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Seventy-Three Indicted in Organized Crime Enterprise Involving More Than $163 Million in Health Care Fraud

Organized crime enterprise known as the Mirzoyan-Terdjanian, fleeced the health care system through a wide-range of money making criminal fraud schemes

The FBI reported this week that seventy-three people, including a number of alleged members and associates of an Armenian-American organized crime enterprise, were charged in indictments with various health care fraud-related crimes involving more than $163 million in fraudulent billing.

Organized crime enterprise known as the Mirzoyan-Terdjanian, fleeced the health care system through a wide-range of money making criminal fraud schemes

The FBI reported this week that seventy-three people, including a number of alleged members and associates of an Armenian-American organized crime enterprise, were charged in indictments with various health care fraud-related crimes involving more than $163 million in fraudulent billing.

This is the largest Medicare fraud scheme ever perpetrated by a single criminal enterprise and charged by the Department of Justice. The defendants are charged with engaging in numerous fraud activities, including highly-organized, multi-million-dollar schemes to defraud Medicare and insurance companies by submitting fraudulent bills for medically unnecessary treatments or treatments that were never performed.

Healthcare Announces Fraud Arrests

According to a report by Javelin Strategy & Research, fraud resulting from exposure of health data versus other kinds of sensitive information increased from 3% in 2008 to 7% in 2009. In addition, the study showed that criminals were able to exploit information from medical records to commit fraud for four times longer as compared to other types of identity theft. Other studies are showing that these figures are increasing significantly in 2010.

According to the indictments, the defendants allegedly stole the identities of doctors and thousands of Medicare beneficiaries and operated at least 118 different phony clinics in 25 states for the purposes of submitting Medicare reimbursements.

Crime in the healthcare industry is a triple-threat because the criminals target not only consumer data but also information from healthcare providers, insurers, and pharmaceutical companies. With data gathered from these sources, there are multiple ways to profit from it, such as filing false patient claims to insurers and government agencies, identity theft, or just simply selling the valuable data on the black market to other criminals. In fact, the information healthcare organizations maintain is actually more valuable to fraudsters than credit card numbers! Why? Because credit card numbers and financial account information can have a very short lifespan. Users can cancel cards, close accounts and can be monitored more closely for fraudulent activity and shut off instantly. Information contained in healthcare records, however, can be used for many different fraudulent purposes, and never changes.

“The emergence of international organized crime in domestic health care fraud schemes signals a dangerous expansion that poses a serious threat to consumers as these syndicates are willing to exploit almost any program, business or individual to earn an illegal profit,” said Acting Deputy Attorney General Gary G. Grinder.

This week, special agents of the Office of Inspector General in coordination with federal law enforcement partners made 52 arrests across the nation—from New York to Los Angeles.

“The international organized crime enterprise known as the Mirzoyan-Terdjanian, fleeced the health care system through a wide-range of money making criminal fraud schemes. The members and associates located throughout the United States and in Armenia, perpetrated a large-scale, nationwide Medicare scam that fraudulently billed Medicare for more than $100 million of unnecessary medical treatments using a series of phantom clinics,” said Kevin Perkins, FBI Assistant Director of the Criminal Investigative Division.

A breakdown of the Seventy-Three Indicted:

Forty-four defendants were charged in two indictments unsealed this week in the Southern District of New York with racketeering conspiracy and conspiracy to commit the following acts: health care fraud, bank fraud, money laundering, fraud in connection with identity theft, credit card fraud, and immigration fraud.

Seven defendants were charged in the District of New Mexico with health care fraud, mail fraud, wire fraud, money laundering conspiracy, money laundering, forfeiture, and aggravated identity theft.

Six defendants were charged in the Southern District of Georgia with health care fraud, conspiracy to commit health care fraud, money laundering conspiracy, and aggravated identity theft.

Six defendants were charged in the Northern District of Ohio with health care fraud, mail fraud, conspiracy to commit mail fraud, wire fraud, conspiracy to commit money laundering, and aggravated identity theft.

Ten defendants were charged in two indictments in the Central District of California with conspiracy to commit bank fraud, bank fraud, money laundering, conspiracy to launder monetary instruments, criminal forfeiture, aggravated identity theft, aiding and abetting, and causing an act to be done.

According to the charges filed in U.S. District Court in the Southern District of New York, the Mirzoyan-Terdjanian Organization is named for its principal leaders, Davit Mirzoyan and Robert Terdjanian. The leadership of the organization is based in Los Angeles and New York, and its operations extend throughout the United States and internationally.

Among the defendants charged with racketeering is Armen Kazarian, who is alleged to be a “Vor,” a term translated as “Thief-in-Law” and refers to a member of a select group of high-level criminals from Russia and the countries that has been part of the former Soviet Union, including Armenia. This is the first time a Vor has ever been charged for a racketeering offense, and the first time since 1996 that a known Vor has been arrested on any federal charge.

The health care fraud and conspiracy to commit health care fraud charges each carry a maximum penalty of 10 years in prison and a $250,000 fine. The conspiracy to commit bank fraud charges each carry a maximum penalty of 30 years in prison and a fine of $1 million. The conspiracy to commit money laundering charges each carry a maximum penalty of 25 years in prison and a $500,000 fine. The conspiracy to commit money laundering charges each carry maximum penalties of 20 years in prison and a $500,000 fine. The conspiracy to commit fraud in connection with identity theft charges carry a maximum penalty of five years in prison and a $250,000 fine. The aggravated identity theft charges each carry a required two-year consecutive prison sentence to any other sentence imposed, the conspiracy to commit credit card fraud charges carry a maximum penalty of 10 years in prison and a $250,000 fine. The conspiracy to commit immigration fraud charges carry a maximum penalty of five years in prison and a $250,000 fine.

The cases were investigated by special agents from the FBI’s Los Angeles and New York field offices. In recent years, the department has undertaken a series of steps to modernize its organized crime program and enable federal law enforcement to take a unified approach to combating international organized crime. Earlier this month the FBI, working in partnership with international law enforcement, busted several cybercriminals that targeted small- to medium-sized companies, municipalities, churches, and individuals, infecting their computers with “ZeuS,” popular malware used to capture passwords, account numbers, and other data used to log into online banking accounts.

Healthcare organizations need to recognize the threats they face and take the appropriate steps to protect the sensitive information they maintain and exchange to protect patients and themselves from harm. They face unique challenges though, as there is no “template based” approach to secure their information infrastructure. They must identify, adopt and deploy security solutions that address particular needs based on their risk, environment, and information flow (3rd party partners, billing, etc.) to protect patients and sensitive organizational data.

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