Editor's Note: This article was contributed by Dennis Jay, the executive director of the Coalition Against Insurance Fraud (CAIF).
Mikhail Zemlyansky was nothing if not ambitious. The Russian native masterminded a sprawling crime empire that bled New York auto insurers with seeming impunity.
Data are in short supply, but the anecdotal case is building. Investigators frequently say they’re seeing more gangs of larger scope, often tighter hierarchical organization and discipline, and well-oiled looting ability. Several nine-figure fraud sprees have surfaced just in the last few months alone. But whether the curve is way up, somewhat up or even flat, the fact is that organized crime maintains a dominant presence in the insurance-fraud business.
Organized crime itself is a slippery term. There’s no easy definition; call them fraud gangs or cartels. Whatever the name, they’re large, complex and often-insular operations that can be devilishly hard to penetrate. Some are homegrown; some are franchises of overarching mafias back in the home country. Some rings are quite large; others are smaller but still highly organized enough to be called organized crime.
In fact, drug dealers and other mobsters are switching to insurance because they perceive this crime as more lucrative, less-dangerous and possessing lower odds of being caught (see chart to the right below).
Zemlyansky ran nine clinics in the Bronx, Brooklyn, and Queens. They allegedly provided worthless and excessive medical treatments, including physical therapy, acupuncture, pain management, psychological services, X-rays, MRIs and other services.
Physicians, Lawyers Get Their Cut
Rings also may be franchises of, or at least tied to, larger mob organizations back in their home countries. Insurance fraud then becomes an integral part of larger spiderwebs of global corruption and deceit. North Korea even has resorted to insurance fraud to help finance its crumbling economy, according to news reports.
“The emergence of international organized crime in domestic healthcare fraud schemes signals a dangerous expansion that poses a serious threat to consumers as these syndicates are willing to exploit almost any program, business or individual to earn an illegal profit,” says Acting Deputy U.S. Attorney General Gary G. Grinder.
AP also deals directly with high-level Armenian/Russian organized crime figures, both within the United States and abroad, the FBI says.
Armen Karazianis is another cautionary tale. He was a vor, or overlord, of a vast Armenian cartel in Southern California. He was busted last year in a takedown of dozens of Armenian gangsters. Karazianis erected 118 sham medical clinics spanning 25 states. He looted insurers with $160 million in claims for worthless medical treatment.
One of his clinics stole the identities of 2,900 Medicare patients in Orange County, Calif., prosecutors charge. Their information was used for fake claims involving bladder tests, pregnancy ultrasounds and other treatments. He also specialized in kidnapping, extortion, credit-card fraud and counterfeit checks.
Karazianis received three years in federal prison in 2011. The sentence was relatively light, but he was the first vor ever convicted. That alone sent a loud message to vors of other Armenian gangs.
Five clinics allegedly were involved. At least 26 suspected gang members were arrested. They included a clinic owner, doctors, clinic employees and staged-crash recruiters and others. Three generations of one family allegedly took part—a mother, daughter and granddaughter.
The days of investigators operating in silos are numbered—auto insurers tackling crash gangs, health insurers chasing down health gangs, and workers’ compensation insurers hunting their medical mills.
Presenting A United Front