Bashian & Papantoniou, P.C.

Feds Uncover Healthcare Fraud Schemes in NY, TX Totaling $625 Million

Over thirty-five people have been arrested in and around New York City as part of an investigation into a healthcare fraud scheme that defrauded insurance carriers, including Medicare and Medicaid, out of as much as $250 million, according to the New York Times. Those arrested are expected to face charges that include racketeering, healthcare fraud, money laundering, insurance fraud, and wire fraud. The forthcoming charges are believed to be based on bills for unnecessary medical treatments from auto accident claims.

This news follows just one day after seven were arrested in Dallas, Texas in a home healthcare scheme that defrauded the federal government out of as much as $375 million in Medicare and Medicaid disbursements. The Texas defendants are said to have registered homeless people for healthcare services never rendered, and the scheme is described as “staggering in its breadth and scope” by federal prosecutors and as the largest known fraud perpetrated by a single doctor to date.

While it is not yet clear what led to the discovery of the NY insurance fraud, the discovery of the Texas operation grew out of newly-administered computer analysis techniques that search for suspicious billing patterns. Since 2009, as reported by the New York Times, the Department of Justice as charged more than 800 defendants with fraud totaling more than $2.2 billion.

Criminal Charges “Not Appropriate” Against NYPD Commissioner’s Son, Says District Attorney’s Office

Greg Kelly, the son of NYPD Commissioner Ray Kelly and a television anchor for Good Day New York, will not be charged with the rape of a 28 year old woman after an investigation by the Manhattan District Attorney’s Office. The NYPD elected to have the DA’s office, led by Cyrus Vance, investigate the rape allegations to avoid any conflicts of interest from the commissioner.

As reported by the Daily Mail, in a letter to Kelly’s attorney, Martha Bashford, the chief of the sex crimes unit in the Manhattan DA’s office, wrote,” After reviewing all of the evidence, we have determined that the facts established during our investigation do not fit the definitions of sexual assault crimes under New York criminal law.”

The two-week long investigation included interviews of numerous witnesses, including the accuser and Kelly, and analyses of receipts, security logs, phone records, and text messages. As a result of this investigation, “criminal charges are not appropriate,” wrote Bashford.

“I am thankful that the investigation established what I’ve known all along, that I am innocent of the allegations that were waged against me,” Kelly told the Daily Mail.

New York Attorney General Sues Banking Giants Over Fraudulent Foreclosures

New York Attorney General Eric Schneiderman filed a lawsuit in a Brooklyn Supreme Court alleging that banking giants Bank of America, JP Morgan Chase, and Wells Fargo created and maintained a mortgage database and then used that information to institute defective foreclosure proceedings against homeowners. Mr. Schneiderman alleges that the banks created this private mortgage electronic registry system, or MERS, as a tool to make it nearly impossible for homeowners to track which bank or entity in fact owned the home or issued the mortgage for the home in question. In essence, the complaint alleges that large banks created a private system with inaccurate records to more easily conduct fraudulent foreclosure proceedings against homeowners, while limiting the ability of those homeowners to defend themselves against foreclosure.

“The banks created the MERS system as an end-run around the property recording system, to facilitate the rapid securitization and sale of mortgages,” Schneiderman said, through his press office. “Once the mortgages went sour, these same banks brought foreclosure proceedings en masse based on deceptive and fraudulent court submissions, seeking to take homes away from people with little regard for basic legal requirements or the rule of law.”

The lawsuit states that “by creating this bizarre and complex end-around of the traditional public recording system, banks achieved their primary goal — over 70 million mortgage loans, including millions of subprime loans, have been registered in the MERS system and the industry has saved more than $2 billion in recording fees.”

The lawsuit seeks an end to this practice, along with civil damages and payments to victimized homeowners.

Pilot “Adolescent Diversion Parts” Provide Leniency to Minor Defendants

 In the State of New York, minors as young as 16 years of age are prosecuted in adult criminal court, rather than in family court, for non-violent offenses, including vandalism and shoplifting. However, as the New York Law Journal reports, courts across the state have begun to implement a pilot program for minor offenders that emphasizes rehabilitation and skill building, including job training and drug counseling, over punishment. Termed “Adolescent Diversion Parts,” this pilot program will allow non-violent offenders to receive lighter sentences in conjunction with rehabilitation programs, leading to a dismissal of charges following attendance of court-mandated programs, for example, rather than community service and a criminal record. Prosecutors and defense attorneys alike are optimistic about this new measure, with the understanding that a heavy hand with adolescent offenders leads to increased rates of recidivism, when additional support and opportunities for growth are often needed to correct problem behavior and prevent crime. Courts across the state, including in Nassau County and in each of the five boroughs, have adopted this pilot program so far. Johnathan Lippman, the Chief Judge of the New York State Court of Appeals, said in a speech last year, as reported by the New York Law Journal, “We need an approach that is based on the best interest of the child and rehabilitation rather than an approach based on punishment and incarceration.” In addition to the state-wide establishment of this new approach to adolescent offenders, Judge Lippman has also called for raising the age of criminal responsibility to 18.

