Cardiologists plead guilty to embezzlement. Source: N.Y. State Governor’s Office

Two private-practice cardiologists pleaded guilty to embezzlement, admitting that between them they took salaries of approximately $840,000 from the University of Medicine and Dentistry of New Jersey while providing no services in return to the university, other than referring cardiac patients, according to U.S. Attorney Christopher J. Christie.

Bakul Desai, MD, 55, of Livingston, N.J., a part-owner of a cardiology and internal medicine practice with offices in Jersey City and Secaucus, and Laxmipathi Garipalli, MD, 59, of Colts Neck, N.J., pleaded guilty before U.S. District Judge Stanley R. Chesler.

Both pleaded guilty to one count each of embezzlement, which carries a maximum statutory penalty of 10 years in prison and a $250,000 fine. Judge Chesler scheduled sentencing for both defendants for June 5, and both men were freed on $1 million bond secured by equity in their homes.

“Our work to clean up the mess we found at UMDNJ over two years ago continues,” said Christie. “We will hold the institution and individuals responsible for criminal acts.”

The prosecutions of Desai and Garipalli are an outgrowth of the U.S. Attorney’s Office investigation of fraud and abuse at UMDNJ. The U.S. Attorney’s office and UMDNJ began a Deferred Prosecution Agreement (DPA) in December 2005 after it was found that UMDNJ had committed healthcare fraud through intentional double-billing of the federal Medicaid reimbursement program in the amount of approximately $4.9 million.

During the course of the DPA, other fiscal abuses were uncovered by a federal monitor, former federal judge and U.S. Attorney Herbert J. Stern. The DPA ended in December 2007, and due to the satisfactory completion of reforms at the institution, a criminal complaint charging healthcare fraud was dismissed at the request of the U.S. Attorney.

The criminal investigation surrounding the cardiology referral program is continuing.

UMDNJ’s University Hospital is a state-licensed Level 1 Trauma Center. To maintain state funding and accreditation, the hospital was dependent on the annual performance of a number of cardiac procedures, including cardiac catheterizations and cardiothoracic surgery. Beginning in at least 1995, however, the hospital was failing in this regard.

According to the charges, UMDNJ and several of its administrators began a program to bring in more cardiac surgery patients through part-time employment contracts with a number of community cardiologists. The doctors, including Desai and Garipalli, had their own private practices and many patients whom they could refer to the hospital.

The UMDNJ contracts with the community cardiologists required them to work part-time at the hospital as clinical assistant professors, and to perform bona fide services, such as teaching at UMDNJ’s medical school, providing on-call coverage, attending weekly conferences, lecturing, and supporting UMDNJ’s research efforts.

In return, the contracts provided that the community cardiologists would receive annual salaries of between approximately $50,000 and $180,000. Desai entered into his contract in January 2003, and Garipalli in October 2003.

Both defendants admitted that they intentionally accepted the payments, provided no bona fide services in return and that they were therefore not entitled to the compensation.