LawFuel.com – Law News Daily – Racketeering Included Massive No-Fault Automobile Insurance Fraud Scheme, Securities Fraud Schemes, Money Laundering, and Operating Illegal Gambling Businesses
Preet Bharara, the United States Attorney for the Southern District of New York, announced that MIKHAIL ZEMLYANSKY was found guilty yesterday on racketeering conspiracy, securities fraud, mail fraud, and wire fraud charges following a four-week jury trial before United States District Judge J. Paul Oetken. The jury convicted ZEMLYANSKY of racketeering stemming from the largest single no-fault automobile insurance fraud scheme ever charged, and his two investment fraud schemes, Lyons Ward & Associates and the Rockford Group.
U.S. Attorney Preet Bharara said: “Mikhail Zemlyansky now stands convicted of spearheading three fraud schemes: one in which the defendant and his co-conspirators billed insurance companies for over $100 million in fraudulent medical treatments, and two that swindled investors out of over $18 million. Worse yet, Zemlyansky laundered the fruits of his crimes through check-cashing entities and shell companies, and invested his criminal proceeds on luxury items. Today’s verdict ensures that he will be punished for the vortex of fraud he orchestrated.”
According to the allegations in the Superseding Indictment and evidence admitted at trial:
From 2007 through 2012, ZEMLYANSKY was a leader of an enterprise engaged in a pattern of racketeering that included a massive scheme to defraud automobile insurance companies under New York’s no-fault insurance law, multiple securities fraud schemes, money laundering, and the operation of illegal gambling businesses.
Under New York State Law, every vehicle registered in the 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 professional.
From 2007 through 2012, ZEMLYANSKY’S organization defrauded automobile insurance companies of more than $100 million by, among other things, creating and operating medical clinics that provided unnecessary and excessive medical treatments in order to take advantage of the No-Fault Law. In addition, ZEMLYANSKY’S organization fraudulently owned and controlled more than a dozen medical professional corporations (“PCs”) – including no-fault clinics, MRI offices, and acupuncture and chiropractic PCs – by paying licensed medical professionals to use their licenses to incorporate the professional corporations. ZEMLYANSKY and his co-conspirators paid kickbacks of thousands of dollars to runners to recruit patients to receive the same battery of tests and treatments, and received kickbacks from other co-conspirators for referring patients for additional unnecessary treatments. All told, ZEMLYANSKY’S organization billed insurance companies for more than $100 million in fraudulent medical treatments. Furthermore, ZEMLYANSKY and his co-conspirators further laundered the proceeds of the fraud through check-cashing entities and shell companies, and used the money to pay for luxury cars, watches and vacations.
In addition to the no-fault insurance fraud, ZEMLYANSKY was convicted for operating two investment fraud schemes that swindled innocent victims out of nearly $18 million. Both fraudulent entities – Lyons Ward & Associates and the Rockford Group – purported to be settlement claims funding companies that invested in lawsuits in return for a portion of future settlements. As part of these schemes, ZEMLYANSKY and his co-conspirators created bogus documents and account statements used by cold-callers working in boiler rooms to solicit victims through false representations. In reality, there was no investment fund at all; instead, ZEMLYANSKY and his co-conspirators simply stole the money invested by victims and laundered the proceeds by wiring them overseas to shell companies in Eastern Europe, which were then turned into cash in the United States.
Finally, ZEMLYANSKY’S organization operated high-stakes illegal poker games in Mill Basin, Brooklyn, that netted profits of tens of thousands of dollars per game.
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ZEMLYANSKY was convicted of one count of conspiracy to commit racketeering, which carries a maximum sentence of 20 years in prison. In addition, ZEMLYANSKY was convicted of one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years; mail fraud and wire fraud, which carries a maximum sentence of 20 years; as well as substantive counts of securities fraud, mail fraud and wire fraud, each carrying a maximum of 20 years. ZEMLYANSKY is scheduled to be sentenced on July 15, 2015, at 3:00 p.m., before Judge Oetken. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
ZEMLYANSKY, 37, of Hewlett, New York, was initially arrested on February 29, 2012, and is the 34th defendant convicted in this case. ZEMLYANSKY was remanded pending sentencing following his conviction.
At ZEMLYANSKY’S first trial in the fall of 2013, a mistrial was declared on Count One – which also charged ZEMLYANSKY with racketeering conspiracy – after the jury failed to reach a unanimous verdict. At that trial, ZEMLYANSKY was acquitted of eight counts of charges related to the no-fault insurance fraud scheme and money laundering.
U.S. Attorney Preet Bharara thanked the Federal Bureau of Investigation and the New York City Police Department for their continued outstanding work in this investigation. Mr. Bharara also thanked the National Insurance Crime Bureau, the investigative units of the insurance companies, the Manhattan District Attorney’s Office, and the Alabama Securities Commission for their valuable assistance with the investigation.
The case is being prosecuted by the Office’s Violent & Organized Crime Unit. Assistant U.S. Attorneys Daniel S. Goldman, Daniel S. Noble, and Joshua A. Naftalis are in charge of the prosecution. Assistant U.S. Attorney Carolina Fornos of the Office’s Money Laundering & Asset Forfeiture Unit is responsible for the forfeiture aspects of the case.