Deep Dive
Shownotes Transcript
This episode of Swindled may contain graphic descriptions or audio recordings of disturbing events which may not be suitable for all audiences. Listener discretion is advised. The pirates are out to get you. Don't let them brand you with their mark. Piracy funds organised crime. It will destroy our film and video industry.
Piracy costs jobs and will destroy our music and publishing industry. Piracy funds terrorism and will destroy our development and your future enjoyment. Don't touch the whole stuff. Call is copyright. There was a plague upon us at the end of the 20th century. Widespread music piracy. It's true.
The adoption and facilitation of peer-to-peer file sharing networks had enabled every deviant with an internet connection and a CD burner to become a music mogul. Khalid Satari included. Khalid Satari is an ambitious man from Abu Dhabi. He immigrated to the US in the mid 90s to attend the University of Tennessee.
For extra cash, Satari sold illegal mixtapes out of his dorm room. Mostly R&B and hip-hop compilations. Even though Khalid's Satari personally didn't care for the stuff. But that's where the money was at. So that's where Satari went.
He moved to Atlanta after graduating to turn his hobby into a career. He would pay popular local DJs to appear on his records. Another DJ Rock production, they would say. That's what Khalid had dubbed himself. DJ Rock's bootlegged mixtapes became so popular that other bootleggers started bootlegging it to undercut the originator. Demand far outweighed supply.
So Khalid DJ Rock's Atari expanded his operation and began experimenting with large-scale duplication. He hired crews of Mexicans to work around the clock burning discs and printing packaging. DJ Rock had moved on from selling mixes to selling replicas of platinum selling titles. They would photocopy the inserts and sell the counterfeits in bootleg storefronts, swap meets and flea markets. Cash money. No limit. Five bucks a piece.
By 1999, Rock Enterprises was operating multiple duplication plants, some at strip mall offices, others at friends' houses. The operation was pumping out tens of thousands of CDs every month. While Metallica was suing its fans, Khalid Sattari was rigging in millions, who said the music industry was dead. To be fair, Khalid did have his fair share of losses, too. The cops found one of his duplication plants in Cobb County, Georgia, on October 31, 2000.
Approximately 57,000 counterfeit CDs were seized, along with tens of thousands of dollars worth of equipment. Khalid Satari was slapped with a felony, but served little time. Within weeks, he replaced the raided facility in Cobb County with another across town. His operation continued to grow. By 2001, Satari was managing at least nine duplication plants that produced up to 20,000 discs a day, but the feds were closing in.
They'd been watching Khalid Satari for years. However, it would be those closest to the counterfeit king that would bring him down. Pamela Harris, Khalid Satari's former secretary and mistress, gave federal investigators incriminating evidence about Rock Enterprises' bootlegging business and told them Satari would wire the profits to bank accounts in the United Arab Emirates, Egypt, and Israel.
A source told Vibe magazine that Pamela Harris decided to snitch on Khalid after he dumped her because his wife had walked in on them having sex. A classic mistake, but not the only one. The FBI also discovered that Marco Romero, one of Khalid Sattari's most trusted allies, had committed real estate fraud. To avoid charges, Romero agreed to wear a wire to record Khalid talking about the illegal business.
During a year and a half of surveillance, Khalid discussed almost every detail of the operation. He was also recorded saying that he would flee to the UAE when he sensed things getting a bit too dicey. Federal authorities pounced. A warrant was issued for Khalid Sattari's arrest on October 24th, 2003. He was arrested four days later without incident.
Prosecutors alleged that Satari had created an illegal market with a gross retail value of $50 million. They'd found his warehouses where more than 3 million CDs had been manufactured since 1999. But the authorities never found Khalid Satari's money. In April 2008, Khalid Satari was released from prison. He had spent more than three years behind bars on piracy charges, an account of conspiracy to defraud the United States.
The federal government attempted to deport him, but could not find a country that was willing to accept him. So Khalid Satari remained in Georgia and used his hidden funds to launch his next scheme. In 2009, Khalid Satari opened a pain management clinic in Commerce, Georgia. He opened a urinalysis lab called Confermatrix in Lawrenceville, Georgia a few years later. Then he purchased a medical billing business called New Medical.
Satari would pay kickbacks to pill mill doctors to have their patients urine tested at his facilities. He then overbilled the cost for unnecessary sampling to federal and state Medicare and Medicaid programs. Khalid Satari had created a vertically integrated medical fraud scheme, which allowed him to own multiple million dollar homes, expensive cars and jewelry, most of which had been purchased using his teenage son's name. Still, Khalid wanted more.
