On December 7, 2009, a publisher of Russian-language newspapers and magazines, Andranik Petrosian, of Burbank, California was sentenced to 96 months in prison by United States District Judge Stephen V. Wilson in the Central District of California. In addition to the prison term, Judge Wilson ordered Petrosian to pay $521,845 in restitution to the Internal Revenue Service.
This sentence followed his trial in April 2008 where a federal jury convicted him of conspiracy to defraud the Internal Revenue Service and making false statement to special agents with the IRS.
The allegations in this case were that Mr. Petrosian used his publications – which included the newspaper Contact Weekly and the magazines Kakadu and Tet-a-Tet – as fronts to launder more than $10 million for medical companies some of which were alleged to be entirely fraudulent. It was essentially a phony or inflated invoice arrangement - masquerading as a check cashing arrangement.
As detailed in the indictment, the "cash back" or laundering arrangement worked as follows. Beginning in 2003 and continuing through 2007, the medical companies wrote checks to Mr. Petrosian's companies for advertising or graphic design services that were significantly in excess for the services provided. Mr. Petrosian's companies provided invoices for the "advertising" or "graphic design services" which allowed the medical companies to falsely deduct the entire payments on their tax returns. While Mr. Petrosian did place advertisements in his publications, these advertisements were worth only a small fraction of the price paid by medical companies across the Southwest.
Mr. Petrosian would deposit the checks made payable to his businesses and, subsequently, would give cash back, less a fee of up to 10%, to his "advertisers." The "advertisers" would use the false invoices to fraudulently substantiate expenses used in the preparation of their tax returns which were subsequently filed with the IRS.
In the trial, it was alleged that Mr. Petrosian returned approximately 90 percent of the money from the checks back to the medical company administrators in cash. The cash was allegedly handed over in white envelopes during back-office meetings at Petrosian’s office on Glenoaks Boulevard in Burbank. Mr. Petrosian allegedly obtained large quantities of cash, either by smuggling cash into the United States derived from wire transfers to Armenia, or via an elaborate Hawalla-type money-changing system.
It was also alleged that the medical company administrators used the cash Mr. Petrosian returned to make cash payments to patients and cappers/marketers. Based on my experience in these cases, these arrangements were also used as a means of the businesses who are "advertising" to obtain tax free money for other purposes as well.
The U.S. Attorney's Office contended that Mr. Petrosian's operation fueled medical insurance fraud schemes by providing a steady stream of untraceable cash. In one such scheme, it was alleged that a clinical laboratory used the cash Mr. Petrosian provided to make illegal kickback payments to clinics in exchange for the clinics referring blood samples to the laboratory for analysis. The payments motivated the clinics to refer patients for medically unnecessary tests that were paid for by Medicare.
This sentence followed his trial in April 2008 where a federal jury convicted him of conspiracy to defraud the Internal Revenue Service and making false statement to special agents with the IRS.
The allegations in this case were that Mr. Petrosian used his publications – which included the newspaper Contact Weekly and the magazines Kakadu and Tet-a-Tet – as fronts to launder more than $10 million for medical companies some of which were alleged to be entirely fraudulent. It was essentially a phony or inflated invoice arrangement - masquerading as a check cashing arrangement.
As detailed in the indictment, the "cash back" or laundering arrangement worked as follows. Beginning in 2003 and continuing through 2007, the medical companies wrote checks to Mr. Petrosian's companies for advertising or graphic design services that were significantly in excess for the services provided. Mr. Petrosian's companies provided invoices for the "advertising" or "graphic design services" which allowed the medical companies to falsely deduct the entire payments on their tax returns. While Mr. Petrosian did place advertisements in his publications, these advertisements were worth only a small fraction of the price paid by medical companies across the Southwest.
Mr. Petrosian would deposit the checks made payable to his businesses and, subsequently, would give cash back, less a fee of up to 10%, to his "advertisers." The "advertisers" would use the false invoices to fraudulently substantiate expenses used in the preparation of their tax returns which were subsequently filed with the IRS.
In the trial, it was alleged that Mr. Petrosian returned approximately 90 percent of the money from the checks back to the medical company administrators in cash. The cash was allegedly handed over in white envelopes during back-office meetings at Petrosian’s office on Glenoaks Boulevard in Burbank. Mr. Petrosian allegedly obtained large quantities of cash, either by smuggling cash into the United States derived from wire transfers to Armenia, or via an elaborate Hawalla-type money-changing system.
It was also alleged that the medical company administrators used the cash Mr. Petrosian returned to make cash payments to patients and cappers/marketers. Based on my experience in these cases, these arrangements were also used as a means of the businesses who are "advertising" to obtain tax free money for other purposes as well.
The U.S. Attorney's Office contended that Mr. Petrosian's operation fueled medical insurance fraud schemes by providing a steady stream of untraceable cash. In one such scheme, it was alleged that a clinical laboratory used the cash Mr. Petrosian provided to make illegal kickback payments to clinics in exchange for the clinics referring blood samples to the laboratory for analysis. The payments motivated the clinics to refer patients for medically unnecessary tests that were paid for by Medicare.
At the sentencing hearing, Judge Wilson said the evidence at trial showed that Petrosian was at the “fulcrum” of a money-laundering scheme that helped perpetrators of health care fraud avoid paying federal taxes.
Posted by Tracy Green. Should you have any questions regarding your own situation or this post, you can email Tracy at tgreen@greenassoc.com. Green & Associates in Los Angeles, California focuses their practice on the representation of licensed professionals, individuals and businesses in civil, business, administrative and criminal proceedings. They have a specialty in representing licensed health care providers. Their website is: http://www.greenassoc.com/
