Dozens charged with largest Medicare scam ever

A vast network of Armenian gangsters and their associates used phantom health care clinics and other means to try to cheat Medicare out of $163 million, the largest fraud by one criminal enterprise in the program's history, U.S. authorities said Wednesday.


Federal prosecutors in New York and elsewhere charged 73 people. Most of the defendants were captured during raids Wednesday morning in New York City and Los Angeles, but there also were arrests in New Mexico, Georgia and Ohio.

The scheme's scope and sophistication "puts the traditional Mafia to shame," U.S. Attorney Preet Bharara said at a Manhattan news conference. "They ran a veritable fraud franchise."

Unlike other cases involving crooked medical clinics bribing people to sign up for unneeded treatments, the operation was "completely notional," Janice Fedarcyk, head of the FBI's New York office, said in a statement. "The whole doctor-patient interaction was a mirage."

The operation was under the protection of an Armenian crime boss, known in the former Soviet Union as a "vor," prosecutors said. The reputed boss, Armen Kazarian, was in custody in Los Angeles.

Bharara said it was the first time a vor — "the rough equivalent of a traditional godfather" — had been charged in a U.S. racketeering case.

Kazarian, 46, of Glendale, Calif., and two alleged ringleaders — Davit Mirzoyan, 34, also of Glendale, and Robert Terdjanian, 35, of Brooklyn — were named in an indictment charging racketeering conspiracy, bank fraud, money laundering and identity theft.

The indictment accused Terdjanian and others of hatching other schemes involving stolen credit cards, untaxed cigarettes and counterfeit Viagra. It also alleges that during a meeting last year at a Brighton Beach restaurant, Terdjanian pulled a knife on someone who owed him money "and threatened to disembowel the individual if the debt was not paid."

A judge jailed Terdjanian without bail on Wednesday at a brief hearing. Afterward, his attorney said his client denies the charges.

Kazarian and Mirzoyan were scheduled to appear in court Wednesday in Los Angeles.

Authorities began the New York-based investigation after information on 2,900 Medicare patients in upstate New York — including Social Security numbers and dates of birth — were reported stolen.

The defendants in the New York case also had stolen the identities of doctors and set up 118 phantom clinics in 25 states, authorities said. The names were used to submit fake bills for care that was never given, they said.

Some of the phony paperwork was a giveaway: It showed eye doctors doing bladder tests; ear, nose and throat specialists performing pregnancy ultrasounds; obstetricians testing for skin allergies; and dermatologists billing for heart exams.

.94 charged in Medicare scams totaling $251M

MIAMI – Elderly Russian immigrants lined up to take kickbacks from the backroom of a Brooklyn clinic. Claims flooded in from Miami for HIV treatments that never occurred. One professional patient was named in nearly 4,000 false Medicare claims.

Authorities said busts carried out this week in Miami, New York City, Detroit, Houston and Baton Rouge, La., were the largest Medicare fraud takedown in history — part of a massive overhaul in the way federal officials are preventing and prosecuting the crimes.

In all, 94 people — including several doctors and nurses — were charged Friday in scams totaling $251 million. Federal authorities, while touting the operation, cautioned the cases represent only a fraction of the estimated $60 billion to $90 billion in Medicare fraud absorbed by taxpayers each year.

For the first time federal officials have the power to overhaul the system under Obama's Affordable Care Act, which gives them authority to stop paying a provider they suspect is fraudulent. Critics have complained the current process did nothing more than rubber-stamp payments to fraudulent providers.

"That world is coming to an end," Health and Human Services Secretary Kathleen Sebelius told The Associated Press after speaking at a health care fraud prevention summit in Miami. "We've got new ways to go after folks that we've never had before."

Officials said they chose Miami because it is ground zero for Medicare fraud, generating roughly $3 billion a year. Authorities indicted 33 suspects in the Miami area, accused of charging Medicare for about $140 million in various scams.

Suspects across the country were accused of billing Medicare for unnecessary equipment, physical therapy and other treatments that patients never received. In one $72 million scam at Bay Medical in Brooklyn, clinic owners submitted bogus physical therapy claims for elderly Russian immigrants.

Patients, including undercover agents, were paid $50 to $100 a visit in exchange for using their Medicare numbers and got bonuses for recruiting new patients. Wiretaps captured hundreds of kickback payments doled out in a backroom by a man who did nothing but pay patients all day, authorities said.

The so-called "kickback" room had a Soviet-era propaganda poster on the wall, showing a woman with a finger to her lips and two warnings in Russian: "Don't Gossip" and "Be on the lookout: In these days, the walls talk."

With the surveillance, the walls "had ears and they had eyes," U.S. Attorney Loretta Lynch said at a news conference in Brooklyn.