Feds Accuse LA Operators of $1.6 Billion Sober-Home Scam

LOS ANGELES, Calif. — The Justice Department charged 15 defendants, including six medical professionals, in a series of Los Angeles-area health care fraud schemes that produced more than $1.8 billion in fraudulent claims to government and private health care programs, federal prosecutors announced.

Click here to view the official U.S. Department of Justice press release on the Los Angeles health care fraud takedown.

The charges were announced by the Justice Department and the U.S. Attorney's Office for the Central District of California on October 22, 2026.

Eight defendants were arrested on October 22, 2026, according to the release.

The largest case in the takedown is a sham substance abuse treatment scheme that billed private insurers more than $1.6 billion, which the department described as the largest case of its type it has ever prosecuted.

A $1.6 Billion Treatment Scheme, Body Brokers, and Vulnerable Patients

Nathan Young, 39, of Los Angeles, also known as "Pablo," and his father, David Young, 71, of Los Angeles, also known as "Sancho Lopez," were charged along with Honey Phipps, 42, and Cody Phipps, 36, both of Greenville, Texas.

According to the indictment, the Youngs controlled dozens of purported substance abuse treatment companies in the Los Angeles area and around the country.

Prosecutors allege the defendants directed body brokers, including Honey and Cody Phipps, to target vulnerable people, including people who were unhoused and people attending substance abuse support groups.

The defendants allegedly sought out patients whose insurance policies paid the highest reimbursements, and in some cases fraudulently enrolled people in policies they were not eligible for, according to the release.

Patients were allegedly lured to Southern California and elsewhere with free flights, money, apartments, hotel stays, cars, gift cards, and drugs, according to prosecutors.

Once patients arrived, prosecutors allege, so-called premium patients received hotel stays and dinners, while non-premium patients lived in cramped, unsanitary housing described as "trap houses."

The Youngs allegedly recycled patients through their facilities to keep billing insurance, coached patients to fabricate symptoms, and directed that patients be given drugs to keep them from leaving, according to the indictment.

The four defendants are charged with conspiracy to commit health care fraud and wire fraud, conspiracy to violate the Eliminating Kickbacks in Recovery Act, three counts of health care fraud, and two counts of violating that act, with additional counts against Nathan and David Young, according to the release.

Nicholas Moore, 33, of North Myrtle Beach, South Carolina, pleaded guilty to a superseding information charging him with conspiracy to commit health care fraud and wire fraud in connection with the same scheme, according to the release. Prosecutors said Moore admitted assisting in the submission of $199 million in fraudulent claims.

Unnecessary Artery Procedures, Hospice Claims, and Patient Harm

Dr. Harold Tabaie, 78, of Anaheim, a cardiothoracic surgeon, and Hany Malek, 61, of Tarzana, a chiropractor, were charged by indictment in a scheme that billed Medicare $134 million for unnecessary atherectomy procedures, according to the release.

Prosecutors allege Malek posed as a medical doctor, diagnosed patients with arterial disease, and referred them to two Los Angeles clinics the men co-owned, where Tabaie performed procedures on patients who did not have disease in their arteries. Some procedures left patients in extreme pain, according to the indictment.

Three separate hospice schemes accounted for more than $138 million billed to Medicare for patients who were not terminally ill, according to the release.

Geoffrey Jimenez, 60, of Los Angeles: Charged by complaint in an alleged scheme through Transitions Hospice, Inc. that billed Medicare approximately $9.8 million, with more than $8.3 million paid out, according to the release.

Dr. Richard Keech, 83, of Torrance: Charged by information in an alleged scheme that caused more than $10 million in false hospice claims. Prosecutors allege Keech signed Certificates of Terminal Illness for beneficiaries who had not elected hospice care.

Armani Raffi, 59, of Van Nuys: Charged by information in an alleged four-hospice scheme in Sherman Oaks that submitted approximately $21 million in false claims and was paid more than $17.5 million, according to the release.

Two California doctors, Hassan Badday, 48, of Los Angeles, and Robby Ayoub, 52, of Huntington Beach, were charged in separate indictments with allegedly accepting illegal kickbacks for authorizing medically unnecessary genetic testing orders, according to the release.

Thomas Steven Mladinich, 38, of Newport Beach, was charged by information with receiving illegal kickbacks for patient referrals. Prosecutors said he received between $150,000 and $250,000 in kickbacks.

Christina Mareik, 61, of Whittier, also known as Christina Sanchez Hernandez, was charged in an approximately $270 million Medi-Cal pharmacy scheme. Prosecutors allege approximately $269,130,000 in false claims were submitted through Monte Vista Pharmacy, of which Medi-Cal paid at least approximately $178,746,000.

Dejun Wang, 62, of Walnut, a physician, was charged by indictment with the prohibited sale of prescription drug samples, including Rybelsus, Ozempic, and Mounjaro, according to the release.

"These charges include the largest sober home fraud scheme the Department has ever prosecuted, and a scheme involving unnecessary invasive procedures detected through data analytics," said Assistant Attorney General Colin M. McDonald of the Justice Department's National Fraud Enforcement Division. "Our message is simple: if you steal health care dollars from the American taxpayer or abuse your position to harm patients, we are coming for you."

"It is especially egregious when doctors and other health care professionals, who pledged to do no harm, resort to petty greed and criminality," said First Assistant U.S. Attorney Bill Essayli for the Central District of California. "The cases announced today represent billions of dollars in intended losses."

Arrests in Three States, Charges Pending, and Victim Contacts

Eight defendants were arrested on October 22, 2026, with initial appearances expected in federal court in downtown Los Angeles and in Texas, according to the release.

The FBI, HHS-OIG, IRS Criminal Investigation, DEA, the U.S. Marshals Service, and the California Department of Justice investigated the cases, according to the release.

An indictment is merely an allegation, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law, the department stated.

People who believe they are victims in the Tabaie and Malek case can contact the Fraud Division's Victim Assistance Unit at 1-888-549-3945 or victimassistance.fraud@usdoj.gov, according to the release.

Sources

U.S. Department of Justice, Office of Public Affairs, Official Press Release, Los Angeles Health Care Fraud Takedown, October 22, 2026; U.S. Department of Health and Human Services, Office of Inspector General, Enforcement Action Listing, October 22, 2026.