The U.S. Attorney's Office announced that 36 people were charged with running a "systematic scheme to defraud private insurance companies of more than $279 million under New York’s no-fault automobile insurance law," calling it the "largest single no-fault automobile insurance fraud ever charged." How? By allegedly setting up over 100 fake medical clinics to bill insurance companies for imaginary injuries and treatments.
The press release (PDF) from U.S. Attorney Preet Bharara explains:
Under New York State Law, every vehicle registered in the State is required to have no fault automobile insurance, which enables the driver and passengers of a registered and insured vehicle to obtain benefits of up to $50,000 per person for injuries sustained in an automobile accident, regardless of fault (the “No Fault Law”). The No Fault Law requires prompt payment for medical treatment, thereby obviating the need for claimants to file personal injury lawsuits in order to be reimbursed. Under the No-Fault Law, patients can assign their right to reimbursement from an insurance company to others, including medical clinics that provide treatment for their injuries. New York State Law also requires that all medical clinics in the State be incorporated, owned, operated, and/or controlled by a licensed medical practitioner in order to be eligible for reimbursement under the No-Fault Law. Insurance companies will not honor claims for medical treatments from a medical clinic that is not actually owned, operated, and controlled by a licensed medical practitioner.
From at least 2007 through 2012, the No-Fault Organization has engaged in a massive
and sophisticated scheme to defraud automobile insurance companies of hundreds of millions of dollars by, among other things, creating and operating medical clinics that provided unnecessary and excessive medical treatments in order to take advantage of the No-Fault Law. In order to mislead New York authorities and private insurers, the true owners of these medical clinics (“Clinic Controllers”), almost all of whom were also members and associates of a criminal organization consisting primarily of individuals of Russian descent, paid licensed medical practitioners, including doctors, to use their licenses to incorporate the professional corporations, through which the medical clinics billed the private insurers for the bogus medical treatments.
The ring was supposedly run by Mikhail Zemlyansky ("Russian Mike") and Michael Danilovich ("Fat Mike")—there are other Mikes ("Skinny Mike," "Mike B")—and 10 doctors and three lawyers were involved. The Clinic Controllers would pay people to recruit automobile accident victims and then would bill for unnecessary work, "like thousands of other 'patients' receiving therapy, tests, and medical equipment they didn't need," according to Police Commissioner Kelly.
The NY Times looks at the Russian immigrant roots of the scam, which originated in Brighton Beach: "Some experts in law enforcement and academia believe that the cumbersome Soviet system, with its thicket of strictures that governed almost every aspect of life, effectively helped to groom a generation of post-Soviet criminals in the United States." And one law enforcement official said, "This is the Russian mind-set, and this is why it’s endemic in the system. If you’re not scamming the system, if you’re not scamming the government, you’re not doing what you’re supposed to be doing — you’re looked upon as a patsy."
