Business owner admits role in $135 million medical equipment scheme, DOJ says

October 10, 2011
by Brendon Nafziger, DOTmed News Associate Editor
A New Jersey man pleaded guilty in a Newark federal court last week for his role in a $135 million medical equipment leasing scheme involving the sale of non-existent devices, according to the Justice Department.

Donner, the 52-year-old owner of Donner Medical Marketing Inc. in Berkeley Heights, N.J., pleaded guilty to one count of mail fraud for his role in a convoluted plot the government claims defrauded 50 banks and lenders of more than $80 million, U.S. Attorney Paul J. Fishman said in a statement.

Although the case was originally announced last year, Donner, who stood before U.S. District Judge Susan Wigenton on Thursday, had not been named until now.

From at least 2002 to 2010, Donner gave Charles Schwartz, the 58-year-old owner of Allied Health Care Services Inc., invoices for non-existent medical equipment, such as ventilators, the government said documents and statements made in court reveal. Schwartz in turn used these invoices to raise $135 million from financial institutions, which bought what they thought was valuable equipment and then leased it back to Schwartz and his company.

The institutions then paid Donner for the apparently imaginary equipment. He forwarded about 96-97 percent of the money back to Schwartz, keeping the rest for himself as a "commission," prosecutors said.

Throughout the scheme, the two men tried to deceive bank examiners who wanted to inspect the bogus equipment, the DOJ said.

In August 2010, Schwartz allegedly said the banks and lenders had fallen "hook, line and sinker" for a part of their scheme, according to a release issued by the FBI last year.

"The financial losses in this case are staggering," Michael B. Ward, special agent in charge of the FBI's Newark division, said in a statement after Schwartz's September 2010 arrest. "Based upon the amount and extent of alleged fraud with which Schwartz is accused, it appears he was determined to steal as much money as he could, as fast as he could. I commend the special agents and prosecutors who worked so diligently to bring this matter to justice."

Schwartz pleaded guilty to one count of mail fraud in April.

Donner's charge carries a maximum penalty of 20 years in prison and a fine of $250,000 or twice the gross gain or loss from the crime. Sentencing is scheduled for Jan. 11.