So in 2013, he attempted to buy what every legit business owner dreams of owning.
an American politician. I absolutely know these children are heartbroken, but I also know they probably do not have the logistical ability to plan a nationwide rally without it being hijacked by groups that already had the pre-existing anti-gun agenda. Jack, it's just silly. They're already doing it. They're on buses going to the state legislature today. They're 17 years old. They can figure this out. They have the money for the bus and they're ready to go. I mean, I just have a hard time believing it.
That's Jack Kingston, an 11-term Republican congressman from Savannah, not so subtly accusing survivors of a school shooting of acting in a politically motivated, co-opted way by pleading with congressmen and women their grandparents' age to do something to help prevent them from being massacred in a classroom. It had George Soros written all over it. There was no fooling him.
Surely the eagle-eyed and reasonable Representative Jack Kingston, who was the frontrunner for a U.S. Senate seat in late 2013, would not accept $80,052 in campaign donations from a convicted felon. Or would he? In December 2013, the Atlanta Journal-Constitution received a tip about a fundraiser held for Representative Kingston at a winery and resort in Gwinnett.
The fundraiser was hosted by Khalid Sattari's lab, ComferMatrix, and his billing company, New Medical. At that fundraiser, which Jack Kingston personally attended, 26 employees from the companies donated more than $80,000 to the Kingston campaign. The Atlanta Journal-Constitution discovered that most of the donors were not registered to vote, nor did they have a history of political giving.
The newspaper's theory of a "straw donor scheme" was confirmed by a company whistleblower who said the employees were given "bonuses" and encouraged by Satari to donate most of it to the Kingston campaign. The associate told the Atlanta Journal-Constitution that Satari was hoping to build clout in Washington for expanded drug testing for welfare programs which would be a boon for Confirmatrix. "They wanted it where if you wanted to get Medicaid, you have to get a drug test.
When the newspaper published the investigation linking Khalid Zatari to the Kingston fundraiser, an FBI investigation was launched and Kingston quickly refunded the money. Jack Kingston told the Atlanta Journal-Constitution that he knew nothing about Khalid Zatari. The FBI dropped their investigation after Jack Kingston lost in the primaries. Instead of becoming a senator, Jack went to work for a lobbying firm and Khalid Zatari continued his lucrative medical billing fraud scheme.
but the feds were closing in again almost three years later in november 2016 khalid satari's urinalysis lab confirmatrix was raided by federal agents after being implicated as an unindicted co-conspirator in a scheme to distribute opiates illegally federal authorities shut down a series of pain clinics in east tennessee that had been linked to hundreds of opioid deaths
A federal indictment claimed that Confermatrix had paid over $200,000 to those pain clinics for patient accounts and then, as usual, overbilled federal insurance programs. At the time, Confermatrix was the most significant outlier among urinalysis labs in amounts billed to Medicare. The average per patient cost across the nation was $751. Confermatrix billed an average of $2,406 per patient.
Comfort Matrix filed for bankruptcy two days after the raid, but no charges were ever filed. However, Khalid Satari already had a new laboratory in place just in case. Clio Laboratories. It too was registered in his son's name. Within months, Clio Laboratories was enrolled as a Medicare provider. But this time instead of urine tests, the lab was more focused on genetic testing. However, the goal of overbilling remained the same.
The plan was to give away free and mostly medically worthless genetic screenings to senior citizens and then bill the government or private insurance companies for the costs. The tests were expensive, up to $18,000 per patient. If insurers declined to cover the costs, the patient was billed directly. It was an evil idea. But this time, Khalid Sattar was not such a pioneer.
Local advocates for seniors are warning of a genetic testing scam. Genetic testing companies are offering free tests to Medicare patients. They say it will help you avoid diseases or find the right medication. The catch? They want your Medicare ID number.
