Medicare scam network allegedly fronted by mobsters

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Sunday, October 17, 2010 (SF Chronicle)
Medicare scam network allegedly fronted by mobsters
Thomas Watkins, Associated Press

(10-17) 04:00 PDT Glendale (Los Angeles County) --
Endeavor Diagnostics billed itself as a thriving medical laboratory that
performed more than $1 million of work for Medicare patients.
When two FBI agents went to inspect it, they found an empty San Fernando
Valley office with only a desk and a fax machine. There were no workers
and no biological samples.
Behind the door of the facade were signs tying the operation to a
sprawling network of phantom enterprises allegedly set up by Armenian
mobsters to try to defraud Medicare of $163 million for services never
provided.
Dozens of arrests around the country Wednesday highlighted a criminal
demographic rarely seen, but one that officials say is rooted in
California and growing in reach and sophistication.
"They are victimizing our systems, they are victimizing business, they are
victimizing private citizens," said Glendale police Lt. Steve Davey, who
heads up a task force tackling Eurasian crime.
Few criminal groups can match the sophistication of Armenian scammers, who
developed an uncanny savvy for probing weaknesses in government systems.
They have been known for devising complex white-collar schemes such as
credit card fraud, identity theft and mortgage fraud.
Indictments released Wednesday in Los Angeles, New York and elsewhere show
how various cells, largely working on their own but often sharing
techniques, set up fraudulent medical businesses using stolen physician
identities.
After becoming licensed Medicare providers and submitting claims, the fake
office billed the government, which would pay money to fraudulent bank
accounts. Many claims were bogus, but sometimes criminals would provide a
small service then submit an inflated bill.
The groups have been known to recruit people with a nominal sum to become
a fake patient, then bill Medicare for services supposedly rendered.
In all, $163 million in fraudulent bills were submitted, with Medicare
actually paying out $35 million, according to the documents.
The complex operation was allegedly overseen by Armen Kazarian, who melted
into Glendale's large Armenian population after arriving as an asylum
seeker in 1996 and mostly stayed out of view of the police.
Kazarian, 46, who is in custody in Los Angeles, is known by the Soviet
term "thief in law," which is the rough equivalent of a "godfather."
Authorities say it is only the second time such a figure has been arrested
in the United States.
Zaven Kazazian, president of the Los Angeles chapter of the
Armenian-American Chamber of Commerce, said much of the crime in the
community is carried out by people raised under communist rule in the
former Soviet republic of Armenia, where exploiting a corrupt government
was seen as fair game.
"It is a different cultural background," Kazazian said. "Everybody was out
for themselves."
Kazazian stressed that only a handful of Armenians are engaged in criminal
enterprises and cautioned against making generalizations. ----------------------------------------------------------------------
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