Ninth man pleads guilty in Shore prescription fraud scheme

A pharmaceutical drug representative from Atlantic County became the ninth man to plead guilty in a multimillion-dollar kickback scheme that recruited Shore firefighters and other public employees to take advantage of state benefit plans covering costly compounded medicines and netting millions to conspirators.

Richard Zappala, 45, of Northfield, pleaded guilty before U.S. District Judge Robert Kugler in Camden on Thursday.

He is the sixth drug salesman to admit to a role defrauding the New Jersey state health benefits programs and other insurers by submitting fraudulent claims, said acting U.S. Attorney William E. Fitzpatrick in a release. In addition to the pharmaceutical representatives, a Margate physician, a retired Atlantic City firefighter, and a gym floor installer have pleaded guilty in the $28 million fraud.

According to the information filed with Zappala's plea agreement, the state health plan paid an out-of-state compounding pharmacy — as yet not publicly identified — a total of more than $50 million for compounded medications mailed to people in New Jersey between January 2015 and April 2016.

Zappala's role in the scheme, which included recruiting and paying public employees and doctors, netted him nearly $1.5 million in criminal proceeds and accounted for losses to the state health plan of more than $4.3 million, according to court documents. The admitted ringleader, Matthew Tedesco, who is to be sentenced Dec. 4, admitted to receiving more than $11 million from the out-of-state compounding pharmacy, a portion of which he passed along to other conspirators, according to the guilty plea.

Zappala and others received a percentage of each prescription filled and paid by the state plan, authorities said. "He would select the compounded medications that paid the most without regard to their medical necessity," the U.S. Attorney's Office said in a release. The compounded medications are individually prepared creams and vitamins, including anti-fungal, scar, pain, and libido treatments.

Since the summer, the prescription-drug scheme has been the subject of relentless rumors and anxiety in Shore towns worried about the potential impacts on their public safety departments and schools.

Despite the pleas, Shore towns, including Ventnor and Margate, and school districts, including Linwood-based Mainland, are still waiting for the other shoe to drop. The governments of Margate, Ventnor, and Atlantic City have all been subpoenaed for records of employees holding the costly prescription plans. Atlantic County Prosecutor Damon Tyner has said the county's role in the investigation could lead to hundreds of people being charged.

This summer, Tyner and the FBI raided the offices of endocrinologist James Kauffman in what Tyner called a health benefits fraud investigation. Kauffman was charged with weapons offenses after he brandished a gun and threatened to kill himself. He remains jailed in Atlantic County. Kauffman's wife, April, a Shore radio host and veterans advocate, was murdered in their home in 2012, a crime that remains unsolved.

Kauffman, 68, now totally white-haired since his imprisonment and no longer licensed to practice medicine, was formally arraigned in Atlantic County Court on Thursday on gun and obstruction charges.