MANHATTAN (CN) – A Russian crime group, including doctors and lawyers, ran the largest no-fault insurance scheme in history, pocketing nearly half of the $279 million they got from it, federal prosecutors said Wednesday.
Prosecutors unsealed an indictment against 36 defendants, which include 10 licensed doctors and three attorneys. The suspects face federal racketeering, conspiracy and other charges that could send them to prison for 30 to 70 years.
Some of the suspects opened bogus medical clinics as early as 2007, to cash in on New York State’s no-fault insurance law, which allows anyone injured in a car accident to collect up to $50,000 for medical treatment, prosecutors said.
Most defendant clinics were run by “members and associates of a criminal organization consisting primarily of individuals of Russian descent,” the U.S. Attorney’s Office said.
Nicknames of the defendants include “KGB,” for Yuriy Zayonts, and “Russian Mike,” for Mikhail Zemlyansky.
The clinics’ straw owners paid doctors to use their licenses to incorporate the clinics, and to mislead state authorities and insurers about their legitimacy, prosecutors said.
The owners paid runners $2,000 to $3,000 a head to recruit patients, according to a 35-page indictment against lead defendant Zemlyansky.
The doctors prescribed unnecessary treatments, including acupuncture, neurological care and even hearing tests, according to the indictment.
U.S. Attorney Preet Bharara called it the “largest single no-fault insurance fraud case in history.”
The “cadre of corrupt doctors … peddled their medical licenses like a corner fraudster might sell fake ID’s – except that those medical licenses allowed unlawful entry, not to a club or a bar, but to a multibillion dollar pool of insurance proceeds,” Bharara said at a press conference.
He added: “These defendants then used that money in part to finance their own lavish personal lifestyles – including vacations in Mexico and Atlantic City, purchases of luxury items at Louis Vuitton, Chanel, and Saks Fifth Avenue, as well as expensive jewelry and limousines.”
Prosecutors calculate the actual loss at $113 million.
Bharara called the scope of the alleged fraud “staggering.”
Earlier this week, federal prosecutors in Texas claimedthat a ring headed by a Dallas-area doctor fraudulently billed Medicare and Medicaid for more than $350 million. Prosecutors called that ring it “the largest alleged home health fraud scheme ever committed.”
As much as 10 percent of Medicare and Medicaid payments may be lost to fraud – $70 billion a year – Fast Company magazine reported, attributing the number to the Centers for Medicare and Medicaid Services.
If that number is correct, Wednesday’s bust would have to be repeated more than once a day to match the scale of annual public insurance fraud.
A spokeswoman for a whistleblower who is suingtwo of the nation’s largest medical labs urged prosecutors to set their sights on larger targets.
“Medicare fraud is systemic in the health care industry,” Karen Hinton said. “You have to go after individual doctors. You also have to go after systemic abuse. … It’s harder, difficult, because it involves corporations.”
Hinton’s client, Andrew Baker, wants the government to intervene in his lawsuits against the Laboratory Corporation of America and Quest Diagnostics. Baker claims that Labcorp raked in more than $3 billion on so-called “pull-through” schemes, and that a similar fraud by Quest also made billions.
Both labs are challenging Baker’s lawsuit on procedural grounds in Manhattan Federal Court, and it is uncertain whether those cases will be argued on their merits.