Key Member of Scheme that Illegally Sought $20 Million Worth of Expensive Anti-Psychotic Drugs Sentenced to 15 Years in Prison

LOS ANGELES – One of the leaders of a conspiracy linked to a sham Glendale medical clinic was sentenced today to 15 years in federal prison for his role in a $20 million scheme to defraud Medicare and Medi-Cal by, among other things, fraudulently prescribing expensive anti-psychotic medications and then re-billing the government for those drugs over and over.

Artak Ovsepian, 33, of Tujunga, one of the leaders of the conspiracy who oversaw the acquisition of drugs with bogus prescriptions, was sentenced by United States District Judge S. James Otero.

Calling the offense “despicable” and “horrific,” Judge Otero noted that the scheme “preyed on some of those most vulnerable members of society, from the mentally ill, to down-and-out veterans, to elderly victims whose identities were stolen, which then interfered with their ability to obtain medical treatment” that they truly needed.

Following a jury trial before Judge Otero in February 2014, Ovsepian was found guilty of conspiracy to commit health care fraud, aggravated identity theft, conspiracy to misbrand pharmaceutical drugs, false statements to the federal government, and conspiracy to use other persons’ identification documents in furtherance of fraud.

Ovsepian was one of three people found guilty at trial, and one of 16 who have been convicted in relation to the scheme run out of Manor Medical Imaging in Glendale.

The operators of Manor Medical employed an unlicensed medical practitioner to write bogus prescriptions using an American doctor’s name and license number, and had close relationships with pharmacies and a fraudulent drug wholesale company that were used to funnel prescription drugs back to the pharmacies participating in the scheme.

Employees of Manor Medical generated thousands of prescriptions for identify theft victims – such as elderly Vietnamese beneficiaries of Medicare and Medi-Cal, military veterans who were recruited from drug rehab programs, and denizens of Skid Row. Members of the conspiracy created or doctored patient files to make it falsely appear the drugs were necessary and the patients were legitimately treated. After the prescriptions were filled at pharmacies and paid for by Medicare and Medi-Cal, the drugs were sold on the black market and redistributed to pharmacies, where the drugs would be subject to new claims made to Medicare and Medi-Cal as though they were new bottles of drugs.

The case was the first in the nation involving an organized scheme to defraud government health care programs through fraudulent claims for expensive anti-psychotic medications. Judge Otero noted that the conspiracy was “particularly devious” because the participants believed they targeted “under-the-radar” drugs in an effort to evade the attention of law enforcement.

Ovsepian “held a leadership role in a complex and pervasive scheme to manipulate and steal the identities of the poor and vulnerable, to defraud essential government programs of more than $20 million, and to cover up those crimes through systematic lies and deception,” federal prosecutors wrote in a sentencing memorandum previously filed with the court.

The scheme generated fraudulent billings of more than $20 million, of which Medi-Cal and Medicare actually paid more than $9 million.

Previously in this case, another leader of the conspiracy – Lianna “Lili” Ovsepian, 34, of Tujunga, the manager and owner of Manor Medical – was sentenced to eight years in prison after pleading guilty to health care fraud charges (see: http://www.justice.gov/usao/cac/Pressroom/2014/107.html).

Following last year’s trial at which Artak Ovsepian was found guilty, Judge Otero said, “The scope of the fraud was breathtaking.” The Judge added that the defendants “preyed upon the poor [and] used them as pawns.”

At last year’s trial, Artak Ovsepian was one of three people that were found guilty. The other two were:

Dr. Kenneth Johnson, 48, of Ladera Heights – who served as the face of Manor Medical with pharmacists and auditors from Medicare and Medi-Cal, and who pre-signed thousands of blank prescriptions that were filled out by co-conspirators – who is scheduled to be sentenced by Judge Otero on November 5; and

Nuritsa Grigoryan, 49, of Glendale – who holds an Armenian medical license and who pretended to be an American doctor when she saw homeless “patients” at the clinic and filled out the bogus prescriptions pre-signed by Dr. Johnson – who fled the United States after being found guilty and remains a fugitive.

The scheme centering on Manor Medical also involved pharmacies in and around the San Gabriel Valley. The conspiracy was essentially a  “prescription harvesting” scheme in which Medicare and Medi-Cal beneficiaries were recruited or had their identities stolen, the beneficiary information was used to bill Medicare and Medi-Cal for millions of dollars of illegitimate medical services and prescriptions, and the drugs that were dispensed by the pharmacies were diverted to black market wholesalers and back to the pharmacies so the drugs could be used to submit new bills to Medicare and/or Medi-Cal as though the drugs had never been dispensed.

The primary pharmacy involved in the case, Huntington Pharmacy in San Marino, was operated by a Pasadena couple whose business grew dramatically due its affiliation with Manor Medical, including Medi-Cal claims that jumped from $50,000 in 2009 to approximately $1.5 million in 2010. One of the owners of the pharmacy, Phic Lim, is scheduled for trial on September 29. His wife, Theana Khou, previously pleaded guilty as part of a joint resolution with another case filed against her and her husband.

The investigation in this case, which was called Operation “Psyched Out,” was conducted by the San Marino Police Department; the California Department of Justice, Bureau of Medi-Cal Fraud and Elder Abuse; the United States Food and Drug Administration, Office of Criminal Investigations; IRS-Criminal Investigation; the United States Department of Health and Human Services, Office of the Inspector General; U.S. Immigration and Customs Enforcement’s Homeland Security Investigations; the Glendale Police Department, Organized Crime Team; and the California Department of Health Care Services, Audits and Investigations Branch.

U.S. Immigration and Customs Enforcement’s Homeland Security Investigations; the Glendale Police Department, Organized Crime Team; and the California Department of Health Care Services, Audits and Investigations Branch.