I-Team: Conspiracy, Fraud Trial of Lawyer Underway (Part 1)

Federal prosecutors say some local doctors and lawyers conspired to rip off their clients and patients for tens of millions of dollars. On Tuesday, the first of what may be dozens of prosecutions began.

The FBI spent more than four years investigating prominent Las Vegas professionals. The first target, attorney Noel Gage, says he will be acquitted.

Have an opinion on this case? Tell us.

Noel Gage isn't the alleged ringleader or even the biggest target. He just happens to be the first guy out of the box.

The charges are similar to what was alleged in the G-sting political corruption case, namely, that as conspiracy deprived, the victims of honest services. Prosecutors say Noel Gage and others not yet charged paid kickbacks and cut side deals to line their own pockets and divvied up millions of dollars that should have gone to their severely-injured patients and clients. The same two prosecutors who spearheaded G-sting are confident they can prove it.

"I'd like to comment, but I can't," said Gage.

For someone who says he can't talk, defendant Noel Gage sure has done a lot of it since being charged last year. First, in a series of T.V. ads which introduced him to the jury pool as a champion of the little guy, and also in two warm and fuzzy Review-Journal profile pieces which revealed that he loves his family.

This week, federal prosecutors will paint a much different picture of Noel Gage.

Steve Myhre, Asst. U.S. Attorney said, "He paid over a million dollars in kickbacks."

The government has done most of its talking in court. In 2006, it issued nearly two dozen subpoenas to prominent doctors and lawyers, Noel Gage among them, following an intense FBI investigation, resulting in tens of thousands of pages, billing statements, bank records, and internal emails, detailing a complex web of relationships.

The common denominator, the hub of the alleged conspiracy, is self-described medical fixer Howard Awand, who isn't a doctor or a lawyer but who dispensed legal and medical advice as he allegedly orchestrated different lineups of doctors and lawyers for different personal injury cases.

The government believes the conspirators siphoned tens of millions of dollars away from severely injured patients, cutting side deals that the clients knew nothing about. To prove it, they will follow the money.

Read the second superseding Criminal Indictment

To bolster the documents, prosecutors will present testimony from two doctors who say they were part of the scheme -- surgeons John Thalgott and Ben Venger, both of whom approached the government and agreed to testify in exchange for immunity.

Thalgott told the FBI he participated because Gage and Awand let him side on a possible malpractice lawsuit. Venger acknowledges receiving huge under-the-table payments.

One blockbuster piece of evidence is a recording of a conversation between Dr. Venger and prominent attorney Bob Vannah, who has not been charged but is considered one of the government's main targets. Vannah wanted to assure Dr. Venger that the FBI was after Howard Awand and not them.

Vannah: "I'll be honest with you. The FBI's not interested in me. They're interested in Howard."

Venger: "Do you think Howard's going to prison?"

Vannah: "No, nothing's going to happen to him."

On the tape, Venger complains to Vannah that Awand has been shooting his mouth off. Prosecutors have a video from Venger's own wedding at which Awand joked with Bob Vannah about a lucrative score.

Howard Awand: "That should be worth about four and a half million dollars."

On the audio tape, Vannah tells Venger how he worked with Awand.

"Let me tell you what. I will go to my f...ing grave. My position is, no doctor I've ever heard of, I never gave a doctor a check. I never gave any doctors any money. I paid Howard for his help, and my understanding was that Howard worked with a number of high class doctors and that he had them on retainer so he could get answers to questions," said Vannah.

And later...

Venger: "He's got big problems."

Vannah: "For sure he does. I never paid anybody anything. I would just send Howard a s...load of money every month, say here's my check and shut your f.....ing mouth."

Venger: "Well, that's what I worry about, because of Howard's big mouth and whether Howard kept any records or what."

Vannah: "Well, we knew he kept up, not quote unquote records like he paid off this man, but good records. How did he pay you? He paid you out of his personal account."

Noel Gage is not mentioned on this tape but prosecutors will argue this is the same arrangement Awand had with Gage. Dr. Venger will testify that he received hundreds of thousands of dollars in under-the-table payments from Gage, money that otherwise would have gone to the injured clients.

To understand how the alleged cabal operated, consider one of the cases listed in the indictment -- that of Melodie Simon, a teacher at Cheyenne High School who underwent back surgery in 2000.

Doctors Mark Kabins and John Thalgott operated, but something went wrong. Simon is permanently paralyzed from the waist down.

She was put in touch Awand and he met with Noel Gage about the case. A letter to Dr. Kabins from his attorney acknowledges that Gage felt he could sue Kabins and Thalgott, but offered to let them off and blame Simon's paralysis on Anesthesiologist Dan Burkhead.

The lawyer advised Kabins against making a deal with Gage and said the insurance company would not allow it. But Kabins and Thalgott did it anyway.

In a sworn statement to the FBI, Thalgott says he and Kabins met with Gage and Awand without their lawyer. Gage remarked in the beginning it was a "meeting that didn't happen."

In the meeting, Gage and Awand cut a deal to let Kabins and Thalgott off if they helped build a case against Dr. Burkhead.

Days later, Awand sent a confidential letter to Kabins, telling Kabins that both he and Gage would keep their word, then asking for help in proving where the anesthesiologist screwed up.

Melodie Simon sued Dr. Burkhead and was awarded $7 million, money to last the rest of her life. The FBI thinks Gage and Awand greatly inflated Simon's medical bills because it meant more money for them.

Out of the $7 million, Gage made three payments to Awand totally $1.3 million, and another payment of $430,000 to a doctor who helped the scheme -- all without telling Melodie Simon the real reason for the payouts.

More importantly for Simon, doctors Kabins and Thalgott, who had some responsibility according to Gage, were covered by $6 million in malpractice insurance, money that wasn't paid to Simon because her lawyer cut a backroom deal, according to the government.

As the money rolled in, the conspirators got even busier, the government says.

Awand sent this letter to Dr. Kabins in 2002 saying he referred so many cases he had lost track of them. Two doctors had second thoughts and went to the government.

John Thalgott and Ben Venger both will testify. But even after the word surfaced about an FBI probe, some suspects stayed the course.

Top defense attorney Tom Pitaro is expected to argue that no crime was committed and the case was created by the insurance industry.

Email your comments to Chief Investigative Reporter George Knapp.

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