Dozens Arrested in Medicare-Fraud Scheme - WSJ.com

An Armenian-American crime ring defrauded Medicare of more than $35 million by using stolen doctor and patient identities and setting up dozens of phony clinics coast-to-coast, according to federal indictments unsealed Wednesday.

Members of the group, based in New York and Los Angeles, were taken into custody as part of a nationwide Medicare fraud sweep that resulted in charges in California, Ohio, New Mexico and Georgia.

Manhattan U.S. Attorney Preet Bharara said the case was among the largest-ever Medicare fraud enterprises. That is based on the more than $100 million in concocted bills authorities say participants submitted to Medicare beginning at least as early as 2006, though they obtained only $35.7 million in improper payments.

Mr. Bharara said the accused international crime syndicate "would be the envy of many traditional mafia families."

It was the latest in a string of health-care fraud busts nationwide by the Department of Justice.

Federal prosecutors said the new indictment in New York also represents the first time a high-level organized crime figure from the former Soviet Union known as a "vor" had ever been charged with U.S. racketeering offenses.

That man, Armen Kazarian, 46 years old, who was arrested in Los Angeles, gave protection to members of the group, resolved disputes and used threats of violence to control the organization, the indictment said.

According to prosecutors, a "vor" resembles a kind of Eurasian godfather. An attorney for Mr. Kazarian couldn't be reached for comment.

Prosecutors said Mr. Kazarian was residing here after fraudulently obtaining political asylum from Azerbaijan in 1996. He drove a Rolls Royce Phantom, a car priced at more than $350,000, prosecutors added.

Most of the 44 people charged Wednesday were members of the Armenian group, but some were doctors, lawyers and patients, according to the indictments.

The Armenian-American organization stole the identities of doctors and patients, including more than 2,000 from the Orange Regional Medical Center in upstate New York, prosecutors said. The names were allegedly used to file reimbursement requests to Medicare for procedures that weren't performed at 118 nonexistent clinics in 25 states.

"The clinic is a post office box," said David C. Shafer, the assistant special agent in charge for organized crime at the FBI's New York office.

Kirk Ogrosky, former deputy chief of health-care fraud enforcement at the Department of Justice, said Medicare has been "particularly vulnerable" to fraud, though recent improvements in analyzing claims data was likely to reduce potentially fraudulent claims.

In a separate scheme, the Justice Department alleged, members of the Armenian-American group created fake companies and staged auto accidents to submit false claims to private insurance companies.

Some patients were allegedly recruited to undergo unneeded procedures. In one instance, ring members allegedly solicited exotic dancers whose van had crashed to take part in the scheme.

Mr. Kazarian's role, prosecutors allege, was to maintain order in the organization. The indictment says Mr. Kazarian traveled to New York in 2006 to resolve a dispute and decided to erase a $200,000 debt one ring member owed to an associate.

When that man claimed he couldn't afford Mr. Kazarian's $100,000 fee, Mr. Kazarian allegedly ordered another associate to seize the man's yacht.

The charges filed Wednesday include accusations of racketeering, health-care fraud, identity theft, money laundering and bank fraud.

Three of the 44 people charged remained at large Wednesday afternoon.