing all the business arrangements between Drobot, Pacific Hospital, and these doctors, comparing them to bank records to make sure the quid pro quo between money and surgeries was real and ongoing.

• 24:06Speaker 02

  So they would write a contract for $30,000 a month, and the doctors would get $60,000. Or in the next month, they would get $15,000. On the next one, they'd get $30. And they started to realize that at one point, and so they started amending the contracts. And some contracts had three, four, and five amendments to them. The first one was for $30,000. And when that surgeon started bringing a lot more patients, now it's at $60,000 a month. And then it was $65,000 or $85,000, depending on how many patients they were bringing in.

• 24:41Speaker 01

  And he and his team started to notice something else, a new wrinkle to the fraud.

• 24:47Speaker 02

  In addition to the doctor billing for their surgery, the hospital billing for their part of providing the facility and the services there, there was a third bill that was getting submitted, and that was for the hardware implants that were being placed in the patients as part of the spinal fusion surgery.

• 25:08Speaker 01

  At the time, there was a regulation in place called the Spinal Pass Through Law. This allowed a hospital doing a spinal surgery to get reimbursed for the full sticker price of whatever the spinal hardware cost. That's the screws, the rods, the other pieces that stabilized the spine.

• 25:24Speaker 02

  What we uncovered was shell companies that were inflating these costs of the hardware. So there were middlemen, so to speak, between the hardware manufacturer and the hospital.

• 25:39Speaker 01

  These middle companies were inflating the costs of the hardware. A lot.

• 25:44Speaker 02

  And in one specific incident, one of those middlemen companies, we discovered, was a company owned by Drobot himself.

• 25:54Speaker 01

  Michael Drobot, the owner of Pacific Hospital.

• 25:57Speaker 02

  So then insurance would pay Pacific for their services that they rendered as part of the facility, and then they would also pay them for the hardware that was used for the patient.

• 26:08Speaker 01

  At double, triple, sometimes even 10 times the actual cost.

• 26:13Speaker 02

  The surgeons are effectively forcing the patients to do their surgery at Pacific Hospital, and they have to tell them, "Well, it's because it's the best place for you." They can't say, "Because I'm getting an extra $15,000 or $20,000 for going there." So you have, is the surgery the right option? Is the place of surgery the right option? Is the hardware that's getting implanted in you the right option? There's so many places in there for corruption of decisions made by these doctors and everyone else involved that has a duty to these patients.

• 26:49Speaker 01

  Operation Spinal Cap and Operation Backlash were in separate offices, targeting separate sets of doctors, but they shared DNA. Jeff Horner and John Habin were friends. So they shared info and other things.

• 27:03Speaker 03

  You know, sometimes I think, you know, FBI agents get very, they, they don't want to share their informants. They don't want to extend anything outside their case.

• 27:14Speaker 01

  One informant in particular was worth sharing, especially at the beginning. It was a guy whose work spanned all across Southern California. This was the informant who first leaked Sean O'Keefe's name to the FBI. John was happy to make the intro to Jeff.

• 27:29Speaker 03

  John and I are, are great friends. He's a super talented agent, super bright. And if it wasn't for him sharing Paul Randall with me as an informant very early on, our case never would have taken off.

• 27:41Speaker 01

  Paul Randall, the rat that started it all. The same guy who'd shown up at Mark Sersansy's door to kick his rat ass was spilling his guts to the FBI, recording conversations with Drobot and countless other doctors as they negotiated the biggest kickback scheme in medical history. And he was not only talking to the FBI, he was feeding Bill Reynolds information too. And while the FBI did know about those meetings, what they didn't know was that Bill Reynolds was talking to the press. And that was gonna jeopardize the whole operation.

• 28:22Speaker 01

  Don't want to wait for the next episode? You don't have to. Unlock all episodes of Dr. Billions ad-free right now by subscribing to The Binge. And it doesn't stop at Dr. Billions. Subscribers get a binge drop of a brand new series on the first of every month. That's all episodes, all at once, all ad-free. Search for The Binge on Apple Podcasts and hit subscribe. If you're not on Apple, head to getthebinge.com to subscribe directly.

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• 29:26Speaker 01

  It was very hard to miss. On Thursday, February 9th, 2012, on the front page of the Wall Street Journal, just below the lead article on Mitt Romney losing presidential primaries in Colorado, Minnesota, and Missouri, was this headline, "In Small California Hospitals: The Marketing of Back Surgery." And right below that, a close-up portrait of the FBI's most valuable informant, Paul Randall.

• 29:57Speaker 01

  The lead writer of the piece, John Carey, did not want to comment for our story, but Bill Reynolds confirmed that he and Mark Sersansy were talking at length with the paper. Several months of calls and data sharing. And since Bill knew Paul Randall and knew Paul liked to talk, Bill was very open with Carey about the role this guy was playing. I'm just gonna read a few choice quotes from the article. Quote, "Mr. Randall, 52 years old, an entrepreneur with a collection of sports memorabilia and a yen for gambling, began his career as a hospital marketer in the mid-1990s after serving a stint in federal prison for racketeering." Unquote. Quote, "After serving time in the Terminal Island

• 30:41Speaker 01

  Federal Correction Facility in Long Beach Harbor, Mr. Randall went into business with Michael D. Drobot, the owner of Pacific Hospital of Long Beach." Unquote. And then this one. Quote, "By last August, federal prosecutors had prepared a charge that, if filed in court, would accuse him of conspiring to inflate the cost of spinal surgery hardware and use the proceeds to pay kickbacks to doctors to refer workers' compensation patients for surgeries." The article almost reads like a straight profile of Randall. And if you're in business with the guy, you might just wonder, why hasn't that indictment been filed?

