Constantine Zverev v. USA Vein Clinics of Chicago, LLC et al

Filing 61

MEMORANDUM Opinion and Order. Signed by the Honorable John J. Tharp, Jr on 3/27/2017. Mailed notice(air, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
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Plaintiffs
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v.
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USA VEIN CLINICS OF CHICAGO, LLC;
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USA VEIN CLINICS, LLC; USA VEIN
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CLINICS OF BOSTON, LLC; USA VEIN
CLINICS, P.C.; USA VEIN CLINICS OF NEW )
YORK, LLC; USA VEIN CLINICS, INC.; and )
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YAN KATSNELSON, AN INDIVIDUAL,
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Defendants.
UNITED STATES OF AMERICA ex rel.
CONSTANTINE ZVEREV, AND THE STATE
OF CALIFORNIA, STATE OF ILLINOIS,
STATE OF MASSACHUSETTS, AND STATE
OF NEW YORK, ex rel. CONSTANTINE
ZVEREV,

No. 12 CV 8004
Judge John J. Tharp, Jr.

MEMORANDUM OPINION AND ORDER
Plaintiff-Relator Constantine Zverev brings this qui tam action on behalf of the United
States of America and the states of Illinois, California, Massachusetts, and New York under the
federal False Claims Act, 31 U.S.C. § 3729(a)(1)(A)-(C), Illinois False Claims Act, 740 Ill.
Comp. Stat. 175/1 et seq., California False Claims Act, Cal. Gov’t Code § 12650, et seq.,
Massachusetts False Claims Act, Mass. Gen. Laws ch. 12 §§ 5A-5O, New York False Claims
Act, N.Y. State Fin. Law, §§ 187-194, and the Illinois Insurance Claims Fraud Prevention Act,
740 Ill. Comp. Stat. 92/1 et seq. The crux of Zverev’s allegations is that the defendants, his
former employers, schemed to defraud Medicare and Medicaid (as well as various other private
insurance providers) by billing those providers for medical procedures that were either never
performed, performed inadequately, or performed when medically unnecessary. Zverev also

maintains that once it was discovered that he was conducting his own private investigation of
these acts, his employment was terminated him in retaliation, and in violation of the Federal
False Claims Act, 31 U.S.C. § 3730(h)(1) and the Illinois Whistleblower Act, 740 Ill. Comp.
Stat. 174/20. The defendants move to dismiss Zverev’s Second Amended Complaint
(“complaint”) in its entirety. For the reasons that follow, that motion is granted in part and denied
in part.
BACKROUND
In addition to Dr. Yan Katsnelson, a cardiovascular surgeon, the complaint names
numerous limited liability corporations as defendants in the action. According to the complaint,
defendant Dr. Katsnelson either owns or controls the defendant entities in their entirety, and they
operate in an integrated and uniform manner in terms of “policies, practices, treatment and
billing modalities.” Sec. Am. Compl. (“Compl.”), ¶ 13, ECF No. 37. Each of the corporate
defendants is centrally connected to a common computer system and common databases. For
simplicity’s sake, the corporate defendants will generally be referred to collectively as “USA
Vein” except where noted.
USA Vein provides in-patient endovascular laser therapy (“EVLT”) procedures. EVLT is
used to treat varicose veins, which are veins that are visibly swollen and twisted. The EVLT
procedure entails the insertion of a heated laser fiber into the target vein via a catheter. The
physician then gradually increases the fiber’s temperature until reaching the required
temperature. The fiber is then removed, which collapses the vein and shut off circulation through
it. The vein then slowly dies off, and blood is diverted through the remaining healthy veins.
EVLT can serve both cosmetic and medical purposes; the defendants obtained reimbursement for

