Jury Convicts Sleep Doctor of Insurance Fraud and Tax Evasion

Talk about nightmares: A federal jury in Boston has convicted sleep apnea specialist Pankaj Merchia, M.D., of healthcare fraud, money laundering, conspiracy to defraud the IRS, and tax evasion. He was indicted on money laundering and healthcare fraud charges in December 2022.

“Over 10 years, the defendant hid millions in income from the IRS and defrauded insurers through his medical practice,” said Assistant Attorney General A. Tysen Duva of the Justice Department’s Criminal Division. “The defendant—a highly educated physician — put greed over his integrity, lining his own pockets through lies and deceit at the expense of insurers and Americans who pay healthcare premiums, then doubling down on his lies and deceit and attempting to hide his ill-gotten gains from the IRS. The Criminal Division will prosecute doctors and other professionals like this defendant who abuse the system, and through their crimes, inflate insurance costs for all Americans and fail to pay their taxes due and owing.”

According to court documents and evidence presented at trial, Dr. Merchia, of Boca Raton, Fla., and Brookline, Mass., was a Harvard-educated sleep doctor who was in charge of several sleep medicine companies. From 2017 to 2019, the defendant fraudulently billed insurance companies millions of dollars for sleep apnea machines that had not been used by his former patients. Dr. Merchia billed up to hundreds of thousands of dollars per patient for the medical devices, even when, in some cases, those patients returned the devices. Dr. Merchia used proceeds of the fraud to purchase a $2.1 million home in Brookline.

Dr. Merchia also defrauded a health insurer out of more than $390,000 by submitting fraudulent claims for treating his brother. After being told that he could not bill insurance for treating a family member, Dr. Merchia created a new medical business in the name of a nominee and submitted new claims so the insurance company would continue paying the illicit reimbursement, prosecutors claim. 

In addition, from 2009 to 2019, Dr. Merchia did not report or pay tax on more than $6.5 million in income he earned from his medical businesses by falsely claiming the businesses were owned by a co-conspirator. To defraud the IRS, Dr. Merchia fabricated a sham transaction, falsely claiming he sold his medical businesses in 2008. To ensure his co-conspirator did not owe taxes, they claimed deductions—spread over many years—for the fabricated sale payment. 

Dr. Merchia was convicted of one count of healthcare fraud, three counts of money laundering, one count of conspiracy to defraud the IRS, and two counts of tax evasion. He is scheduled to be sentenced on April 28. Each count of healthcare fraud and money laundering carries a maximum 10-year prison term, while both tax evasion and conspiracy to defraud the IRS each carry a maximum five-year jail term.

IRS Criminal Investigation and the Insurance Fraud Bureau of Massachusetts are investigating the case.

Trial Attorney Ezra Spiro of the Criminal Division’s Tax Section and Assistant U.S. Attorney Neil Gallagher of the District of Massachusetts are prosecuting the case.