When Licensed Professionals Commit Insurance Fraud

The actions taken against the 18 health care providers were part of what DFS characterized as “an extensive and ongoing” investigation into “fraudulent health service providers and medical mills that abuse the no-fault insurance system.” See Governor Cuomo Announces First Round of 18 Doctors and Other Health Service Providers Banned from Abusing No-Fault Auto Insurance System, Press Release, http://on.ny.gov/1F742L5.

The DFS said that its investigation had uncovered evidence of doctors and other health service providers giving unnecessary treatment to car accident victims, billing insurers for unnecessary treatment or treatment that was never provided, and “renting” their taxpayer identification number to fraudulent medical practices run illegally by laypersons who submitted fake bills to insurance companies.

Then there is the case that Preet Bharara, U.S. Attorney for the Southern District of New York, has referred to as the “largest single no-fault automobile insurance fraud scheme ever charged” because it defrauded automobile insurance companies of more than $100 million. Brooklyn Doctor Found Guilty in Manhattan Federal Court in Connection with Massive No-Fault Insurance Fraud Scheme, Press Release, http://1.usa.gov/1EDDNso. The perpetrators used this scheme for, among other things, creating and operating medical clinics that provided unnecessary and excessive medical treatments in order to take advantage of New York's no-fault law. See Manhattan U.S. Attorney Announces Conviction of Mikhail Zemlyansky on Racketeering, Securities Fraud, Mail Fraud, and Wire Fraud Charges, Press Release, http://1.usa.gov/1E5nxQg. The results have been somewhat mixed in this case. Many of the defendants have pleaded guilty, but often to lesser charges.

The first trial of one of the alleged leaders of the scheme, Mikhail Zemlyansky, in Fall 2013, resulted in a mistrial on Count One ' which charged Zemlyansky with racketeering conspiracy ' after the jury failed to reach a unanimous verdict. At that trial, Zemlyansky was acquitted of eight counts. (Late in March of this year, Zemlyansky was found guilty after re-trial on racketeering conspiracy, securities fraud, mail fraud, and wire fraud charges following a four-week jury trial before Judge J. Paul Oetken.)

Moreover, one of the dozens charged in the case was attorney Matthew Conroy of Garden City, NY. He went to trial and was found not guilty by Judge Oetken, who heard the case without a jury. John Riley: Attorney Matthew Conroy Acquitted in Massive Auto Insurance Case, Newsday , Jan. 26, 2015, http://nwsdy.li/1E5o3hk.

Still, it is clear that the case was ground-breaking. According to prosecutors, in order to mislead New York authorities and private insurers, the true owners of various medical clinics paid licensed doctors to use their licenses to incorporate professional corporations through which the true owners billed private insurers millions of dollars for medical treatments and tests, many of which were not medically necessary. The government asserted that Tatyana Gabinskaya, a doctor in Brooklyn, was the stated owner of one such clinic that provided MRIs and other radiology tests but that the clinic, in reality, was owned by Zemlyansky and Michael Danilovich. In addition, the government charged, Gabinskaya was the stated owner of six other medical professional corporations, including five incorporated in the span of approximately one year.

The government contended that when interviewed under oath about her role at the clinic, Gabinskaya repeatedly lied to deceive the insurers and induce them into paying claims that were not eligible for reimbursement. Gabinskaya was indicted, along with dozens of other defendants, and, following a two-week jury trial before Judge Oetken, was convicted of one count of conspiracy to commit health care fraud and one substantive count of health care fraud. She also was convicted of one count of conspiracy to commit mail fraud and one substantive count of mail fraud.

Thereafter, Gabinskaya was sentenced by Judge Oetken to one year and one day in prison. In a statement, Bharara said, “Gabinskaya was one of the linchpins in a scheme that defrauded insurers on an unprecedented scale. At the heart of her deception was her repeated lie that she owned and operated a medical clinic she did not in fact own or operate that billed for numerous fraudulent claims. That has proven to be a prescription for prison.” Brooklyn Doctor Sentenced in Manhattan Federal Court to One Year and One Day in Prison for Role in Auto Insurance Fraud Scheme, Press Release, http://1.usa.gov/1PiI1Rw.