2

medically necessary EVLT procedures rendered to patients insured through Medicare, Medicaid,
and private insurance plans.
Plaintiff-Relator Constantine Zverev worked out of USA Vein’s Northbrook, Illinois
clinic as an information technology and data analyst from May 2011 through October 2011. As
an analyst, he was responsible for compiling patient data and creating programs that could be
used to identify trends in patient populations and the services they requested. In conducting these
duties, he claims to have had access to USA Vein’s patient data including patient identifying
information, dates of service, and details of services provided. The complaint also refers to
“billing data spreadsheets” to which Zverev claims he had access (e.g., Compl. ¶ 100).
In reviewing this information, Zverev became suspicious of the defendants’ billing
practices. He first became concerned when he was copied on an email sent from Cathy Mata,
USA Vein’s billing manager, to Dr. Katsnelson, Jekaterina Rapaport (USA Vein’s insurance
manager for Illinois), and Stella Gazaryan (USA Vein’s office manager for California). The
email stated “I noticed that Dr. Katsnelson is billing in Boston and Chicago in the same date. We
should be more careful.” Id. at ¶ 87. His interest piqued, Zverev began sleuthing through USA
Vein “patient databases” (id. at ¶ 88) looking for examples of such occurrences. These databases
included a patient database and a billing database; the latter, according to the complaint,
indicated which insurer was billed for which patient.
According to Zverev, this review revealed that the defendants were billing Medicare for
EVLT procedures that could not have possibly been completed on the dates that the defendants
represented in the bills. He points, for example, to records indicating that on October 12, 2009
Dr. Katnelson performed eight EVLT procedures on eight different patients in Chicago, while on
the same day he also apparently conducted five initial patient visits in Boston. At least six of

3

these patients were billed for the defendants’ services through Medicare. These same records
allegedly indicate that on March 22, 2010—in a single day—Katsnelson performed nineteen
patient visits in Chicago, eight in New York, and fourteen in Boston. Zverev maintains that at
least thirty-one of these forty patients were insured through Medicare or Medicaid, and that
Medicare or Medicaid was subsequently billed for those procedures. Similarly, records indicate
that on March 23, 2010 Dr. Katsnelson billed for nine patient visits in Chicago, two in New
York, and twenty in Boston. At least twenty-six of these thirty-one patients were billed through
Medicare or Medicaid. Assuming an hour per procedure, Zverev concluded that the defendants
were billing more procedures than Katsnelson possibly could have completed and so must have
been engaged in a scheme to defraud insurance providers, including Medicare and Medicaid, by
billing for services that were never rendered. Zverev’s suspicions were further bolstered by a
conversation that Zverev allegedly had with another one the defendants’ employees, Dr.
Melkonyan. Melkonyan told Zverev that he had been asked by Dr. Katnelson to sign off on
several altered and backdated patient bills, which reflected charges for services which he
(Melkonyan) had never actually performed. Shortly after this conversation, Dr. Melkonyan left
his job with USA Vein.
In addition, Zverev maintains that the defendants also billed insurance providers for
“services inadequately rendered.” Id. ¶¶ 82, 110, 113-116. More specifically, Zverev alleges that
Katsnelson and other doctors at USA Vein reused what were supposed to be single use laser
fibers when performing EVLT procedures, while billing Medicare and Medicaid for new fibers
in connection with each procedure. The complaint alleges that several doctors and technicians
who worked, or formerly worked, at several USA Vein locations told Zverev that Dr. Katsnelson
directed them to sterilize and reuse single-use fibers, and that Zverev had personally observed

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fibers soaking in a sterilization fluid even though they were only supposed to be used once. He
claimed that the defendants then “billed Medicare, Medicaid and private insurers, as if the
procedure were properly conducted using new instruments.” Id. at ¶ 84.
Finally, Zverev also alleges that his investigation revealed that the defendants were
billing insurance providers for “medically unnecessary” services because USA Vein ultrasound
technicians recommended EVLT procedures as medically necessary “at a significantly higher
rate than would be expected.” Id. at ¶ 124. He maintains that this occurred because Dr.
Katsnelson ordered ultrasound technicians to make as many “positive diagnosis” as possible,
even in cases where no procedure was medically necessary, in order to increase the number of
claims that could be submitted to the government. Id. at ¶ 127. Other physicians allegedly told
Zverev that Dr. Katsnelson ordered them to perform EVLT procedures on the same vein multiple
times within a period of two months without a determination of medical necessity. These same
physicians told Zverev that Dr. Katsnelson then ordered them to indicate on Medicare and
Medicaid submissions for reimbursement that the procedures were medically required, even
though they did not believe that was the case.
Zverev alleges that in October 2011 Dr. Katsnelson became aware that Zverez was
investigating the defendants’ billing practices. Zverev believes that Dr. Katsnelson became
aware of his investigation by having a family member monitor Zverev’s computer activities.
Subsequently, on October 22, 2011, a Saturday, Katsnelson unexpectedly approached Zverev at a
local restaurant and demanded that Zverev turn over his work laptop immediately. Zverev
complied. Later that evening, Katsnelson called Zverev and demanded the password for that
same laptop. According to Zverev, Katsnelson told Zverev that if he did not give the password to

