Businesses should raise their guard and warn employees and other business connections about avoiding potentially fraudulent COVID-19 related scams.
The U.S. Department of Health and Human Services Office of Inspector General is alerting the public about fraud schemes related to the novel coronavirus (COVID-19). Scammers are using telemarketing calls, text messages, social media platforms, and door-to-door visits to perpetrate COVID-19-related scams.
Fraudsters are offering COVID-19 tests, HHS grants, and Medicare prescription cards in exchange for personal details, including Medicare information. However, these services are unapproved and illegitimate.
These scammers use the coronavirus pandemic to benefit themselves, and beneficiaries face potential harm. The personal information collected can be used to fraudulently bill federal health care programs and commit medical identity theft.
Examples of some of these scams include:
- Scammers are using social media to perpetrate COVID-19-related scams. In one major scheme, fraudsters hack social media accounts and send direct messages to beneficiaries while posing as a friend or government employee. The impersonator claims the person is eligible for government grants (citing various reasons like COVID-19, disability, etc.) and urges them to call a phone number to collect the funds. Upon calling, the beneficiary is asked to pay a “processing fee” (using bank account information, gift cards, bitcoin) to receive the grant money. In return, targets of this scam never receive any money, but often large sums of their money are stolen from them. These alleged grants are entirely illegitimate.
- Fraudsters are also continuing to offer COVID-19 tests to Medicare beneficiaries in exchange for personal details, including Medicare information. However, the services are unapproved and illegitimate.
- In another fraud scheme, some medical labs are targeting retirement communities claiming to offer COVID-19 tests, but they are actually drawing blood and billing federal health care programs for medically unnecessary services.
- Also, fraudsters are offering people a $200 Medicare prescription card when no such cards currently exist.
Peter Khaim, 40, and Arkadiy Khaimov, 37, both of Forest Hills, New York, each were charged with one count of conspiracy to commit health care fraud and wire fraud, and one count of conspiracy to commit money laundering. Khaim was separately charged with two counts of concealment money laundering and one count of aggravated identity theft. Khaimov was separately charged with two counts of concealment money laundering.
“These defendants allegedly lined their own pockets by exploiting Medicare flexibilities that were designed to ensure that patients obtained access to needed medications during the COVID-19 crisis,” said Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division. “Together with our law enforcement partners, the Criminal Division is working to aggressively identify, investigate, and prosecute scammers who seek to take advantage of the COVID-19 crisis to defraud our public health care programs.”
“As alleged in the indictment, the defendants manipulated information in over a dozen pharmacies to defraud the Medicare program, including by taking advantage of systems that were intended to assist patients during the COVID-19 pandemic, and then went to great lengths to hide their ill-gotten gains through a network of sham companies,” said Acting U.S. Attorney Set D. DuCharme of the Eastern District of New York. “This office and our law enforcement partners are committed to holding accountable those who seek to enrich themselves at the expense of vital taxpayer-funded health care programs upon which so many rely.”
“We allege Mr. Khaim and Khaimov used the COVID-19 pandemic as cover to exploit changes in the Medicare system,” said Acting Director in Charge William F. Sweeney Jr of the FBI’s New York Field Office. “The changes to this program, funded by taxpayers, were put in place to help fellow citizens obtain needed medications during the pandemic, not line the pockets of fraudsters. Those who attempt to illegally profit from our public funded healthcare programs should remember taxpayers also fund courts and jails, and behavior like the type announced today will be met with swift action from the FBI and our law enforcement partners. If you are aware of frauds like the one announced today, please contact us at 1-800-CALL-FBI.”
“Fraudsters who target the Federal health care system attempt to undermine the integrity of programs that serve millions of individuals. When they leverage a public health emergency to perpetrate schemes, their wanton disregard for the programs and beneficiaries is glaringly clear,” said Special Agent in Charge Scott J. Lampert of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). “We are responding aggressively with our law enforcement partners to pursue bad actors and to warn the public about these ongoing scams.”
