United States Drug Enforcement Administration

NEW YORK -   - James J. Hunt, Special Agent-in-Charge of the U.S. Drug Enforcement Administration’s New York Division,  Bridget G. Brennan, New York City’s Special Narcotics Prosecutor,  Scott Lampert, Special Agent-in-Charge of the Office of the Inspector General, U.S. Department of Health and Human (OIG HHS), New York City Department of (DOI) Commissioner Mark G. Peters, Acting Brooklyn District Attorney Eric Gonzalez, New York City Human Resources (HRA) Commissioner Steven Banks and New York State Health Department Commissioner Dr. Howard A. Zucker announced today the indictment of 13 individuals in connection with schemes to defraud Medicaid and Medicare of millions of dollars, to illegally sell prescriptions for opioid painkillers and to commit money laundering.

Two indictments filed by the Office of the Special Narcotics Prosecutor center on three medical clinics in Brooklyn, which are charged in addition to the 13 individuals and two corporate entities. The indictments contain a combined 477 of the following: Conspiracy in the Fourth Degree, Criminal Sale of a Prescription for a Controlled Substance, Health Care Fraud in the First and Second Degrees, Grand Larceny in the First and Second Degrees, Petit Larceny, Offering a False Instrument for Filing in the First Degree, Falsifying Business Records in the First Degree, Money Laundering in the First, Second and Fourth Degrees, Scheme to Defraud and Scheme to Defraud by Unlawfully Selling Prescriptions.

This morning 12 defendants were arrested in Brooklyn, Queens, Staten Island, Manhattan and New Jersey. Arraignments are set to take place this afternoon before Manhattan Supreme Court Justice Neil Ross, Part 23, 100 Centre Street, 13th floor.

Physicians Lazar Feygin and Paul Mcclung and office managers Konstantin Zeva, Rachel Smolitsky, Vyacheslav Maksakov, Aka “Steve,” and Pavel Krasnou are charged with running three medical clinics in Brooklyn that were engaged in a variety of criminal activity. The clinics allegedly defrauded Medicaid and Medicare by billing for millions of dollars in unnecessary medical tests. To induce patients to submit to these tests, Feygin and Mcclung, and other medical practitioners in their employment are charged with illegally providing  patients with prescriptions for oxycodone, an addictive opioid painkiller, for no legitimate medical purpose.

It is alleged that the patients would not receive prescriptions for oxycodone, an addictive painkiller with a high resale value on the black market, unless they submitted to unnecessary procedures which the clinics billed to Medicaid and Medicare. Members of the charged conspiracies also engaged in laundering money to conceal illicit proceeds. As the main alleged architect of these alleged schemes, FEYGIN enjoyed a lavish lifestyle that included extensive real estate holdings, frequent trips overseas and the regular purchase of luxury goods.

The charges are a result of a long-term wiretap investigation by the DEA’s Long Island District Office-Tactical Diversion (LIDO-TDS), the Special Narcotics Prosecutor’s Prescription Drug Investigation Unit, the Brooklyn District Attorney’s Office, the Office of the Inspector General for the U.S. Department of Health and Human Services, the New York City Department of Investigation, the New York City Human Resources Administration, and the New York State Health Department’s Bureau of Narcotic (BNE).

DEA’s LIDO-TDS comprises agents and officers of the DEA, Port Washington Police Department, Nassau County Police Department, Suffolk County Police Department, Rockville Centre Police Department and the Internal Revenue (IRS). 

Investigative techniques used in what has been dubbed “Operation Avalanche” include physical surveillance, interviews with patients and former employees, a series of Russian-language wiretaps, analysis of medical records, consultations with medical and insurance industry experts, and a review of financial records associated with the clinics and other related corporate entities.

Illegal Sales of Oxycodone Prescriptions

At the outset of the long-term investigation, which began in 2013, the DEA’s Long Island District Office and Special Narcotics investigators identified a group of “doctor shoppers,” or individuals who sought to illegally obtain prescribed controlled substances, operating in the New York metropolitan area. Agents learned that these doctor shoppers frequented two Brooklyn clinics owned by Dr. Lazar Feygin. The clinics served as highly prolific oxycodone “pill mills,” or medical practices that make money by illegally selling prescriptions: Parkville Medical Health, P.C. in Kensington and LF Medical Services of NY, P.C. in Clinton Hill.

Acting Brooklyn District Attorney Eric Gonzalez submitted multiple eavesdropping applications for court authorization. The wiretap investigation was initiated in September of 2016 in collaboration with DEA’s LIDO-TDS, the Special Narcotics Prosecutor’s Office, and the New York City Department of Investigation.