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him that he would call the police, so Zverev provided the password to Katsnelson. A few hours
later, Katsnelson sent an email to Zverev stating that Zverev was fired.
DISCUSSION
Defendants move to dismiss the complaint, with prejudice, pursuant to Federal Rule of
Civil Procedure 12(b)(6), alleging that Zverev’s fraud claims lack the particularity required by
Rule 9(b), and that his retaliation claims are unsupported by any allegations of fact.1 When
analyzing the sufficiency of a complaint, the court construes it in the light most favorable to the
plaintiff, accepting well-pleaded (that is, non-conclusory) facts as true, and drawing all
reasonable inferences in the plaintiff’s favor. W. Bend Mut. Ins. Co. v. Schumacher, 844 F.3d
670, 675 (7th Cir. 2016). Under Federal Rule of Civil Procedure 8, a complaint can withstand a
motion to dismiss only if it alleges enough facts to render the claims facially plausible, not just
conceivable. Id. (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). Moreover, under Rule 9(b) of the Federal Rules of Civil
Procedure, applicable to Zverev’s claims that defendants were engaged in fraudulent billing
practices (Counts I-III and V-IX), a party who alleges fraud or mistake “must state with
particularity the circumstances constituting fraud or mistake.” Pirelli Armstrong Tire Corp.
Retiree Medical Benefits Trust v. Walgreen Co. 631 F.3d 436, 441 (7th Cir. 2011). “The
requirement that fraud be pleaded with particularity compels the plaintiff to provide enough
detail to enable the defendant to riposte swiftly and effectively if the claim is groundless. It also
forces the plaintiff to conduct a careful pretrial investigation and thus operates as a screen against
spurious fraud claims.” Fidelity Nat. Title Ins. Co. of New York v. Intercounty Nat. Title Ins. Co.,

1

The complaint also includes a common law conspiracy claim (Count III), but Zverev
voluntarily dismissed that claim without prejudice in his response to the motion. See Pl.’s Resp,
n. 1, ECF No. 50. Accordingly, it is not addressed in this opinion.
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412 F.3d 745, 749 (7th Cir. 2005). For purposes of Rule 9(b), particularity “means the who,
what, when, where, and how: the first paragraph of any newspaper story.” DiLeo v. Ernst &
Young, 901 F.2d 624, 627 (7th Cir. 1990).
A. Application of Rule 9(b) to the FCA Claims
Counts I and II of the Second Amended Complaint rely on sections 3729(a)(1)(A) and
(B) of the FCA, which require Zverev to allege that (1) defendants submitted a claim or
statement to the government; (2) for the purposes of obtaining money; (3) knowing that the claim
or statement was false. 31 U.S.C. § 3729(a)(1)(A)-(B). The various state laws cited by Zverev
that prohibit the submission of false claims require the pleading of the same elements as the
FCA.2 The defendants argue that Zverev has failed to satisfy Rule 9(b) not because the complaint
is not sufficiently detailed as to any of the three schemes it describes (billing for EVLT
procedures not performed; billing for laser fibers that were reused; and performing EVLT
procedures that were medically unnecessary), but rather because the complaint lacks
particularized information concerning any alleged false claim actually submitted to the
government. Defs.’ Mot. 9, ECF No. 40. In other words, the defendants assert that Zverev has
failed to allege specific facts indicating that the defendants submitted a false claim or statement
to the government—the threshold element of any FCA claim. Def’s Mot. 8, ECF No. 40
(“Relator must identify the time, place, and content of the alleged false claims, and the method
by which the alleged false claims were communicated.”).