“The defendants allegedly carried out a $30 million health care fraud and money laundering scheme, siphoning funds meant for patients during the COVID-19 pandemic,” said Special Agent in Charge Jonathan D. Larsen of IRS-Criminal Investigation (IRS-CI). “While Americans across the country are in dire need of medical and financial assistance, the defendants allegedly used the stolen proceeds to purchase real estate and luxury items. IRS-CI and our law enforcement partners will continue to work tirelessly to expose COVID-19 schemes and bring those responsible to justice.”
“This indictment describes allegations of crimes that are especially egregious and caused significant harm to the programs designed to protect the most medically vulnerable, jeopardizing the health of our Medicare system and then using our nation’s financial system to launder proceeds of the fraud,” said Special Agent in Charge Patricia Tarasca of the Federal Deposit Insurance Corporation, Office of Inspector General (FDIC-OIG). “We appreciate the cooperation of our fellow law enforcement partners as we work to identify and investigate fraud of this type.”
According to the indictment, the defendants used COVID-19 emergency override billing codes in order to submit fraudulent claims to Medicare, for which they were allegedly paid over $30 million for expensive cancer medication Targretin Gel 1% that, in fact, never was purchased by the pharmacies, prescribed by physicians, or dispensed to patients, often during periods when pharmacies were non-operational, and using doctors’ names on prescriptions without their permission.
The indictment alleges that the defendants acquired control over dozens of New York pharmacies by paying others to pose as the owners of the pharmacies and hiring pharmacists to pretend to be supervising pharmacists at the pharmacies, for the purpose of obtaining pharmacy licenses and insurance plan credentialing. As the effects of the COVID-19 pandemic began to be felt in the United States, the defendants used the COVID-19 pandemic as an opportunity to capitalize on a national emergency for their own financial gain by using the COVID-19 “emergency override” billing codes to submit fraudulent claims for Targretin Gel 1%, which has an average wholesale price of approximately $34,000 for each 60 gram tube.
The indictment also alleges that, with the proceeds of the fraud, the defendants engaged in a complex money laundering conspiracy where they created sham pharmacy wholesale companies, which they named after pre-existing pharmacy wholesalers, and fabricated invoices to make it appear that funds transferred from the pharmacies to the sham pharmacy wholesale companies were for legitimate pharmaceutical drug purchases.
In the first phase of the money laundering conspiracy, the defendants conspired with an international money launderer who arranged for funds to be wired from the sham pharmacy wholesale companies to companies in China for distribution to individuals in Uzbekistan. In exchange, the defendants received cash provided by members of the Uzbekistani immigrant community to an unlicensed money transfer business for remittance to their relatives in Uzbekistan, minus a commission that was deducted by the money launderer.
In the second phase of the money laundering conspiracy, when the amount of fraudulent proceeds exceeded the amount of cash available in the Uzbekistani immigrant community, the defendants directed the international money launderer to transfer funds back from the sham wholesale companies to the defendants, their relatives, or their designess, in the form of certified cashier’s checks and bags of cash that were dropped at their house in the middle of the night. The defendants used the proceeds of the scheme to purchase real estate and other luxury items.
Protect Yourself
Businesses should protect themselves and warn their employees to guard against these and other scams. Recommended steps include:
- Be vigilant and protect yourself from potential fraud concerning COVID-19 vaccines. You will not be asked for money to enhance your ranking for vaccine eligibility. Government and State officials will not call you to obtain personal information in order to receive the vaccine, and you will not be solicited door to door to receive the vaccine.
- Beneficiaries should be cautious of unsolicited requests for their personal, medical, and financial information. Medicare will not call beneficiaries to offer COVID-19 related products, services, or benefit review.
- Be suspicious of any unexpected calls or visitors offering COVID-19 tests or supplies. If you receive a suspicious call, hang up immediately.
- Do not respond to, or open hyperlinks in, text messages about COVID-19 from unknown individuals.
- Ignore offers or advertisements for COVID-19 testing or treatments on social media sites. If you make an appointment for a COVID-19 test online, make sure the location is an official testing site.
- Do not give your personal or financial information to anyone claiming to offer HHS grants related to COVID-19.
- Be aware of scammers pretending to be COVID-19 contact tracers. Legitimate contact tracers will never ask for your Medicare number, financial information, or attempt to set up a COVID-19 test for you and collect payment information for the test.
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