Watch CBSN Live

Man pleads guilty to penis pump Medicare scam

PROVIDENCE, R.I. - An Illinois man pleaded guilty in Rhode Island on Thursday to charges he shipped unwanted penis enlargers to diabetes patients as part of a Medicare fraud scheme that cost $1 million to $2.5 million from 2005 to 2009.

Gary Winner, 49, admitted to four charges stemming from the scheme shortly after making his first appearance in U.S. District Court in Providence. He is accused of purchasing $26 penis enlargers from an adult website, repackaging them and shipping them to patients with information claiming the so-called "erectile pumps" helped "bladder control, urinary flow and prostate comfort."

The online stores peddling adult sexual products sold the devices under a variety of names, according to a criminal information charging Winner.

More Americans reaching age 90 than ever before
Ron Paul: Keep Medicare and offer medical savings accounts
Medicare fraud detection found flawed

Prosecutors say Winner targeted Medicare beneficiaries through his medical equipment company, Planned Eldercare, based in Buffalo Grove, Ill., and persuaded patients to provide their Medicare information by offering free medical equipment and supplies.

The plot targeted arthritis and diabetes patients through telemarketing, prosecutors said.

Diabetes patients were sent the penis enlargers repackaged in clear plastic bags with an information sheet claiming "regular use" increases blood flow in the urinary tract and prostate. Winner then charged Medicare $284 each for a total of $370,305, authorities said.

In charging Medicare, Winner claimed the devices treated erectile dysfunction, prosecutors said. Medicare reimburses for products treating organic impotence and erectile dysfunction. Medicare requires the devices be "medically necessary" and prescribed by a physician, prosecutors said. The erectile pumps shipped by Winner served "no medical purpose," they said.

Winner is accused of swindling another $1.8 million by seeking reimbursement for arthritic packages he claimed Medicare beneficiaries and their physicians ordered.

When employees confronted Winner about sending out supplies for arthritis patients regardless of need, he is accused of saying "it doesn't cost the client anything as the government is paying for it, and that the government would just print more money, so order more." Prosecutors also say he told patients inquiring about items they didn't order to "put them under the sink."

The Northbrook, Ill., resident agreed to forfeit $2.2 million. He faces up to 33 years in prison and $760,000 in fines when he is sentenced on Feb. 10. He and defense attorney William H. Kettlewell declined comment.

In a plea agreement signed in September, Winner agreed to plead guilty to two counts of health care fraud, the introduction of an adulterated and misbranded medical device into interstate commerce and money laundering. Prosecutors have agreed to recommend a lesser sentence.

Winner is also accused with waiving copayments for Medicare patients, which the program prohibits. By doing this, Winner induced beneficiaries to accept products they had not ordered and not report the fraudulent billing to Medicare, prosecutors said.