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A.G. Schneiderman Announces Indictment And Arrests Of Medical Testing Company Owners In Multi-Million Dollar Medicaid Fraud

Tea Kaganovich And Ramazi Mitiashvili Indicted For Grand Larceny In The First Degree For Stealing From Medicaid By Billing For Fake Medical Tests

Attorney General’s Civil Lawsuit Seeks $24 Million Under The State’s False Claims Act

If Convicted Of Top Counts, Defendants Each Face Up To 25 Years In State Prison

Attorney General Eric T. Schneiderman recently announced the indictment and arrest of Tea Kaganovich, 45, and Ramazi Mitiashvili, 57, both of Brooklyn, NY for Grand Larceny in the First Degree and other related charges for illegally billing Medicaid for fraudulent diagnostic testing services and laundering the criminal proceeds from their scheme. The Attorney General also filed a civil lawsuit seeking $24 million in damages from the defendants under the State’s False Claims Act and other laws. The indictment alleges that Kaganovich and Mitiashvili, operators of Sophisticated Imaging, Inc., East Coast Diagnostics, Inc., and East West Management, Inc., engaged in a systematic scheme to subject Medicaid patients to a battery of diagnostic tests that were not medically necessary and not ordered by real physicians. Kaganovich, Mitiashvili, and the indicted corporations then caused the Medicaid program, including Medicaid Managed Care Organizations (“MCOs”), to be billed for medical testing, some of which was never rendered at all. The defendants later laundered their illicit proceeds through various bank accounts and paid co-conspirators hundreds of thousands of dollars to perpetuate the scheme. The Attorney General’s civil lawsuit alleges that defendants’ illegal conduct cost Medicaid over $8 Million.

“Medicaid is meant to be a healthcare safety net for New Yorkers, not a bank account for criminals,” said Attorney General Schneiderman. “My office will continue to investigate and bring to justice those who try to undermine the Medicaid program and defraud New York taxpayers.”

During its ongoing investigation into “medical mills”, the Attorney General’s Medicaid Fraud Control Unit (MFCU) discovered that the pattern of fraud at each medical mill was similar. Medical mills are purported healthcare clinics that solicit Medicaid recipients who have no apparent medical concerns with promises of a cash payment, usually ranging between $20 and $50. After getting the recipients in the door and obtaining their Medicaid identification, the mills, using licensed healthcare providers complicit in the scheme, submit fraudulent claims to Medicaid or MCOs for services that are never rendered or medically unnecessary. Prosecutors allege that the licensed healthcare providers who purportedly staff the mills are paid by the mills for the use of their medical licenses and Medicaid credentials, but often never see the patients in whose names they submit claims to Medicaid.

In 2016, MFCU sent undercover investigators posing as Medicaid recipients into one of the mills. The investigators discovered individuals who held themselves out as physicians even though they did not have licenses. To maximize billing, the unlicensed “doctors” subjected the patients, including MFCU’s undercover agents, to an array of medical tests from individuals purporting to be diagnostic technicians with a variety of medical equipment. The “tests” were whatever equipment the technicians happened to bring to the medical mill that day.

Prosecutors allege that Kaganovich, Mitiashvili, and their corporations participated in the “medical mill” scam by funding and staffing it. Prosecutors also allege that to keep the scheme going, Kaganovich and Mitiashvili paid hundreds of thousands of dollars in kickbacks to the owners of medical clinics for patient referrals. Prosecutors further allege that Kaganovich and Mitiashvili also employed the purported diagnostic technicians who rotated between mills and contracted with licensed physicians to read the medically unnecessary diagnostic scans their employees generated. Prosecutors also allege that operators further caused the physicians to bill Medicaid and MCOs for the fraudulently obtained scans, and that once reimbursed by Medicaid or MCOs, the physicians paid Kaganovich and Mitiashvili for administering the allegedly medically unnecessary scans.

In October 2016, investigators from MFCU executed search warrants at two medical mills related to the defendants’ scheme located at 2423 Adam Clayton Powell Boulevard in Manhattan and at 2781 Webster Avenue in the Bronx.

A grand jury sitting in Manhattan returned an indictment charging all defendants with Grand Larceny in the First Degree, a class B felony; Grand Larceny in the Second Degree, a class C felony; and Prohibited Practices (Kickbacks) in violations of the New York Social Services Law, a class E felony. The grand jury also charged Kaganovich and East Coast Diagnostics with Money Laundering in the First Degree, a class B felony; Mitiashvili and East West Management with Money Laundering in the Second Degree, a class C felony; and Kaganovich and Sophisticated Imaging with Money Laundering in the Third Degree, a class D felony. Lastly, Kaganovich and Mitiashvili were indicted for Scheme to Defraud in the First Degree, a class E felony. If convicted of the top counts, each defendant faces up to 25 years in state prison.

Notably, a federal grand jury sitting in Brooklyn indicted Kaganovich and Mitiashvili last month for various federal crimes related to a similar healthcare fraud scheme.

Acting Justice Mark Dwyer of the Supreme Court, New York County arraigned the defendants and adjourned the case to April 6, 2018. Both defendants pled not guilty. The Defendants continue to be held in federal custody.

The Attorney General would like to thank the New York State Office of the Medicaid Inspector General (OMIG), the U.S. Department of Justice Medicare Strike Force, which operates with the U.S. Attorney’s Office, Eastern District of New York; the Office of the Kings County District Attorney; the United States Department of Health and Human Services, Office of the Inspector General (HHS OIG); the New York City Human Resources Administration, Medicaid Provider Investigations and Audit Unit, and the managed care company HealthFirst for their assistance and cooperation in this investigation.

This case was investigated by MFCU Investigators Stanislav Tabakov and Thomas Dowd, and Supv. Inv. Dominick DiGennaro under the supervision of Deputy Chief Investigator Kenneth Morgan. Senior Auditor-Investigator Lisandra Defex conducted the financial analysis with the assistance of New York City Regional Chief Auditor Investigator Thomasina Smith. MFCU Lead Data Scientist Steve Salotti and Legal Assistant Daniel Herzog assisted on the case.

Special Assistant Attorneys General Alyssa A. Preston and Jonathan Reiner are prosecuting the case along with NYC Deputy Regional Director Twan V. Bounds with the assistance of NYC Regional Director Christopher M. Shaw. Thomas O’Hanlon is the Chief of Criminal Investigations-Downstate. Special Assistant Attorneys General David Abrams and Konrad Payne are handling the civil lawsuit with the assistance of Civil Enforcement Chief Carolyn Ellis. MFCU is led by Director Amy Held and Assistant Deputy Attorney General Paul Mahoney.

The charges are merely accusations and the defendants are presumed innocent unless and until proven guilty in a court of law.