Recruiters are showing up at senior events promoting a genetic test they claim is completely paid for by Medicare. Testing company representatives are showing up at senior centers, senior housing developments, health fairs, farmers markets, and even random shopping mall parking lots. Scammers are already setting up shop in senior citizen centers right here in the Mid-South. Wakanda artists get seniors to submit DNA samples for genetic testing.
cancer risk testing. They pretend to screen for cancer and other life-threatening diseases. Then they ask for Medicare, Social Security, or other banking information. It's just pure greed. Pure, pure greed. It had nothing to do with taking care of the community. Fraudsters. They're out to get your Medicare number. Scammers are always looking to take popular things that people are interested in and twist that around to get what they want and steal from you. I mean, something I always like to stress is
You don't have to be an idiot or a dummy or a sucker to get scammed. These scammers are good at what they do. On September 30th, 2019, Khalid Satari surrendered to authorities in New Orleans. He was one of 35 defendants swept up in Operation Double Helix, a federal sting targeting allegedly $2.1 billion in fraudulent Medicare billings for unnecessary genetic screenings.
Khalid Sattari's operation alone accounted for almost half a billion in costs. The government seized 16 bank accounts and restrained real estate from Sattari. He is currently in custody fighting a series of counts related to the scheme, including conspiracy to commit money laundering.
Breaking news, tonight 35 people are charged in a massive Medicare scam accused of submitting more than $2 billion in false claims for bogus genetic tests. All paid for by your tax dollars. This type of inflated medical billing fraud is all too common. Five months before Operation Double Helix, the U.S. Department of Justice arrested 24 people involved with telemedicine and medical equipment companies for billing Medicare for more than $1.2 billion dollars.
The telemedicine companies were collecting Medicare IDs from senior citizens and sending them boxes of medical devices like leg braces that they didn't order. Even saying no I didn't want it, about a week later I got this box in the mail with everything that I didn't want in it.
Less than a year after Operation Double Helix and Operation Brace Yourself came Operation Rubber Stamp, bringing the total to $4.5 billion in false billings from 86 criminal defendants, including more than two dozen licensed medical professionals. So far, more than 30 individuals have pleaded guilty. There will be more to come. The schemes evolve with the science, and they're nearly impossible to prevent.
The best way to find them is to pay the claims and chase the crooks, who tend to stand out in a crowd when their bellies get full. Other times it's the actual scientists and their promising ideas that devolve into a criminal conspiracy. For profit, or for reverence, ambition can make you look pretty ugly.
The revolutionary biotechnology company raises millions of dollars from investors on the back of a microbial poop test, only to collapse under the weight of it all on this episode of Swindled.
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The universe, that vast expanse of stars, planets, and infinite space, inspires a sense of awe and wonder when we gaze up into the night sky. You might be surprised to find out that there's an equally fascinating universe much closer to home. Living in, on, and around us is an unseen universe of microscopic organisms.
Current estimates suggest there are more microorganisms in the human body than stars in the Milky Way. Though invisible to the naked eye, this teeming microcosm of bacteria, viruses, fungi, and other microbes has a tremendous influence on our health and lives. Ah yes, the microbiome. Did you know that an ecosystem of trillions of bacteria live on and inside our bodies?
Did you know that those bacteria account for 3-6 pounds of our body weight? Did you know those bacteria are essential to human health and wellness? It's okay if you didn't know. The microbiome is a relatively new field of study.
Although it has been known for some time that the human body is inhabited by at least 10 times more bacteria than human cells, most human studies have focused on the bad bacteria that makes us sick rather than the good bacteria that keeps us healthy and possibly even shapes our moods and behavior. The microbiome is the forgotten organ.
The National Institute of Health wanted to change that. So in 2007, they launched a five-year, $173 million initiative called the Human Microbiome Project. The first phase ran from 2007 to August 2012. It focused on sequencing the genomes of the thousands of species of microbes living in synergy with 250 healthy human volunteers. It was a significant step in better understanding the human microbiome.
Most people haven't heard about it and don't care about it, but some out there couldn't wait to see the results. You know the ones. The crazy ones. The misfits. The rebels. The troublemakers. The round pegs and the square holes.
In this particular case, it was three startup-crazed graduate students in San Francisco. In the wake of the Human Microbiome Project's completion, Jessica Richman, William Ludington, and Zachary Apte were at lunch discussing their desire to examine their own microbiomes, but soon realized that such goals were practically impossible to achieve as an ordinary member of the public.
"We really wanted to sequence ourselves," Ludington told the Berkeley Science Review. "But there wasn't a cheap place to do it that would give us meaningful, quick answers." Their team did not have the financial backing from the United States federal government. So, they decided to invent a way to do it themselves.
The group had enough expertise between the three of them to pull it off. Zachary Schultz-Apte had a PhD in biophysics and cell biology from the University of California, San Francisco, where he was currently enrolled. Will Ludington, also a student at UCSF, specialized in the ecological and evolutionary dynamics of gut microbiota. And Jessica Sunshine-Richmond was a doctoral student in computational social science at Oxford.
