An Ohio physician has pleaded guilty to drug, tax and fraud charges for using his clinic to supply drugs to addicts throughout the Midwest, and for his role in schemes to evade more than $3.5 million in taxes, the Department of Justice announced.
Kevin B. Lake, 50, of Albany, Ohio will forfeit what's left of the $29 million in proceeds from the clinic's illegal activities. Lake owned and operated Columbus Southern Medical Center through corporate or trust entities in an effort to shield himself from the illegal drug trafficking going on there, the DOJ said.
According to the plea agreement, Lake admitted that from 2006 to 2013, clinic staff prescribed controlled substances to patients who did not actually need them. The DOJ said hundreds of patients showed up each day, most of them returning patients, for oxycodone, hydrocodone and Xanax. From 2004 to 2009, the percentage of patients receiving such drugs rose from 60 to 90 percent.
Lake pleaded guilty to running the clinic as a "drug premises," admitting that he solely controlled the proceeds from the illegal activities, which totaled $38 million in payments for patients' visits. He further admitted to laundering more than $20 million of the illegal proceeds, the DOJ said.
Lake also admitted to tax evasion on his personal income tax returns, having filed fraudulent tax returns for his corporations and trusts and paying himself a salary of $90,000 from 2010 through 2013 from the clinic entities, which was not reported as income. Instead, Lake disguised it as phony rental payments for use of his personal residence for corporate retreats. These and other tax-related infractions caused a tax loss of more than $3.5 million, the DOJ said.
Lake's illegal actions continued to spiral following the DEA's first appearance at Lake's clinic in June 2010, as he tried to separate himself from the drug premises by ceasing his salary and filing a fraudulent claim for disability payments from his two disability insurers. The insurance companies denied his claims and only paid out $18,000. Lake sold the clinic's remaining stock to employees through an Employee Stock Ownership Plan for $14 million.
Following the stock sale and failed disability claims, Lake fraudulently collected unemployment benefits, stealing more than $20,000 in government funds, the DOJ said.
"At the same time Dr. Lake was running his medical center as an illegal drug premises, he took every opportunity to cheat the U.S. Treasury out of millions of dollars in taxes," said Acting Deputy Assistant Attorney General Goldberg. "As the income tax filing season begins, Lake's guilty plea is a stark reminder of what awaits those filing false returns -- no matter their profession, income level or the complexity of their scheme."
As part of his plea agreement, a sentence of five years has been recommended. A judge will consider that recommendation at a yet-to-be-scheduled hearing. Three other defendants, including two other doctors, have already pleaded guilty in the case.
"For seven years, Kevin Lake operated Columbus Southern Medical Center as a pill mill," said Southern Ohio U.S. Attorney Benjamin Glassman. "He got rich by feeding the addictions of hundreds and hundreds of people."