MS Coast businessman pleads guilty in federal health care fraud case

Ocean Springs businessman Kenneth Ritchey pleaded guilty to one federal charge for his role in a health care fraud scheme involving protective gear purchased and resold at inflated prices to Veterans Affairs hospitals across the U.S. during the pandemic.

On Wednesday in federal court in Gulfport, Ritchey — dressed in a blue suit and light blue tie — pleaded guilty to one federal charge of conspiracy to defraud the United States. He appeared with his attorneys, Arthur Madden and Scott Gilbert.

Judge Sul Ozerden deferred sentencing until July 27, pending a pre-trial investigative report.

Richey, 59, faces up to five years in prison, up to a $250,000 fine, and up to three years of post-release supervision.

The investigation into Ritchey’s business dealings began as early as April 2020 when federal agents raided Gulf Coast Pharmaceuticals Plus, LLC., a wholesale distribution business Ritchey’s wife owns and he ran.

According to the charging documents, Ritchey worked with 12 alleged co-conspirators to buy up and hoard PPE they later sold at higher prices during the early months of the COVID-19 pandemic — all at the expense of Veterans hospitals and other entities desperate to protect employees from the coronavirus.

MS Coast businessman faces new charges in conspiracy to price-gouge PPE during COVID

The PPE gear sold by GCPP was marked up as much as 300% over costs, the records say, and providers brought them out of fear of being unable to get the equipment during the national emergency due to the COVID-19 pandemic.

Some providers asked about the inflated prices at the time of the sales, but the record says the co-conspirators sent them messages to dissuade them from reporting the business for price gouging or Ritchey and others created fraudulent receipts to the providers to cover up the crimes.

His co-conspirators included a warehouse manager and employee in Jackson County, nine sales representatives with an office in Broward County, Florida, and another unnamed co-conspirator, believed to be a Harris County pharmacist convicted of crimes involving Ritchey.

A federal grand jury indicted Ritchey on six federal charges that included conspiracy to commit health care fraud and wire fraud, making false statements, conspiracy to defraud the United States, and conspiracy to hoard designated scarce materials.

In exchange for his plea, the government is dismissing the remaining charges.

Before facing federal charges, Ritchey pleaded guilty to a state charge of price-gouging involving the Jackson VA center. A judge sentenced him to five years in prison but suspended the prison term and ordered him to serve three years under supervision and pay over $54,000 in restitution.

PPE gear bought online and at home improvement stores

In addition to GCPP, Ritchey controlled another entity and retail pharmacy in Jackson County that profited from the price-gouging scheme.

To carry out the scheme, Ritchey allegedly directed his employees to buy the gear and awarded them by paying them, for example, 50 cents for each N-95 mask they acquired, plus expenses.

The co-conspirators bought the gear at home improvement stores in Mississippi, Louisiana, Texas, Alabama, Florida, Georgia, South Carolina and North Carolina, and they often used military and other discounts in places they could make bulk purchases.

The staff also bought other gear online.

According to the court filings, GCCP paid an average of $3.49 for each N-95 mask but then sold them and other PPE “by as much as 300% over its costs and exploited the fear and desperation of health care providers, including VA health care facilities, to acquire PPE and other designated materials during a declared national emergency.”

Ritchey’s attorneys questioned the government’s method of determining an average price on masks. Ritchey’s attorneys questioned that amount and said they might dispute that figure at a later date, likely during sentencing.

GCPP bought over 1 million N-95 masks, 550,000 procedural masks, and thousands of other PPE and materials.

GCCP’s salespeople knew of the price gouging scheme; the records say they sent messages to one another about which states had laws about price gouging to avoid sales in those areas.

Co-conspirators charged in PPE fraud scheme

Of the 12 alleged co-conspirators, three have faced federal charges

The former head buyer at GCPP, Brandon J. Reich of Broward County, Florida, has pleaded guilty to a federal charge of conspiracy to commit health care fraud as part of the PPE price-gouging scheme.

Reich is awaiting sentencing and faces up to 5 years in prison and up to a $250,000 fine.

Another alleged co-conspirator, 30-year-old James Wesley “Trey” Martin of Ocean Springs, has pleaded not guilty to a federal charge of making false statements.

Martin allegedly committed his crime while working as a warehouse manager and permit holder at GCPP.

Martin is accused of creating fraudulent paperwork at Ritchey’s direction for Jada Gilbert, a former pharmacist in charge at Blue Ribbon Pharmacy in Harris County, Texas.

Gilbert called Martin to ask that he create the fraudulent paperwork after CVS Caremark decided to audit Gilbert’s pharmacy in 2019.

In April, Gilbert pleaded guilty in federal court in Gulfport to a federal charge of conspiracy to commit health care fraud.

As part of her plea, Gilbert admitted conspiring with others to create fraudulent invoices and purchase logs for high-adjudication pharmaceutical products, namely specialized products to treat burns, that she had never ordered or dispensed.

Gilbert admitted she was trying to conceal her crime when she submitted the fraudulent paperwork to CVS benefit managers during the audit.

Assistant U.S. Attorneys Jonathan Buckner and Sara Porter are prosecuting the case.