Two California men allegedly created a series of medical-equipment companies with no physical storefronts or warehouses, used them to submit more than $3.5 million in fraudulent claims to Medicare and moved on to new companies when the previous ones began facing fraud-related claim denials, according to the U.S. Department of Justice. The case involves Nouman Mustafa, 36, of Torrance, and Mohsin Khan, 40, of Bakersfield, who were indicted by a federal grand jury on September 17 on multiple counts of health care fraud and aggravated identity theft. The charges were announced by the U.S. Attorney’s Office for the Eastern District of California.
Companies allegedly created to appear legitimate
According to court records cited by the Justice Department, Mustafa and Khan allegedly created a series of shell companies between January 2025 and January 2026. The businesses were designed to appear to be legitimate durable medical equipment (DME) companies that could provide medical equipment to Medicare beneficiaries. Investigators allege that the companies did not actually operate like genuine medical-equipment businesses. None of them had physical storefronts, warehouses or other locations where legitimate business could have been conducted, according to the court records.The two men allegedly used the companies to submit claims to Medicare for durable medical equipment. In total, the claims they submitted amounted to more than $3.5 million, prosecutors said. The alleged operation was also structured to move from one company to another. Mustafa and Khan typically used a company for only a few weeks or months. Once its claims began to be denied because of suspected fraud, they allegedly shifted their activity to another company and continued submitting claims.
Information allegedly came from contacts overseas
The Justice Department alleges that Mustafa and Khan obtained information used to submit the claims from contacts in Pakistan and elsewhere. The information reportedly included details belonging to real Medicare beneficiaries as well as information about their doctors. The men allegedly used those details as part of the process of submitting the fraudulent claims to the federal health insurance programme.According to prosecutors, Mustafa and Khan did not keep all the proceeds generated through the alleged scheme. They allegedly retained approximately 30% of the money, while sending the remaining amount to their contacts. The allegations describe a scheme that prosecutors say relied on a succession of companies rather than a single business entity. When one company’s claims attracted scrutiny and began to be rejected, the defendants allegedly moved to another company, allowing the alleged billing activity to continue.
Arrests and federal investigation
The case came under investigation by the U.S. Department of Health and Human Services Office of Inspector General, with assistance from the Bakersfield Police Department, according to the Justice Department. Mustafa was arrested on February 11, 2026, at Los Angeles International Airport while he was attempting to board a one-way flight to Pakistan. At that time, he was arrested on a criminal complaint.Khan was arrested at his home in Bakersfield on September 30, the same day the Justice Department announced the indictment. He was scheduled to make his initial court appearance following his arrest. According to the Justice Department, the two men are Pakistani nationals who also hold dual United States citizenship. Court records indicate that they had previously worked in the US in occupations including security guards, warehouse managers and licensed insurance agents.
Charges and potential penalties
Mustafa and Khan face multiple counts of health care fraud and aggravated identity theft. If convicted, each health care fraud count carries a potential sentence of up to 10 years in prison and a fine of up to $250,000. The aggravated identity theft charges carry a mandatory minimum sentence of two years in prison, which would be served consecutively to any sentence imposed for the other counts, according to the Justice Department. However, the eventual sentences, if there are convictions, would be determined by the court after consideration of applicable statutory factors and the federal Sentencing Guidelines. The case remains at the charging stage. The Justice Department stressed that the allegations contained in the indictment are not findings of guilt and that Mustafa and Khan are presumed innocent unless and until they are proven guilty beyond a reasonable doubt.