Before that, she was a successful entrepreneur who had reportedly launched and sold a company soon after graduating high school. Before studying interdisciplinary engineering at Stanford, a LinkedIn dream team come true. With their powers combined, Apti, Ludington, and Richmond founded uBiome. The company's mission was to advance the science of the microbiome and make it useful to people.
In other words, uBiome wanted to provide a way for the public to monitor their own microbiomes and contribute the results to a larger publicly available dataset that would dwarf the human microbiome project almost instantly. The possibilities would be endless. Because for the first time, uBiome would allow people to observe lifestyle changes critically using concrete data, whether it's a new diet or a promising new facial cleanser.
Ubiome would provide a way to judge its effects based on changes to your microbiome. Customers with gastrointestinal or sinus problems could ask their own questions about their microbiome's role and could experiment with modifications based on their data. As a result, everything from autism to asthma to allergies to depression could be better understood, controlled, and personalized. The power of science was back in the hands of the people. It was citizen science at its finest.
So citizen science is the process of involving the public in science, and it's desperately needed. It's basically crowdsourcing applied to your health, and there's crowdsourcing in so many other things that are just not as important as basic scientific research, but this is about to change. But Ubiom's citizen science was, quote, discovery-based and lacked a hypothesis, which academia does not like to fund. This ambitious project would require money.
So, in the fundamental spirit of the company, in November 2012, Ubiome turned to the people and launched an Indiegogo crowdfunding campaign. Hi, I'm Zach. I'm Will. And I'm Jessica. I'm going to tell you about an exciting new project that we're working on, Ubiome.
Scientists recently discovered a new organ in the human body. Incredibly, this organ isn't made of human cells. It's microbes! It's called the microbiome, and it's the ecosystem of microbes in and on your body. From your feet, to your gut, to your brain, the microbiome is important to the functioning of the human body. In the Indiegogo introductory video, the Ubiome co-founders explain the benefits of testing the microbiome and how they plan to do it.
Basic supporters of the campaign would receive a scientific survey in the mail along with a testing kit for the gut microbiome called the Explorer. The Explorer kit included a small cotton swab which the customer would use to sample their poop.
That sample would be returned to uBiome using the enclosed prepaid mailer, where it would then be sequenced at the company's lab in San Francisco. "Our lab in San Francisco." "Our lab in San Francisco." "In our state-of-the-art lab right here in San Francisco." "So we have our own lab that we designed ourselves. It's in our office in San Francisco." Within weeks, uBiome would follow up with a link to a portal where the customer could explore the results
An interface would inform people of what's in their gut, how it correlates to other people and uBiome's larger sample, and relevant scientific studies related to their microbiome profile. So much beautiful information wrapped in a pleasant user experience. Here's how we're going to do it. You fund our project, and in return, we send you a sample kit that you take a sample with and send back to us.
We then use state-of-the-art DNA sequencing to analyze your samples and send custom bioinformatics back to you. uBiome set its crowdfunding goal at $100,000, a reasonable amount for such a research project, but a lofty goal by crowdfunding standards. Nevertheless, the uBiome team was confident.
We believe the biological information era is going to follow the same trend that the internet did, Jessica Richman said in a press release. When citizens became empowered to explore the internet via search engines like Google, usage skyrocketed.
With uBiome, people can have cutting-edge access to the latest in biomedical science. This unparalleled access is going to change things in a big way. We have the science and the team that can make this a reality, but we need people like you to get this project started. We want to collaborate with you to build the world's largest database of human microbiomes, help people learn about their own bodies, and advance scientific progress. The more people we get, the more we can tell you about yourself and your microbiome.
Please join us. For science! To promote the campaign, the company sent press releases to every digital and traditional publication that may be of interest. In return, Ubiome received mentions by Forbes, NPR, Wired, TechCrunch, Boing Boing, The Wall Street Journal, and more. And Jessica Richman, who emerged as the spokesperson for the company, hit the biomedical media circuit hard.
Ubiome is all about understanding the human microbiome, the collection of microbes in your body.
Going in, Richman said she and her colleagues had no idea whether their pitch would be successful. There's a lot of uncertainty. You sort of don't know if you're going to raise $10 or a million dollars, and you sort of have to be prepared or keep your mind open for any of those things to happen. Turns out they hit it big, one of the few to raise more than a quarter of a million bucks from their Internet campaign. It seems likely they caught a recent wave of interest in what's living in our guts. Ubiom's crowdfunding campaign ended in February 2013.
