Restaurateur Charged In Multimillion-Dollar Insurance Fraud Scheme And Money Laundering Conspiracy

United States Attorney for the Southern District of New York, Jay Clayton, and Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation ("FBI"), James C. Barnacle, Jr., announced today the arrest of ZHAN PETROSYANTS, a/k/a "Johnny," in connection with the unsealing of an Indictment charging PETROSYANTS with operating an extensive no-fault insurance fraud scheme that submitted tens of millions in fraudulent medical claims and laundering the proceeds. PETROSYANTS was taken into federal custody last night and will be presented today before U.S. Magistrate Ona T. Wang in Manhattan Federal Court. The case has been assigned to U.S. District Judge Victor Marrero.

"As alleged in the indictment, Zhan Petrosyants orchestrated a complex scheme to cheat insurance providers out of millions of dollars," said U.S. Attorney Jay Clayton. "No-fault insurance fraud schemes raise costs for everyone and reduce benefits to consumers, an unnecessary burden we all unfortunately share. Today's arrest demonstrates this Office's continuing commitment to rooting out this pernicious type of fraud that imposes costs on all New Yorkers."

"Zhan Petrosyants allegedly stole money by submitting fabricated medical claims to receive millions of dollars in unauthorized payments," said FBI Assistant Director in Charge James C. Barnacle, Jr. "The FBI remains dedicated to dismantling fraudulent schemes that exploit benefits at the expense of New Yorkers."

According to allegations in the Indictment and other publicly filed information in this case:[1]

Under New York State Law, every vehicle registered in New York State 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 "No-Fault Law"). The No-Fault Law requires prompt payment for medical treatment, thereby obviating the need for claimants to file personal injury lawsuits in order to be reimbursed. Under the No-Fault Law, patients can assign their right to reimbursement from an insurance company to others, including medical clinics that provide treatment for their injuries. New York State law also requires that all medical clinics in the State be incorporated, owned, operated, and/or controlled by a licensed medical practitioner in order to be eligible for reimbursement under the No-Fault Law. Insurance companies will not honor claims for medical treatments from a medical clinic that is not actually owned, operated, and controlled by a licensed medical practitioner.

PETROSYANTS and his co-conspirators defrauded automobile insurance programs designed to provide health care benefits for motor vehicle accident victims out of millions of dollars. PETROSYANTS and his co-conspirators agreed to and did submit fraudulent claims to the insurance programs for services that were never provided, services that were unnecessary and excessive, and services that were billed under the names of medical corporations that were not actually owned, operated, and controlled by licensed medical professionals, as required by New York State laws and regulations. If insurance companies had known that the nominee medical corporations were actually owned and controlled by non-medical professionals, the insurance companies would have denied payment for claims submitted by the nominee medical corporations.

To carry out the scheme, PETROSYANTS and his co-conspirators recruited purported physicians, psychologists, and other clinicians under whose names the fraudulent no-fault insurance claims were submitted, and prepared fraudulent no-fault insurance claims to obtain benefits from the automobile insurance companies. When preparing these fraudulent bills, the conspirators frequently used the license information and signatures of licensed psychologists and medical professionals on fraudulent billing records submitted to insurance companies.

In furtherance of the scheme, PETROSYANTS and his co-conspirators obtained advance payments based on the fraudulent claim amounts through financing agreements with funding companies. In particular, PETROSYANTS arranged for his-conspirators to use the services of a funding company ("Funding Company-1") affiliated with a law firm, which provided quick access to criminal proceeds through advances paid by the funding company and provided a veneer of legitimacy to the scheme. In exchange for securing financing from Funding Company-1, PETROSYANTS received a referral fee from Funding Company-1 as well as kickback payments from his co-conspirators representing a portion of the advances paid by Funding Company-1 to the scheme participants. Some of the kickback payments were paid to PETROSYANTS using blank, pre-signed checks drawn on accounts nominally controlled by certain of the No-Fault Providers, which were filled out by co-conspirators in PETROSYANTS's presence.

Further, PETROSYANTS caused Funding Company-1 to pay millions in advances on no-fault medical claims to two shell corporations. Neither shell company was a provider of medical services and the bank accounts in their names that received Funding Company-1's advances were not controlled by a medical professional. Substantially all of the money that these shell companies received from Funding Company-1 was then transferred to a bank account nominally held by a jewelry business based in the Diamond District of midtown Manhattan.

As a result of their fraudulent scheme, PETROSYANTS and his co-conspirators caused insurance providers to be billed tens of millions of dollars in fraudulent no-fault medical claims.

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ZHAN PETROSYANTS, 44, of Edgewater, New Jersey, is charged with one count of conspiracy to commit healthcare fraud, which carries a maximum sentence of 20 years in prison; one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison; one count of aggravated identity theft, which carries a mandatory two-year consecutive sentence; and one count of conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison.

The maximum potential sentences in this case are prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendant would be determined by a judge.

Mr. Clayton praised the outstanding work of the FBI.

The case is being handled by the Office's Illicit Finance and Money Laundering Unit. Assistant U.S. Attorneys Cecilia Vogel, Christopher Brumwell, and Eli J. Mark are in charge of the prosecution.