Lawyers

A number of lawyers in New York recently have faced both jail time and loss of their licenses as a result of their involvement in insurance fraud.

For example, in March 2013, attorney Sol Naimark pleaded guilty to his role in two separate conspiracies to defraud private insurance companies under New York's no-fault regime. Naimark admitted to paying a no-fault clinic controller to refer patients who had received unnecessary treatments so that he could file personal injury lawsuits on behalf of these patients. He also pleaded guilty to a charge relating to payments he made to a so-called “runner” to bring him no-fault patients so that he could file personal injury lawsuits on their behalf. See Lawyer Pleads Guilty to Involvement in Massive No-Fault Automobile Insurance Fraud Scheme, Press Release, http://1.usa.gov/1AWFMaA.

Last September, Naimark tendered his resignation as an attorney and counselor-at-law to the Appellate Division, Second Department. He acknowledged his criminal conviction; acknowledged that if disciplinary charges were predicated on his criminal conviction of a serious crime, he could not successfully defend himself on the merits against such charges; and acknowledged that he knew that he would be barred by Judiciary Law ' 90 from seeking reinstatement as an attorney for a minimum of seven years. In late January, the Second Department accepted Naimark's resignation and said that he “is disbarred, and his name is stricken from the roll of attorneys and counselors-at-law, effective immediately.” Matter of Naimark , 126 A.D.3d 19 (2d Dept. 2015).

Victor J. Horowitz, another lawyer, met the same fate as Naimark. Matter of Horowitz , 123 A.D.3d 207 (1st Dept. 2014). On Aug. 29, 2012, Horowitz pleaded guilty, in the U.S. District Court for the District of New Jersey, to health care fraud and tax evasion and, thereafter, was sentenced to 17 months' imprisonment on each count, along with fines and restitution. His conviction stemmed from his participation in a scheme by which individuals falsely claimed to have been injured in automobile collisions and fraudulently obtained payments from insurance carriers for unnecessary medical treatments. At his plea allocution, Horowitz admitted that he represented people and pursued legal claims on their behalf that involved overbilling for unnecessary services by a rehabilitation center as part of the fraudulent scheme, and that he recovered on behalf of those clients over $30,000 that he knew included overbilling or payments for unnecessary treatment services.

Horowitz was temporarily suspended from the practice of law in New Jersey by the Supreme Court of New Jersey on Nov. 7, 2012, and, based on that order, by the U.S. District Court for the Eastern District of New York by order dated March 6, 2013.

The First Department's Disciplinary Committee sought an order from the First Department striking Horowitz's name from the roll of attorneys pursuant to Judiciary Law ' 90(4), based on his federal conviction for health care fraud. Section 90(4)(a) authorizes automatic disbarment of any attorney upon conviction of a felony, defined as “any criminal offense classified as a felony under the laws of this state or any criminal offense committed in any other state, district, or territory of the United States and classified as a felony therein which if committed within this state, would constitute a felony in this state.” The out-of-jurisdiction felony must be “essentially similar,” although not necessarily identical to, an offense classified as a felony in New York. See Matter of Margiotta, 60 N.Y.2d 147 (1983).

The committee suggested that Horowitz's conviction for health care fraud was essentially similar to a conviction under New York's class D felony offense of insurance fraud in the third degree. Penal Law '176.20. Horowitz disputed this, contending that his health care fraud conviction only could be said to be essentially similar to the New York misdemeanor of insurance fraud in the fifth degree. Penal Law ' 176.10.

