SAN JOSE -- The deal was too good to pass up -- free "mani-pedis" and massages. All customers had to do was turn a blind eye when the spa fibbed and billed their insurance companies for "chiropractic services."
Meanwhile, the owners and two employees of San Jose Chiro on Landess Avenue were actually committing what prosecutors say is the largest medical fraud case in Santa Clara County history -- raking in $7 million in about 17 months, or more than $400,000 a month.
"Non-therapeutic massages, facials, manicures and pedicures are great, but they are not medical treatments," prosecutor Christopher Kwok said Thursday. "Portraying them as medical treatments to get insurance reimbursement is a crime."
Authorities on Wednesday arrested San Jose Chiro chiropractor Tracy Thu Khac Minh Le, 39, and her husband Thanh Trung Tran, 37, as well as their employees, Lillian Yenloan Be, 39, and Honggam Thi Tran, 37. Each has been charged with 11 counts of felony health care insurance fraud and faces up to 24 years in jail if convicted. All have since been released on $75,000 bail.
Based on a tip, authorities began an investigation of San Jose Chiro at the end of 2012, which they dubbed "Operation Nail Polish." An investigator from the Santa Clara County District Attorneys Office visited the spa eight times and received eight free manicures and pedicures. Her insurance company was billed $2,000 or $250 per visit -- at least five times as much as nail care typically costs even when it is legitimately billed.
Large as the insurance fraud appears, it's just the tip of the iceberg.
"Insurance crimes are a multi-billion drain on California's economy," said state Insurance Commissioner Dave Jones said in a written statement. "Insurance fraud is not a victimless crime -- we all pay for these crimes through higher insurance premiums."
Kwok said it's unclear whether customers knew of the fraudulent billing, though it seems likely many did, since even the best insurance policies don't usually cover nail care. About 90 percent of the spa's business was fraudulently billed, Kwok said.
However, some insurance companies do cover massage. One customer who got massages at San Jose Chiro complained on Yelp about a month before the arrests that the spa was no longer willing to bill her particular insurance company.
"The only reason why I even come here is because my insurance covers it, so it's free," the woman griped in the online post. "I'm just gonna go elsewhere and pay for a better massage than having a free one where the service is mediocre."
Contact Tracey Kaplan at 408-278-3482. Follow her at Twitter.com/tkaplanreport.