The company raised $351,193 in 10 weeks, completely shattering its goal. The celebration did not last long, however. There was work to do. They had more than 2,500 poop kits to send out. Speaking of deuces, by the end of 2013, Ubiome co-founder Will Ludington had enough of that shit and left the company for personal reasons. However, Zach Apte and Jessica Richman continued spreading the word.
The response to the crowdfunding campaign had been overwhelmingly positive. It even allowed Jessica to realize every Megamind's dream. She presented her own TED talk. Let's hope it doesn't go to her head. So I want to start off with a question. The title of my talk. Can a citizen scientist win a Nobel Prize? Well, so much for that.
Actually, that was a TedMed talk, which is, if we're being honest, barely a TED talk at all. Not sure if it even counts. Jessica also presented a TEDx talk in Brussels. But she couldn't quite reach the main stage. Not with that material. But there was room to grow.
Unfortunately, there was a buzz about Ubiome in Silicon Valley. It was the latest toy for the quantified self. Count your steps, monitor your sleep, and now, sequence your microbiome, become the optimal human machine, and then die anyway. That's an incomplete dataset.
Hi, I'm Zach Apte, CTO and co-founder of uBiome. And I'm Jessica Richman, CEO and co-founder of uBiome. We've given thousands of people from all over the world access to valuable data about the bacteria that live in and on their body. We've formed partnerships with universities like Harvard, Stanford, and UCSF, and been featured in publications like the MIT Technology Review, the Wall Street Journal, and we run ABC News. We've done all this with the help of a community of eager and curious citizen scientists.
For Jessica Richman, Zach Apte, and Ubiome, the next few years were a wave of exponential growth. In 2014, they raised $5 million from investors in Silicon Valley with backing from startup accelerator Y Combinator. The funding allowed Ubiome to finally establish a professional lab space instead of storing its samples in storage closets and secondhand freezers.
This move also enabled Ubiome to receive clinical certification from the state of California, which meant that the company had government approval to become a bona fide medical testing company, even though its products exhibited zero medicinal utility. Initially, Ubiome was for fun and curiosity, nothing more. The Explorer test was educational, but everyone could see the potential.
What benefit you get from your biome at this point is to learn more about your microbiome and how that interacts with your health. So we don't make health recommendations at this point because we're gathering this big data set. In the meantime, what you can do are scientific studies on yourself.
In 2015, uBiome announced partnerships with Apple, the Centers for Disease Control, and numerous academic institutions, including Harvard, Stanford, and the University of California, San Francisco. The company also boasted of holding more than 200 patent assets relating to sample collection, laboratory automation, computational approaches, and more. uBiome even launched its own grant program.
Jessica Richman was named one of the most important women under 30 in tech by Business Insider, among other awards.
The winner of the Ivy Innovator Award for Technology presented by Cadillac is... Jessica Richmond. In 2016, Fast Company named Ubiome one of the world's 10 most innovative companies in healthcare. They received accreditation from the College of American Pathologists, published some peer-reviewed studies, and raised even more money.
In November, Silicon Valley venture firm 8VC invested $15.5 million into uBiome on the heels of the company's new product announcement, SmartGut, the world's first sequencing-based microbiome test for clinical use.
SmartGut is the world's first sequencing-based clinical microbiome test developed by our scientific team for doctors and their patients. With just one small, easily obtained sample, it generates invaluable reports for patients suffering from a range of chronic gut disorders, including Crohn's, ulcerative colitis, and irritable bowel syndrome.
SmartGut was followed by SmartJane, a revolutionary, doctor-ordered, at-home, clinical, precision sequencing, women's health test. Ubiome's combined HPV, STI, and vaginal risk factors test allowed patients to test themselves at home. Also, since both the SmartGut and SmartJane tests were required to be ordered by a health provider, the costs of the tests were covered by health insurance.
So I think this will have a massive change in a number of different markets that are all at this point uncorrelated to each other but are actually very much related. There's the lab testing industry, there's consumer goods that have a microbiome component, there's cosmetics that have a microbiome component, there's food. So I guess we put all this together. We did this in one of our initial presentations for Angel Investors. We put this together and they were like, really? You have like a trillion dollar market?
