On Thursday, a New Jersey financial advisor was convicted of wire and healthcare fraud after prosecutors said he swindled state insurance plans out of $4 million by submitting false claims for patient medications, then pocketed proceeds from the transactions. At least one of the counts carries a maximum 20-year jail sentence.

A jury in federal court found Kaival Patel, a former Stifel Nicolaus rep from West New York, N.J., guilty on 11 counts, including wire fraud, healthcare fraud and money laundering by transacting in criminal proceeds, according to the U.S. Attorney’s Office for the District of New Jersey. The DOJ announced the conviction in a press release Friday.

Prosecutors said Patel operated a company that submitted false claims for specialty patient medication and kept the reimbursements. The claims were submitted to healthcare plans for New Jersey local and state government employees. The plans included the State Health Benefits Program, the School Employees’ Health Benefits Program and the Bergen County Prescription Benefits Plan, according to the government’s filing.

The scheme involved compounded medications—specialty drugs mixed and altered by pharmacists for patients with specific medical needs (items that might cause allergic reactions might be removed from the mixes, for example). Such drugs require a prescription. Patel launched a company called ABC Healthy Living LLC to market these medications.

“Patel and his conspirators learned that certain state and local government employees had insurance that would reimburse up to thousands of dollars for a one-month supply of certain compound medications such as vitamins, scar creams, pain creams, libido creams, and acid reflux medications,” said the U.S. Attorney’s Office. “Patel and a conspirator approached Patel’s family member, a medical doctor who owns and operates a clinic in Newark, N.J., and convinced him to authorize prescriptions for the compound medications for patients who had no medical need for the prescriptions. Patel received commissions for the compound medication prescriptions.”

The family member and doctor is Saurabh Patel of Woodbridge, who owns a medical practice in Newark and pleaded guilty in February to a charge of conspiring to commit healthcare fraud, according to a previous DOJ release.

Patel and his cohorts paid corrections officers to receive the fraudulent prescriptions at the family member’s practice, according to the DOJ. “Patel conspired with a compounding pharmacist to add unnecessary ingredients to the compound medications to further increase their cost and augment his illicit profits. Patel engaged in a series of financial transactions to receive proceeds from the healthcare fraud and wire fraud conspiracy.”

Patel, who is 54, was with Stifel, Nicolaus & Co. until early 2022 but was let go shortly after the criminal charges were filed in January of that year. The Financial Industry Regulatory Authority barred him a few months later in May 2022 for failing to provide information about the case. He had previously been with Wells Fargo and Morgan Stanley. According to the federal complaint, Patel was prohibited by his employer from engaging in outside business activities, and the government court filing alleged ABC Healthy Living was set up with the help of Patel’s spouse to conceal the medical products business.

The U.S. Attorney’s Office said that 47 people have either been convicted or pleaded guilty in the matter.

Patel faces 20 years for the count of conspiracy to commit wire fraud and healthcare fraud, as well as a fine of at least $250,000 (or twice the losses from the scheme, whichever is greater). Each of the other 10 counts comes with a maximum penalty of 10 years, plus the same fines.

Patel will be sentenced on April 10, 2024. The judge was Robert B. Kugler. Patel’s case was held in the U.S. District Court for the District of New Jersey.