Grand Jury Indicts New Defendants and Brings Additional Charges Against Los Angeles-Based Oxycontin Ring That Allegedly Bilked Medicare
Indictment Alleges That Medicare and Medi-Cal were Fraudulently Billed for More Than $8.9 Million for the Addictive Painkiller and Unneeded Medical Services

LOS ANGELES—A federal grand jury has returned a superseding indictment that charges 16 defendants with being part of a drug trafficking organization that illegally obtained and distributed more than 900,000 Oxycontin pills obtained in part through fraud against public insurance programs such as Medicare.

One of the defendants—Theodore Yoon, 68, of Arcadia—was arraigned on the new indictment this afternoon in United States District Court in Los Angeles. Nine of the defendants were arraigned yesterday. Five other defendants were arraigned October 5. The 15 defendants who have been arraigned have all pleaded not guilty and were ordered to stand trial next month. One defendant is a fugitive.

The first superseding indictment replaces charges filed a year ago, adding new charges of money laundering and structuring of cash transactions. The superseding indictment adds new defendants, including four pharmacists. The indictment alleges a conspiracy to distribute controlled substances, a conspiracy to commit health care fraud, structuring financial transactions, and money laundering. The indictment also seeks the forfeiture of proceeds related to the criminal offenses.

The indictment outlines a scheme in which a medical clinic in the Westlake District of Los Angeles was used as a base of operations for doctors, who wrote Oxycontin prescriptions for Medicare and Medi-Cal beneficiaries, as well as other patients, who did not need the powerful painkiller. The Oxycontin was obtained from Southland pharmacies, some of which submitted fraudulent bills to the public insurance programs. Members of the conspiracy allegedly resold the Oxycontin on the street and reaped millions of dollars in profits.

The indictment alleges that more than 900,000 Oxycontin pills were diverted to the street, where they were sold for between approximately $23 and $27 per pill, according to the first superseding indictment.

To deal with the large amounts of cash generated from the illegal Oxycontin sales, some of the defendants allegedly “structured” cash deposits by making bank deposits in amounts of $10,000 or less to evade bank reporting requirements.

Other defendants used proceeds from the sale of Oxycontin to gamble at casinos to purchase automobiles and jewelry and to buy more Oxycontin.

The scheme allegedly was orchestrated by Mike Mikaelian and Anjelika Sanamian, who operated the Lake Medical Group on West 8th Street in Los Angeles. The indictment describes Lake Medical Group as a “prescription mill” that both generated prescriptions for unneeded Oxycontin and submitted claims to Medicare and Medi-Cal for medical services that were unnecessary or were never performed.

The indictment alleges that Dr. Morris Halfon and other physicians based at Lake Medical Group knowingly diverted the Oxycontin by prescribing it to individuals who did not have a medical need. The indictment further alleges that a significant percentage of the prescriptions were filled at Southland pharmacies owned and operated by Arcadia pharmacist Theodore Yoon and the five new defendants who were arraigned on October 5:

• Phic Lim, 44, of Pasadena, a pharmacist who was part-owner of Yoon’s chain of pharmacies and who allegedly structured cash deposits;
• Theana Khou, 40, of Pasadena, who along with Lim co-owned the Huntington Pharmacy in San Marino and who allegedly structured cash deposits;
• Matthew Cho, 48, of Irvine, a pharmacist who was part-owner of Yoon’s chain of pharmacies;
• Perry Tan Nguyen, 54, of Huntington Beach, the owner-operator of St. Paul’s Pharmacy in Huntington Park, who allegedly structured cash deposits; and
• Elizabeth Duc Tran, 47, of Fountain Valley, the owner-operator or Mission Pharmacy, which had outlets in Panorama City and Fountain Valley.

The indictment alleges that Lake Medical Group used recruiters—generally called “cappers”—who brought Medicare and Medi-Cal patients to the clinic in exchange for cash or other rewards. The “patients” were seen by a medical doctor or physician’s assistant, who would provide a prescription for a high dosage of OxyContin—usually 90 pills at 80mg strength—and order unnecessary medical tests and procedures to help justify the OxyContin prescriptions. “Runners” employed by the Lake Medical Group took the recruited “patients” to pharmacies, where they obtained the Oxycontin, which was then delivered to Mikaelian, who then sold it on the street.

Lake Medical Group operated for approximately 18 months, during which time doctors working at the clinic prescribed Oxycontin approximately 10,833 times. During this time, Medicare Part D and Medicare prescription drug programs paid more than $2.7 million for Oxycontin prescriptions generated by the clinic and its doctors.

During the same period—August 2008 through early February 2010—the clinic and its doctors fraudulently billed Medicare approximately $4.6 million and Medi-Cal approximately $1.6 for alleged medical services that were either not performed or were unnecessary, according to the indictment.

An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty.

The investigation into the Oxycontin distribution/Medicare fraud ring was called Operation Dirty Lake. The investigation was conducted by the California Department of Justice, Bureau of Medi-Cal Fraud and Elder Abuse; the United States Department of Health and Human Services, Office of the Inspector General; IRS-Criminal Investigation; the California Department of Health Care Services, Investigations Branch; the Los Angeles County Sheriff’s Department-HALT Team; the United States Food and Drug Administration, Office of Criminal Investigations; the Federal Bureau of Investigation; and the Drug Enforcement Administration.