Case 1:10-cr-00002-PB Document 1 Filed 01/12/10 Page 1 of 5

U.S. DISTRICT COURT

UNITED STATES DISTRICT COUftff TRICT OF N.H.
DISTRICT OF NEW HAMPSHIRE FILED

UNITED STATES OF AMERICA 2010 JAN I 2 A 10: U2

v. CRIMINAL NO. 10- (iiS.-3.-ol BBu

CHRISTOPHER PHILLIPS,
UNDER SEAL
Defendant.

INFORMATION
The United States Attorney charges:

COUNT 1
CONSPIRACY

(18U.S.C. §371)

1. From approximately October 2008 to January 2009, in the District of New

Hampshire and elsewhere, the defendant,

CHRISTOPHER PHILLIPS,

knowingly and willfully agreed and conspired with other people to commit an offense against the

United States, to wit, to knowingly and willfully devise a scheme or artifice to defraud and to

obtain money from insurance companies by means of false or fraudulent pretenses,

representations or promises, and in furtherance thereof transmitted or caused to be transmitted in

interstate commerce, by means of wire, certain signs, signals, or sounds in violation of Title 18,

United States Code, Section 1343.

In addition, PHILLIPS committed one or more acts to effect the object of the

conspiracy.

2. At all relevant times, PHILLIPS was the managing director of VICIS Capital,

LLC (VICIS), a hedge fund with a principal place of business in New York.
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3. As part of its investment strategy, VICIS invested in start-up companies. These

companies included Medical Supply Management, Inc. ("MSMI"), a Massachusetts company

primarily engaged in the durable medical equipment business and MDWerks, a Florida company

engaged in the business of offering electronic medical claims processing and claims management

services for health care providers.

4. In February 2007, VICIS provided funds to MSMI to purchase from Deutsche

Medical Services, Inc. ("DMS"), a California company, the assignment of health insurance

claims for transdermal compound creams purportedly dispensed to California workers

compensation patients by doctors (the "DMS receivables"). MSMI purchased the DMS

receivables at 60 percent of the face value of each claim.

5. VICIS invested approximately $7,540,981 in MSMI's purchase of the DMS

receivables between February 2007 and April 2008. In April 2008, VICIS also provided

approximately $788,269 to MDWerks to purchase DMS receivables. In total, VICIS invested

approximately $8,329,250 in the purchase of DMS receivables.

6. Initially, MDWerks/MSMI/VICIS achieved a very unfavorable collection rate on

the DMS receivables. Two steps were taken to improve the collections. First, MSMI stopped

billing the DMS receivables itself and hired a New Hampshire medical claims billing company

("Billing Company") to bill the receivables to insurance companies. Second, MSMI/VICIS

placed MDWerks in charge of filtering defective claims and otherwise managing the processing

of the DMS receivables by the Billing Company. These steps failed to improve the collections to

the degree necessary for VICIS to profit on its investment.

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7. In July 2008, Conspirator A received information from the Billing Company's

president that the collection rate on the DMS receivables was so low because the receivables

were fraudulent and that many doctors had never in fact dispensed the transdermal compounds on

which the receivables were based. Throughout early August 2008, the Billing Company's

president provided Conspirator A with additional information regarding the non-dispensing of

the transdermal compounds on which the DMS receivables were based.

8. On or about August 14, 2008, Conspirator A met with PHILLIPS and told him

that the DMS receivables appeared to be fraudulent. Between August 14, 2008 and October

2008, Conspirator A and PHILLIPS had additional conversations in which Conspirator A

reiterated that the DMS receivables were fraudulent.

9. On or about September 23, 2008, the Federal Bureau of Investigations ("FBI")

began investigating the DMS receivables and their handling by MDWerks/MSMI/VICIS.

10. On October 24, 2008, as part of the FBI investigation and at the FBI's direction,

the Billing Company's president explained to Conspirator A a potential billing method by which

the collection rate of the DMS receivables could be vastly increased. This method involved

adding a fraudulent date of service to the claims to serve as a date for when the transdermal

creams underlying the DMS receivables purportedly would have been dispensed.

11. On October 29, 2008, Conspirator A met with PHILLIPS in New York to explain

the scheme to use fraudulent dates of services (the "scheme") to increase collections and to

obtain PHILLIPS' agreement to pay for expenses associated with the scheme. At the conclusion

of the meeting, PHILLIPS placed an interstate telephone call to the Billing Company's president

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in New Hampshire to authorize proceeding with the scheme and to promise to pay the Billing

Company's costs associated with the scheme.

12. On November 3, 2008, PHILLIPS spoke again with the Billing Company

president by telephone in New Hampshire to further discuss executing the scheme.

13. Shortly after the November 3, 2008 telephone conversation, PHILLIPS instructed

Conspirator B to act as an intermediary between himself and the Billing Company's president

concerning the execution of the scheme. PHILLIPS thereafter communicated about the scheme

to the Billing Company's president primarily through Conspirator B.

14. On November 11, 2008, PHILLIPS sent, by means of interstate wire, an e-mail to

the Billing Company's president in New Hampshire in which he confirmed that he wanted to

continue with the scheme.

15. On December 2, 2008, PHILLIPS sent an additional e-mail to the Billing

Company's president in New Hampshire in which he promised the Billing Company's president

that the Billing Company would be compensated for completing the scheme.

16. On December 16, 2008, PHILLIPS conducted an interstate telephone call with the

Billing Company's president in New Hampshire, during which PHILLIPS and the Billing

Company's president discussed more of the logistics for completing the scheme. During the call,

PHILLIPS instructed the Billing Company's president to submit the fraudulent claims as soon as

possible in order to hasten the speed of collections for MSMI/VICIS.

17. On December 17, 2008, PHILLIPS met with Conspirator A in Tampa, Florida to

discuss progress in completing the scheme. During this conversation, Conspirator A told

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PHILLIPS that VICIS would have to make a special payment to the Billing Company related to

the scheme, and PHILLIPS agreed to facilitate the payment.

18. On December 3 0, 2008, PHILLIPS authorized the payment of $260,000 to the

Billing Company for costs associated with the scheme and wired $260,000 to Conspirator B for

this purpose.

19. On December 31, 2008, PHILLIPS emailed Conspirator B to make sure that

payment to the Billing Company had been made. Conspirator B confirmed that he had made the

payment to the Billing Company.

20. On January 1, 2009, Conspirator B emailed PHILLIPS to inform him that the

Billing Company's president reported that the company had completed adding the fraudulent

dates of service to the claims and had transmitted them by wire to an out-of-state claims

clearinghouse for submission to insurance companies, thereby completing the scheme.

In violation of Title 18, United States Code, Section 371.

Dated: January 12, 2010

MICHAEL J. GUNNISON
Attorney for the United States,
Acting Under Authority Conferred
by28U.S.C. §515

By:

Assistant United States Attorney