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See California False Claims Act, Cal. Gov’t Code § 12650, et seq.; Illinois False Claims
Act, 740 Ill. Comp. Stat. 175/1 et seq.; Massachusetts False Claims Act, Mass. Gen. Laws ch. 12
§§ 5A-5O; New York False Claims Act, N.Y. State Fin. Law, §§ 187-194; Illinois Insurance
Claims Fraud Prevention Act, 740 Ill. Comp. Stat. 92/1 et seq. Federal pleading standards,
including Rule 9(b), apply to these state law claims when brought in federal court. Avila v.
CitiMortgage, Inc., 801 F.3d 777, 782 n.5 (7th Cir. 2015); Ackerman v. Northwestern Mut. Life
Ins. Co., 172 F.3d 467, 470 (7th Cir. 1999).
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Here, with the addition of the information included in Exhibit A to his response brief, the
court concludes that Zverev has pled with sufficient particularity that the defendants engaged in a
fraud scheme that included the submission of bills to Medicare and Medicaid for EVLT
procedures that were not performed. The court agrees, however, that the complaint fails to allege
adequately that false billings were submitted with respect to the other schemes alleged.
1. The Alleged Scheme to Bill for EVLT Procedures Not Performed
With respect to the alleged scheme to bill for EVLT procedures that were not performed,
Zverev’s claim is clear, plausible, and particularized. He charges that Katsnelson, through the
USA Vein entities he controlled, billed Medicare and Medicaid for procedures that he did not
perform. The claim is plausible because it alleges that Katsnelson billed the government and
private insurers for large numbers of procedures supposedly performed in up to three different,
geographically remote cities in a single day; there are, so the saying goes, only so many hours in
a day, and the complaint reasonably contends that Katsnelson could not have done all the work
he claims to have done without the ability to teleport himself between Chicago, New York,
Boston, and other geographically dispersed locations where he allegedly performed EVLT
procedures on the same day.3 And the claim is sufficiently particularized because Zverev has, in
the complaint and Exhibit A, provided detailed information about the dates when Katsnelson
billed these seemingly impossible numbers of procedures, which procedures were billed to the
government, and when they were billed.4

3

The plausibility of the claim is also buttressed by allegations that a doctor employed by
USA Vein told Zverev that Katsnelson had asked him to sign off on altered and backdated
patient bills for services that the doctor had not provided. Compl. ¶ 101.
4

The defendants argue in their reply brief that Zverev “has not alleged any particularized
facts, let alone cited specific examples, describing procedures that were not performed,”
claiming that he has not provided “the dates of services, the names of the physician who treated
8

To illustrate with just one example, on October 12, 2009, the complaint alleges that Dr.
Katnelson performed eight EVLT procedures on eight different patients in Chicago, while on the
same day he also conducted five procedures in Boston. As supplemented by Exhibit A, the story
is even more interesting; according to that summary, Katsnelson performed 14 EVLT procedures
in Chicago and seven in Boston. If, as Zverev alleges, each EVLT procedure takes about an hour,
Katsnelson could not have performed all of the procedures reflected in the records while also
traveling from Chicago to Boston (or vice versa). Further supplementing the allegations of the
complaint, Exhibit A also shows that 12 of the 21 procedures Katsnelson is recorded as having
performed were billed to Medicare.
It is true enough that the complaint’s allegations do not identify the specific EVLT
procedures that were performed on October 12, 2009, and those that were not. The same holds
true for all the other dates identified on which Katsnelson is alleged to have performed an
impossible number of procedures. The defendants argue, therefore, that the complaint fails to
include the requisite degree of particularity because it does not identify specific claims for
payment that were false; at most, the information Zverev has set forth shows that some
procedures billed to the indicated insurer that day (whether Medicare or a private insurer) were
not performed. This argument finds some support in Seventh Circuit cases like United States ex
rel. Grenadyor v. Ukrainian Village Pharm., Inc., 772 F.3d 1102 (7th Cir. 2014), in which the
panel held that the FCA complaints failed to satisfy Rule 9(b)’s heightened pleading
requirements because the relator failed to identify with specificity even a single false claim

