DOJ Charges Pharmacy Owners in $30M Health Care Fraud & Money-Laundering Scam
The Department of Justice (DOJ), with the US Attorney’s Office for the Eastern District of New York, has charged two pharmacy owners in a $30 million health care fraud and money laundering scheme. The two owners, Peter Khaim, 40, and Arkadiy Khaimov, 37, own more than a dozen pharmacies in New York City and Long Island.
Khaim and Khaimov are accused of allegedly exploiting Medicare emergency codes and then submitting them for fraudulent claims for expensive drugs usually prescribed for cancer patients. The charges include claims the cancer drugs were never provided, ordered or authorized by medical professionals.
The two defendants jointly faced charges of one count of conspiracy to commit health care fraud and wire fraud and one count of conspiracy to commit money laundering. In addition, Khaim was separately charged with two counts of concealment money laundering and one count of aggravated identity theft. Khaimov was charged separately with two counts of concealment money laundering.
Defrauding Medicare is always a serious offense, but in this case, the FBI is accusing the two defendants of specifically stealing from the overwhelmed health care system during the historic health care crisis that has occurred in the US due to the Pandemic.
“These defendants allegedly lined their own pockets by exploiting Medicare flexibilities that were designed to ensure that patients obtained access to needed medications during the COVID-19 crisis,” stated Acting Assistant Attorney General Brian Rabbitt. “Together with our law enforcement partners, the Criminal Division is working to aggressively identify, investigate, and prosecute scammers who seek to take advantage of the COVID-19 crisis to defraud our public health care programs.”
The FBI alleges Khaim and Khaimov manipulated information from their pharmacies by taking advantage of specific systems created to assist patients during the COVID-19 Pandemic, and then siphoned funds meant for patients of the Coronavirus to sham companies for their own profit.
In court papers, the defendants are accused of devising methods to hide their illegal activities by creating “a network of sham companies.” Currently, 15 percent of the population, about forty-four million, are enrolled in Medicare.
The court filing states Khaim and Khaimov used override billing codes to submit sham claims to Medicare and then were paid over $30 million for the cancer medication Targretin Gel 1%. Each tube of Targretin Gel 1% has an average price of about $34,000.
Once payments from Medicare came in, the medication was never purchased by the defendants and never prescribed by doctors or dispensed to cancer patients. In addition, the two pharmacy owners are accused of using physician’s names on prescriptions without their knowledge or consent.
Khaim and Khaimov allegedly took over more than two dozen New York pharmacies, as the FBI states in the indictment, by “paying others to pose as the owners of the pharmacies and hiring pharmacists to pretend to be supervising pharmacists at the pharmacies for the purpose of obtaining pharmacy licenses.”
The indictment for money laundering stems from the two men allegedly taking the proceeds of their fraudulent gains and laundering money via their sham pharmacy wholesale companies. Fake invoices and fictional references were devised to create an illusion of funds being transferred from the legitimate pharmacies to the sham wholesale companies.
The defendants allegedly worked with an “international money launderer” who set up wires from the sham companies to firms in China with the end distribution of funds sent to people in Uzbekistan.
The indictment also alleges, “In the second phase of this conspiracy, when the fraudulent proceeds exceeded the amount of cash available, the defendants caused others to transfer funds back from the sham wholesale companies to the defendants, their relatives, or their designees, in the form of certified cashier’s checks and cash that was dropped off at their residences in the middle of the night. The defendants used the proceeds of the scheme to purchase real estate and luxury items.”
This case was investigated by HHS-OIG’s New York Field Office, the FBI’s New York Field Office, the IRS-CI’s New York Field Office, and the FDIC. The Medicare Health Care Strike Force was created in March 2007 under the US Attorney’s Office for the Eastern District of New York and the Criminal Division’s Fraud Section. There are currently fifteen strike forces operating in the US in twenty-four districts. To date, 4,200 defendants have been charged with over $19 billion in fraudulent Medicare and Medicaid schemes.
