Ken Paxton

Tuesday, April 15, 2008

Children's Rehab Clinic Founder in McAllen Pleads Guilty to Enrichment Scheme Defrauding Medicaid Program

AUSTIN The former president and primary stockholder of McAllen-based Just for Kids rehabilitation center pleaded guilty Monday to defrauding the Medicaid program. According to authorities, Eliseo Sandoval filed inflationary cost reports to the taxpayer-funded program in order to obtain reimbursements to support a lavish lifestyle and personal business ventures, including real estate and sporting goods enterprises.

Sandoval, 38, entered a guilty plea Monday just before his trial was scheduled to begin in Travis County District Court. Sandoval admitted that he used more than $4 million dollars in fraudulent, excessive Medicaid reimbursements to acquire a Brooks County ranch, a McAllen office building, several sports cars, a motorcycle and high-end sport utility vehicles. To purchase the office building, which doubled as a rehabilitation center for children, Sandoval obtained a mortgage, then used Medicaid funds to make mortgage payments and pay construction costs on the building.

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This defendant pleaded guilty to cheating the taxpayers to fund his lavish lifestyle, Attorney General Abbott said. By charging Medicaid excessive amounts for his services, the defendant was able to open numerous businesses, purchase luxury vehicles and even buy a ranch. The Office of the Attorney General will continue aggressively cracking down on waste, fraud and abuse in the Medicaid system.

Attorney General Abbott added, We are grateful to the Travis County District Attorney’s Office for their assistance with this case.

The investigation and prosecution was a joint effort of Attorney General Abbott’s Medicaid Fraud Control Unit and the Travis County District Attorney’s Public Integrity Unit. Texas Health and Human Services Commission auditors uncovered the defendant’s fraudulent Medicaid cost-report scheme.

District Judge Wilford Flowers accepted Sandoval’s guilty plea on first-degree felony charges. Sandoval’s sentencing is set for June 6.

Sandoval pleaded guilty to three separate charges, including misapplying Medicaid funds through his business; filing false, excessive cost-report statements to Medicaid for reimbursement; and falsely claiming college degrees from the University of Texas Pan American and St. Edwards University. According to investigators, Sandoval claimed two college degrees in order to profit from a Medicaid provision entitling multiple degree-holders to higher reimbursement rates.

In July 2004, the Just for Kids pediatric rehabilitation center filed for bankruptcy, despite more than $10 million income from annual Medicaid payments. Shortly after Sandoval completed construction of the $3 million rehabilitation center, he filed for personal bankruptcy and sought bankruptcy protection for other businesses he controlled.

These businesses included Fishing Properties, which owned the building leased to his McAllen sporting goods enterprise, Rio Grande Outfitters. Sandoval also owned Genesis Pediatric Development, a real estate company that owned the Just for Kids rehabilitation office complex. Just for Kids in turn paid rent to Genesis and Sandoval. The defendant also profited from a Medicaid billing company that exclusively serviced Just for Kids, charging the organization 15 percent of its Medicaid-billed amounts for the service.

In 2006 alone, Texas spent more than $17 billion to fund its portion of the Medicaid program. To save taxpayer dollars and protect Texas seniors, Attorney General Abbott dramatically expanded the Medicaid Fraud Control Unit.

The unit has established field offices in Corpus Christi, Dallas, El Paso, Houston, Lubbock, McAllen, San Antonio and Tyler through authorization and funding from the 78th Legislature. It works with federal, state and local agencies across the state to identify and prosecute those who defraud the Medicaid program.

To obtain more information about the Attorney General’s efforts to fight Medicaid fraud, access the agency’s Web site at