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Attorney General Lockyer Files Medi-cal Fraud Charges Against Glendale "Pharmacy" and Doctors
Also Charges Seven Defendants with ID Theft, Money Laundering and Grand Theft
(SACRAMENTO) – Attorney General Bill Lockyer today filed felony criminal charges against three owners and employees of a bogus Glendale pharmacy and four doctors who fraudulently billed Medi-Cal for more than $500,000, and laundered the money by investing in a pseudo-caviar production company.
"This scam operation bilked the state's Medi-Cal system of more than $500,000 – money that is needed to fund a program that provides desperately needed services to some of our most vulnerable citizens," Lockyer said. "It is truly atrocious that these doctors and so-called pharmacy owners violated the trust of these patients, stole their identities and submitted false claims to Medi-Cal, all with the intent to line their pockets with these ill-gotten gains. We will prosecute them to the fullest extent."
Filed in Los Angeles Superior Court, the complaint alleges that, during a 10-month period, the defendants defrauded the Medi-Cal program of more than $500,000 through a Glendale "pharmacy" they established as a front for their criminal operation. The "pharmacy" had very few walk-in customers, did not keep regular business hours, was understocked and carried supplies that had expired.
In the criminal complaint, the Attorney General's Bureau of Medi-Cal Fraud and Elder Abuse (BMFEA) alleges that four doctors transmitted fictitious prescriptions to the "pharmacy," which billed the Medi-Cal program without filling the prescriptions. Most of the prescriptions were for Aricept, an expensive medication commonly prescribed to Alzheimer patients. An examination of patient files revealed that there was no medical basis for the prescriptions.
A wholesaler to the "pharmacy" provided BMFEA investigators with records that indicate the pharmacy only purchased $37,550 in medications. Yet the "pharmacy" requested and received reimbursements of $505,256.56 from Medi-Cal. The lawsuit also alleges that the ill-gotten gains were laundered through investments in a company that produced a caviar-type product.
Charged were Robert Khatchatrian, Asmik Aroutiounian, Norik Yeghisian, Armen Kazanchian, Vahan Madatovian, Noune Pashinian and Vagharshak Pilossyan with 18 felonies. The charges include one count of grand theft with special allegations, eight counts of Medi-Cal fraud, seven counts of identity theft and two counts of money laundering.
If convicted, Khatchatrian and Aroutiounian face more than 12 years in prison. The other defendants face more than six years.
The complaint alleges that Khatchatrian and Aroutiounian purchased the former GMG Hollywood Pharmacy and changed the name to MTC Pharmacy. The two allegedly set up the fraud scheme to finance a second business, Royal Caviar. From July 24, 2000, to April 8, 2001, MTC Pharmacy billed the Medi-Cal program for the filling of 3,745 prescriptions for only 218 patients.
The identity theft charges stem from allegations that the defendants used the identities, medical records and Medi-Cal beneficiary information of patients without their permission or knowledge to submit false Medi-Cal claims. More than half of the patients who allegedly received prescriptions from MTC Pharmacy were patients of Kazanchian, Pashinian, Madatovian and Pilossyan. Seven patients interviewed said they never had been to MTC Pharmacy or had never received prescriptions from their doctors. In most of the cases, the patients said they had not visited their doctor near the times during which MTC Pharmacy billed Medi-Cal for their prescriptions.
Six of the patients interviewed whose names were used to bill Medi-Cal for Aricept said they do not have Alzheimer's or any memory loss problems. All were under the age of 65. Records show that 67 percent of the prescriptions billed by MTC Pharmacy involved Aricept; in the five pharmacies within the same zip code as MTC Pharmacy, the rate is less than 1.5 percent.
BMFEA investigators said that during the same period, Khatchatrian and Aroutiounian started Royal Caviar, which produced a soy-based product similar to caviar. Defendant Yeghisian was the office manager for MTC Pharmacy and also an employee at Royal Caviar.
Since taking office as Attorney General in 1999, Lockyer has made the prosecution of Medi-Cal fraud a top priority. During the past four years, his BMFEA has filed more than 460 criminal cases and won nearly $50 million in court-ordered restitution. Criminal filings and restitution orders increased by 201% and 390%, respectively, during Lockyer's first term as Attorney General. In 2001, Lockyer received a national award from the U.S. Department of Health and Human Services for having the top-performing health care fraud and elder abuse prosecutorial program in the country.