THE FRAUD

"They're ripping off our grandparents, our parents, and ultimately, all of us who will be involved in the Medicare system."

C. FRANK FIGLIUZZI, Special Agent in Charge of the
FBI’s Cleveland office
Oct. 13, 2010

U.S. federal authorities arrested on Oct. 13, 2010 more than 50 members of an Armenian-American organized crime enterprise engaged in a nationwide scheme to defraud the Medicare and other health care programs of an estimated $163 million.

The crime enterprise is charged with engaging in numerous fraud schemes including a massive, highly organized scheme to defraud Medicare. According to the US Justice Department Indictment, the organization stole the identities of legitimate doctors and filed applications to bill Medicare in the names of these doctors, often providing a clinic address on the application that was in fact simply the location of a mailbox. The organization then obtained the stolen identities of thousands of real Medicare beneficiaries, including the identities of approximately 2,900 Medicare patients from the Orange Regional Medical Center in upstate New York.

With the stolen identities of doctors and patients in hand, the organization billed Medicare for over $100 million dollars in taxpayer funds for treatments no doctor ever performed, and no patient ever received. For example:

• Forensic pathologists billed for live office visits;
• Eye doctors billed for bladder tests;
• Ear, nose, and throat specialists billed for performing pregnancy ultrasounds; and
• Obstetricians tested for skin allergies.

Although Medicare identified and shut down the phony clinics after several months, in many cases Medicare had already paid out millions of dollars—more than $35 million in total—and that money had already been withdrawn by the defendants and sometimes transferred overseas. The organization, aware that each clinic had a limited shelf life, then simply turned to another fraudulent clinic, operating at least 118 different phony clinics in 25 states during the course of the scheme.

The gang members and associates are also charged with crimes such as a scheme to defraud automobile insurance companies that provide health care benefits to accident victims, bank fraud, money laundering, credit card fraud, narcotics distribution, contraband cigarette distribution, immigration fraud, extortion, and other offenses.

The indictment says most members of the organization were Armenian nationals or immigrants who maintained substantial ties to Armenia. In addition to regularly traveling to Armenia, they had criminal connections, transferred criminal proceeds to the country, and bought real estate and businesses with money from their illegal profits.