The First Department was not persuaded by Horowitz's argument. In its decision, it ruled that his admissions during his federal plea allocution established that his admitted criminal conduct supporting his federal conviction of health care fraud rendered his conviction essentially similar to the New York State felony of insurance fraud in the third degree. The court found that grounds for automatic disbarment were established, and it granted the committee's petition to the extent that it sought an order striking Horowitz's name from the roll of attorneys effective nunc pro tunc to Aug. 29, 2012. (See also Matter of Ioannou, 116 A.D.3d 178 (1st Dept. 2014) (lawyer disbarred after pleading guilty to, among other things, insurance fraud in the third degree in violation of Penal Law ' 176.20, a class D felony, based on his admission that he had assumed the identity of a woman, who was not a client, had used her name and personal identifying information to settle an insurance claim, and then had stolen the proceeds of the settlement that he had fraudulently negotiated). Cf. Matter of Squitieri' 2011 N.Y. Slip Op. 82966(U) (App. Div. 1st Dept. Sept. 8, 2011). Here, a disbarred lawyer subsequently pleaded guilty to health care fraud. See Former Attorney Pleads Guilty in Manhattan Federal Court to Filing Fraudulent $1 Million Personal Injury Claim Against the FBI, Press Release, http://1.usa.gov/1REo8Tz.

Conclusion

Insurance fraud has consequences. This author often has discussed the impact of insurance fraud on individual consumers and on those who perpetrate insurance fraud. As discussed here, it also can leave a permanent stain on the lives of the licensed professionals who enable and assist those who engage in insurance fraud.

Evan H. Krinick is managing partner of Uniondale, NY's Rivkin Radler, and can be reached at [email protected]. This article also appeared in the New York Law Journal, an ALM sister publication of this newsletter.

Insurance fraud is committed not only by people who set fire to their homes for the insurance money or who lie about “missing” property that was in their “stolen” cars. Doctors and lawyers ' licensed professionals ' also commit insurance fraud. They risk the usual penalties, including potential jail time, as well as the loss of their ability to practice their profession.

Doctors

Consider, for example, that about a year-and-a-half ago, 18 doctors and other health service providers took a hit to their pocketbooks when the New York Department of Financial Services (DFS) announced that it was banning them from billing New York's no-fault auto insurance system. (N.Y. Ins. Law ' 5101 et seq.; 11 N.Y.C.R.R. ' 65 et seq. Under New York's no-fault law, every vehicle registered in New York is required to have no-fault automobile insurance, which enables the driver and passengers of a registered and insured vehicle to obtain benefits of up to $50,000 per person for injuries sustained in an automobile accident, regardless of fault. The law requires prompt payment for medical treatment, thereby obviating the need for claimants to file personal injury lawsuits in order to be reimbursed. Patients can assign their right to reimbursement from an insurance company to others, including medical clinics that provide treatment for their injuries. The law also requires that all medical clinics in the state be incorporated, owned, operated, or controlled by a licensed medical practitioner to be eligible for no-fault reimbursement. Insurance companies need not honor claims for medical treatments from a medical clinic that is not actually owned, operated, and controlled by a licensed medical practitioner.)

The actions taken against the 18 health care providers were part of what DFS characterized as “an extensive and ongoing” investigation into “fraudulent health service providers and medical mills that abuse the no-fault insurance system.” See Governor Cuomo Announces First Round of 18 Doctors and Other Health Service Providers Banned from Abusing No-Fault Auto Insurance System, Press Release, http://on.ny.gov/1F742L5.

The DFS said that its investigation had uncovered evidence of doctors and other health service providers giving unnecessary treatment to car accident victims, billing insurers for unnecessary treatment or treatment that was never provided, and “renting” their taxpayer identification number to fraudulent medical practices run illegally by laypersons who submitted fake bills to insurance companies.

Then there is the case that Preet Bharara, U.S. Attorney for the Southern District of New York, has referred to as the “largest single no-fault automobile insurance fraud scheme ever charged” because it defrauded automobile insurance companies of more than $100 million. Brooklyn Doctor Found Guilty in Manhattan Federal Court in Connection with Massive No-Fault Insurance Fraud Scheme, Press Release, http://1.usa.gov/1EDDNso. The perpetrators used this scheme for, among other things, creating and operating medical clinics that provided unnecessary and excessive medical treatments in order to take advantage of New York's no-fault law. See Manhattan U.S. Attorney Announces Conviction of Mikhail Zemlyansky on Racketeering, Securities Fraud, Mail Fraud, and Wire Fraud Charges, Press Release, http://1.usa.gov/1E5nxQg. The results have been somewhat mixed in this case. Many of the defendants have pleaded guilty, but often to lesser charges.

