3. Pursuant to the Katz Companies' contractual relationship with OSMI, the KatzCompanies processed the assigned claims by submitting the claims for payment to numeroushealth care benefit programs, including private health insurance companies, the State
California Insurance Fund, and the United States Department
Labor. The Katz Companiesthen paid the amount collected on these claims from the health care benefit programs to OSMI,minus a processing fee.
On or about March
2008, several months after the Katz Companies assumedresponsibility for the claims that OSM[ bought from Factoring Company, the Katz Companiespurchased similar claims directly from Factoring Company. To fund this purchase
claimsfrom Factoring Company, on
about March 31,2008, the Katz Companies receivedapproximately $6.8 million from a hedge fund operating in
York and Florida. In exchangefor this funding and other additional debt that the Katz Companies already owed the hedge fund,the Katz companies gave a $10 million Note to the hedge fund. It was KATZ's intention to useproceeds from the collection
the claims purchased from Factoring Company to resolve thedebt to the hedge fund.
To assist the Katz Companies in billing the health care benefit programs for theclaims that it owned and that OSMI assigned to it, the Katz Companies engaged a NewHampshire company with expertise in health care billing (hereafter "Billing Agency"). BillingAgency submitted the claims to health care benefit programs, and the Katz Companies paidBilling Agency a percentage
the amount collected.
[n the summer
2008, Billing Agency identified various problemswith the claims that were being submitted for payment to health care benefit programs
the Katz Companies. These problems included the discovery that billings were being
Case 1:08-cr-00159-SM Document 1 Filed 12/10/08 Page 2 of 4