the patient, the codes used in billing, and an explanation for why the codes billed were not
appropriate.” Reply at 4, ECF 52. But Exhibit A provides that data and more. It presents: the date
and location of the EVLT procedures; patient identification information; the billing codes
submitted; the dates on which the procedures were billed; and the insurer that was billed for the
procedure.
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submitted to the government despite having adequately alleged that the defendant pharmacy had
provided kickbacks to customers. Notwithstanding the kickback scheme, the court dismissed the
claim in light of his failure “to allege either that the pharmacy submitted a claim to Medicare (or
Medicaid) on behalf of a specific patient who had received a kickback, or at least name a
Medicare patient who had received a kickback . . . .” 772 F.3d at 1107. Similarly, in Gross v.
AIDS Research Alliance-Chicago, 415 F.3d 601, 605 (7th Cir. 2005), the Seventh Circuit
affirmed the dismissal of FCA claims because the plaintiff failed to allege particularized details
about allegedly false certifications that had been submitted by the defendants to obtain payments
from the government.
But Zverev has done more here than did the relators in Grenadyor and Gross. He has
adequately alleged facts that show that some number of the claims USA Vein billed on specific
days were fraudulent and that Medicare and Medicaid were billed for a substantial portion of the
procedures on those days. Does this mean that USA Vein necessarily submitted false bills to the
government? No. Does it plausibly allege that the government was defrauded by the submission
of one or more identifiable claims submitted for reimbursement of particular services purportedly
performed on specific days? Yes, and as the Seventh Circuit recently confirmed in United States
ex rel. Presser v. Acacia Mental Health Clinic, LLC, 836 F.3d 770, 777 (7th Cir. 2016), this
Circuit’s “case law establishes that a plaintiff does not need to present, or even include
allegations about, a specific document or bill that the defendants submitted to the Government.”
Rather, what Rule 9(b) requires in this context is simply allegations that permit the reasonable
inference that the defendant presented false claims to the government. Id. at 778. See also United
States ex rel. Baltazar v. Warden, 635 F.3d 866, 870 (7th Cir. 2011) (“A relator need not have
seen the claims submitted to the federal government . . . but must know enough to make fraud a

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likely explanation for any overbilling”); United States ex rel. Lusby v. Rolls-Royce Corp., 570
F.3d 849, 854-55 (7th Cir. 2009) (“It is enough to show, in detail, the nature of the charge, so
that vague and unsubstantiated accusations of fraud do not lead to costly discovery and public
obloquy.”). Thus, while in Lusby the Court acknowledged that “it is essential to show a false
statement,” it did not demand allegations that identified a specific false statement; it was enough
there that the relator’s allegations identified the type of false statement and permitted the
inference that “at least one such certificate” had been submitted to the government. 570 F.3d at
854. See also, e.g., Leveski v. ITT Educ. Servs., Inc., 719 F.3d 818, 839 (7th Cir. 2013) (no
identification of specific certification, but inferring that a certification must have been submitted
because the defendant could not otherwise have obtained its funding from the government).
Zverev’s allegations satisfy this standard.
The court does not read Grenadyor or Gross to be inconsistent with Presser’s reiteration
that a relator need not “include allegations about, a specific document or bill that the defendants
submitted to the Government.” 836 F.3d at 777.5 In Grenadyor, the problem was not so much the
failure to identify a specific kickback recipient as it was the failure to allege facts that plausibly
established that anyone received a kickback; the failure to identify a specific kickback recipient
was a symptom of the larger problem. E.g., 772 F.3d at 1107 (complaint lacked particularity
because it failed “to identify a single patient who received [a kickback] over the course of the
year”). And in Gross, the problem was not the failure to identify submissions to the government,
but rather the failure to describe how those submissions constituted false statements to obtain
payments. 415 F.3d at 605. That is not a problem here, where the false submissions are alleged to

