The fraud case against Hertel & Brown Physical & Aquatic Therapy is the largest-ever white-collar criminal prosecution in Erie. With 21 defendants, it is also a case that has spent years in the federal justice system in advance of a trial.
The prosecution started with a grand jury indictment returned in U.S. District Court in Erie in November 2021. The case has featured myriad pretrial rulings over complicated pieces of evidence — including billing records at the core of the FBI’s evidence.
The lead defendants in the case are Hertel & Brown as a business and co-owners Aaron W. Hertel and Michael R. Brown. Along with 18 other employees, they are accused of conspiring to overbill Medicare, Medicaid and private insurers as much as $22 million over 14 years, starting when Hertel & Brown first opened in 2007.
The investigation into the billing practices at Hertel & Brown Physical & Aquatic Therapy became public when the FBI and other law enforcement agencies searched what was then the business’ main office, in the West Erie Plaza, on Feb. 23, 2021. A grand jury indicted the business, its two owners and 18 employees on Nov. 9, 2021.
All the defendants are charged with felony counts of health care fraud and criminal conspiracy to commit wire fraud and health care fraud.
The allegations include that Hertel & Brown billed insurers for services that the practice never provided, and that the practice billed as if licensed physical therapists provided treatments when unlicensed aides or technicians performed them.
All the defendants pleaded not guilty at their arraignments. They were all released on unsecured bonds of $10,000. Hertel & Brown remains in business, but with one location instead of the previous five.
Follow GoErie.com for developments in the case, which is scheduled for trial in the first quarter of 2025 at the federal courthouse in Erie. U.S. District Judge Susan Paradise Baxter is presiding.
An indictment launches a landmark case
The investigation into the physical therapy business, one of the largest in the region, became public on Feb. 23, 2021. The FBI and other law enforcement agencies searched Hertel & Brown’s offices, including what was its main office in the West Erie Plaza in Millcreek Township.
The grand jury indictment came about eight months later, on Nov. 9, 2021. The U.S. Attorney’s Office alleged Hertel & Brown’s operations were based in fraud.
The evidence against the 21 defendants included emails and billing records. Details of the probe emerged as the U.S. Attorney’s Office unsealed the search warrants in the case.
U.S. District Judge Susan Paradise Baxter is presiding over the Hertel & Brown case.
The unprecedented nature of the case became clear as the defendants were arraigned in the days following the return of the indictment. The prosecutor, Assistant U.S. Attorney Christian Trabold, and the defense lawyers predicted a trial would last at least six weeks.
A hint at guilty pleas as pretrial issues dominate
Some of the defendants in the Hertel & Brown case quickly started to spar with one another. Some made requests for a speedy trial or trials separate from a larger trial with most of the other defendants.
Some defendants said they wanted speedy trials to quickly resolve charges that they said were stigmatizing them. The U.S. Attorney’s Office pushed back at the requests. Trabold, the prosecutor, said a number of unnamed defendants were already cooperating and could eventually plead guilty.
Assistant U.S. Attorney Christian Trabold, the lead federal prosecutor in Erie, is prosecuting the Hertel & Brown case.
Hertel & Brown’s footprint shrank as the case proceeded. It closed its office in Summit Township. It also closed an office in Fairview Township.
The criminal case expanded somewhat with the filing of a superseding indictment on May 10, 2022. The indictment said the U.S. Attorney’s Office would seek forfeiture of a condominium that Aaron Hertel and Michael Brown own in Florida.
As case stretches into a year, fights over evidence takes over
Judge Baxter rejected the requests for separate trials in July 2022. As the case reached the one-year mark since the indictment, she also set deadlines after meeting with the parties.
The defense started its most vigorous pretrial push as two defendants sought to invalidate statements that they gave to the FBI. Trabold said the statements — characterized in court records as “smoking-gun” evidence — were valid.
The Hertel & Brown case is being prosecuted at the federal courthouse in downtown Erie.
As that dispute consumed the court’s time, more details emerged about the evidence. Trabold said in a court filing that Michael Brown had declined to be interviewed by the FBI under the Fifth Amendment, and a lawyer for Aaron Hertel raised the possibility that any overbilling might have been unintentional.
Trabold revealed more evidence in court about the statements the two physical therapists made to the FBI. The lawyers for the physical therapists said their clients never made the statements, and they asked Baxter to dismiss the indictment due to the disclosures. Baxter rejected the request in October 2023.
A boat explosion is linked to the Hertel & Brown case
The drawn-out nature of the Hertel & Brown case continued to be an issue for some defendants. Baxter set new pretrial deadlines, and in June 2024 set a trial date. She ultimately scheduled jury selection to begin Feb. 18, 2025, at the federal courthouse in Erie.
In setting the dates, Baxter said the complexity of the case made the pretrial continuances necessary. The possibility of guilty pleas continued to loom as the trial schedule took shape.
As the trial neared, the defense focused on attempts to get more evidence tossed. The two physical therapists once again asked that Baxter suppress their statements to the FBI, and other defendants asked the judge to toss text messages, emails, billing records and other evidence that the FBI got with search warrants.
The fight revealed more about the government’s evidence, including how the case was tied to a fatal boat explosion at the Erie Yacht Club on May 30, 2011.
Pretrial disputes in the Hertel & Brown case revealed the connection between the fraud case and a fatal boat explosion at the Erie Yacht Club on May 30, 2011.
At suppression hearings over the physical therapists statements, FBI agents said the statements were incriminating, at that the therapists gave them voluntarily.
Text messages, a whistleblower and major rulings
The suppression fight over the search warrants revealed information about the seized text messages. In a court filing, Trabold said, “Text messages recovered from Michael Brown’s cell phone corroborate that Brown directed an employee of his physical therapy practice, Co-Defendant Hertel & Brown Physical and Aquatic Therapy, to falsify billing records.”
The suppression fight over the warrants also provided a glimpse at what triggered the FBI to investigate Hertel & Brown. The initial tip came in a whistleblower complaint from a former employee, according to court filings and evidence presented in court.
The defense lost its efforts to suppress the statements, texts, emails, billing records and other evidence. Baxter denied the suppression requests on Jan. 8.
Moments after Baxter ruled, several defendants asked her to push the trial into March so they would have more time to prepare. That request is pending.
Contact epalattella@timesnews.com or 814-870-1813. Follow him on X @ETNpalattella.
This article originally appeared on Erie Times-News: Hertel & Brown case: What you need to know about big fraud prosecution