It's actually kind of true in a way because it affects so many different things and it's just a matter of staging them and going after the right ones first and then the other ones after that. In 2018, Ubiome announced it had raised another $83 million in venture capital. Since its inception, Ubiome had raised $105 million total.
Jessica Richman told Business Insider that the proceeds of the financing would be used to enhance and expand the company's product portfolio beyond SmartGud and SmartJane. It was a triumphant year for Ubiome. In addition to the major funding, the company had received numerous awards related to innovation and technological pioneering. Jessica Richman and Zach Apte's wildest entrepreneurial dreams had come true. They were on top of the world, but behind the scenes was a different story.
Nobody knew it yet, but Ubiome was already in a death spiral. When interest waned, it would circle the drain. So long, we hardly knew you. Support for Swindled comes from Rocket Money. Most Americans think they spend about $62 per month on subscriptions. That's very specific, but get this, the real number is closer to $300. That is literally thousands of dollars a year, half of which we've probably forgotten about.
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Ubiome's mission is to advance the science of the microbiome and make it useful to people. We work with more than 200 universities and over 1,000 researchers around the world. Our database contains the largest microbiome dataset in the world with over 250,000 samples, growing to over 1 million by the end of 2019. Ubiome had naysayers and critics since day one.
Early on there were vocal concerns from members of the scientific community that uBiome had not obtained approval from an IRB or Institutional Review Board. IRBs oversee the research to make sure the participants are treated ethically. They're central for any modern scientific study.
Ubiome eventually obtained an IRB for their work, but pushed back at the idea in a blog post on Scientific American. IRBs are for the "old world of scientific inquiry," not for citizen scientists who are studying themselves. That was another issue altogether, Ubiome's critics say. The data. Since people were testing at home with no clinical supervision, how could Ubiome ensure that the samples were authentic?
If people were sick and said they weren't, if someone sent in pet feces instead of their own, if someone was on antibiotics, all of these things could distort the data. Ubiome's entire premise rested on an honor system that was highly subject to human error.
Not that it even mattered. According to many, even if accurate, the data was borderline useless at the moment anyway. I mean, it was obvious. There's nothing you can say right now about the microbiome that's of deep clinical utility. It's a fascinating place as a scientist, right? It's a new frontier of research, and it's a wild place, and the complexities of analysis are really fun.
But that does mean that we don't know enough to give people solid clinical answers on this stuff for the most part yet. That's Gabe Foster. He was in charge of building the testing lab at uBiome. He told Amy Doxer Marcus at the Wall Street Journal that, in his professional opinion, despite what the company advertised, there is no clinical application for a microbiome test. The science is just too young. The microbiome changes too rapidly.
Jessica Richman and Zach Apte knew deep down that was true. They hadn't even bothered to add controls for baseline comparisons. Gabe Foster was fired from Ubiome in 2014.
He told the Wall Street Journal that he had disagreed with Zach Apte one too many times. The culture at Ubiome did not allow for such insubordination. Former employees further confirmed the hostile work environment to Business Insider. They described Richmond and Apte as intimidating and micromanagers. People would literally sneak out the back door of the office when they heard Zach come in to avoid being attacked, one employee said.
They were also incredibly secretive, another remembered. It was next to impossible to be granted access to the database. The staff didn't even know what the precision sequencing they were advertising even meant. And everyone had to pretend that they didn't know Zach and Jessica were in a romantic relationship. It was obvious, but the co-founders were worried about the optics with the investors and all.
Anyone who got promoted at Ubiome were the "yes men," a former employee told Business Insider. It quickly became a place where you couldn't disagree. Those who were blindly loyal were awarded promotions. Business Insider reached out to Jessica Richman and Zach Apte about their former employees' concerns and criticism. A spokesperson for the couple responded in part, quote, "Business Insider's unsubstantiated allegations appear to come from disgruntled former employees.
Because Business Insider has not provided Dr. Apte or Dr. Richman with any data analysis, statements by other authors on the peer-reviewed scientific paper, or specific concerns from other experts in the field, there is no way to know whether their assertions are based on real data or simply idle gossip and guesswork.
Business Insider also asked Jessica Richman about her age after discovering that she was 40 years old in 2014 when she appeared in one of the publication's own articles about the 30 most important women under 30 in tech. Additionally, in 2018, Richman confirmed to a Business Insider reporter that she was under 40 years old to earn a spot on another list of healthcare leaders under 40. She was 44 years old at that time.
