By means of identity theft, they set up over 100 non-existent clinics and charged Medicare for $100 million. The leader of the gang got asylum in the U.S. in 1996 by falsely claiming his father had been killed in Armenia and that his life was at risk. The
is in the Oct. 13
Real Patients, Real Doctors, Fake Everything Else
A pregnant woman who gets an ultrasound exam—from an ear, nose and throat doctor. A forensic pathologist whose patients walked into his office, rather than being rolled in with toe tags. A dermatologist who conducted heart tests. A psychiatrist who performed M.R.I.’s.
But none of the far-fetched procedures ever took place, according to federal prosecutors. The names of the patients and doctors were real, but none of them knew that their identities had been stolen. The addresses for the medical offices were often nothing more than mail drops.
In the universe of fake limbs and needless neck braces more typical of Medicare fraud, few cases have appeared more brazenly absurd, and few were as ambitious. By inventing 118 bogus health clinics in 25 states, prosecutors said, a band of Armenian-American gangsters billed Medicare for more than $100 million, and managed to collect $35 million over at least four years. Preet Bharara, the United States attorney in Manhattan, called it the “single largest Medicare fraud ever perpetrated by a single criminal enterprise.”
Eighteen people were charged in the Medicare indictment unsealed on Wednesday, part of a larger ring of 44 people prosecutors said had engaged in a variety of swindles, including bilking auto insurance companies by falsifying, staging or exaggerating the severity of fender-benders. Charges included racketeering, health care fraud, identity theft, money laundering and bank fraud. Forty-one of the defendants had been arrested as of Wednesday afternoon.
At its heart, the gang, based largely in Los Angeles, resembled a giant identity-theft ring that stole doctors’ dates of birth and Social Security and medical license numbers and paired them up with legitimate Medicare recipients, whose names and information were also stolen. About 3,000 of those patients’ names came from the Orange Regional Medical Center in Middletown, N.Y., the authorities said.
The defendants would create fake clinics—sometimes nothing more than an address at a Mail Boxes Etc. store, from New York City to Mobile, Ala., to Apple Valley, Calif.—and bill the agency for examinations and procedures that never happened and for equipment that did not exist, officials said. The scheme sidestepped the cumbersome element of most Medicare schemes, which typically involve pairing up a corrupt doctor with a complicit patient faking an injury.
“The whole doctor-patient interaction was a mirage,” said Janice K. Fedarcyk, assistant director in charge with the New York office of the Federal Bureau of Investigation.
Most of the fake claims were traditional. The hard-to-believe exams like the dermatologist’s heart test were the exception, and raised flags at Medicare. But often, the claim had already been paid.
The scheme involved a long series of open-and-shut fake clinics that were clearly uninterested in standing up to official scrutiny. For every fake clinic that was discovered, a new one would arise somewhere else with no apparent connection until now, prosecutors said.
They had to look only legitimate enough, prosecutors said, to get money from an agency set up to pay first and ask questions later.
Medicare was “sucker punched” in the case, Mr. Bharara said. “By design, Medicare is user-friendly,” he said. “It reimburses doctors in a timely fashion.”
Jenny Backus, a spokeswoman for the Department of Health and Human Services, said: “Cracking down on criminals who steal from Medicare is a top priority for this administration. Thanks to the new health care law, we all have new powers and tools to get the job done and recover funds for the Medicare Trust Fund.”
One law enforcement official said the investigation had found that the group received reimbursement for significantly more than $35 million, but could prove only the amounts contained in the indictment.
The leader of the gang was identified as Armen Kazarian, of Los Angeles, and described as a vor, an Armenian term roughly translated as “thief-in-law” and likened to a Mafia godfather. The analogy was one of several invocations of the traditional Mob made at a news conference in Manhattan on Wednesday, with Mr. Bharara calling the case “the envy of any traditional Mafia family.”
Mr. Kazarian entered the country as a refugee with an asylum application that was granted in 1996, prosecutors said. Mr. Kazarian claimed he could not return to Armenia for fear of prosecution, but later investigation showed he had lied. For example, he told the asylum officer who interviewed him that he had fled the region after watching his father be doused by gasoline and burned to death, and he went on to describe a time he was attacked while visiting his father’s grave. Nine years later, in 2005, agents with the F.B.I., interviewing him in an unrelated matter, told him they had learned that his father was still alive.
Prosecutors said that Mr. Kazarian’s arrest signified the first time a vor had been charged in the United States with a racketeering crime, and the first time since 1996 that a known vor had been arrested on any federal charge.
Those arrested in New York appeared in a Manhattan federal courtroom crowded with lawyers and family members. Judge Robert P. Patterson sped through nearly a dozen indictments Wednesday afternoon, with all defendants pleading not guilty. Most were freed on bail ranging from $100,000 to $500,000. Family members and lawyers declined to comment.
The case includes other elements familiar to organized crime cases, including petty infighting and a threat of violence that seems to be always present. In one 2009 episode described in the Medicare indictment, one defendant, Robert Terdjanian, met another person at a restaurant in Brighton Beach and pulled a knife, threatening to disembowel him if a debt was not paid. In another instance, Mr. Kazarian and another defendant threatened to sodomize and kill an associate who had repeatedly called Mr. Kazarian while drunk, the indictment says.
Many of the fraudulent claims in the case were typed in a second-floor office on Coney Island Avenue, said Police Commissioner Raymond W. Kelly.
The proceeds from the scheme were often sent back to criminals in Armenia, the indictment says, or were rendered untraceable through a series of bank transfers that ended in a check-cashing facility or a pile of Las Vegas casino chips.
Michael J. Gaeta, the supervisor of the New York F.B.I. office’s Russian Organized Crime Squad, said the threat posed by such groups from Russia and the former Soviet republics had changed drastically from the crude and brutal approach that was rooted in extortion and other violent crimes.
“That’s not the threat we’re looking at here,” he said. “New York and the U.S., to them it’s a big pot of gold, and they’re coming after it. And with the world getting smaller, it’s much easier for them to do it.”