The first trial of one of the alleged leaders of the scheme, Mikhail Zemlyansky, in Fall 2013, resulted in a mistrial on Count One ' which charged Zemlyansky with racketeering conspiracy ' after the jury failed to reach a unanimous verdict. At that trial, Zemlyansky was acquitted of eight counts. (Late in March of this year, Zemlyansky was found guilty after re-trial on racketeering conspiracy, securities fraud, mail fraud, and wire fraud charges following a four-week jury trial before Judge J. Paul Oetken.)

Moreover, one of the dozens charged in the case was attorney Matthew Conroy of Garden City, NY. He went to trial and was found not guilty by Judge Oetken, who heard the case without a jury. John Riley: Attorney Matthew Conroy Acquitted in Massive Auto Insurance Case, Newsday , Jan. 26, 2015, http://nwsdy.li/1E5o3hk.

Still, it is clear that the case was ground-breaking. According to prosecutors, in order to mislead New York authorities and private insurers, the true owners of various medical clinics paid licensed doctors to use their licenses to incorporate professional corporations through which the true owners billed private insurers millions of dollars for medical treatments and tests, many of which were not medically necessary. The government asserted that Tatyana Gabinskaya, a doctor in Brooklyn, was the stated owner of one such clinic that provided MRIs and other radiology tests but that the clinic, in reality, was owned by Zemlyansky and Michael Danilovich. In addition, the government charged, Gabinskaya was the stated owner of six other medical professional corporations, including five incorporated in the span of approximately one year.

The government contended that when interviewed under oath about her role at the clinic, Gabinskaya repeatedly lied to deceive the insurers and induce them into paying claims that were not eligible for reimbursement. Gabinskaya was indicted, along with dozens of other defendants, and, following a two-week jury trial before Judge Oetken, was convicted of one count of conspiracy to commit health care fraud and one substantive count of health care fraud. She also was convicted of one count of conspiracy to commit mail fraud and one substantive count of mail fraud.

Thereafter, Gabinskaya was sentenced by Judge Oetken to one year and one day in prison. In a statement, Bharara said, “Gabinskaya was one of the linchpins in a scheme that defrauded insurers on an unprecedented scale. At the heart of her deception was her repeated lie that she owned and operated a medical clinic she did not in fact own or operate that billed for numerous fraudulent claims. That has proven to be a prescription for prison.” Brooklyn Doctor Sentenced in Manhattan Federal Court to One Year and One Day in Prison for Role in Auto Insurance Fraud Scheme, Press Release, http://1.usa.gov/1PiI1Rw.

Lawyers

A number of lawyers in New York recently have faced both jail time and loss of their licenses as a result of their involvement in insurance fraud.

For example, in March 2013, attorney Sol Naimark pleaded guilty to his role in two separate conspiracies to defraud private insurance companies under New York's no-fault regime. Naimark admitted to paying a no-fault clinic controller to refer patients who had received unnecessary treatments so that he could file personal injury lawsuits on behalf of these patients. He also pleaded guilty to a charge relating to payments he made to a so-called “runner” to bring him no-fault patients so that he could file personal injury lawsuits on their behalf. See Lawyer Pleads Guilty to Involvement in Massive No-Fault Automobile Insurance Fraud Scheme, Press Release, http://1.usa.gov/1AWFMaA.

Last September, Naimark tendered his resignation as an attorney and counselor-at-law to the Appellate Division, Second Department. He acknowledged his criminal conviction; acknowledged that if disciplinary charges were predicated on his criminal conviction of a serious crime, he could not successfully defend himself on the merits against such charges; and acknowledged that he knew that he would be barred by Judiciary Law ' 90 from seeking reinstatement as an attorney for a minimum of seven years. In late January, the Second Department accepted Naimark's resignation and said that he “is disbarred, and his name is stricken from the roll of attorneys and counselors-at-law, effective immediately.” Matter of Naimark , 126 A.D.3d 19 (2d Dept. 2015).

