Leader Of $20 Million Fraud Scheme Involving Bogus Prescriptions For Expensive Anti-Psychotics Sentenced To 8 Years In Federal Prison

LOS ANGELES – The leader of a $20 million health care fraud scheme based at a Glendale medical clinic was sentenced today to eight years in federal prison for overseeing a plot to fraudulently prescribe expensive anti-psychotic medications and to sell those drugs back to pharmacies through the black market, where the drugs would be billed to the government over and over.

Lianna “Lili” Ovsepian, 33, of Tujunga, was sentenced this morning by United States District Judge S. James Otero, who stated that “we can’t have a situation where crime pays.” In addition to the prison term, Judge Otero ordered Ovsepian to pay $9,146,137 in restitution to Medicare and Medi-Cal.

Last November, Ovsepian pleaded guilty to conspiracy to commit health care fraud and conspiracy to commit identity theft.

Ovsepian was the manager and owner of Manor Medical Imaging, Inc. in Glendale, which generated thousands of fraudulent prescriptions for unneeded and expensive anti-psychotic medications for “patients” who were typically low-income beneficiaries of the government-funded health care programs Medicare and Medi-Cal, and who did not need those drugs. The prescriptions appeared to be issued by co-conspirator Dr. Kenneth Johnson, who pre-signed thousands of blank prescriptions that were filled out by Ovsepian’s mother-in-law, Nuritsa Grigoryan.

The beneficiaries who received the prescriptions were brought to pharmarcies, where the prescriptions were filled. The drugs were returned to Manor, the “patients” were given nominal payments (usually around $100), and the drugs were diverted into the black market, where they were sold to other pharmacies and re-billed to health care programs as though the drugs were being dispensed for the first time.

As prosecutors argued at sentencing, the beneficiaries included veterans recruited from dual diagnosis programs for drug addiction and schizophrenia, elderly Medicare beneficiaries whose identities were stolen and homeless beneficiaries recruited from skid row.

From September 2009 through October 27, 2011, when the scheme was shut down by authorities, Medi-Cal and Medicare was billed more than $20 million, and the programs paid more than $9.1 million to pharmacies based on more than 14,000 claims submitted in relation to the scheme, prosecutors wrote in a sentencing brief filed in Ovsepian’s case.

The case involving Manor was the first one in the nation alleging an organized scheme to defraud government health care programs through fraudulent claims for anti-psychotic medications. The case is also the largest of its kind in Southern California involving a fraud targeting Medicare Part D.

Following a trial earlier this year, Dr. Johnson, Grigoryan and Ovsepian’s brother, Artak Ovsepian, were found guilty of a host of charges related to the scheme (see: http://www.justice.gov/usao/cac/Pressroom/2014/023.html). Those three defendants are currently pending sentencing.

Ovsepian oversaw a scheme that involved several family members and other co-conspirators. A total of 16 defendants have been convicted either through guilty pleas or by jury verdicts.          

Other defendants who were charged in this case include a Pasadena couple whose Huntington Pharmacy in San Marino saw its business grew dramatically due its affiliation with Manor Medical. The owner of the pharmacy, Phic Lim, is scheduled for trial in this case in March 2015.

The investigation in this case, which was called Operation “Psyched Out,” was conducted by the San Marino Police Department; the California Department of Justice, Bureau of Medi-Cal Fraud and Elder Abuse; the United States Food and Drug Administration, Office of Criminal Investigations; IRS-Criminal Investigation; the United States Department of Health and Human Services, Office of the Inspector General; U.S.
Immigration and Customs Enforcement’s Homeland Security Investigations; the Glendale Police Department, Organized Crime Team; and the California Department of Health Care Services, Audits and Investigations Branch.

Release No. 14-107