Hospital Billing Fraud: The $11 Million Amtrak Scheme

How an $11 Million Hospital Billing Fraud Scheme Unfolded — and What Insiders Recognized First

Hospital billing fraud does not always originate inside a hospital. The prosecution of Jaekwan Lee, a licensed physical therapist from Flushing, New York, illustrates how billing fraud can take root in any setting where credentials, bank accounts, and insurance information can be exploited — and how insiders are often the first to see the warning signs. According to the U.S. Attorney’s Office for the District of New Jersey, Lee was sentenced on October 8, 2026 to 15 months’ imprisonment, two years’ supervised release, and ordered to pay $841,666 in restitution for his role in a scheme that caused the Amtrak health care plan to pay over $11 million in fraudulent claims. Every False Claims Act matter is different; results depend on the specific facts of each case, and no similar outcome is implied.

From January 2022 through June 2022, Lee and his co-conspirators agreed to bill the Amtrak health care plan for services that were never provided and were medically unnecessary. Lee allowed his physical therapy license and his business bank accounts to be used in the fraudulent billing scheme, receiving a portion of the proceeds in return. He pleaded guilty on May 12, 2026, before U.S. District Judge Madeline Cox Arleo in Newark federal court to conspiracy to commit health care fraud. The investigation resulted in the prosecution of nineteen individuals in total; all have pleaded guilty to conspiracy to commit health care fraud.

The Mechanics of the Scheme: Three Patterns That Insiders May Recognize

The Amtrak health care plan fraud followed three distinct patterns that someone working inside a billing operation, a physical therapy practice, or an employer benefits office might recognize. Each pattern left traces visible to people inside the organizations involved — in credentialing records, claims data, and employee behavior.

Licensed Providers Lending Their Credentials

Lee did not personally treat patients; he allowed his physical therapy license and business bank accounts to be used by others to process fraudulent claims. From the inside, this pattern may appear as a licensed provider’s name on billing records for services they did not perform, or as credentials moving through a billing workflow without the provider’s active involvement in patient care.

Phantom Services Billed to an Employer Health Plan

The fraud targeted the Amtrak health care plan — a self-insured employer health plan — rather than Medicare or Medicaid directly, yet it drew federal criminal prosecution. In total, the Amtrak health care plan paid over $11 million in fraudulent claims associated with providers connected to the scheme. This case demonstrates that federal enforcement attention is not confined to government payers; fraudulent billing against large employer-sponsored plans can and does attract federal criminal prosecution. Every False Claims Act matter is different; results depend on the specific facts of each case, and no similar outcome is implied.

Cash Kickbacks to Plan Members

Conspirators recruited Amtrak employees by paying them cash in exchange for allowing the conspirators to use their personal and insurance information to submit false and fraudulent claims. The overall scheme involved dozens of Amtrak employees and multiple health care providers, who paid hundreds of thousands of dollars in cash kickbacks over the course of the scheme. Someone in an HR, payroll, or plan-administration role might observe this pattern through unusual concentrations in claims data or unexplained cash activity among employees.

Why Enforcement of Hospital Billing Fraud Extends Beyond Medicare and Medicaid

The prosecution of nineteen individuals — all of whom pleaded guilty to conspiracy to commit health care fraud — reflects a broad, coordinated enforcement approach that reached providers, employees, and others across the scheme. The investigation was conducted by the Amtrak Office of Inspector General, under the direction of Special Agent in Charge James Harper, and the Amtrak Police Department, under the direction of Chief of Police James Cook, and was prosecuted by the U.S. Attorney’s Office for the District of New Jersey.

The involvement of the DOJ’s National Fraud Enforcement Division — announced on April 7 and described in the sentencing release as investigating and prosecuting those who commit fraud against the American people — signals that billing fraud against employer health plans may receive sustained investigative attention. The type of conduct described here is not confined to hospital or clinic settings. It can arise wherever billing, credentialing, or plan-administration functions exist.

The False Claims Act and What It Means for a Potential Whistleblower

While the Lee matter was prosecuted criminally, billing fraud against federally funded or federally connected health plans can also give rise to civil False Claims Act liability under 31 U.S.C. § 3729. Under 31 U.S.C. § 3730, a person may bring a civil action for a violation of section 3729 for the person and for the United States Government. A whistleblower who files such a qui tam complaint may be eligible to share in any civil recovery — though there is no assurance of any particular outcome in any individual case.

The statute provides that, where the government proceeds with the action, the person bringing the action shall receive at least 15 percent but not more than 25 percent of the proceeds of the action or settlement. Where the government declines to intervene and the person proceeds, the statute provides for a share of between 25 and 30 percent. The False Claims Act also provides retaliation remedies for employees who face adverse action for reporting fraud. Anyone who believes they may have witnessed conduct like that described here should consider consulting with attorneys who handle qui tam matters to evaluate whether their specific facts may support a claim.

If practices like these look familiar from your own workplace, you can discuss what you have seen with a Price Armstrong attorney confidentially and at no cost. Call (888) 670-9542 or use the secure evaluation form below.

Frequently Asked Questions About Hospital Billing Fraud and Whistleblowers

Does the False Claims Act cover fraud against employer health plans, or only Medicare and Medicaid?

The False Claims Act, at 31 U.S.C. § 3729, imposes liability on any person who knowingly presents a false or fraudulent claim for payment or approval to the United States Government. Whether a particular employer health plan fraud falls within that reach depends on the specific facts and the plan’s connection to federal programs or funding — a question that attorneys who handle qui tam matters can help evaluate. The Amtrak scheme was prosecuted criminally, demonstrating that federal enforcement can extend to employer-sponsored plans.

What share of a recovery might a whistleblower receive under the False Claims Act?

Under 31 U.S.C. § 3730, where the government proceeds with a qui tam action, the relator shall receive at least 15 percent but not more than 25 percent of the proceeds of the action or settlement. Where the government declines to intervene and the relator proceeds independently, the statute provides for a share of between 25 and 30 percent. There is no assurance of any particular outcome in any individual case, and the statute contains additional provisions that may affect the share in specific circumstances.

What protections exist for an employee who reports billing fraud and faces retaliation?

31 U.S.C. § 3730 provides that an employee, contractor, or agent who is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts taken in furtherance of a False Claims Act action shall be entitled to all relief necessary to make that employee, contractor, or agent whole. That relief may include reinstatement, two times the amount of back pay, and compensation for any special damages. Employees who believe they have faced such retaliation may wish to consult with attorneys who handle qui tam matters about their options.