Former co-owner of Tony’s Baltimore Grill and ex-Ventnor cop plead guilty in vast Shore benefits-plan conspiracy

Two high-profile defendants in a $53 million prescription-drug benefits scheme that involved Jersey Shore doctors, firefighters, police officers, teachers, and others with access to state health-care plans pleaded guilty Thursday in U.S. District Court in Camden.

Brian Pugh, 45, of Absecon, N.J., the former co-owner of Tony’s Baltimore Grill in Atlantic City, and Thomas Schallus, 45, of Northfield, N.J., a former police sergeant in Ventnor, admitted defrauding state and local health benefits programs out of $1.47 million and $477,958, respectively, according to Vikas Khanna, First Assistant U.S. Attorney for the District of New Jersey.

Both pleaded guilty before U.S. District Judge Robert B. Kugler to one count of conspiracy to commit health-care fraud.

They are the the latest to plead guilty in the conspiracy, which has implicated more than 30 people, in which state and local government employees were recruited and compensated to receive medically unnecessary compound prescription medications.

Charges are pending against codefendants John Sher and Thomas Sher, brothers who were both Margate firefighters at the time of their arrest, and Christopher Broccoli, who was a Camden firefighter. They will face trial before Kugler in Camden federal court on Aug. 15, according to a statement from the U.S. Attorney’s Office.

The leader of the conspiracy, William Hickman, pleaded guilty in June 2021 to being the organizer of the prescription drug conspiracy, which prosecutors say cost state health-benefit plans more than $53 million.

» READ MORE: Leader of $53 million Jersey Shore health benefits conspiracy pleads guilty

Hickman, 43, of Northfield, agreed to more than $26 million in forfeitures of investment accounts and other property, according to Kugler. He is awaiting sentencing. Hickman is alleged to have used a shell company, Boardwalk Medical LLC, to solicit the services of the late James Kauffman, an endocrinologist, and other doctors for fraudulent prescriptions for expensive creams, vitamins, and libido medication, and scar ointments.

Kauffman hanged himself in prison while awaiting charges that he arranged the 2012 murder of his wife, April Kauffman, a Shore radio personality and veteran’s advocate.

In December, several others who pleaded guilty in the conspiracy, including a former Pleasantville guidance counselor and several pharmaceutical sales representatives, were sentenced to prison terms ranging up to 18 months.

Others sentenced in the conspiracy received longer punishments. In October, 2020, Kugler sentenced Richard McAllister, 45, a former schoolteacher, and James Wildman, 46, a former maintenance worker for the public school system, both of Marmora, N.J., to prison terms of 37 months and 46 months in prison, respectively.

McAllister and Wildman served as recruiters, according to the U.S. attorney, and persuaded individuals in New Jersey to obtain expensive and medically unnecessary compounded medications from a Louisiana pharmacy, Central Rexall Drugs Inc. The Central Rexall CEO, Hayley Taff, pleaded guilty in August 2020, to health-care fraud conspiracy.

The scheme spread after leaders in the conspiracy discovered that certain expensive medication prescriptions, including pain, scar, antifungal and libido creams, as well as vitamin combinations, were reimbursed for up to thousands of dollars for a one-month supply.

» READ MORE: Firefighters, cop, pizzeria co-owner charged in Shore health care fraud scheme

According to prosecutors, the conspirators “also learned that some New Jersey state and local government and education employees, including teachers, firefighters, and state troopers, had insurance coverage for these particular compound medications.”

Dozens of pubic employees and others covered by the public plans were recruited to obtain compounded medications. The prescriptions were faxed to Central Rexall, which filled the prescriptions and billed the state health plans. The pharmacy then paid certain conspirators a percentage of each prescription filled, payments that were then distributed to others in the scheme.

Pugh and Schallus each face a maximum penalty of 10 years in prison and a $250,000 fine, or twice the gross gain or loss from the offense, according to a news release.

Sentencing for Pugh is scheduled for Nov. 17, and for Schallus, Nov. 14.