Prescription scam gets 4-year term
Military insurer cheated out of $12M in scheme by former medical sales rep
A former high school basketball coach turned medical sales rep was sentenced in federal court Thursday to 51 months in prison for defrauding Tricare, the nation’s military health insurer, of more than $12 million in fraudulent prescriptions for patients in Arkansas who were never examined by a doctor.
Derek Clifton, 39, of Alexander, a former Baxter County High School basketball coach, was accused of funneling fraudulent prescriptions to Dr. Joe May, of Benton, in a scheme which netted Clifton nearly three quarters of a million dollars in payouts before federal investigators uncovered it.
Prosecutors said the ringleader of the scheme was Glenn Hudson, a friend of Clifton’s and also a medical sales representative, who admitted last June that he would send prescriptions, rubber-stamped by May to the pharmacy. The pharmacy had an exclusive contract with Tricare, which paid the drugs’ high costs.
Hudson admitted he pocketed $1.5 million as the organizer of the fraud network. Clifton himself was
said to have brought in about $750,000 in the scheme.
It was one of many schemes across the country involving Tricare that federal authorities began investigating after an onslaught of claims in 2015, leading to indictments across the country.
In approaching Clifton to participate in the scheme, Hudson told him that the drugs were free to Tricare beneficiaries, and that anyone could use the drugs because they treated everyday conditions, such as wrinkles, prosecutors said. Hudson also told Clifton that the beneficiaries could live anywhere because the pharmacy was licensed in every state and shipped refills automatically, according to court documents.
Prosecutors said Clifton recruited friends, neighbors and former basketball players to receive the drugs, often emphasizing the drugs were free and not narcotics. Clifton even told his former players that they could be paid for receiving the drugs, and prosecutors said he also paid others to find more Tricare beneficiaries to receive the drugs, providing a “talk track” for recruiters to solicit beneficiaries.
May is accused of rubber-stamping prescriptions he received from Clifton that included patient insurance information and, often, refill quantities already filled in. Prosecutors said May — who is also accused of authorizing the maximum number of refills despite never having seen the patients — would then email Clifton the signed prescriptions, sent as PDFs, and Clifton emailed them to Hudson, who directed them to the pharmacy.
For more than three hours on Thursday, Clifton’s attorneys, Nicki Nicolo and Sergio Ceja, wrangled with Assistant U.S. Attorney Alexander Morgan over an appropriate sentence for Clifton.
Nicolo, noting that Clifton has been held in federal custody for eight months and 10 days, asked U.S. District Judge Kristine G. Baker for a sentence of time served to be followed by a period of probation, allowing him to get out of jail almost immediately. Nicolo argued that the conditions Clifton had been subjected to had served the purposes of retribution, deterrence and rehabilitation.
“Derek has greatly suffered in the time he has spent in Pulaski and Prairie County jail for over eight months,” Nicolo said. “This is a tough place for anyone, much less someone with no criminal history, no arrests, no anything their entire life.”
Nicolo said Clifton was besieged by other inmates who took his belongings, was isolated from his family and had no visitors besides his attorneys.
“He’s been staring at a wall trying to figure out how to survive,” she said. “This is not normal federal prison conditions, this is covid time in a county jail. You are getting one hour out for every 42 hours on average. During that one hour you have to take a shower, make your phone calls and do all of your necessary business.”
Nicolo said that Clifton’s time in jail had subjected him to worse punishment than any other defendant in the Tricare scheme. She said Clifton began to abuse prescription medications to “numb the pain and anxiety” after the indictment and eventually was taken into custody following a suicide attempt in 2020.
A number of character witnesses testified on Clifton’s behalf, including a director of a re-entry program sponsored by the Pulaski County sheriff’s office, the director of the M-18 recovery program in Central Arkansas, a parent whose son played basketball for Clifton and Clifton’s father.
Those witnesses described Clifton as a caring, giving person who opened his home to young people in need. They pleaded with Baker to show mercy.
In a rambling statement nearly 30 minutes long, Clifton apologized for his involvement in the scheme, pleaded for mercy and told Baker that the conditions he had endured in jail had exacerbated many of the mental health issues he had suffered since childhood.
“Being locked up in the county jail during this pandemic has been incredibly hard,” Clifton said, growing emotional at times. “At times, I had to go without basic needs, such as running water. The water would go out for a couple of days, and we were competing to get water out of a jug with other inmates. Going without toilet paper because the guards might think it’s funny to just not give it to you and watch you suffer.”
Morgan, however, said Clifton’s difficulties in dealing with incarceration were not unusual and were not a sign of particularly cruel punishment. He said Clifton’s crimes were not just illustrated by the flim-flam scheme but also by the cover-up that followed.
He conceded that Clifton was likely a charming person, educated, a good friend and a great father, but he said none of that mitigated the offenses Clifton committed.
“To prey on this industry, you need to be able to move in certain circles,” Morgan said, saying that the average perpetrator would be a respectable community member with no prior criminal behavior.
After a lengthy recess, Baker agreed with the prosecution that Clifton should serve time in prison.
“Mr. Clifton,” Baker said, “your fate is not in my hands, it’s in your hands. You broke the law.”
As Baker pronounced the sentence, Clifton alternately wiped at his eyes, put his head down on the table and cradled his head in his hands. As marshals prepared to lead him out of the courtroom, family members and supporters silently stood and watched as he was led away.