AGREED-TO STATEMENT OF FACTS UNITED STATES v. CHRISTOPHER PHILLIPS

U.S. DISTRICT COUR DISTRICT OF NEW HAMPS

JAN 1 9 2010

FILED

Had this case gone to trial, the United States would have proven beyond a reasonable

doubt, by a combination of witness testimony, documents, recordings and other real evidence,

that Christopher Phillips committed conspiracy to commit wire fraud in violation of 18 U.S.C. §

371, as set forth in the Information.

Beginning in February 2008, Christopher Phillips was hired as a managing director of

VICIS Capital, LLC (VICIS), a hedge fund with a principal place of business in New York. As

part of its investment strategy, VICIS invested in start-up companies. These companies included

Medical Services 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. The chief executive officer of MSMI was Lowell Fisher and the chief executive

officer of MDWerks was Howard Katz.

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

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. Upon Phillips coming to work at VICIS in

February 2008, he assumed responsibility for VICIS' investment in DMS.

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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 billii

the DMS receivables itself and hired Global Healthcare Solution ("Global"), a New Hampshire

company to bill the claims to insurance companies. Global's president was Janine Boudreau.

Second, MSMI/VICIS placed MDWerks in charge of filtering defective claims and otherwise

managing the processing of the DMS receivables by Global. These steps failed to improve the

collections to the degree necessary for the DMS receivables to turn a profit for these companies

In July 2008, Katz received information from Boudreau that the collection rate on the

DMS receivables was so low because the receivables were fraudulent and that many doctors ha<

never in fact dispensed the transdermal compounds on which the receivables were based. The

United States would present testimony, emails and other documents showing the failure of the

doctors to dispense the compounds that underlie the DMS receivables.

Throughout early August 2008, Boudreau provided Katz with additional information

regarding the non-dispensing of the transdermal compounds on which the DMS receivables wei

based. On or about August 14, 2008, Katz met with Phillips and told him that the DMS

receivables appeared to be fraudulent. Between August 14, 2008 and October 2008, Katz and

Phillips had additional conversations in which Katz reiterated that the DMS receivables appeare

to be fraudulent.

On September 23, 2008, the Federal Bureau of Investigations (FBI) began investigating

the DMS receivables and their handling by MDWerks/MSMI/VICIS. The FBI began its

investigation as a result of information provided by Bourdreau.

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A month later, as part of the FBI investigation and at the FBI's direction, Boudreau

explained to Katz a potential billing method by which the collection rate of the DMS receivab

could be vastly increased. This method involved adding a fraudulent date of service to the ck

to serve as a date for when the transdermal creams underlying the DMS receivables purported

would have been dispensed (the "scheme"). The United States would present recorded teleph

calls between Boudreau and Katz in which Boudreau explained this fraudulent method for

MSMI/MDWerks/VICIS to collect on the DMS receivables.

On October 29, 2008, Katz met with Phillips at VICIS' offices in New York to obtain

Phillips' agreement to pay for Boudreau's expenses. At the conclusion of the meeting, Phillif

placed an interstate telephone call from New York to Boudreau in New Hampshire to authori:

her to proceed and to promise to pay her costs associated with the scheme. The United States

would present a recorded portion of this call between Phillips and Boudreau, in which he

authorized her to proceed.

On November 3, 2008, Phillips spoke again with Boudreau by telephone from Tennes

to discuss the scheme that she had previously explained to Katz, including that she would use

fraudulent dates of service to increase collections on the DMS receivables. Bourdeau told

Phillips that the scheme was "not legal." Shortly after this telephone conversation, Phillips

instructed Fisher to act as an intermediary between himself and Boudreau concerning the

execution of the scheme. Phillips thereafter communicated about the scheme to Boudreau

primarily through Fisher. The United States would present several recorded telephone

conversations between Fisher and Boudreau discussing execution of the scheme.

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On November 11, 2008, Phillips sent an e-mail to Boudreau in New Hampshire in which

he confirmed that he wanted her to continue with the scheme. On December 2, 2008, Phillips

sent an additional e-mail to Bourdreau in which he promised Boudreau that she would be

compensated for completing the scheme.

On December 16, 2008, Phillips conducted an interstate telephone call with Bourdreau in

New Hampshire, during which Phillips and Bourdreau discussed more of the logistics for

completing the scheme. During the call, Phillips approved Boudreau submitting fraudulent

claims as soon as possible in order to hasten the speed of collections for MSMI/VICIS. The

United States would present a recorded portion of this call as well.

The next day, Phillips met with Katz in Tampa, Florida to discuss progress in completing

the scheme. During this conversation, Katz told Phillips that VICIS would have to make a

payment to Boudreau for costs associated with the scheme, and Phillips agreed to facilitate the

payment. On December 30, 2008, Phillips authorized the payment of $260,000 to Boudreau for

costs associated with the scheme and wired $260,000 to Fisher for this purpose. The United

States would present emails and bank records showing the wiring of funds from Phillips to

Fisher.

On December 31, 2008, Phillips emailed Fisher to make sure that payment to Boudreau

had been made. Fisher confirmed that he had made the payment to Boudreau. The next day

Fisher emailed Phillips to inform him that Boudreau reported that she had completed adding the

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

clearinghouse which was forward them to insurance companies for payment, thereby completing

the scheme.

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Based on these facts, had there been a trial, the United States would have proven beyond

a reasonable doubt that Phillips committed all of the elements of conspiracy to commit wire

fraud in violation of 18 U.S.C. § 371, including that he committed an overt act in furtherance of

the conspiracy by wiring funds to pay for costs associated with executing the scheme.

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