The investigation revealed that beginning in 2012, Feygin hired a series of doctors, physicians’ assistants and nurse practitioners to allegedly prescribe large quantities of oxycodone unnecessarily to large numbers of patients and order unnecessary medical procedures. McClung was one of these physicians.

A small group of employees, including McClung and physician’s assistant Juan Cabezas, broke off from Feygin’s practice in 2013 and formed PM Medical P.C. While PM Medical operated independently from Feygin, medical practitioners and staff engaged in the same pattern of criminal activity. The investigation revealed that the three clinics gained reputations throughout New York City as locations where oxycodone prescriptions were relatively easy to obtain.

Feygin and other indicted staff members of Parkville and LF Medical were allegedly responsible for prescribing over 3.7 million oxycodone pills between early 2012 and early 2017 and ordering reimbursed procedures, generating over $16 million in revenue. Indicted PM Medical practitioners prescribed over 2.6 million pills between mid-2013 and early 2017, and ordered reimbursed procedures generating more than $8 million in revenue.

At the height of the conspiracies in 2016, the three clinics conducted a total of more than 1,600 office visits per month. Charges of Criminal Sale of a Prescription for a Controlled Substance contained in the two indictments focus on a sampling of 20 patients. 

Medical practitioners employed by Feygin included Dr. Michael Taitt, physicians’ assistants Marie Nazaire and Cabezas, and nurse practitioner Marjorie Louis-Jacques.  Konstantin Zeva served as the office manager of Parkville and Feygin’s relative Rachel Smolitsky served as the office manager of LF Medical. Reynat Glaz worked as a physical therapist.

Prescribing practitioners at PM Medical included McClung, physicians’ assistants Abdus Sattar and Cabezas. Vyacheslav Maksakov served as an office manager for PM Medical. Pavel Krasnou was also an office manager.

The investigation revealed that oxycodone prescriptions were routinely written for no legitimate medical purpose and that some medical practitioners employed by the clinics were pressured to write these prescriptions. As part of the conspiracy, in a November 9, 2016 phone call, Feygin told Zeva that he planned to warn a medical practitioner, “if she’d send one more patient to pain management without my personal knowledge, she’ll have a big problem with me. That’s it. Because it is a total shame. That is why we have a decreased number of patients. They send them all to pain management.”

On multiple calls detailed in the conspiracy charge, Zeva and others discussed the need to pay medical practitioners more in order for them to risk their medical licenses by frequently prescribing oxycodone.

Patients received only cursory medical examinations, or no examination at all, and contraindications for opioid drugs were systematically ignored. Patients were pressured to submit to excessive and unnecessary medical tests. In an October 26, 2016 phone call, Zeva informed Feygin that a patient in a wheelchair was complaining about the elevator at Parkville Medical being broken, to which Feygin replied, “if he is given his freaking oxycodone, then excuse me, he should kiss your [unintelligible] instead of complaining.” 

For example, the clinics continued to provide oxycodone prescriptions to patients in the face of evidence that they were likely selling pills or abusing other narcotic drugs. In some cases, patients tested positive for other narcotic drugs, which would also raise a red flag about continuing an oxycodone prescription.
 
Medicaid and Medicare Fraud

It was part of the conspiracies for Parkville Medical, LF Medical and PM Medical to be reimbursed by Medicaid and Medicare for office visits purportedly conducted by medical practitioners, which they knew did not meet required standards for reimbursement.

The Feygin clinics and PM Medical allegedly charged the government-funded medical insurance programs, including the NYC Health + Hospitals’ insurance company MetroPlus Health Plan and the private insurer Fidelis Care, not just for office visits, but also for excessive diagnostic tests, the great majority of which were medically unnecessary. The Office of the Inspector General, U.S. Department of Health and Human Services, the New York City Department of Investigation, the New York City Human Resource Administration  and the Brooklyn District Attorney’s Office provided crucial assistance in developing this aspect of the investigation.

Feygin’s clinics received over $16 million in reimbursements from Medicaid/Medicare between early 2013 and early 2017, while PM Medical received over $8.6 million between 2013 and 2017. Both Feygin and McClung were in the top 10 highest reimbursed providers for all of MetroPlus Health Plan for three years from January 1, 2014 through December 31, 2016.

The investigation revealed that some medical practitioners employed by the clinics were pressured to order tests that were not medically necessary. For example, patients who had never complained of nerve-related conditions or heart problems were administered expensive nerve conduction diagnostic tests and echocardiographs by the clinics.

Beginning in late 2016, the lion’s share of drug urinalyses ordered by Feygin’s clinics was handled by Alec Brook-Krasny, a former New York State Assemblyman affiliated with Quality Laboratory Services in Sheepshead Bay. Brook-Krasny is charged with directing unnecessary laboratory testing of specimens sent from Parkville Medical and LF Medical for which Quality Laboratory Services was reimbursed by Medicaid and Medicare.