• 31:24Speaker 02

  Obviously, that's not good when your cooperator is on the front page of the Wall Street Journal.

• 31:29Speaker 01

  Operation Spinal Cap lead agent John Habin.

• 31:32Speaker 02

  It effectively shut us down, and, and I thought our case was done.

• 31:36Speaker 01

  John could probably picture in his mind, all the rats fleeing the sinking ship.

• 31:42Speaker 02

  I thought everybody would have shut down and would have moved on and figured that the jig is up. We need to move on and find something else.

• 31:50Speaker 01

  And?

• 31:51Speaker 02

  It was quiet for a while because everybody sort of went into hiding because they were afraid that the big bad government was gonna come and spoil all their plans.

• 32:01Speaker 01

  But?

• 32:02Speaker 02

  When nothing happened, at least that they saw, then they kind of like stuck their head out and were like, "Okay, it looks like the coast is clear." And what shocked me was how quickly everybody recovered and went back to business as usual. Because it's so much money, you can't give that up. You can't give it up.

• 32:25Speaker 01

  Things did get a little tougher for Paul Randall, but only a little.

• 32:30Speaker 03

  We had Paul Randall meeting with Lokene Tantowaya at a sports club in La Jolla. And Dr. Lokene Tantowaya was so paranoid, he would have Paul Randall stripped down and actually bend over. And he checked his anus for recording devices.

• 32:46Speaker 01

  It was not up his butt that day. In April 2013, a little over a year after the Wall Street Journal article came out, the feds were ready to start making moves, taking their investigation from the covert to the overt phase.

• 33:03Speaker 02

  Make it dramatic. I need some music, theme music.

• 33:07Speaker 01

  Drobot had two offices, one at Pacific Hospital in Long Beach and the other, a corporate office in Newport Beach in Orange County. It was raiding time.

• 33:17Speaker 02

  So we show up there, knock on the door, you know, 8 o'clock in the morning, and myself and 80 of my closest friends decide that it's time to take this case and move it forward.

• 33:30Speaker 01

  Do you have one of those battering rams and you're going through the door?

• 33:33Speaker 02

  I mean, we have them, but generally in the white collar cases, everybody's like, OK, we'll just open the door for you.

• 33:41Speaker 01

  It took all day. Then the next day, the group showed up at Pacific Hospital and raided it too. Soon, even Michael Drobot would begin cooperating with the feds, giving them information that would, in turn, help both Operation Spinal Cap and Operation Backlash. But far away from these raids, far away from the newspaper headlines, far away from both FBI investigations, there was another man. His name was Robert Pereira, and he had a different view on everything that was going on at Pacific Hospital.

• 34:18Speaker 07

  I made a good living for a couple of years, but no matter how much I was being paid, I just couldn't stand by.

• 34:25Speaker 01

  Robert's job during these years was a representative for one of the companies providing hardware to some of the surgeons conducting these spinal surgeries. Many mornings, he would show up at Pacific Hospital and set out the trays of hardware for that day's surgeries. He says some of that hardware was hiding a secret.

• 34:43Speaker 07

  There's just no excuse for it. I mean, postpone the surgery, source another vendor, figure something out, but...

• 34:52Speaker 01

  He says the rods and screws doctors were putting in patients' bodies were not medical grade, and they were not regulated by the FDA. He says he saw them being manufactured on the down low at a nondescript machine shop in the California desert.

• 35:08Speaker 07

  These guys are going to have surgery tomorrow morning, and these implants are going in their spine, and they're bullshit.

• 35:14Speaker 01

  Every day, Robert delivered this hardware to operating rooms. He'd look up at the board of patients coming in.

• 35:21Speaker 07

  I'm looking at the surgery board for tomorrow going, these people are fucked. There's five, six surgeries on the board, and these people are fucked.

• 35:32Speaker 01

  The kickbacks were just the beginning. That's on the next episode of Dr. Billions. Don't want to wait for the next episode? You don't have to. Unlock all episodes of Dr. Billions ad-free right now by subscribing to The Binge. And it doesn't stop at Dr. Billions. Subscribers get a binge drop of a brand-new series on the first of every month. That's all episodes, all at once, all ad-free. Search for The Binge on Apple Podcasts and hit subscribe. If you're not on Apple,

• 36:12Speaker 01

  head to GetTheBinge.com to subscribe directly. Dr. Billions is produced by Western Sound for Sony Music Entertainment's The Binge. I'm your host, Ben Adair. I'm also the executive producer for Western Sound. From Sony Music Entertainment, the executive producers are Jonathan Hirsch and Catherine St. Louis. Dr. Billions was reported and produced by Dana Balut. It was written by Dana Balut and Ben Adair. Najib Amini is our fact checker. Michael Rayfield is the mix engineer. Music courtesy of North Figueroa Studios. Legal by Sam Borenzweig at Claris Law, PLLC.

• 36:57Speaker 01

  Next up, episode four, Egomaniac Airlines.

• 37:11Speaker 00

  Fall never arrives all at once. First the air, then the light. And slowly, the things you love begin to find each other. A jacket meets a dress. A hoodie slips beneath a blazer. An old cap finds a new scarf. Because you don't simply step into the season. You create it, layer by layer, until it finally feels like fall. Find fall your way at Ross.