5

The Court notes as well that Judge Posner was on the panel in Lusby, Grenadyor, and
Gross, but apparently found no material inconsistency between their holdings concerning the
necessity of identifying specific claims for payment.
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be fraudulent invoices for the provision of medical services. The court therefore concludes that
Zverev’s complaint satisfies Rule 9(b)’s requirements for pleading the submission of false claims
to the government. To the extent that the defendants maintain that Zverev is required to allege
the details about specific bills submitted to the government for reimbursement, there is no such
requirement.
It also bears noting that the Seventh Circuit has held repeatedly that “the particularity
requirement of Rule 9(b) must be relaxed where the plaintiff lacks access to all facts necessary to
detail his claim.” Corley v. Rosewood Care Ctr., Inc., 142 F.3d 1041, 1051 (7th Cir. 1998); see
also Presser, 836 F.3d at 778 (quoting Corley on this point). While Zverev claims to have had
access to records sufficient to plausibly show that USA Vein billed the government for
procedures that were not performed, he does not claim to have had access to all records
necessary to detail false bills submitted and, in any event, his access to any records was
terminated when he was fired. What he has produced, thus far, is enough to justify going forward
with discovery. As stated in Lusby, it is enough for a complaint alleging a violation of the FCA
to include allegations that “show, in detail, the nature of the charge, so that vague and
unsubstantiated accusations of fraud do not lead to costly discovery and public obloquy.” 570
F.3d at 854-55. Zverev’s claim regarding the billing of EVLT procedures is not the sort of
unsupported claim of fraud that Rule 9(b) protects against and it will work no injustice on the
defendants to permit the claim to go forward to discovery. The complaint includes enough detail
to put the defendants on notice of “what the fraud entails,” Lusby, 570 F.3d at 855, and to allow
them to contest the allegations about that scheme effectively—evidence permitting.
The defendants also object that, in any event, the alleged scheme to bill for EVLT
procedures not performed does not plausibly establish that the defendants submitted claims for

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procedures that Katsnelson did not perform because it rests entirely on Zverev’s unsupported
claim that an EVLT procedure typically takes about an hour. It is true that Zverev does not
explain on what that estimate is based, but it is enough at the pleading stage to note that Zverev’s
allegation is not inherently implausible (Zverev worked for USA Vein for about six months, had
access to areas where the procedures were performed, and interacted with employees involved in
conducting the procedures; it is plausible, then, that he would have some general understanding
of how long a typical EVLT procedure would take) and that in ruling on a motion to dismiss, the
court is required to accept the truth of the defendant’s fact allegations. If, indeed, Katsnelson is
able to perform such procedures more quickly due to his skills and experience, the force of
Zverev’s claim will be diminished proportionally, but that is quintessentially a question of fact
that cannot be resolved against Zverev at this juncture. Taking language out of context, the
defendants point to Presser’s dismissal of an FCA claim based on the relator’s “personal
estimation,” 836 F.3d at 780, but the Presser court was addressing not a simple estimate of the
typical length of an event—a seemingly straightforward task within the ken of a layperson with
some basis of familiarity with the event—but an unsupported opinion about the medical
necessity of certain procedures that were offered by the relator, who had none of the professional
qualifications or specific information necessary to offer such an opinion. Here, the allegation is
one of fact, and the court is required to assume, at this juncture, that it is true.6