Victor J. Horowitz, another lawyer, met the same fate as Naimark. Matter of Horowitz , 123 A.D.3d 207 (1st Dept. 2014). On Aug. 29, 2012, Horowitz pleaded guilty, in the U.S. District Court for the District of New Jersey, to health care fraud and tax evasion and, thereafter, was sentenced to 17 months' imprisonment on each count, along with fines and restitution. His conviction stemmed from his participation in a scheme by which individuals falsely claimed to have been injured in automobile collisions and fraudulently obtained payments from insurance carriers for unnecessary medical treatments. At his plea allocution, Horowitz admitted that he represented people and pursued legal claims on their behalf that involved overbilling for unnecessary services by a rehabilitation center as part of the fraudulent scheme, and that he recovered on behalf of those clients over $30,000 that he knew included overbilling or payments for unnecessary treatment services.

Horowitz was temporarily suspended from the practice of law in New Jersey by the Supreme Court of New Jersey on Nov. 7, 2012, and, based on that order, by the U.S. District Court for the Eastern District of New York by order dated March 6, 2013.

The First Department's Disciplinary Committee sought an order from the First Department striking Horowitz's name from the roll of attorneys pursuant to Judiciary Law ' 90(4), based on his federal conviction for health care fraud. Section 90(4)(a) authorizes automatic disbarment of any attorney upon conviction of a felony, defined as “any criminal offense classified as a felony under the laws of this state or any criminal offense committed in any other state, district, or territory of the United States and classified as a felony therein which if committed within this state, would constitute a felony in this state.” The out-of-jurisdiction felony must be “essentially similar,” although not necessarily identical to, an offense classified as a felony in New York. See Matter of Margiotta, 60 N.Y.2d 147 (1983).

The committee suggested that Horowitz's conviction for health care fraud was essentially similar to a conviction under New York's class D felony offense of insurance fraud in the third degree. Penal Law '176.20. Horowitz disputed this, contending that his health care fraud conviction only could be said to be essentially similar to the New York misdemeanor of insurance fraud in the fifth degree. Penal Law ' 176.10.

The First Department was not persuaded by Horowitz's argument. In its decision, it ruled that his admissions during his federal plea allocution established that his admitted criminal conduct supporting his federal conviction of health care fraud rendered his conviction essentially similar to the New York State felony of insurance fraud in the third degree. The court found that grounds for automatic disbarment were established, and it granted the committee's petition to the extent that it sought an order striking Horowitz's name from the roll of attorneys effective nunc pro tunc to Aug. 29, 2012. (See also Matter of Ioannou, 116 A.D.3d 178 (1st Dept. 2014) (lawyer disbarred after pleading guilty to, among other things, insurance fraud in the third degree in violation of Penal Law ' 176.20, a class D felony, based on his admission that he had assumed the identity of a woman, who was not a client, had used her name and personal identifying information to settle an insurance claim, and then had stolen the proceeds of the settlement that he had fraudulently negotiated). Cf. Matter of Squitieri' 2011 N.Y. Slip Op. 82966(U) (App. Div. 1st Dept. Sept. 8, 2011). Here, a disbarred lawyer subsequently pleaded guilty to health care fraud. See Former Attorney Pleads Guilty in Manhattan Federal Court to Filing Fraudulent $1 Million Personal Injury Claim Against the FBI, Press Release, http://1.usa.gov/1REo8Tz.

Conclusion

Insurance fraud has consequences. This author often has discussed the impact of insurance fraud on individual consumers and on those who perpetrate insurance fraud. As discussed here, it also can leave a permanent stain on the lives of the licensed professionals who enable and assist those who engage in insurance fraud.

Evan H. Krinick is managing partner of Uniondale, NY's Rivkin Radler, and can be reached at [email protected]. This article also appeared in the New York Law Journal, an ALM sister publication of this newsletter.