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Attorney General Lockyer Files Medi-Cal Fraud Charges for Major Multi-State Scheme to Steal Health Care Funds

Fraud Ring Operated in California and New Jersey
Wednesday, June 26, 2002
Contact: (415) 703-5837

(LOS ANGELES) - Attorney General Bill Lockyer filed today felony criminal charges against 29 defendants in a massive health care fraud scheme that allegedly bilked California's Medi-Cal program of more than $11 million.

"The defendants are accused of illegally trafficking in blood to endanger public health and stealing over $11 million from the state's health care program designed to help more than 6.5 million poor, elderly and disabled Californians," Lockyer said. "Our two-year investigation led to shutting down this bi-coastal fraud ring and the arrest of the alleged ring leader and his henchmen."

The felony complaints were filed against 16 individuals and 13 medical laboratories and businesses operating in Los Angeles, Riverside and Orange Counties. Six individuals, including the alleged mastermind, were arrested on the East Coast in the states of New Jersey, New York, Maryland and Virginia and will be extradited to California for prosecution. Six other individuals were arrested in southern California by the Attorney General's Bureau of Medi-Cal Fraud and Elder Abuse.

"Scam artists who use medical laboratories to rip off the Medi-Cal system not only steal from the poor but also endanger others by building a black market for blood," Lockyer said. "Cracking down on these organized schemes is important to ridding the lab industry of Medi-Cal fraud and stop the illegal trafficking of blood."

The 29 defendants were charged with 104 felonies, including conspiracy to cheat and to commit acts endangering the public health, grand theft, submitting false claims to Medi-Cal and Medicare, identity theft, money laundering, tax evasion, creating a false financial statement, and the illegal transmitting of money overseas without a license.

Arrested Tuesday were former physician Surinder Singh Panshi, 53, of South Orange, New Jersey, who allegedly organized the fraud scheme and who was convicted twice previously of healthcare fraud in New York. Singh and co-defendant Tahir Sherani, 37, Pakistan, are currently being held without bail in New Jersey. Co-defendant Saeed Ahmed, 34, Pakistan, is being held without bail in New York. Co-defendants Bilal Ahmed, 21, Pakistan, and Muhammad Yasin, 29, Pakistan, are being held without bail in Maryland. Co-defendant Laureano Imbert, 51, Cuba, is being held without bail in Virginia.

Also arrested Tuesday and held in Orange County jail were:

* Raymond Gutierrez, 30, of the Philippines, and Yakoob Habib, 53, of Buena Park, held without bail;
* Danny Du, 51, of the Philippines, held on $1.5 million bail;
* John Lim, 44, of the Philippines, held on $250,000 bail;
* Cesar Sarmiento, 31, and Virgilio Madrigal, 32, both of Anaheim, held on $100,000 bail.

Fugitive arrest warrants were issued for four additional defendants: Ron Martin, 43, Manchester, CT; Zubhair Main Younis, 45, Brooklyn, NY; Rizwan Haider, 32, Owing Mills, MD, and Danny Washington, 35, West Covina, CA.

The criminal filing alleges that between 1997 and 2000, the defendants took control of thirteen clinical laboratories entrusted with the testing of blood and urine at the request of doctors who treat Medi-Cal and Medicare patients. Within months of these acquisitions, the defendants allegedly dramatically increased Medi-Cal and Medicare billings through fraudulent claims that involved the unauthorized use of physician names and Medi-Cal provider numbers that were stolen. More than two dozen doctors were the victims of identity theft and never authorized the specimen testing that was the basis of millions of dollars of fraudulent claims.

The criminal scheme involved a combination of billing for services that were never performed and, to manufacture a facade to mask their criminal enterprise, the testing of blood obtained via black market sources from drug addicts and street people. Investigative findings also show that the labs often billed and shut down quickly, leaving blood and urine specimens behind along with hazardous chemical agents.

The arrests this week cap a more than two-year investigation by the BMFEA in California and the New Jersey Attorney General's Money Laundering Unit, which have been working closely on the case. The state attorneys general were assisted by other government agencies, including the U.S. Department of Health and Human Services, Office of the Inspector General, which investigates Medicare fraud, and the California Franchise Tax Board, which uncovered widespread tax evasion by the defendants. Also participating at various stages of the case were the FBI, INS, U.S. State Department, Attorney General's Bureau of Investigation, California Department of Health Services' Laboratory Field Services and Los Angeles County Sheriff and Health Authority Law Enforcement Task Force.

Since becoming Attorney General in January 1999, Lockyer has made the prosecution of Medi-Cal fraud a top priority. As a result, over the course of the past three years, the BMFEA has filed almost 360 criminal filings and won nearly $40 million in court-ordered restitution. As point of reference for comparison purposes, the five years previous to 1999 only yielded a total of 195 criminal filings and $11 million in restitution. Late last year, the Attorney General received a national award from the United States Department of Health and Human Services for having the top-performing health care fraud and elder abuse prosecutorial program in the country.

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