Brook-Krasny also arranged for laboratory test results to be altered to remove contraindications for opioid prescribing. For example, patients prescribed opioids are instructed not to consume alcohol because there is a high risk of overdose. Yet, urinalysis testing of patients at Feygin’s clinics routinely came back positive for alcohol. Rather than preventing these patients at Feygin’s clinics from receiving opioid prescriptions or switching to a non-opioid pain reliever, the alcohol-related results were systematically deleted by Brook-Krasny, as discussed in a series of phone calls in October 2016, so that doctors would not balk at continuing the opioid prescriptions.

It was also part of the conspiracies for Parkville Medical and LF Medical to be reimbursed by Medicaid and Medicare for physical therapy and psychiatry services.  The investigation indicated that physical therapy sessions by Reynat Glaz might involve nothing more than a few minutes in a massage chair. Even though GLAZ allegedly knew these treatments fell below required standards of reimbursement, claims were still submitted. The investigation further revealed that patients were allegedly required to undergo these treatments as a condition of receiving prescriptions for oxycodone.

On October 25, 2016, Zeva and Glaz discussed how Zeva should develop a numerical system to determine how many tests need to be ordered depending on how many patients and practitioners were at the clinic on a particular day.  In another call on November 23, 2016, Feygin told Zeva that more patients needed to be sent to see the psychiatrist, otherwise Feygin would be paying the psychiatrist more than the fees brought in.

In a PM Medical-related call, Maksakov discussed the need to vary diagnosis codes to avoid scrutiny from MetroPlus Health Plan.

Money Laundering

An extensive financial investigation by the DEA’s Long Island Division, the Special Narcotics Prosecutor’s Office and New York/New Jersey High Intensity Drug Trafficking Area revealed the extent of the ill-gotten gains. The investigation identified numerous assets that will be the subject forfeiture proceedings, including domestic bank and brokerage accounts. 

As part of the money laundering scheme, clinics paid practitioners through a series of corporations and limited liability companies that allegedly served as shell companies. Some of the money was then funneled back into the clinics to pay business expenses. 

For example, it was part of the conspiracies for Maksakov to promote illegal activities by paying the certain business expenses of PM Medical from a REGO Management, INC. bank account and for Pavel Krasnou to be paid by PM Medical via TRC Global Opportunity Inc., a corporation he owned and controlled.  Investigators determined that McClung, Maksakov and Krasnou each derived-either personally or through their shell companies-approximately $1 million in checks from PM Medical between August 2013 and July 2016.

Similarly, Feygin wrote more than $1 million in checks to promote the continuing illegal activity of Parkville; Smolitsky wrote more than $50,000 in checks to promote the continuing illegal activity of LF Medical. The Special Narcotics Prosecutor’s Office, DEA, and HIDTA determined that Feygin was provided personally over $2 million in checks from Parkville between September 2012 and September 2016, and $276,000 in checks between January 2015 and June 2016 by LF Medical. 

The Special Narcotics Prosecutor’s Office, DEA and HIDTA also determined that Feygin utilized bank accounts associated with Parkville and LF Medical to make hundreds of thousands of dollars in payments to companies he controlled. Feygin’s accounts, along with the accounts of the other defendants, were frozen in conjunction with today’s arrests as part of a parallel civil forfeiture action instituted by the Special Narcotics Prosecutor.

Court authorized search warrants are being executed at the three indicted medical clinics and at the principal defendants’ residences, including the homes of Feygin, Mcclung, Zeva, Maksakov, Krasnou and Brook-Krasny.

Special Narcotics Prosecutor Bridget G. Brennan thanked her office’s Prescription Drug Investigation Unit, the DEA’s Long Island District Office, the Brooklyn District Attorney’s Office, the Office of the Inspector General for the U.S. Department of Health and Human (OIG HHS), the New York City Department of (DOI), the New York City Human Resources (HRA) and the New York State Health Department’s Bureau of Narcotic (BNE). The Port Washington Police Department, the Nassau County Police Department, the Suffolk County Police Department, the Rockville Centre Police Department, the Internal Revenue (IRS), New York/New Jersey HIDTA, DEA’s Organized Crime Drug Enforcement Task Force Fusion Center and the New York County District Attorney’s Asset Forfeiture Unit assisted in the investigation.

