Pharmacy Owners Sentenced for $18M COVID-19 Health Care Fraud and Money Laundering Scheme

Two pharmacy owners were sentenced for using New York-area pharmacies to submit millions of dollars in false and fraudulent claims to Medicare and then laundering the proceeds, including during the COVID-19 pandemic.

Peter Khaim, 44, of Forest Hills, New York, was sentenced today to eight years and one month in prison, and his brother and co-defendant, Arkadiy Khaimov, 41, also of Forest Hills, was sentenced on April 3 to six years in prison.

According to court documents, Khaim and Khaimov engaged in a complex money laundering conspiracy to launder the proceeds of a fraudulent health care scheme involving 16 New York-area pharmacies that they and their co-conspirators owned and controlled. Khaim, Khaimov, and their co-conspirators exploited the COVID-19 emergency for their own financial gain by using COVID-19-related “emergency override” billing codes to submit fraudulent claims for expensive cancer medications Targretin Gel 1% and Panretin Gel 0.1% that were not prescribed by physicians or dispensed to patients, and that were purportedly dispensed during periods when certain pharmacies were closed.

To conceal over $18 million of their criminal proceeds, Khaim, Khaimov, and their co-conspirators funneled money through several shell companies, including sham pharmacy wholesale companies designed to look like legitimate wholesalers. Khaim and Khaimov typically sent the funds from the pharmacy bank accounts they controlled to the sham wholesale companies. The funds were then typically sent to companies in China for distribution to individuals in Uzbekistan. The defendants then received a corresponding amount of cash from a co-conspirator, minus a commission. At other times, the fraudulent proceeds were sent from the sham wholesale companies to Khaim, Khaimov, their relatives, or their designees, in the form of certified cashier’s checks and cash. Khaim and Khaimov used the proceeds of the scheme to purchase real estate and other luxury items. 

Khaim pleaded guilty on Nov. 3, 2022 to one count of conspiracy to commit money laundering.  Khaimov pleaded guilty on Nov. 16, 2022 to one count of conspiracy to commit money laundering. At sentencing, Khaim was ordered to pay more than $18 million in restitution and to forfeit more than $2.7 million. Khaimov was ordered to pay more than $18 million in restitution and to forfeit more than $9.6 million. 

Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division; U.S. Attorney Breon Peace for the Eastern District of New York; Assistant Director in Charge James Smith of the FBI New York Field Office; Special Agent in Charge Thomas M. Fattorusso of the IRS Criminal Investigation; Special Agent in Charge Naomi Gruchacz of the Department of Health and Human Services Office of Inspector General (HHS-OIG); and Special Agent in Charge Patricia Tarasca of the Federal Deposit Insurance Corporation Office of Inspector General (FDIC-OIG) made the announcement.

HHS-OIG, the FBI, IRS Criminal Investigation, and FDIC-OIG investigated the case. 

Trial Attorney Arun Bodapati of the Criminal Division’s Fraud Section’s Northeast Strike Force prosecuted the case, with assistance from Principal Assistant Chief Jacob Foster and Assistant Chief Patrick Mott of the Criminal Division’s Fraud Section.

The Fraud Section leads the Criminal Division’s efforts to combat health care fraud through the Health Care Fraud Strike Force Program. Since March 2007, this program, currently comprised of nine strike forces operating in 27 federal districts, has charged more than 5,400 defendants who collectively have billed federal health care programs and private insurers more than $27 billion. In addition, the Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, are taking steps to hold providers accountable for their involvement in health care fraud schemes. More information can be found at www.justice.gov/criminal-fraud/health-care-fraud-unit.