On November 11, 2026, the director of a day care center in Flushing, Daniel Lee, pleaded guilty to his involvement in a staggering $127 million Medicaid fraud scheme. This case centers on two adult day care facilities—Happy Life Inc. and the Royal Adult Day Care Center operated by Z&W Empire Enterprises—along with a pharmacy. Investigations have revealed a series of alarming fraudulent practices and methods employed in this scheme.
According to the indictment and governmental investigations, prosecutors allege that Lee and his co-defendant Inwoo Kim have been operating multiple pharmacies and adult day care centers in Brooklyn and Flushing since at least 2016. This illicit operation involved healthcare fraud through illegal kickbacks and money laundering. The fraudulent claims predominantly fall into two categories: approximately $58 million related to inflated costs of prescription and over-the-counter medications, and around $62 million attributed to falsely reported adult day care service charges, totaling approximately $120 million.
In February of this year, law enforcement executed a search warrant at Happy Life, where they uncovered over $100,000 in cash along with an additional $900,000 in fraudulent proceeds from bank accounts.
Authorities further allege that Kim transferred some business ownership to others, including Lee, to obscure his actual control over these operations. As of now, Kim has not entered a plea.
Prosecutors, along with the New York State Office of the Comptroller (OSC), have presented substantial evidence of organized forgery and bribery schemes. Happy Life and Royal routinely provided cash kickbacks and grocery vouchers to Medicaid beneficiaries, which served as an enticement for them to enroll in their services.
The indictment disclosed that an anonymous tipster had reported to governmental agencies that Happy Life promised members cash rewards of $500 for not attending the center at all, and $300 if they chose to attend. There were also instances where cash was used to coax elderly individuals into relinquishing their entitled home health care services.
Law enforcement intercepted communications in Korean among the conspirators, revealing that one participant had asked to “first give $10,000 to Korean members.” Moreover, Daniel Lee confirmed via messages to associates that he had delivered envelopes filled with cash to specific beneficiaries.
In a surprise field investigation conducted by the OSC at Royal in February 2024, authorities discovered that the billing records were completely out of touch with reality. The facility’s office address held a certificate of occupancy (CO) from the New York City Department of Buildings, allowing for a maximum of just 81 people present, including staff.
Contrarily, their reported records indicated that services were supposedly provided to hundreds, even thousands, over just a few days. For instance, on August 8, 2022, Royal claimed to have provided adult day care services to as many as 1,041 Medicaid beneficiaries in a single day. Similarly, reports from January 9, 2023, indicated about 823 beneficiaries, February 27 reported approximately 784, and March 27 accounted for around 790 beneficiaries.
Moreover, the attendance sheets for Royal’s members exhibited numerous irregularities, including pre-filled blank dates, signatures that bore identical handwriting, and even records of service on “Sunday rest days.” Daniel Lee even conceded to auditors that some daily attendance sheets from January to February 2024 “might have been thrown away by the cleaning staff or left in his car or residence.”
Additionally, comparisons showed over 20 cases where beneficiaries were hospitalized and receiving treatment at medical facilities while Happy Life continued to submit reimbursement requests for adult day care services and transportation costs.
Another significant aspect of the case revolves around the alleged collusion between the pharmacy and the day care center. A cooperating witness testified to law enforcement that he had been instructed by co-conspirator Kim to stay at the Royal pharmacy for several weeks and distribute kickbacks to patients. During this time, the witness observed long lines of Royal members gathering outside Daniel Lee’s office to receive cash payments.
One of their tactics included “monetizing” the non-prescription medication (OTC) benefits received by the elderly each month. Some beneficiaries with red, white, and blue cards held pre-loaded OTC cards that could be utilized for purchasing pain relievers, vitamins, and other approved over-the-counter products. Prosecutors allege that the implicated pharmacy paid cash to certain beneficiaries for their monthly OTC benefit balances in exchange for their cooperation in obtaining higher-margin prescription medications.
Further supporting this case, related emails and Excel spreadsheets meticulously detail the monthly tracking of prescription drug kickbacks. A cooperating witness conveyed a spreadsheet to Kim, which outlined the rebates on a monthly basis and by specific medications, revealing that high-margin diclofenac epolamine patches could yield kickbacks of up to $100 per transaction.
The ramifications of this scheme are extensive, as it highlights significant gaps in oversight within programs designed to protect vulnerable populations. The ongoing legal proceedings will likely unveil further complexities surrounding the operation and exposed fraudulent activities.