FBI executes search warrant at The Scooter Store

Agents cluster at the front door of Building No. 1 during the February raid. Agents cluster at the front door of Building No. 1 during the February raid. Photo: TOM REEL, Tom Reel/Express-News Photo: TOM REEL, Tom Reel/Express-News Image 1 of / 23 Caption Close FBI executes search warrant at The Scooter Store 1 / 23 Back to Gallery

SAN ANTONIO — Executing a search warrant, federal agents Wednesday swarmed the New Braunfels headquarters of The Scooter Store, one of the nation's largest suppliers of power wheelchairs and scooters.

Authorities wouldn't comment on the reason for the raid, but a source familiar with the investigation said officials were looking for details of how The Scooter Store bills for its equipment.

The Scooter Store recently has drawn scrutiny for receiving millions in Medicare overpayments from 2009 to 2011.

Earlier this month, the company underwent another round of layoffs. That came after the Centers for Medicare & Medicaid Services (CMS) announced that reimbursements for power chairs, scooters and other equipment will be sharply lower starting July 1.

Company officials were mum about the raid. Neither Michael Clark, chief administrative officer, nor spokesman Tim Zipp responded to phone calls.

The Justice Department last week obtained search warrants for at least three Scooter Store locations in New Braunfels, according to people familiar with the matter.

A search warrant also was executed at a San Antonio information management services company that stores Scooter Store records.

The search warrants were filed under seal.

About 150 law enforcement officials — including from the FBI, the Office of the Inspector General (OIG) of the U.S. Department of Health and Human Services and the Texas attorney general's Medicaid Fraud Control Unit — combed The Scooter Store's offices Wednesday.

Most Scooter Store employees were directed to leave, but first had to show identification to agents, according to an employee who asked to remain anonymous because the person didn't have authority to speak.

More Information Slideshow mySA.com: See more photos from the FBI's raid of the New Braunfels business.

A group of employees — presumably executives whose names were on a list — remained behind to be interviewed.

“The employees went out in an orderly fashion,” Timothy J. Menke, a senior adviser for investigations with OIG, said outside the company's headquarters. “We're executing the search warrant on the entire site.”

The Scooter Store employs about 1,200 people at its New Braunfels headquarters and about 1,800 overall, Zipp told the San Antonio Express-News earlier this month. The company laid off 150 people this month and 220 people in September.

For now, uncertainty swirls around The Scooter Store. It's not clear when employees will be able to return to work. They've been advised to call a phone number starting Thursday morning for instructions on when to report.

FBI Special Agent Erik Vasys said the agency was “conducting a regular and usual investigative activity, the details of which I can't discuss further.”

A search warrant was executed in The Scooter Store building that houses IT servers and billing information before the search warrant for the company's main offices was carried out, a second employee said.

The raid came as company executives were set to depart for off-site training that was scheduled to last until Friday afternoon, the first employee said.

The Scooter Store's business has experienced a lot of tumult lately.

Power-mobility devices are a target in the crackdown on Medicare fraud. Government officials have raised concerns that scooters and power chairs are being prescribed to people who don't need them.

CMS is conducting a three-year demonstration program that requires durable medical equipment providers to get “prior authorization” from Medicare before patients living in any of seven states can receive a scooter or power chair.

Texas is one of the seven states, which were chosen for their “high populations of fraud- and error-prone providers,” according to CMS.

In January, CMS announced that Medicare will pay on average 36 percent less for scooters and power wheelchairs starting July 1.

As a result, The Scooter Store announced plans to expand its offerings of products and services, though it didn't provide any details.

Last year, an independent auditor found The Scooter Store received anywhere from $46.8 million to $87.7 million in Medicare overpayments from 2009 to 2011.

The company, however, only has to repay $19.5 million. That led two U.S. senators to ask CMS why it agreed to accept an amount “significantly less” than what it overpaid The Scooter Store.

In a Jan. 22 reply, CMS said it accepted the amount based on The Scooter Store's analysis of the auditor's report.

The company was given five years to repay CMS, though the agency said the agreement doesn't absolve The Scooter Store from further liability related to the billed claims.

Back in 2005, the Justice Department alleged in a civil lawsuit that The Scooter Store defrauded Medicare and Medicaid.

The company disputed the allegations but agreed to settle by paying the federal government $4 million and forgoing $13 million in Medicare payments.

As part of the settlement, The Scooter Store in 2007 entered into a five-year “corporate integrity agreement.” Under the terms of that agreement, The Scooter Store had to report and repay any overpayments within 30 days of identification.

But The Scooter Store agreed to repay the $19.5 million only after the OIG last February threatened to exclude the company from federal health care programs.

It's not clear if Wednesday's events are related to issues surrounding the 2007 agreement with the Justice Department.

The agreement expired on May 11. The OIG still is evaluating The Scooter Store's compliance for the last year of the agreement, an agency spokesman said Wednesday.

Meanwhile, The Scooter Store retail location along Interstate 35 remained open Wednesday, though a store representative said the computer and phones weren't working.

Word of the raid spread quickly through New Braunfels.

“I feel sorry for the employees who may lose their jobs,” said Dianna Cotten, 67, a New Braunfels resident and Scooter Store customer since the 1980s.

pdanner@express-news.net

Staff Writers Zeke MacCormack and Guillermo Contreras contributed to this report.