Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), William J. Bratton, Commissioner of the New York City Police Department (“NYPD), and Thomas O’Donnell, the Special Agent-in-Charge of the New York Office of the Department of Health and Human Services, announced today the unsealing of an indictment charging ten defendants with operating a massive health care fraud scheme through three medical clinics in Brooklyn and Queens through which the defendants submitted over $70 million in fraudulent claims to Medicaid and Medicare. As alleged in the Indictment, VICTOR LIPKIN, VADIM ZUBKOV, EDUARD ZAVALUNOV, NIKOLOZ CHOCHIEV, ANATOLIY FATAKHOV, MARIANA SWAFFAR, JACQUELINE PINEZ, JONATHAN OLIVER, JASON BRISSETT, and GILBERT TROTMAN recruited financially disadvantaged and homeless people insured by Medicare and/or Medicaid (the “Phony Patients”) to undergo unnecessary medical tests, typically performed by unlicensed personnel, at the clinics in exchange for cash, and then billed the insurers for administering those unnecessary tests. In total, the defendants are alleged to have submitted over $70 million in fraudulent claims to Medicaid and Medicare, for which they fraudulently received over $25 million in insurance payments. Each of the defendants was arrested this morning. All of the defendants other than TROTMAN are expected to be arraigned in Manhattan federal court later today before a U.S. Magistrate Judge. TROTMAN was arrested in the Atlanta, Georgia, area and will be presented there later today.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, these defendants corrupted financially strapped people and fleeced Medicare and Medicare to the tune of tens of millions of dollars. To fuel their greedy scheme, the defendants allegedly had phony patients submit to medically unnecessary treatments, paying these ‘patients’ a fraction of what they themselves reaped from the fraudulent billings. The scheme enriched the defendants and burdened Medicare and Medicaid, but the scheme has been exposed and ended.”

FBI Assistant Director-in-Charge Venizelos said: “As alleged, the defendants engaged in a systematic scheme to defraud government programs designed to assist deserving patients. Adding insult to injury, the defendants preyed upon vulnerable members of our community, exploiting the less fortunate in furtherance of their criminal activity. Health care fraud wastes tax dollars, increases costs for the public and destroys the integrity of our health care system. The FBI, along with our federal, state, and local law enforcement partners, is committed to investigating this type of fraud and holding accountable those who take advantage of our government health care programs.”

NYPD Commissioner William J. Bratton said: “Healthcare fraud places a burden on taxpayers and on a healthcare system that millions of people rely on for medical care. Thanks to the collaborative efforts of our investigators, along with our federal partners, this criminal network was dismantled and its members will be held accountable for their actions.”

HHS Special Agent-in-Charge O’Donnell said: “Kickbacks and medically unnecessary services have no place in the Medicare and Medicaid systems. These programs are intended for the elderly and the most vulnerable segments of our society. The Office of Investigations will continue to vigorously pursue those that defraud these programs for their personal gain.”

According to the allegations contained in the Indictment unsealed today in Manhattan federal court:

The Heath Care Fraud Scheme

Beginning in or about 2005, LIPKIN and ZUBKOV recruited and paid a particular licensed physician (the “Doctor”) to act as the nominal owner and/or physician under whose name three purported medical clinics would bill Medicare, Medicaid, and private insurance providers (the “Insurance Providers”) for unnecessary services and tests – including sleep tests and stress tests – performed at the clinics. The clinics were located on Avenue V in Brooklyn, New York, and on Hillside Avenue and Elmhurst Avenue, respectively, in Queens, New York. LIPKIN and ZUBKOV were, in fact, the beneficial owners of the clinics, but they concealed their ownership through the Doctor’s nominal affiliation with the clinics, and by laundering the proceeds of the clinics’ operation through shell companies that they owned and controlled. LIPKIN, ZUBKOV, and ZAVALUNOV operated and controlled the clinics, and ran the clinics’ day-to-day operations, despite the fact that they were not licensed physicians, as required by New York law.

At the direction of LIPKIN, ZUBKOV, and ZAVALUNOV, other members of the scheme, including OLIVER, BRISSETT and TROUTMAN (the “Runners”), and CHOCHIEV, recruited financially disadvantaged individuals with Medicaid and/or Medicare insurance to act as Phony Patients and undergo unnecessary medical tests at the clinics in exchange for cash payments. The Runners often recruited such individuals from soup kitchens and local welfare offices, and coached them on what to say on various medical forms in order to make it falsely appear that the medical tests to which the defendants intended to subject them were medically necessary. In furtherance of the scheme, CHOCHIEV also made threats of physical violence to individuals who CHOCHIEV believed owed money to the scheme members.

Also in furtherance of the scheme, before the medically unnecessary tests were performed on the Phony Patients, SWAFFAR and PINEZ obtained the Phony Patients’ Medicaid and/or Medicare insurance information, and then contacted the Insurance Providers to confirm that the Insurance Providers would reimburse for the tests. SWAFFAR and PINEZ engaged in such conduct knowing that the Phony Patients were being recruited and paid by the Runners to undergo the tests. Once they determined that a particular Phony Patient’s insurance would pay out claims made by the clinic for the planned medical tests, SWAFFAR and PINEZ notified the Runners that the individuals were eligible and could be brought to the clinic to undergo such tests.

After the Phony Patients had been recruited, confirmed to be Medicare and/or Medicaid eligible, and transported to one of the clinics by the Runners or CHOCHIEV, in many instances, certain individuals who were not physicians administered a host of unnecessary medical tests to them. In particular, for example, FATAKHOV administered unnecessary medical tests, including stress tests, to the Phony Patients of the Elmhurst Avenue Clinic. FATAKHOV administered these tests outside the presence and supervision of the Doctor or other licensed physician, knowing that the presence or supervision of a licensed physician was required. After the unnecessary medical tests were administered, the Phony Patients were paid cash kickbacks. The defendants, through the clinics, then submitted fraudulent claims to Medicaid and Medicare seeking reimbursement for the unnecessary medical tests. In total, in the course of the scheme, the defendants fraudulently billed over $70 million to Medicaid and Medicare, for which they received over $25 million in reimbursements.

All ten defendants are charged with conspiring to commit mail fraud, wire fraud, and health care fraud. LIPKIN, ZUBKOV, and ZAVALUNOV are also charged with conspiring to launder the proceeds of the fraud. A table listing the charges against each defendant and the potential penalties for each count is attached. The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the judge.

Mr. Bharara praised the outstanding investigative work of the FBI’s New York Health Care Fraud Task Force, the NYPD, and HHS. Mr. Bharara also thanked the New York City Human Resources Administration, the New York State Office of Medicaid Inspector General, and the New York State Attorney General Medicaid Fraud Control Unit for their assistance in the investigation.

The FBI’s New York Health Care Fraud Task Force was formed in 2007 in an effort to combat health care fraud in the greater New York City area. The task force comprises agents, officers, and investigators of the FBI, NYPD, New York State Insurance Fraud Bureau, U.S. Department of Labor, U.S. Office of Personnel Management Inspector General, U.S. Food and Drug Administration, NYS Attorney General’s Office, NYS-Office of Medicaid Inspector General, NYC Health and Hospitals Inspector General, New York City Human Resources Administration, and National Insurance Crime Bureau.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Timothy Howard and Daniel Tehrani are in charge of the prosecution. Assistant United States Attorney Carolina Fornos is in charge of the forfeiture aspects of the case.

The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

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¹ The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the judge.