The couple's spokesperson responded, Jessica Richman and Zach Apte were a lot of things. Great at marketing, yes. Exaggerative salespeople, perhaps. Deliberately untruthful, surely not.
Unless... I requested one test, I send the test back, then a few months later they say, "Oh, we've upgraded our technology. Click this button, we'll resequence your biome or we'll upgrade your test results." And then you click the button, they bill the insurance again for another $3,000. I just... the more time I spent with UBiome, the less I trusted what they were doing, both on a scientific and an ethical level.
That's Damien Moskowitz. He was a former customer that spoke to Amy Doxer-Marcus at the Wall Street Journal about Ubayom's aggressive business tactics. Damien said Ubayom billed his insurance multiple times for a single test. The company repeatedly gave him the option to upgrade his results or re-sequence his microbiome based on that single test. Sometimes they would throw a $20 Amazon gift card his way if he agreed. Ubayom was making $3,000 every time.
Damian Moskowitz felt the company's actions were shady, so he investigated. He discovered that there was a different billing code for every charge on the insurance records, even though it was the same test. It was a deliberate misdirection by Ubiom to keep insurance companies from noticing there was a problem. Moskowitz sent letters voicing his concerns to the California Medical Board in the Wall Street Journal in May 2018. Both organizations began taking a closer look.
Meanwhile, complaints from other customers kept pouring in. Mark Harris told CNBC that he ordered one SmartGut test from uBiome and received six kits in the mail. uBiome reminded him that the microbiome changes over time, so just take the tests, okay? Mark never sent back all six tests, despite the company's relentless pestering. Imagine his surprise upon learning that uBiome had charged his insurance $2,970 five separate times.
The Federal Trade Commission had received more than 20 complaints about Ubiom's billing practices between July 2017 and March 2019. Customers were being billed for unexpected tests, expected tests they never received, and tests they had returned for which the results were never seen. The insurance companies eventually caught onto Ubiom's scam and stopped providing reimbursement, leaving the customer on the hook.
Even more concerning to some was the fact that those customers were essentially diagnosing themselves. Everyone was a few checked survey boxes away from contracting irritable bowel syndrome. The order would be sent to a preferred doctor with a rubber stamp. A testing kit was in the mail, soon followed by the bill.
Ubiome was cutting every corner to reach their optimistic revenue projections. Samples were slowing down, a former employee told Business Insider. They were trying to find any reason why we should bill again for the samples that were in-house. Ubiome was getting desperate. They stopped asking for medical records and allowed patients to order their tests without providing photo IDs. It felt like the science became less and less important to them over time, a former employee said.
In January 2019, Ubiome laid off 55 of its 300 employees. The company told CNBC that it was looking to realign its operations and shift to new areas with more focus on drugs and partnerships with pharmaceutical developers. One of those partnerships was announced in March 2019. L'Oreal, the skincare company, partnered with Ubiome to advance research into the skin microbiome.
The future of personalized skincare was bright. Not so much for Ubiome. The following month, the FBI raided their lab in San Francisco. A San Francisco-based health startup got raided by the FBI just yesterday. The feds showed up at Ubiome. It's a biotech company in the Soma district of San Francisco. They broke down the door and asked employees...
excuse me, to hand over their computers. The FBI is investigating how it bills health insurers for its special gut health tests. Pardon me. On Friday, April 29th, 2019, the Federal Bureau of Investigations visited the offices of Ubiome.
Agents loaded documents into boxes and asked the employees to hand over the computers. Then the evidence was loaded into a van that sped away, leaving an office of employees quite confused. An unnamed source told the Wall Street Journal that the raid was related to Ubiom's billing practices.
The FBI refused to comment. However, a uBiome spokesperson told BioSpace that the company was, quote, cooperating fully with federal authorities on this matter. We look forward to continuing to serve the needs of health care providers and patients.
A testing startup, Ubiom, agents looking into whether the company used improper billing codes for insurance claims. This is according to a report in the Wall Street Journal and also that they sought payment for unnecessary testing. This investigation also involves the doctors who ordered those tests. Ubiom raised $83 million in financing last fall.
Soon after the raid, Ubiom's board of directors announced an internal investigation and placed co-founders Jessica Richman and Zach Apte on administrative leave. In their absence, the board appointed John Rakow, a former federal prosecutor who had served as Ubiom's general counsel as the new acting head of the company.
