LOS ANGELES—Kaiser Foundation Health Plan Inc. is suing a company and a former Kaiser employee for allegedly defrauding the health plan out of millions of dollars as it raced to meet the challenges of having sufficient personal protective equipment for its medical staff during the pandemic.
The allegations in Kaiser’s Los Angeles Superior Court lawsuit against Wasatch Co. include breach of an oral and written contract, unjust enrichment, breach of the duty of loyalty, fraud and receipt of stolen
property. Kaiser seeks unspecified compensatory and punitive damages in the suit brought June 24.
“All told, Wasatch billed, and Kaiser paid, nearly $5 million for goods that Kaiser did not need and never received,” according to the suit.
A Wasatch Co. representative could not be immediately reached.
When the COVID-19 pandemic hit, Kaiser, faced with “extraordinary and unprecedented challenges,” took “every available measure to meet those challenges and to fulfill its mission of providing the highest quality affordable patient care while safeguarding the health and safety of its doctors, nurses, staff, and other stakeholders,” the suit states.
While moving to meet the challenges of the pandemic, the Wasatch Co., led by its vice president and owner, Abdul Wahab Jr., conspired with former Kaiser purchasing manager Atif Siddiqi to bill Kaiser for goods Kaiser did not need and never received, according to the suit, which names both men as co-defendants.
Siddiqi introduced Wahab and Wasatch to Kaiser in March 2020, shortly after the pandemic’s onset and recommended that Kaiser purchase a large quantity of medical scrubs from the company, according to the suit.
“With that legitimate purchase, Wasatch was provisionally approved as a Kaiser vendor and the proverbial fox was in the henhouse,” the suit states.
Over the next 10 months, Wasatch and Wahab, aided and abetted by Siddiqi, placed a series of escalating and fictitious orders with Wasatch, the suit alleges.
Siddiqi would place these orders in Kaiser’s system, lying as necessary to his colleagues about what the goods were or why they were needed,” the suit states. “In addition to lying to his colleagues, Siddiqi
would avoid scrutiny by breaking up large orders into multiple smaller purchases to avoid attention.”
Wasatch and Wahab issued invoices for the alleged false orders and collected payment without delivering any goods, according to the suit.
“The conspirators became emboldened over time, raising the amount of their fake orders from the low five figures in April 2020 to more than a hundred thousand dollars per order by the time Kaiser uncovered the scheme in early 2021,” the suit states.
Despite repeated requests, Wasatch did not provide any evidence the items were ever delivered, according to the suit.
In many instances, Siddiqi avoided scrutiny for purchase orders by breaking them up into multiple separate orders, each of which fell below his $50,000 purchase authority limit, the suit states.
At other times, Siddiqi justified the orders to his Kaiser colleagues and superiors by telling them that the goods were necessary to adapt to supply chain disruptions occasioned by the pandemic or to assist in Kaiser’s efforts to create and otherwise combat the coronavirus, according to the suit.
“Following an internal compliance investigation, Kaiser determined that Wasatch had billed Kaiser for, and Kaiser had paid for, nearly $5 million worth of inventory for which Kaiser has no evidence of delivery and in many instances, such as with the postage meter ink and millions of envelopes, for which Kaiser had no conceivable business need,” the suit states.