MANHATTAN – The ringleader of a $100 million automobile insurance fraud scheme was convicted Thursday of a slew of felony charges including racketeering, massive no-fault automobile insurance scheme, securities fraud schemes, money laundering and operating an illegal gambling business, according to authorities.
Mikhail Zemlyansky and his co-conspirators laundered the profits of the fraud through check-cashing entities and shell companies, and used the money to pay for luxury cars, watches and vacations.
Officials said this is the largest single no-fault automobile insurance fraud scheme ever charged.
“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.” U.S. Attorney Preet Bharara said
Adding, “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.”
Zemlyansky, 37, of Hewlett, New York is scheduled to be sentenced in July, officials said.
A Pattern of Racketeering
From 2007 through 2012, Mikhail 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.
Zemlyansky’s organization defrauded automobile insurance companies of more than $100 million by, among other things, operating medical clinics that provided unnecessary and excessive medical treatments in order to take advantage of the No-Fault Law.
New York’s No-Fault Law
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.
Zemlyansky’s Organization Controlled Medical Clinics
In addition, Zemlyansky’s organization fraudulently owned and controlled more than a dozen medical professional corporations —including no-fault clinics, MRI offices, and acupuncture and chiropractic corporations—by paying licensed medical professionals to use their licenses to incorporate the professional corporations, officials said.
Zemlyanksy 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.
Zemlyansky Also Convicted of Investment Fraud
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.
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.