Brooklyn Adult Daycare Owner Sentenced for $3.2 Million Medicaid Fraud and Illegal Kickback Scheme

What this means for your practice

This enforcement action underscores the severe consequences for healthcare providers involved in schemes that defraud public health programs. For telehealth brands, medspas, dental practices, chiropractic offices, and other healthcare businesses, this case serves as a critical reminder of the risks associated with illegal patient inducements (kickbacks or bribes) and billing for services not rendered. The Department of Justice, in conjunction with agencies like HHS-OIG and local law enforcement, is actively prosecuting such offenses. Practices must maintain robust compliance programs, ensuring strict adherence to billing regulations and prohibiting any form of patient inducement that could be construed as a kickback. Even seemingly minor inducements can accumulate into significant fraud, leading to substantial penalties including imprisonment, restitution, and forfeiture of assets.

Details of the Fraudulent Scheme According to court documents, Eric Zhu, 29, owned and operated Prime Life Adult Day Care LLC (Prime Life) in Brooklyn, New York. From approximately 2020 through 2025, Zhu implemented a scheme involving illegal cash kickbacks and bribes. Medicaid recipients were paid these illicit funds in exchange for enrolling with Prime Life.

The core of the fraud involved Prime Life fraudulently billing Medicaid for SADC services that were never actually provided to these enrolled recipients. Over the five-year period, Prime Life submitted approximately $3.2 million in false and fraudulent claims to Medicaid, which subsequently paid out the entirety of this amount based on these claims.

To facilitate the scheme and generate the cash necessary to pay the kickbacks and bribes, Zhu reportedly utilized multiple business entities to launder the proceeds of the fraud. During a search of Prime Life, a portion of these fraud proceeds was recovered by investigators.

Regulatory Context and Enforcement Stance Colin M. McDonald of the Justice Department’s National Fraud Enforcement Division emphasized the gravity of Zhu’s actions, stating, “Eric Zhu exploited vulnerable Medicaid recipients by paying them illegal cash bribes to enroll in his adult day care program, then fraudulently billed Medicaid $3.2 million for services that were never actually provided.” McDonald further highlighted the broader impact, noting that the scheme “stole millions from American taxpayers and undermined a program meant to help those in need.”

This case is a testament to the vigorous prosecution efforts by the Department of Justice against individuals who defraud public health programs. The prosecution was a collaborative effort involving Assistant Attorney General Colin M. McDonald of the Justice Department’s National Fraud Enforcement Division, U.S. Attorney Joseph Nocella, Jr. for the Eastern District of New York, Assistant Special Agent in Charge Naomi Gruchacz for the U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG), Acting Special Agent in Charge Michael Alfonso of Homeland Security Investigations (HSI) New York, and Jessica S. Tisch, Commissioner, New York City Police Department (NYPD). The investigation itself was conducted by HHS-OIG, HSI New York, and NYPD.

Broader Anti-Fraud Initiatives This sentencing comes within the context of the Department of Justice's heightened focus on combating fraud. The DOJ recently announced the creation of the National Fraud Enforcement Division, which is specifically tasked with investigating and prosecuting those who commit fraud against the American people. This initiative aligns with President Trump’s Task Force to Eliminate Fraud, a whole-of-government effort aimed at eradicating fraud, waste, and abuse within Federal benefit programs, chaired by Vice President J.D. Vance.

Furthermore, the Department of Justice’s Health Care Fraud Strike Force Program, operating across nine federal districts, has a long-standing track record of combating healthcare fraud. Since 2007, this program has charged over 6,200 defendants, collectively involving more than $45 billion in false billings to federal health care programs and private insurers.

Beyond criminal enforcement, the Centers for Medicare & Medicaid Services (CMS), in conjunction with HHS-OIG, continues to implement measures to hold providers accountable for their involvement in healthcare fraud schemes. This multi-pronged approach underscores the government’s commitment to protecting the integrity of public health programs.

What This Means For Your Practice This case offers critical lessons for all healthcare businesses, including telehealth brands, medspas, dental practices, and chiropractic offices, regardless of their specific service offerings. The key takeaways from the prosecution of Eric Zhu include:

• Zero Tolerance for Illegal Inducements: The payment of cash kickbacks or bribes to patients in exchange for their enrollment or utilization of services is a direct violation of federal law and carries severe penalties. Any practice offering incentives to patients must ensure they fall within safe harbor provisions and do not constitute illegal remuneration.
• Accuracy in Billing: Billing for services that were never rendered is a foundational form of healthcare fraud. Practices must ensure that all claims submitted to federal or state healthcare programs accurately reflect services legitimately provided and documented. Robust internal controls and auditing procedures are essential to prevent and detect such billing irregularities.
• Inter-Agency Collaboration: The involvement of federal agencies like the DOJ, HHS-OIG, and HSI, alongside local law enforcement like the NYPD, demonstrates a comprehensive and coordinated approach to combating healthcare fraud. Providers should be aware that investigations can originate from multiple levels of government and involve diverse enforcement bodies.
• Focus on Vulnerable Populations: The exploitation of vulnerable Medicaid recipients was a central aspect of this scheme. Healthcare providers serving patient populations reliant on government programs must exercise heightened diligence to ensure ethical conduct and prevent exploitation.
• Personal Accountability: Eric Zhu's sentence of 57 months in prison, along with substantial restitution and forfeiture orders, highlights that individuals, not just their businesses, are held personally accountable for healthcare fraud. Owners and executives are expected to ensure compliance and face severe consequences for non-compliance.

The ongoing efforts of the DOJ, supported by its dedicated National Fraud Enforcement Division and broader anti-fraud initiatives, signal a sustained and aggressive posture against healthcare fraud. All healthcare providers should view this case as a stark reminder to review and strengthen their compliance frameworks to mitigate risks associated with fraud and abuse.

Key Facts

| Detail | Value | |---|---| | Defendant | Eric Zhu, 29, of Brooklyn, New York | | Entity Involved | Prime Life Adult Day Care LLC | | Nature of Scheme | Medicaid fraud and illegal kickbacks for unprovided social adult daycare (SADC) services | | Fraudulent Billing Amount | Approximately $3.2 million | | Time Period | Approximately 2020 through 2025 | | Sentence | 57 months in prison | | Financial Penalties | Almost $3.2 million in restitution and $1.5 million in fraud proceeds forfeiture |

Frequently Asked Questions

Who was sentenced in this case?

Eric Zhu, a 29-year-old owner of Prime Life Adult Day Care LLC in Brooklyn, New York, was sentenced.

What was the nature of the Medicaid fraud scheme?

Eric Zhu paid illegal cash kickbacks and bribes to Medicaid recipients in exchange for their enrollment in Prime Life, then fraudulently billed Medicaid for adult daycare services that these recipients never received.

How much money was involved in the fraudulent billing?

Prime Life Adult Day Care LLC fraudulently billed Medicaid approximately $3.2 million, and Medicaid paid approximately $3.2 million based on these false claims.

What was the sentence for the defendant?

Eric Zhu was sentenced to 57 months in prison and ordered to pay almost $3.2 million in restitution and forfeit $1.5 million in fraud proceeds.

Which government agencies investigated this case?

The case was investigated by the U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG), Homeland Security Investigations (HSI) New York, and the New York City Police Department (NYPD).

Source: DOJ — Brooklyn Adult Daycare Owner Sentenced to 57 Months for Medicaid Fraud Scheme · Mon, 20 Jul 2026 12:00:00 +0000