Billion-dollar fraudster's failure to ID surgeon in criminal trial doesn't stop jury's guilty verdicts
Michael Drobot testified in U.S. District Court shortly after completing his 63-month sentence in the massive Pacific Hospital spinal surgery kickback scheme.
Almost two weeks removed from prison, the former hospital owner who masterminded the largest fraud in California history stepped down from the witness stand to identify the spinal surgeon he was trying to help imprison.
He couldn’t do it. Michael D. Drobot accepted a prosecutor’s unusual invitation to walk into the well of the courtroom and stand in front of the defense table, but he still did not recognize which of three men in front of him was 65-year-old David Hobart Payne.
It may not have been Drobot’s worst showing: His next day on the stand, he didn’t recognize a driver’s license photo of his son, Michael R. Drobot.
When Payne’s lawyer Michael Schafler told him it was his son, Drobot replied, “I guess it is. … He looks different.”
Those shaky moments in U.S. District Judge Josephine Staton’s downtown Los Angeles courtroom apparently didn’t matter to jurors: They convicted Payne on Friday of five felonies for his $316,000 share of a $1 billion fraud that entangled doctors throughout Southern California.
The prison term he faces at his June sentencing could be the lengthiest handed down in the massive federal prosecution that sent Drobot to prison for 63 months on a plea deal in 2018. Authorities dubbed the years-long investigation Operation Backlash because the kickbacks centered on two types of back surgeries: lumbar fusions and cervical fusions. It overlaps with a state prosecution of workers compensation attorneys by the Orange District Attorney’s Office and a federal prosecution in San Diego.
Many of the approximately 24 people convicted of federal crimes reached agreements with the U.S. Attorney’s Office that resulted in prison terms between six months and 15 months, with Manhattan Beach surgeon Daniel Capen getting 30 months and Drobot’s son getting 41 months.
Payne is one of only two defendants to go before a jury. The other, Malibu neurosurgeon Serge Obukhoff, was acquitted of all 35 counts following a two-week trial in Santa Ana in August 2021.
Covert recording captures ‘plausible deniability’ demand
Indicted in 2017, Payne was “caught redhanded on an FBI recording,” Assistant U.S. Attorney Joseph McNally told the jury last Thursday.
He said the longtime surgeon spent years conspiring with “the two most corrupt people in the Southern California spine industry” in a “bodies for bribes” scheme that involved putting patients under the knife in exchange for secret kickbacks from the workers compensation insurance money gained by the hospital.
McNally was referring to Drobot and Paul Randall, a marketer who recruited bribe-ready surgeons like Payne so Drobot’s Pacific Hospital in Long Beach would have a steady stream of insurance-funded surgeries.
Randall was working with the FBI when he covertly recorded himself and Payne discussing their scheme at a restaurant in January 2012. Jurors heard parts of the recording in trial, including him telling Randall he wants “plausible deniability.”
McNally told the jury the recording makes Payne — not Drobot — the prosecution’s star witness. Payne talks excitedly in the conversation, but, “there’s nothing awesome about brokering a bribe deal and talking about your patients as commodities,” said McNally, who prosecuted Payne with Assistant U.S. Attorneys Billy Joe McLain and Hava Mirrell.
Payne repeatedly discussed “cutting” his patients while plotting bribes with Randall, according to a transcript of the profanity-laden recording, and at one point called a patient who’d unsuccessfully sued him over a surgery at Pacific “the fat lady.” Payne also dismissed a Wall Street Journal article that Randall warned him was about to publish about Drobot’s fraud, saying: “I don’t give a flying fuck about the Wall Street Journal. I really don’t.”
The article published on Feb. 9, 2012, detailing a federal probe into Drobot and Randall that resulted in both being charged with federal felonies. Drobot took a plea deal in 2014 and helped prosecutors secure several other indictments. His crimes included bribing now-former California State Sen. Ronald Calderon to support a law that allowed hospitals to seek insurance payments for the full cost of medical devices. Calderon was sentenced to 3 1/2 years in prison, and the law has been repealed.
Payne, who lives in Irvine, was indicted in 2017. He’s been licensed to practice medicine in California since 1988 after graduating from Wayne State School of Medicine. He earned his bachelor’s degree from the University of Michigan and played football there.