Trial Update: Trial of Allen Stanford of Stanford Financial Group begins

The trial of R. Allen Stanford, a money manager and chairman of the now defunct Stanford Financial Group, began on Monday, January 23, 2012.  Stanford has been accused of running a $7.2 billion Ponzi scheme after being arrested in 2009 in Virginia.  As with most fraudulent Ponzi schemes, Stanford Financial Group was investigated by the SEC, FBI, and the Financial Industry Regulatory Authority (FINRA), a major U.S. private-sector oversight body, to determine how Stanford International Bank was able to consistently make higher-than-market returns to its depositors.  The complaint alleges that Stanford defrauded more than 20,000 investors through the sale of bogus certificates of deposit at Stanford International Bank, Ltd., a financial institution created by Stanford and based in Antigua.

Several aspects surrounding this case will make for an interesting trial.  First, Stanford was the victim of a vicious prison beating in 2009 stemming from an altercation regarding use of the telephone.  He now claims that he has lost all memory and that he cannot recall the details of his business and banking operations.  Second, Stanford has filed a lawsuit accusing federal prosecutors, the FBI and the SEC of his complaint terms “abusive law enforcement,” and adamantly adhering to his claim of innocence.  The suit seeks $7.2 billion in damages, which, coincidentally, is about the same amount that he is accused of stealing in the Ponzi scheme.  Stanford has also filed suit against insurer Lloyd’s of London, claiming that Lloyd’s should be held liable for his legal fees as part of the Director’s and Officer’s policy held by Stanford Financial Group.  However, after it was determined that Lloyd’s did not have to pay, Stanford is now attempting to have the U.S. taxpayer pick up his legal fees through his claim that he is indigent.

Finally, James Davis, the former CFO of Stanford Financial Group and Stanford’s college roommate at Baylor University, will testify as the government’s key witness.  Davis has already pled guilty and hopes that his testimony will lead to a lighter prison sentence at his own sentencing.  There is no doubt that these juicy details ensure that Stanford’s trial will be one to watch.

Co-founder of Megaupload arrested for copyright infringement and money laundering

Kim Dotcom, computer programmer and co-founder of Megaupload, was arrested for charges of copyright infringement and money laundering. Dotcom – born Kim Schmitz in Germany but a legal resident of both Finland and New Zealand – became notorious for his abilities as a computer hacker and has been convicted of insider trading, and embezzlement in the past. Megaupload is a Hong Kong-based internet company established in 2005 that ran a number of online services related to file storage and sharing. In essence, it is alleged that Megaupload operating as an organization dedicated to copyright infringement, costing copyright holders more than $500 million in lost revenue from pirated films and other media. Dotcom and 4 of his associates were arrested in New Zealand at his rented multi-million dollar mansion, which has been reported as the most expensive in the country. In a multinational law enforcement effort, New Zealand authorities were cooperating with the FBI, U.S. Justice Department, Hong Kong Customs, the Hong Kong Department of Justice, the Netherlands Police Agency and the Public Prosecutor’s Office for Serious Fraud and Environmental Crime, London’s Metropolitan Police Service, Germany’s Bundeskriminalamt and the German Public Prosecutors, the Royal Canadian Mounted Police and the Canadian Department of Justice. Concurrent with his arrest, authorities seized a number of bank accounts, PayPal accounts, a Rolls-Royce, a rare Lamborghini, a Maserati and fifteen Mercedes-Benz vehicles. Most were adorned with creative license plates including with the license plate “GOD,” “HACKER,” “POLICE,” “STONED,” “GOOD,” “CEO,” and the ominous “GUILTY.” Even more notable, the indictment alleges that Megaupload or its officers spent almost $8 million on yacht rentals in the Mediterranean during the months of April through June of 2011 alone. The arrest has brought to the forefront the future of global action to prevent internet piracy. Recently, two pieces of controversial anti-piracy legislation, the Protect IP Act (PIPA) and the Stop Online Piracy Act (SOPA), have been introduced in Congress as a means of providing a check on copyright infringement on the internet. In response, several websites, including Wikipedia, went “dark” for twenty-four hours to protest the legislation. The uproar over PIPA and SOPA has led to the Obama Administration’s declaration that both bills would not be passed in their current state, as the government would not support any anti-piracy legislation that facilitates online censorship.  However, anti-piracy remains a hot-button issue and the arrest of Kim Dotcom does not bode well for those opposed to this latest round of internet regulation.

Supreme Court: Police must obtain a warrant before attaching a GPS tracker to a suspect’s vehicle

In a unanimous decision, the U.S. Supreme Court has ruled that police must obtain a warrant before attaching a GPS tracker to a suspect’s vehicle.  However, the Court was split 5-4 in its reasoning behind the ruling, with Justice Antonin Scalia writing for the majority.  Justice Scalia reasoned that the Fourth Amendment’s protection of “persons, houses, papers, and effects, against unreasonable searches and seizures” would extend to private property, including one’s vehicle.  In contrast, the minority decision emphasized a more sweeping declaration that installing the GPS tracker not only trespassed on private property, but violated the suspect’s “reasonable expectation of privacy.” 

