Feds Arrest 44 in 'Largest-Ever' Medicare Fraud Bust

(Oct. 14) -- Federal agents have busted a massive Armenian-American crime ring that defrauded Medicare of $35 million through bogus clinics across the country that used the stolen identities of doctors and patients, according to indictments unsealed this week.

Preet Bharara, the U.S. attorney in New York City, said in a statement that it's the "single-largest Medicare fraud ever perpetrated by a single criminal enterprise."

Prosecutors charged 44 people in New York, Los Angeles, Ohio, New Mexico and Georgia with a variety of offenses, including racketeering, health care fraud, identity theft, money laundering and bank fraud.

The alleged godfather of the crime syndicate, Armen Kazarian, 46, was arrested in Los Angeles. Prosecutors said the "vor," an Armenian word meaning "thief-in-law," ruled by intimidation and fear, providing protection to members of the group and resolving disputes with threats of violence. Two other alleged ringleaders, Davit Mirzoyan, 34, of Glendale, Calif., and Robert Terdjanian, 35, of Brooklyn, were also named in the indictment.

The scam was brazen in its scope but hardly sophisticated, according to the indictments. Fake clinics in 25 states -- some of them no more than a rented mailbox -- sent bills to the nation's health care system for procedures that included an ultrasound given to a pregnant woman by an ear, nose and throat doctor and heart tests conducted by a dermatologist.

Bharara called the case "the envy of any traditional Mafia family." More than $100 million in phony bills was sent to Medicare. About $35 million was reimbursed, prosecutors said.

The gang, based largely in Los Angeles, was a sprawling identity-theft operation that stole the medical license numbers of real doctors and matched them to legitimate Medicare patients, whose names and billing information were also stolen, prosecutors said. About 3,000 of those patient names were lifted from a medical center in Middletown, N.Y., authorities said.