LOS ANGELES – Three people linked to a Glendale medical clinic – including a doctor who took money to let his name be used thousands times on bogus prescriptions – were found guilty today of federal fraud charges related to a $20 million scheme to defraud Medicare and Medi-Cal by, among other things, fraudulently prescribing expensive anti-psychotic medications and then re-billing the government for those drugs over and over.
Today’s convictions stem from the first case in the nation alleging an organized scheme to defraud government health care programs through fraudulent claims for anti-psychotic medications. The evidence presented at trial showed how the operators of Manor Medical Imaging in Glendale operated a clinic authorized to make claims to Medicare and Medi-Cal, employed an unlicensed medical practitioner to write bogus prescriptions using an American doctor’s name and license number, and had close relationships with pharmacies and a fraudulent drug wholesale company that were used to funnel prescription drugs back to the pharmacies participating in the scheme.
In the largest case of its kind in Southern California brought against defendants who bilked Medicare Part D, prosecutors showed a federal jury how employees of Manor Medical generated thousands of prescriptions for identify theft victims – such as elderly Vietnamese beneficiaries of Medicare or Medi-Cal, military veterans who were recruited from drug rehab programs, and denizens of Skid Row. Members of the conspiracy created or doctored patient files to make it falsely appear the drugs were necessary and the patients were legitimately treated. After the prescriptions were filled at pharmacies and paid for by Medicare and Medi-Cal, they were sold on the black market and redistributed to pharmacies, where the drugs would be subject to new claims made to Medicare and Medi-Cal as though they were new bottles of drugs.
The scheme generated fraudulent billings of more than $20 million dollars, of which Medi-Cal and Medicare actually paid more than $8 million.
“The defendants took advantage of this nation’s most vulnerable citizens and took millions of dollars from public health care programs that are designed to help the disadvantaged,” said United States Attorney André Birotte Jr. “Members of this scheme caused thousands of bottles of dangerous prescription drugs to be diverted to the black market. This case is an example of how operators of health care fraud schemes will be brought to justice, whether they be doctors who enable the fraud or those on the street who recruit patients and divert prescription drugs to the black market.”
The three defendants convicted today are:
Dr. Kenneth Johnson, 47, of Ladera Heights, who served as the face of Manor with pharmacists and auditors from Medicare and Medi-Cal, and who pre-signed thousands of blank prescriptions that were filled out by co-conspirators;
Nuritsa Grigoryan, 49, of Glendale, who holds an Armenian medical license and who pretended to be an American doctor when she saw homeless “patients” at the clinic and filled out the bogus prescriptions pre-signed by Dr. Johnson; and
Artak Ovsepian, 32, of Tujunga, one of the leaders of the conspiracy who oversaw the acquisition of drugs at pharmacies using the bogus prescriptions.
The three defendants were convicted of health care fraud conspiracy, aggravated identity theft, conspiracy to misbrand pharmaceutical drugs, false statements to the federal government, and conspiracy to use other persons’ identification documents in furtherance of fraud.
Following the reading of the verdicts, United States District Judge S. James Otero, who presided over the three-week trial, said, “The scope of the fraud was breathtaking.” Judge Otero said the defendants “preyed upon the poor [and] used them as pawns.”
Judge Otero is scheduled to sentence Grigoryan and Ovsepian on June 9. Johnson is scheduled to be sentenced on June 30. At sentencing, all three defendants will face a mandatory sentence of two years in federal prison for committing aggravated identity theft. In addition to the two-year terms, Johnson and Grigoryan statutory maximum sentences of 30 years in federal prison, while Ovsepian will face an additional sentence of up to 35 years.
A fourth defendant who went to trial – Artyom Yeghiazaryan, a driver who took beneficiaries to pharmacies – was acquitted by the jury.
With today’s verdicts, a total of 16 defendants charged in 2011 (see: http://www.justice.gov/archive/usao/cac/Pressroom/2011/157.html) have now been convicted of various charges related to the health care fraud scheme. A total of 18 defendants were indicted in relation to the scheme centering on Manor Medical, but also involving pharmacies in and around the San Gabriel Valley. The conspiracy was essentially a “prescription harvesting” scheme in which Medicare and Medi-Cal beneficiaries were recruited or had their identities stolen, the beneficiary information was used to bill Medicare and Medi-Cal for millions of dollars of illegitimate medical services and prescriptions, and the drugs that were dispensed by the pharmacies were diverted to black market wholesalers and back to the pharmacies so the drugs could be used to submit new bills to Medicare and/or Medi-Cal as though the drugs had never been dispensed.
“This scheme to defraud federal and state governments endangered the public’s health by putting adulterated medicines onto the U.S. market,” said John Roth, Director, FDA’s Office of Criminal Investigations. “We will continue to bring to justice those who put profits above health and safety.”
IRS Criminal Investigation Special Agent in Charge Joel P. Garland said, “Using the identities of the most vulnerable members of society to defraud government health care programs is a despicable crime. It depletes scarce taxpayer dollars and will not be tolerated. Law enforcement officers will respond to it using every legal resource at our disposal. Let this conviction serve as a warning to those who are considering similar conduct.”
The primary pharmacy involved in the case, Huntington Pharmacy in San Marino, was operated by a Pasadena couple whose business grew dramatically due its affiliation with Manor Medical, including Medi-Cal claims that jumped from $50,000 in 2009 to approximately $1.5 million in 2010. One of the owners of the pharmacy, Phic Lim, is scheduled for trial on August 19. His wife, Theana Khou, previously pleaded guilty as part of a joint resolution with another case filed against her and her husband.
“As today's verdicts make clear, federal and state law enforcement will crack down hard on these organized Medicare and Medi-Cal drug benefit fraud schemes,” said Glenn R. Ferry, Special Agent in Charge of the U.S. Department of Health and Human Services Office of Inspector General Los Angeles region. “This case, involving very expensive brand name anti-psychotic drugs, is the largest of its kind here in Southern California.”
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; the Glendale Police Department, Organized Crime Team; and the California Department of Health Care Services, Audits and Investigations Branch.
Release No. 14-023