Drobot ‘praying’ to avoid prison over luxury car scheme
In his rebuttal argument last week, McNally called Payne’s prosecution a “straight-forward case about a corrupt doctor.” He said Payne “knows how bad the recording is,” which is why his lawyer spent “five seconds” addressing it in his direct exam.
Payne “holds patients lives in his hands every day,” McNally said, but chose to sell them out by cutting them up in surgery and placing devices in them that had been pushed through bribes. The devices were sold by Randall, who paid surgeons kickbacks to use them, just like Drobot bribed surgeons to bring their business to Pacific Hospital.
The 15-year scheme triggered what Drobot agreed in testimony was a “race to the bottom.” He’d managed 28 medical centers in his decades-long career, with his ownership and operation of Pacific Hospital extending from 1997 to 2013. (Another defendant who owned the hospital for several years, Faustino Bernadett, was pardoned by President Donald Trump.)
Schafler emphasized Drobot’s fraudulent backgrouin in cross-examination last week, asking him, “You chose to live a lie?”
“Yes,” Drobot answered.
“You chose to be a conman?” Schafler asked.
“Yes,” Drobot answered. He said his fortune was once $60 million — other estimates have placed it much higher — but acknowledged, “I lost it all.”
Drobot began testifying on Feb. 24, 11 days after he was released from prison. Schafler pressed him about his time in prison and the possibility that he could be sent back: He is awaiting sentencing for a 2019 plea deal related to his violation of a $10 million forfeiture order from Judge Staton.
The order called for Drobot to sell his luxury cars — a 1965 Aston Martin, a 1958 Porsche and a 1971 Mercedes-Benz — and put the money toward the $10 million, but Drobot admitted to instead spending the money on himself or laundering it through other people. He is scheduled to appear for a detention hearing Tuesday at 1 p.m. before U.S. Magistrate Judge Douglas McCormick in Santa Ana.
Drobot acknowledged last week that he’s hoping his testimony helps him at sentencing, but he disputed Schafler’s implication that he overstated Payne’s knowledge of his scheme.
“All I’m doing is answering the government’s questions honestly,” he said.
Schafler went over how Drobot requested compassionate release from prison during the pandemic several times, only to be rejected by Judge Staton each time. The attorney also went over with Drobot the cramped, unpleasant conditions of prison.
“You’re hoping you don’t get any additional time, right?” asked Schafler, who defended Payne with Cohen Williams LLP partner Reuven Cohen.
“I’m praying,” Drobot said, agreeing with Schafler that he’s “desperate” not to go back.
Closings address Drobot’s failure to identify Payne
Schafler told jurors in his closing argument that Drobot’s inability to identify Payne in his direct exam contradicts his testimony that Payne had firsthand knowledge of Drobot’s scheme.
“The truth is that Michael Drobot, Sr., does not know Dr. Payne well enough to even identify him in this courtroom, in Dr. Payne's trial. And he certainly doesn't know Dr. Payne well enough to let him in on his billion-dollar secret,” Schafler said.
McNally, on the other hand, said Drobot’s inability to identify Payne signifies his honesty.
If Drobot wanted to simply please prosecutors, “he could have pointed at the only African-American man in the room,” McNally said, referring to Payne. “If he was looking to be the government’s hatchet man, he would have pointed and done that. But he said, ‘I’m not sure.’”
“The fact that he didn’t recognize him at 79 years old? He didn’t recognize a lot of people, including his own son in his DMV photo,” McNally continued. “I’d love to know what I looked like 10 years ago. People change.”
Payne was charged in connection with $450,000 prosecutors say he made in bribes from surgeries he conducted at Pacific Hospital that he and Drobot masked through phony marketing services and a pharmacy contract, but prosecutors ended up not pursuing the pharmacy contract proceeds during the trial. That reduced the total amount presented to jurors to $316,000.
The figure is tiny compared to the vast fortunes of others charged in the conspiracy. Payne’s lawyers wanted to highlight his comparatively modest wealth, including by showing jurors a photo of his years-old family sofa. But prosecutors opposed, and Staton ruled the couch couldn’t be mentioned.
“This evidence has little to no probative value, and the Court agrees that it appeals to class prejudices in a way that invites jury nullification,” Staton wrote.
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