6

Given the degree to which the allegations about this fraud scheme are predicated on
Zverev’s estimate, this promises to be a significant fact dispute in the case. The court notes, for
example, that the materials from the USA Vein website that Zverev included with the complaint
state that the EVLT procedure is “quick,” and that most treatments take less than 15 minutes. See
Compl. Ex. F at pg.2. This claim by USA Vein doesn’t trump Zverev’s allegation at this juncture
(as marketing materials, the accuracy of this estimate is also open to question), but it highlights
the materiality of the dispute between the parties on this issue. If a typical procedure takes 15
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2. The Alleged Scheme to Bill for Medically Unnecessary EVLT Procedures
Zverev’s allegations regarding false billings to Medicare and Medicaid for medically
unnecessary EVLT procedures, by contrast, fall short of plausibly alleging, with the requisite
particularity, that the defendants billed the government for procedures that were not medically
necessary. These allegations rest on Zverev’s claim that “USA Vein ultrasound technicians
recommended a ‘positive diagnoses,’ [sic] indicating a need for surgery, at a significantly higher
rate than would be expected.” The complaint includes allegations that certain technicians
employed by USA Vein in Illinois (where Katsnelson primarily worked) recommended as
surgery as medically necessary in a very high percentage of the patients for which they
performed ultrasounds (in some cases, almost 100%), that several doctors employed by USA
Vein told Zverev that Katsnelson had directed them to perform unnecessary procedures on the
same veins (and that they had complied with those orders), and that USA Vein physicians were
financially incentivized to perform as many procedures as possible. While these allegations may
plausibly suggest that USA Vein billed some provider for some unnecessary procedures on some
dates,7 they provide no basis to identify, with any degree of particularity, which bills were
fraudulent on that basis. In marked contrast to the data provided to identify false billings for
EVLT procedures that were not performed, the complaint provides no similar data from which
the defendants could even begin to identify which claims were alleged to be fraudulent due to
lack of medical necessity. Zverev provides no information, for example, about bills submitted for

minutes rather than 60, the seemingly impossible number of procedures Katsnelson performed
on certain days becomes much more feasible and, so, much less probative of fraud.
7

What the allegations lack with regard to comparative data regarding typical percentages
of EVLT procedures diagnosed as medically necessary it makes up for with allegations that a
number of doctors admitted to Zverev that they performed unnecessary procedures. Compl.
¶¶ 128-133.
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procedures performed by any of the doctors who are alleged to have admitted to Zverev that the
performed and billed for medically unnecessary surgeries. Indeed, the complaint’s allegations do
not provide a basis to rule out a single bill for EVLT procedures from the scope of this alleged
scheme; to defend against this claim on the basis of the allegations presented, the defendants
would be required to review the details of every procedure performed. As such, this claim is the
antithesis of a claim pled with particularity and, accordingly, it fails. United States ex rel. Garst
v. Lockheed-Martin Corp., 328 F.3d 374, 378 (7th Cir. 2003) (“A contention that the ‘total
claims’ are false . . . fails the requirement of specificity.”).
3. The Alleged Scheme to Bill for Reused Laser Fibers
The allegations regarding the alleged scheme to bill the government fraudulently for laser
fibers used in EVLT procedures when USA Vein was reusing fibers rather than using new fibers
for each procedure are equally wanting, if not more so. With regard to this alleged scheme,
Zverev’s complaint, supplemented by its response brief and the data presented there in Table 1,
includes ample information to plausibly establish that USA Vein reused single-use fibers in its
EVLT procedures. The complaint, however, includes no fact allegations that support the
conclusory allegation that USA Vein billed Medicare for single-use fibers for EVLT procedures
in which the laser fibers had been used previously. In contrast to the allegations about billing for
medically unnecessary procedures, the complaint includes no allegations that anyone at USA
Vein told Zverev that USA Vein was submitting false bills on this basis, and provides no
information that would identify any particular fraudulent claims. The claim that USA Vein billed
for single-use fibers that were not ordered is based solely on Zverev’s conclusion that this is the
logical reason that USA Vein would regularly reuse laser fibers; whether that conclusion is

