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(SANTA ANA) – Attorney General Bill Lockyer today announced the head of a massive health care fraud ring responsible for defrauding California's Medi-Cal system of more than $20 million was sentenced to 16 years in prison and ordered to pay $2.5 million in restitution to the state and $124,000 in back taxes to the Franchise Tax Board (FTB). The sentence is the longest in California history for Medi-Cal fraud.
"This organized crime ring operated a sophisticated scam in which they stole patient identity information and illegally trafficked human blood on the streets of southern California in order to fleece the Medi-Cal program out of millions of dollars," Lockyer said. "Medi-Cal fraud rips off taxpayers and results in lost benefits and reduced services for Californians who can't afford private health insurance. Since 1999, we have obtained more than $80 million in restitution for Medi-Cal fraud. This unprecedented sentence sends a message that we will use the full force of the law to prosecute those who defraud our state."
Orange County Superior Court Judge Ronald P. Kreber today sentenced Surinder Singh Panshi, 54, of South Orange, New Jersey, on four felony counts that include fraud, committing acts injurious to public health, money laundering, conspiracy, identity theft and tax evasion. Panshi, a former medical doctor, pled guilty in June.
The criminal complaint was filed in 2002 after a two-year investigation into Medi-Cal fraud and money laundering by the California Attorney General's Bureau of Medi-Cal Fraud and Elder Abuse, in partnership with the FTB, the New Jersey Attorney General's Office and the U.S. Department of Health and Human Services Office of the Inspector General. The investigation resulted in 104 felony criminal charges against Panshi and 28 others. The charges included endangering public health, identity theft, submitting false claims to Medi-Cal and Medicare, money laundering, tax evasion and grand theft.
Panshi operated a complex scheme using more than 15 clinical labs in Los Angeles, Orange and Riverside counties to illegally bill government health programs for tests that were never authorized by doctors, and not performed. Medical clinic employees were paid to draw excess blood from unsuspecting patients, and other blood was purchased from runaway children, homeless individuals and drug addicts. The blood was tested at the labs controlled by Panshi, who billed Medi-Cal using confidential patient information he stole and shared with sister labs his syndicate controlled. The scheme involved the theft of doctors' identities to create false records showing the physicians authorized the labs to perform the tests. Panshi's ring also fostered a black market for blood and stolen identities he obtained.
To erase the money trail, Panshi and his associates used Pacific Variety Market, a small neighborhood store in Jersey City, New Jersey, to launder money stolen from Medi-Cal and Medicare. Checks issued by the California State Controller, many in excess of $100,000, were paid to the labs for fraudulent services, then taken cross-country to Pacific Variety, where they were cashed using fake identification. Other moneys were laundered through R.M. Advance Instrumentation, Inc., with locations in Anaheim and Signal Hill. The company purported to sell laboratory equipment and chemicals, but was actually a front to launder Medi-Cal payments made to Panshi's labs.
Attorney General Lockyer and the New Jersey Attorney General began their coordinated dismantlement of Panshi's ring in 1999 and effectively shut down its operations by the year's end. Panshi has been in the custody of California and New Jersey authorities since his arrest on June 25, 2002. The New Jersey Attorney General's office prosecuted eight of the California defendants on money laundering charges. Panshi was sentenced in New Jersey in June to18 years, the longest term for money laundering in that state. He is expected to serve his sentence in California and then be returned to New Jersey to serve the remainder of his New Jersey sentence.
Other defendants include Yakoob Habib, 54, of Buena Park. Habib operated a money-transmitting business in Anaheim, which illegally sent money to Pakistan. He was sentenced in absentia to three years in state prison for illegally transmitting money, and ordered to pay $60,000 in fines. Habib fled jurisdiction while on bail. On July 18, Judge Kreber issued a $5 million bench warrant for his arrest.
Muhammad Yasin, 30, of New Jersey, was sentenced to eight years in prison for conspiracy to commit health care benefits fraud and failing to file a tax return. He was ordered to pay restitution of $510,519. Yasin was co-owner of Physicians Laboratory Institute, Inc. of Signal Hill, which was accused of stealing more than $1 million from Medi-Cal. Yasin's brother, Shazad Ahmed, 22, of New Jersey, was sentenced to three years in January, and ordered to pay $67,000. A cousin, Saeed Ahmed, 35, of New York, was sentenced to 16 months and ordered to pay $20,000.
Also, co-defendant Ron Martin, 44, of Arizona, who evaded apprehension for 10 months, was recently arrested in Arizona and extradited back to California. He was indicted by the Orange County Grand Jury on August 26 on 41 felony counts, including conspiracy, identity theft, fraud, money laundering and tax evasion. Co-defendant Tahir Sherani, 38, of New Jersey, is scheduled for trial October 24. Both remain in custody. Bail on Martin is $11 million, and bail on Sherani is $1.5 million.
Co-defendants Zubair Younis, 36, of New York, and Rizwan Haider, 32, of Maryland, are fugitives. Awaiting sentencing after pleading guilty are Danny Du 52, of Northridge; Cesar Sarmiento, 33, Anaheim; John Lim, 46, Los Angeles; Raymond Gutierrez, 31, Placentia; and Virgilio Madrigal, 33 of Anaheim.
Panshi failed to file personal income tax returns for 1998 and 1999. He failed to file corporate tax returns in 1999, and did not report more than $300,000 in business income. All income is taxable, including income derived from illegal activities. In January, R.M. Advance Instrumentation pled guilty to one felony count of failing to file a tax return. Today, Panshi was ordered to dissolve the company and pay $26,721 in back taxes. Twelve other corporate co-defendants were charged: three were convicted, three pled guilty and await sentencing and charges are pending on the remaining six.