The case involves a narcotics operation allegedly run by the defendant, Antoine Jones.  During the course of the investigation, DC police and FBI agents tracked Mr. Jones, a nightclub owner, through several means of surveillance techniques, which included tapping his cellphone under a warrant from a federal judge.  Authorities also placed a GPS tracking device on his Jeep Grand Cherokee without a valid warrant, which the government argued was not constitutionally required.  The Justice Department argued that the FBI uses GPS tracking devices in thousands of investigations each year, and attaching a tiny tracking device to a car’s undercarriage was too trivial a violation of property rights to matter.  However, the majority shot this argument down, reasoning that even a small trespass, if committed in “an attempt to find something or to obtain information,” constituted a “search” under the Fourth Amendment.

This is a landmark case as far as constitutional rights in the digital age are concerned.   Justice Sotomayor joined in the majority opinion, but wrote separately to set out various privacy issues that emerging technology was presenting.  For example, smartphones have the ability to disclose a user’s location unless the internal GPS functions are actually turned off.  Unfortunately, the Court’s ruling provided no definitive answers as to whether the government must obtain a warrant for access to such private property.

New York Mafioso Montagna Killed in Montreal, Canada on Thanksgiving Day

Mafia man Salvatore Montagna or “Sal the Ironworker” was shot November 24, 2011 while walking out the door of a home in Ile Vaudreuil, a small island just five minutes west of Montreal. While in New York, Montagno worked for the Bonanno family, a household name to those familiar with the mob families and prominent construction fraud in the area. The Bonanno family is one of the five largest mafia families in New York. In the construction world, they were known experts at “inflating invoices,” i.e. overestimating the amount of workers and materials needed in order to complete large construction projects.

Montagna was born in Montreal, raised in Italy and moved to New York when he was 15. He never filed to obtain U.S. citizenship and after receiving a conviction for refusing to testify before a grand jury on illegal gambling in 2009, Montagna was deported to Canada. After keeping a low profile for several years, by 2011, Montagna was suspected of becoming part of the mafia in Montreal. He continued his New-York born construction scheme by shaking down local construction companies for five percent of their profits.  His death is the continuation of a number of mafia-related deaths in Montreal in recent years and he leaves behind his wife and three daughters.

Trouble Brewing in the Candidates at Hofstra Law School

Amora Rachelle, a second year law student at Hofstra University was arrested this past week for fraudulently impersonating a psychiatrist. The 35 year-old Long Island resident was billing both clients and insurance companies despite her lack of a medical license. Although this is not the first time Rachelle has made the headlines, it is her most damaging story yet. She had recently been in the news after secretly videotaping her Rabbi husband’s encounters with prostitutes on the Sabbath. Rachelle currently faces an enumeration of felony charges including: grand larceny in the third degree, falsifying business records in the first degree, scheme to defraud in the first degree, offering a false instrument for filing in the first degree and finally, unauthorized practices.

This scandal tainting Hofstra University’s law school comes on the heels of Rachelle’s classmate, 23 year-old Evan Sachs who was arrested earlier this year for randomly stabbing an eight year-old child at Dave and Busters. The accused was charged with attempted murder in the second degree in addition to two counts of assault of possession of a weapon. Sachs was a 1L at Hofstra Law School until dropping out several months later. Earlier this year, he walked up to a random eight year-old boy playing video games in the popular Westbury location arcade and stabbed him in the back five times.

While Hofstra Law School’s rankings continue to be on the rise, this negative press is certainly casting down a dark shadow. Fraud and attempted murder charges among the student roster leaves many wondering about the otherwise reputable school’s screening process of applicants.

NYPD Officer Arrested for a Federal Civil Rights Violation

“The power to arrest — to deprive a citizen of liberty — must be used fairly, responsibly and without bias.”  Such was part of a statement given by Loretta E. Lynch, the United States attorney for the Eastern District of New York . The public announcement followed the arrest of Officer Michael Daragjati, 32, of the New York Police Department, charged with a civil rights violation.

The complaint alleges that Officer Daragjati, an 8-year veteran with the force, falsely arrested a black man and was then found bragging about the incident during a telephone conversation. Daragjati stopped and frisked the man in the Stapleton area of Staten Island this past spring. The man was searched and revealed no possession of any contraband or weapons however, when he complained about his treatment by the officer and requested Daragjati’s badge number, he was arrested and charged with resisting arrest.  Daragjati noted in his police report that the arrested had flailed his arms and kicked his legs, exhibiting disorderly conduct and resisting arrest, thus enabling him to detain the man for a period of roughly 36 hours.

To Daragjati’s dismay, authorities intercepted a phone conversation he had with a female friend the day after the arrest during which, the officer referred to the man using racial slurs and acted proud of his arrest. At least 12 more phone conversations were intercepted where Daragjati was heard speaking derogatorily about African-Americans.

In unrelated matters, Daragjati has also found himself charged with both attempted extortion and insurance charges. The case at hand carries a maximum sentence of one year and fine of up to $100,000. However, the man once donning blue may soon be trading in his uniform for one less admired, as the other pending charges carry much longer sentences of up to 20 years and $500,000 in charges.