15

reasonable or not, it provides no basis to identify with any particularity any such claims that were
submitted. Accordingly, it fails as well.
4. The Allegations Against the USA Vein Defendants
The various USA Vein defendants also assert that the complaint fails to allege particular
facts as to their participation in any of the alleged schemes to defraud Medicare and Medicaid.
The defendants argue that Zverev’s complaint “lumps together all of the [d]efendants, without
making any effort to distinguish between them or describe their individual involvement in the
alleged fraudulent activity.” Defs.’ Mot. 12. As part of Rule 9(b)’s requirement that the plaintiff
plead the “who, what, where, when, and how,” the relator must adequately allege each
defendants’ role in the fraudulent scheme. Midwest Grinding Co. v. Spitz, 976 F.2d 1016, 1020
(7th Cir. 1992). Simply lumping defendants together because they share a common nomenclature
is not enough. See Sears v. Likens, 912 F.2d 889, 893 (7th Cir. 1990) (affirming dismissal where
“the complaint lump[ed] all the defendants together and [did] not specify who was involved in
what activity”).
But here, the complaint specifically alleges that Katsnelson controlled each of the USA
Vein entities, that the entities were structured and operated as an integrated unit, and that
Katsnelson caused the entities to submit fraudulent billing submissions while practicing at each
of the USA Vein clinics named in the complaint. For example, Zverev alleges that USA Vein
patient data bases revealed Katsnelson billing for EVLT procedures supposedly performed at
USA Vein’s Chicago location (defendant USA Vein Clinics of Chicago, LLC), its New York
location (defendant USA Vein Clinics of New York, LLC), and its Boston location (defendant
USA Vein Clinics of Boston, LLC), all on the same day. Sec. Am. Compl. at ¶ 94. The alleged
role of each entity, therefore, was the same: to submit claims for EVLT procedures that were not

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performed. The complaint adequately alleges that each of the defendant entities was part of the
alleged fraudulent scheme, orchestrated by Katsnelson, to bill for more procedures than the
defendant clinics actually performed.
B. Retaliation
With respect to Zverev’s retaliation claims (Counts IV and X), the defendants allege that
Zverev has failed to allege facts indicating he was terminated for engaging in protected activity.
Defs.’ Mot., 13. In order to establish a retaliation claim under the FCA, Zverev must plead facts
indicating that (1) he took action in order to stop FCA violations; (2) the defendants knew he was
engaged in that conduct; and (3) that the defendants terminated him because he was engaged in
that conduct. 31 U.S.C. § 3730(h);8 Brandon v. Anesthesia & Pain Mgt. Associates, Ltd., 277
F.3d 936, 944 (7th Cir. 2002). Rule 9(b)’s particularity requirements do not apply to Zverev’s
retaliation claims. Thomas v. EmCare, Inc., 4:14-cv-00130, 2015 WL 5022284, *2-3 (S.D. Ind.
Aug. 24, 2015) (collecting cases).
Zverev has plausibly alleged that he was terminated in retaliation for his investigation
into USA Vein’s suspect billing practices. The complaint alleges that USA Vein had the
capability to monitor his activities on his company-issued laptop computer, and that Katsnelson
assigned a family member to do so during the period he was looking into the billing issues he
had discovered. Shortly thereafter, he alleges, Katsnelson and his wife tracked Zverev down at a
restaurant during a weekend, demanded the immediate surrender of his computer and disclosure
of his password, and terminated him within a few hours of obtaining them. Further, the
complaint alleges that Zverev was not violating any company policy concerning use of the

8

As Zverev concedes, he is required to plead essentially the same elements for his state
law retaliation claim. See , 740 Ill. Comp. Stat. 175/1 et seq.
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computer (there was, he maintains, no policy that barred him from taking the laptop home each
night and his practice in doing so was well known to Katsnelson). This is more than just
suspicious timing, as the defendants characterize it; it is action that plausibly suggests that
Zverev was terminated not because he had taken his work computer outside the office but
because of what Katsnelson found on the computer (i.e., patient and billing data). That suffices
for pleading purposes to state a claim that Zverev was terminated not for having his computer
outside the workplace but for what he was doing on the computer—namely, investigating his
suspicions about Katsnelson’s billing practices. If USA Vein terminated Zverev for some other
reason, it will have to adduce evidence of that fact during discovery.
* * * * *
For the foregoing reasons, the defendants’ motion to dismiss the Second Amended
Complaint is granted in part and denied in part. The FCA and related state law claims founded on
the alleged laser fiber reuse and medically unnecessary EVLT schemes are dismissed without
prejudice. The motion is otherwise denied.

Dated: March 27, 2017

John J. Tharp, Jr.
United States District Judge

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