Congratulations to special agents with the California Department of Justice (DOJ) Bureau of Medi-Cal Fraud and Elder Abuse who worked together with local and federal law enforcement officers in Glendale as part of Operation “Psyched Out” to investigate, arrest and prosecute 16 defendants involved in an elaborate $20 million scheme to defraud Medicare and Medi-Cal, by among other things, fraudulently prescribing expensive anti-psychotic medications and then repeatedly re-billing the government for those drugs.  It all centered around the clinic,  Manor Medical Imaging.

On August 18, 2014, Lianna “Lili” Ovsepian, 33, of Tujunga, the leader of this organized scheme and the manager and owner of Manor Medical Imaging, Inc.,  was sentenced to eight years in federal prison and ordered to pay more than $9 million dollars in restitution to Medicare and Medi-Cal.

“The convicted in this case preyed on veterans, the elderly and the homeless,” said Alan Barcelona, president of the California Statewide Law Enforcement Association (CSLEA).  CSLEA is an association of nearly 7,000 law enforcement, public safety and consumer protection professionals who serve the State of California, including DOJ special agents.  “They wrote bogus prescriptions, used stolen identities, and recycled expensive, anti-psychotic drugs.  The scope of this  organized scheme to defraud was huge and the criminal behavior deplorable.”

This was the largest case of its kind in Southern California and the first case in the nation involving an organized scheme to defraud government health care programs through fraudulent claims for anti-psychotic medications.  Members of the conspiracy created or doctored patient files to make it falsely appear the drugs were necessary and the patients were legitimately treated. After the prescriptions were filled at pharmacies and paid for by Medicare and Medi-Cal, they were sold on the black market and redistributed to pharmacies, where the drugs would be subject to new claims made to Medicare and Medi-Cal as though they were new bottles of drugs.  The scheme generated fraudulent billings of more than $20 million dollars, of which Medi-Cal and Medicare paid more than $9 million based on 14,000  claims submitted in relation to the scheme.

Last November, Ovsepian pleaded guilty to conspiracy to commit health care fraud and conspiracy to commit identity theft.

Manor Medical Imaging, Inc. generated thousands of fraudulent prescriptions for unneeded and expensive anti-psychotic medications for “patients” who were typically low-income beneficiaries of the government-funded health care programs Medicare and Medi-Cal, and who did not need those drugs. The prescriptions appeared to be issued by co-conspirator Dr. Kenneth Johnson, who pre-signed thousands of blank prescriptions that were filled out by Ovsepian’s mother-in-law, Nuritsa Grigoryan.

The beneficiaries who received the prescriptions were brought to pharmacies, where the prescriptions were filled. The drugs were returned to Manor, the “patients” were given nominal payments (usually around $100), and the drugs were diverted into the black market, where they were sold to other pharmacies and re-billed to health care programs as though the drugs were being dispensed for the first time.

As prosecutors argued at sentencing, the beneficiaries included veterans recruited from dual diagnosis programs for drug addiction and schizophrenia, elderly Medicare beneficiaries whose identities were stolen and homeless beneficiaries recruited from skid row.

Following a trial earlier this year, Dr. Johnson, Grigoryan and Ovsepian’s brother, Artak Ovsepian, were found guilty of a host of charges related to the scheme. Those three defendants are currently pending sentencing.  A total of 16 defendants have been convicted either through guilty pleas or by jury verdicts.

Other defendants who were charged in this case include a Pasadena couple whose Huntington Pharmacy in San Marino saw its business grew dramatically due its affiliation with Manor Medical. The owner of the pharmacy, Phic Lim, is scheduled for trial in this case in March 2015.

The investigation in this case, which was called Operation “Psyched Out,” was conducted by the San Marino Police Department; the California Department of Justice, Bureau of Medi-Cal Fraud and Elder Abuse; the United States Food and Drug Administration, Office of Criminal Investigations; IRS-Criminal Investigation; the United States Department of Health and Human Services, Office of the Inspector General; U.S. Immigration and Customs Enforcement’s Homeland Security Investigations; the Glendale Police Department, Organized Crime Team; and the California Department of Health Care Services, Audits and Investigations Branch.