State Investigation Reveals Widespread Medicaid Fraud

Attorney General Spitzer and State Medicaid Inspector General Kimberly O’Connor today announced that, after a 4-month undercover investigation, prosecutors and investigators have dismantled a Medicaid fraud ring involving a doctor, pharmacists, several city pharmacies, millions in fraudulent Medicaid billings and large monetary transfers to individuals in Pakistan.

Sixteen individuals and five corporations have been indicted in the ongoing investigation and a civil action has been filed against twenty individuals and entities freezing assets and seeking the recovery of more than $22 million.

To date, thirteen individuals have been arrested on the charges contained in the indictment. Each is charged with Grand Larceny in the First Degree, a class "B" felony, Conspiracy, a class "E" felony and Scheme to Defraud the State by Unlawfully Selling Prescriptions, a class "A" misdemeanor. If convicted, they face a maximum sentence of 25 years in state prison.

Among those arrested are five individuals associated with the operation of TLC Medical, P.C., a Bronx-based medical practice: Deepak Sachdev, MD, 49, of Franklin Square, a board-certified neurologist, who operated TLC Medical, P.C.; Abraham Lastra, 36, of Irvington, New Jersey; Jose Santana, 28, of New York City; Evelyn Gonzalez, 37, of the Bronx; and Marlon Miller, 27, of the Bronx.

An additional eight individuals have been arrested for buying and selling bogus prescriptions and for stealing millions from Medicaid by falsely claiming that drugs were dispensed to patients based upon these fraudulent prescriptions.

The investigation began in June 2006 when the Attorney General’s Medicaid Fraud Control Unit (MFCU) received a referral from the State Office of the Medicaid Inspector General’s (OMIG). In the months that followed, the Attorney General’s office, with assistance from OMIG staff, conducted an extensive undercover investigation of Sachdev’s medical practice that included surveillance and the use of confidential informants. The undercover investigation culminated in early October with the execution of eight search warrants at locations throughout New York City.

The indictment and complaints filed in the case set forth allegations of a complex network of criminal activity. It is alleged in these documents that:

  • Dr. Sachdev’s medical practice was little more than a mill where he wrote thousands of prescriptions for expensive AIDS-related and anti-psychotic medications for hundreds of individuals who then sold those prescriptions. Sachdev allegedly did not treat these individuals, obtain legitimate medical histories, conduct physical exams or tests, provide treatments or healthcare instructions or schedule follow-up visits. Instead, after seeing the patients – sometimes in groups of four or five at a time – Sachdev just wrote prescriptions, routinely for the same four drugs.

  • Santana, Lastra, Miller and Gonzalez were among the individuals who worked in Sachdev’s office. Lastra provided security to manage the volume of patients who lined up to get prescriptions from Sachdev. He also functioned as one of the managers of the office, as did Gonzalez, ensuring that only patients bearing functioning Medicaid cards were able to meet with Sachdev.
  • In transactions that were often negotiated and consumated inside Sachdev’s office or on the street in front of his office, the patients were paid less than $100 for their prescriptions and for the use of their Medicaid cards so that Medicaid could be billed for the prescriptions. The cost to Medicaid for the four prescriptions that the patients typically received from Sachdev in a single visit is approximately $2,700.
  • Gonzalez, Lastra, Miller, Santana and others who purchased the prescriptions from Sachdev’s patients turned them over to others, including defendant Pedro Santiago, 37, of Mastic Beach, who then allegedly sold prescriptions to pharmacies for between $200 and $250. The pharmacies used the patient’s Medicaid cards to electronically bill Medicaid for the prescribed medications as though they had actually dispensed them. In fact, however, in the overwhelming majority of instances, no patients ever went to the pharmacies and no drugs were ever dispensed.
  • Many of the prescriptions were sold to defendant Rauf Ahmad, 48 of Jersey City, New Jersey, the owner operator of Seven D pharmacy located on Shakespeare Avenue, the Bronx. In 2006, Ahmad and Seven D Pharmacy billed Medicaid approximately $2 million for medications based on prescriptions written by Sachdev.
  • In addition to billing for these fraudulent prescriptions, Ahmad also brought many of these prescriptions to other pharmacies in which he had a financial or ownership interest – including 2001 Bath Avenue Pharmacy in Brooklyn, Shop Wise Pharmacy in Queens and Best Pharmacy in the Bronx – also billed Medicaid an additional $3 million more for medications that were never dispensed.

The following indicted individuals and corporations allegedly billed for such prescriptions: Mohammed U. Farooq, 43, of Dix Hills, co-owner of 2001 Bath Avenue Pharmacy; Muzammel Khan, 56, of Holtsville, a licensed pharmacist who worked at Seven D Pharmacy; Mujjahidul Huq, 26, of Queens, a licensed pharmacist who worked at Shop Rite Pharmacy; Biny Biag, 49, of Bayonne, New Jersey, co-owner of 2001 Bath Avenue Pharmacy.

The charges against the defendants are merely accusations, and the defendants are presumed innocent until and unless proven guilty.

According to the civil complaint filed in the case, Ahmad and persons connected to him transferred more than $1 million to Pakistan in transactions designed to hide the nature of the cash transfers. Since the arrest, the Attorney General’s office has secured the return of $400,000 of Ahmad’s funds. The civil action filed by the Attorney General also resulted in an order freezing Ahmad’s assets and the assets of other associated persons, seeks the forfeiture of criminal proceeds and additional millions in penalties. In addition, the Office of the Medicaid Inspector General, at the request of the Attorney General’s office, has frozen over $1.1 million in Medicaid payments scheduled to be paid to the indicted pharmacies and other pharmacies which billed for prescriptions written by Sachdev.

In addition to thanking the Office of the Medicaid Inspector General, the Attorney General thanked the United States Department of Homeland Security, Bureau of Immigration and Customs Enforcement, Newark, New Jersey office, the New Jersey Attorney General’s Office Medicaid Control Unit, and the New York City Police Department for their assistance in this case.
Special Assistant Attorneys General John Fusto, Debra Glatt and Deborah Nathan, of the Attorney General's Medicaid Fraud Control Unit's New York City Regional Office, are prosecuting the criminal case. Special Assistant Attorney General Paul J. Mahoney and the Civil Enforcement staff of the Medicaid Fraud Control Unit are pursuing the civil action. The investigation is being conducted by Senior Special Investigators Edward Lafond, William Diaz, Robert Crook, Paul Lloyd, Joseph Scalogna, Pedro Foruria, Gene Kenny, James Serra, Robert Flynn, Lawrence Riccio, Victor Maldonado, Jose Ruiz, and Bernard Kleger, under the supervision of Supervising Special Investigator Ralph Aquino; and Associate Special Auditor Investigators Jonathan Romano, Andrea D’Alessio, David Verhey, Yehuda Scheff, Anthony Spaventa, Joanna-Joy Volo, Sandy Bizzaro, and Patricia Iemma, under the supervision of Principal Special Auditor Investigator Jerome Hosinking. Medicaid Fraud Control investigators from across the state participated in the execution of the search warrants.

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