John Rakow called a staff meeting where he announced that uBiome would continue operating as normal. He assured the employees that the science was solid. It was the billing practices that were the issue. Everything would be okay. Rakow also issued a statement to calm the investors' fears. The board and management team have taken strong and swift action to address the issues that have come to light, including implementing a new code of ethics and initiating an independent review of uBiome's billing practices.
As we work diligently to restore the company's credibility and the integrity of its leadership, we will take any corrective actions that are needed to ensure that Ubiome becomes a stronger company. There is significant clinical evidence and medical literature that demonstrates the utility and value of Ubiome's products as important tools for patients, healthcare providers, and our commercial partners. And the company looks forward to continuing to demonstrate this clinical utility and value at a
at a time of growing demand in the market. Three months later, John Rakow resigned. He wanted to "spend more time with his family." Smart move. That same month, July 2019, Jessica Richman and Zach Apte formally resigned from Ubayam, a consulting firm. Golden Associates took on the leadership role at the company while the internal investigation continued. Golden Associates' first order of business was to suspend clinical operations.
No more smart gut. No more smart Jane. The original, clinically worthless Explorer kit was the only test on the menu. Days later, Ubiom reduced its remaining workforce even further. Many of the terminated employees found out they were getting fired days earlier when they received a pay stub off schedule that was two weeks short. Though clinically neutered and trimmed to a skeleton crew, Ubiom was still showing signs of life that summer.
The company rehired its lab director and resumed processing samples. It also announced a new partnership with CVS. The drug chain would begin selling Ubiome's Explorer kits in stores. This was huge. To celebrate the fresh start, the internal management of Ubiome reorganized the company's debt through Chapter 11 bankruptcy and started shopping for a new owner. But then CVS got cold feet.
Given the circumstances surrounding Ubiome, we'll be stopping shipments and, in the event product has already arrived in store, marking it as do not sell, a CVS spokesman told Business Insider by email. To add insult to injury, Ubiome lost its lab certification. All of Ubiome's plans were ruined.
That Chapter 11 bankruptcy turned into a Chapter 7 bankruptcy, and on October 2, 2019, Ubayam closed its doors for good. Jessica Richman and Zach Apte were long gone by the time the federal authorities filed charges against them in March 2021. The couple got married in 2019 and left for Germany soon after, where Apte is also a citizen.
In April 2021, federal prosecutors received a letter from Jessica Richman's attorney. According to the Wall Street Journal, the lawyer said that Jessica suffered from a medical condition and could not travel, and Zach was Jessica's caretaker which meant that he could not travel either. The lawyer claimed that the couple are not fugitives from justice and that their absence has absolutely nothing to do with the more than 40 criminal charges of health care, securities, and wire fraud that were waiting for them. They would get around to it eventually.
The criminal complaint alleged Ubiom tricked insurers into paying for tests that weren't medically necessary or properly vetted by medical regulators. The company would fake documents by using the names of doctors and other healthcare workers without their knowledge and lie to insurance providers to keep them at bay.
Richmond and Apte were also facing separate civil charges brought by the Securities and Exchange Commission. The SEC alleged that 46-year-old Jessica Richmond and 36-year-old Zach Apte defrauded investors out of $60 million by giving a false impression of how well Ubiome was doing.
We allege that Richmond and Afti touted Ubiome as a successful and fast-growing biotech pioneer, while hiding the fact that the company's purported success depended on deceit, said Aaron Schneider, director of the SEC's San Francisco regional office.
Ubiom's purported success in generating revenue was a sham, the SEC's complaint reads. It depended on duping doctors into ordering unnecessary tests and other improper practices that Richmond and Apte directed, and which, once discovered, led insurers to claw back their previous reimbursement payments to Ubiom.
In the civil complaint, the SEC is asking the court to bar both Richmond and Abtey from ever serving as an officer of a publicly traded company, to bar them from buying or selling shares except for their own personal accounts, force Richmond and Abtey to return their investors $60 million with interest, and to pay additional criminal penalties. The SEC is also seeking to recover the millions of dollars Richmond and Abtey made by selling their own Ubiom shares during fundraising.
Jessica Richman and Zachary Apte face up to 100 years in prison if they ever stand trial. So part of this gig as CEO of Reviome is that I get to make a lot of poop jokes and we have a lot of fun around the office talking about poop. But, you know, all joking aside, it's really funny how we think of poop as sort of this waste product, which it is, obviously, but it's also this goldmine of information that can help us improve our health.
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