An elaborate, international health-care fraud ring that stole millions from taxpayers started to come unraveled when an Ohio gynecologist called investigators after receiving insurance payments for male patients.
Ultimately, two California men went to federal prison in May as purported ringleaders of the operation, but not before making off with more than $13 million in Medicare payments for nonexistent medical services in a case that illustrates a common health-care fraud scheme.
Karen Chilyan and Eduard Oganesyan are serving eight and 11 years, respectively. At large are Lilit Galstyan, Julieta Ghazaryan and Marine Movsisyan, who were last week placed on the U.S. Department of Health and Human Services’ most-wanted list.
Federal prosecutors say these people were involved in an Armenian criminal network that billed Medicare for more than $48 million, using the stolen identities of doctors and patients from Ohio and 39 other states.
“This is the new face of organized crime,” Steven Dettelbach, U.S. Attorney for the Northern District of Ohio, said last May. “It used to be what you saw in ‘The Godfather’ but now it’s someone with Internet access stealing hundreds of millions of dollars. This money is being sucked right out of our health-care system.”
The bust was part of a nationwide sweep in 2010 in which 73 people were indicted in New York, Georgia, California and New Mexico. Overall, the fraud ring submitted more than $100 million in bogus Medicare claims.
The group ripped pages straight from the medical fraud playbook, executing what federal investigators call a “drop box scheme.”
Here’s how the scam worked: Chilyan, Oganesyan and others in California first stole doctors’ identities, finding most of the basic information on the Internet. The hard part was getting Social Security numbers, although those were available on the black market.
They then leased office space in Canfield, Ohio, and claimed it was occupied by those doctors. They also set up an empty storefront in Columbus for the gynecologist, along with other businesses in other states.
True to the real estate axiom, Columbus and Canfield were chosen because of their locations. The doctors’ real offices were in Columbus and Cleveland, and the scammers needed a spot at least 60 miles away so their mail wouldn’t accidentally be sent to the real offices.
Sometimes, the scammers rented an empty storefront as the business location. But often they used a private mailbox company which, unlike a post office box, gives the appearance of a street address while leaving a smaller paper trial.
After registering the business with the state, scammers then registered each fake company with the federal government as a medical provider, often listing the mailbox as its address.
The next step was finding patients. Again, they used identity theft. Court records say Chilyan and Oganesyan used the identities of several Medicare recipients in Ohio.
“A lot of the information is available for public websites for doctors. (For) the Medicare beneficiaries, there seems to be a stolen list that is pretty obtainable from the black market,” said John Leahy, special agent with the U.S. Department of Health and Human Services Office of Inspector General in Cleveland.
Scammers often call senior citizens pretending to be with Medicare and ask for their information.
And just like that, they were in business.
Court documents say Chilyan and Oganesyan billed Medicare for more than $2.1 million between Feb. 25 and March 21, 2008, for two Ohio doctors. They received nearly $280,000, wired to investment accounts in the doctors’ names.
Then they laundered the money, according to court records, setting up fake businesses to do so. They also deposited cash into casino accounts and withdrew it as gambling chips.
When the suspicious gynecologist started receiving private insurance payments with men’s names, he called the HHS inspector general’s hotline. Special agents visited the address listed as the practice location in the government’s medical provider database.
“When we checked the office out, it was an empty store room in Columbus,” said special agent in charge Verne Waldow, who supervises Leahy. “The doctor’s name was stenciled on the door in the strip mall. There were eviction notices stuffed into the mailbox and under the door.”
By the time investigators shut off the money faucet, Chylan and Ogansyan had billed Medicare for more than $48 million. Nearly $13 million of that was paid out, according to the court documents.
Court records illustrate how lucrative the group’s scam was: Investigators seized three kilograms of gold pellets valued at $130,086 from a California home, along with jewelry and a watch valued at $14,500. As part of their sentencing, Chylan and Ogansyan were ordered to pay more than $10 million in restitution.
Waldow said after these two men and 71 other people were rounded up in 2010, “the problem for the most part stopped with the false fronts.”
But experts say without improved efforts to screen out fraudsters before they start collecting checks from Medicare — this newspaper found dozens of medical providers in Ohio claiming UPS stores as their address — it’s unclear to what extent there remains vulnerability to other “drop box schemes.”