Bridget G. Brennan said, “Dr. Lazar Feygin, one of the New York State’s top Medicaid billers, ran a multi-million dollar criminal enterprise disguised as a medical practice.   Prescriptions for oxycodone were treated as a commodity and patients were a means to an end - the end being money. Feygin’s clinics and PM Medical made a business out of violating minimum medical standards and ethics in a ruthless quest for Medicaid cash. Patients endured unnecessary procedures knowing they would receive a monthly prescription for the most sought after narcotic on the black market. The fusion of pill mill and Medicaid mill harmed countless people throughout the region, while Feygin and his co-defendants lined their pockets with taxpayer dollars.”

DEA Special Agent-in-Charge James J. Hunt stated, “Hidden within our city were three pill mills disguised as medical clinics, seven drug dealers disguised as medical practitioners and a multi-million dollar scam defrauding NYC’s healthcare fund.  We estimate that these pill mills distributed six million diverted pills, worth $60 to $100 million, into the hands of drug dealers and opioid addicts.  This four-year investigation will have a significant impact on the availability of diverted prescription pills which are reported to have been misused by 80% of new heroin users.” 

“The defendants in this scheme heartlessly contributed to the opioid epidemic plaguing our society, and compromised the care of thousands of vulnerable citizens,” said Special Agent in Charge Scott J. Lampert, of the U.S. Department of Health and Human Services, Office of Inspector General’s New York office.  “This conduct puts lives at risk and won’t be tolerated. HHS OIG, along with our law enforcement partners, will continue to aggressively pursue those who seek to perpetuate and profit from the opioid crisis in this country, as well as undermine our nation’s taxpayer funded federal health care programs.”

New York City Department of Investigation Commissioner Mark G. Peters said, “The defendants are crooks who stole millions from New York City’s cash-strapped healthcare system. They used pain pills instead of revolvers, but they robbed the City all the same. DOI thanks its law enforcement partners for their hard work and collaboration on this investigation.”

Acting Brooklyn District Attorney Eric Gonzalez said, “These defendants are accused of betraying their oaths as healers and healthcare providers.  The alleged frauds, and the integrated illegal narcotics distribution, not only extended the vile cycle of opiate abuse, but also attacked our ability as a society to fulfill the basic moral imperative to provide support and appropriate healthcare for the neediest among us.  At a time when so many families are struggling to afford healthcare, and others are wrestling with addiction, it is particularly deplorable.  I commend Special Narcotics Prosecutor Brennan and all the federal, state and city agencies who worked together to dismantle this criminal scheme, and I look forward to continuing that partnership as we root out fraudulent operations like this one.”

“By forcing vulnerable New Yorkers to submit themselves to medical tests and treatments that they didn’t even need, these defendants have shown not only a clear intention to defraud Medicaid but also an absolute disregard for human dignity,” said Department of Social Service Commissioner Steven Banks. “HRA will continue working with the Special Narcotics Prosecutor, the Department of Investigation and others to prevent, identify and report suspected fraud and abuse that amount to theft of public benefits.”

New York State Health Commissioner Dr. Howard Zucker said, “While thousands of New Yorkers battle opioid addiction each year, these defendants fed the opioid epidemic for their own profit, with no regard for the countless lives they damaged.  New York State has no tolerance for practitioners who dishonor their oath to do no harm, and instead take advantage of those they are entrusted to heal. The Department of Health is proud to have assisted in Operation Avalanche and put an end to these unconscionable schemes.”

Port Washington Police Chief James Salerno stated, “This investigation epitomizes law enforcement collaboration on a common goal.  State, local and federal law enforcement agencies worked together to stop the illegal sales of addictive opioid painkillers and other associated criminal activity.” 

Nassau County Acting Police Commissioner Thomas C. Krumpter said, “These indictments are a clear example of the professionalism of all of the members involved and their agencies which worked cohesively to bring these individuals to justice.  The drugs that these defendants dispensed into our society and the financial draw due to fraud are actions that cannot be tolerated. Congratulations to all for a job well done.”

Suffolk County Police Commissioner Timothy D. Sini said, “This case should serve as yet another warning to anyone who feels he or she can get away with illegally pushing narcotics. The collaboration between the Suffolk County Police Department and our regional and federal partners in law enforcement further emphasizes our commitment to take down anyone who deliberately and illegally prescribes opioids and similar narcotics for their own monetary gain. These doctors took an oath to uphold specific ethical standards to serve the medical needs of their patients, but instead became common drug pushers.  The Department will continue to tirelessly work with our fellow law enforcement agencies in stopping this pathway to addiction.”

Rockville Centre Police Commissioner Charles A. Gennario said, “The Diversion Task Force is a major weapon in combating the opiate epidemic harming our nation.  The cooperation amongst agencies is a force multiplier in this battle.  My agency is proud to be a part of it.”

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The charges and allegations are merely accusations and the defendants are presumed innocent until proven guilty.