CROOKED TAKE ON AMERICAN DREAM 'FAMILY BUSINESS' RUNS $20 MILLION SCAM.

Byline: JASON KANDEL

Staff Writer

Oppressed in their native Ukraine, Konstantin and Mayya Grigoryan came to the United States a dozen years ago in search of the American dream.

They didn't speak English, struggled to pay the bills and relied on family and friends to make ends meet. Eventually they found jobs and began to acquire wealth, opening a restaurant, starting a string of medical clinics and finally buying a $661,500 home in a gated community in Altadena.

But this American dream was built on a crooked foundation, authorities say. Indicted by a federal grand jury in 2004, the couple was convicted of leading a Russian-Armenian organized crime ring that paid kickbacks to doctors, recruiters and patients and defrauded the U.S. government out of $20million over five years.

"The Grigoryan case is quite representative of a major problem in the area," said Assistant U.S. Attorney Bruce Searby, who prosecuted the case. "It's widespread. Medicare expenses generally are busting the federal budget.

"If the government is being defrauded of that money, it's contributing to a great strain on an important public program."

The Grigoryans are in custody awaiting sentencing. Their attorneys either declined to comment or did not return repeated calls.

The case is spelled out in more than 200 pages of court documents -- other records remain sealed -- that paint a rags-to-riches tale of an educated family who immigrated to America, then cheated the government of their adopted homeland.

Fleeing anti-Semitism

In court documents requesting bail, Mayya Grigoryan described her life in the western Ukrainian city of Bershad, growing up as an only child in a blue-collar Jewish family.

"You couldn't get a good job if you were Jewish," she wrote. "Many people felt forced to hide the fact that they were Jewish."

She wrote how she met and fell in love with the "bright, energetic" Konstantin Grigoryan while studying at the Institute of Food Industry in Moscow.

They earned degrees in chemistry, married in 1973 and had a daughter and a son. Konstantin served in the Soviet Army, rising to the rank of colonel. Mayya worked as a lab technician at a winery.

But their middle-class lifestyle was overshadowed by anti-Semitism rampant in the former communist country.

"Both Mayya and Konstantin took fulfillment in their work, but because of Mayya's religious heritage (as well as Konstantin's Armenian background), there were limits to their professional advancement," wrote Kenneth I. Kahn, an attorney representing Mayya. So the family set out for a better life, coming to live with relatives in the Russian district of West Hollywood in 1994.

Setting up the scam 

After briefly working in construction, Konstantin became a technician at a medical lab. Using his earnings, he opened his own health clinics and labs. His business partners were close relatives, including his son-in-law, Eduard Gershelis, a former dental technician.

Members of the group recruited doctors and staff and applied to the federal government to treat Medicare patients, which allowed them to bill the federal health insurance program for medical tests they performed.

Prosecutors said some members of the group would pay $150 to recruiters -- most of them Filipino or Armenian -- to find "patients" as far away as San Diego and Milpitas who would agree to undergo unnecessary tests in exchange for cash or cans of the nutritional supplement Ensure.

"Word got out to homeless and disadvantaged people that these were places they could go to sometimes to get money and sometimes get food," said Jerry Mooney, attorney for Gershelis.

The group could make thousands of dollars off a single patient by billing Medicare for expensive ultrasounds, blood counts and pulmonary work-ups that were unnecessary or never even performed.

They backed up the fictitious tests with phony documents, complete with diagnostic reports, in case they were audited, court records show.

While Konstantin's clinics drew up the claim forms, Mayya's company, called 24/7, submitted the claims to Medicare, prosecutors said.

One clinic, Angeles Medical, took in about $4.6million from 2000 to 2003.

They had expenses -- kickbacks to recruiters, patients and doctors, Searby said. But they also funneled more than $2million through shell companies to Swiss bank accounts, nearly half of which went into an account named Leika, Russian for watering can or funnel, according to the asset forfeiture complaint.

And they bought residential and commercial real estate including a condo in Los Angeles that served as the headquarters for another family business.

Overall, the group stole more than $20million from Medicare from 2000 to 2005, prosectors said.

But eventually they brought in so many patients that Medicare became suspicious and began denying claims for patients whose account numbers were overused, according to court records.

Agents began unraveling the group's network in late 2002 when recruiters driving patients from San Diego to L.A.-area doctors' offices were arrested and connected to Grigoryan. One cooperated with authorities, providing names of patients and other information, court records show.

Unraveling network

By 2003, authorities learned of hundreds of Vietnamese residents in Santa Clara County who were being bused to Grigoryan's clinics in L.A. for checkups -- visits that resulted in $1million in Medicare claims.

Some later complained to Medicare that they had been billed for thousands of dollars in equipment and tests they never received. Others told investigators their Medicare statements listed tests ordered by doctors they never saw, allegedly given at clinics they had never heard of.

The complaints began piling up. By 2004, Konstantin had pleaded no contest to charges of defrauding the state's Medi-Cal health care program. He was sentenced to probation and was barred from participating in state and federal health care programs.

But court records say he simply removed his name from paperwork and continued to run his businesses as a silent partner.

As prosecutors began unraveling his organization, Konstantin confided to an informant that he had grown to hate America and said he had enough money to retire and live comfortably back home.

Months later, a federal grand jury indicted the Grigoryans and their associates for conspiring against Medicare. The couple was arrested last year.

Mayya Grigoryan, 55, pleaded guilty to one count of conspiracy and faces up to five years in prison.

Konstantin, 57, and Gershelis, 35, pleaded guilty to conspiracy and signing a false tax return. They each face eight years in prison when they are sentenced May21.

The U.S. government has seized $2.2million the Grigoryans had in Swiss bank accounts.

In federal court documents in the Grigoryan case, FBI Special Agent Jessica Marrone wrote that "one likely motive" for laundering so much money overseas was the couple's desire to return to their homeland to retire. Marrone wrote that they told a confidential informant in 2004 that they "hate America."

Mooney, the attorney for Gershelis, described his client as a victim of circumstances.

"He came out of a culture and a place where, in order to succeed, one had to beat the system, and the government was sort of the opponent to manipulate because corruption was the order of the day," Mooney said.

"So the mind-set of where they had come from sort of fit where they fell into this activity. They didn't invent this. They learned it from somebody else. They were able to create a more efficient organization with better people."

Searby, the federal prosecutor, said the defendants could have successfully operated a legitimate business.

"This is actually a very intelligent, hard-working and family-oriented group of people that I think could have succeeded in this country even without going down the path they did.

"Hopefully," he said, "others will choose not to follow them in that path, and hopefully when they are released they can start over."

jason.kandel(at)dailynews.com

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