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United States v. Mirzoyan

United States District Court, S.D. New York

April 25, 2017

UNITED STATES OF AMERICA
v.
DAVIT MIRZOYAN, Defendant.

          MEMORANDUM OPINION & ORDER

          PAUL G. GARDEPHE, U.S.D J.

         Indictment 10 Cr. 895 (PGG) charges twenty-eight individuals with participating in a racketeering enterprise that operated a massive Medicare fraud scheme nationwide from 2006 to September 2010. (Indictment (Dkt. No. 3)) The Defendants - a large and close-knit group composed primarily of Armenian nationals - operated a highly sophisticated network of scores of phony medical clinics purportedly located in at least 25 states, (Mirzoyan PSR (Dkt. No. 916) ¶¶ 47, 50, 57) The clinics existed only on paper; there were no doctors and there were no patients, (Id. ¶ 50) The Defendants submitted more than $100 million in fraudulent bills to Medicare - for medical care that was never provided - using the stolen identities of hundreds of doctors and thousands of patients. (Id. ¶¶ 50-57)

         Medicare generally detected a clinic's fraudulent nature after several months, in part because billed-for procedures did not match doctors' specialties. (See Id. ¶¶ 55-56; Indictment (Dkt. No. 3) ¶ 23(b)) But by the time fraud was detected, Medicare often would have paid out hundreds of thousands on fraudulent claims. (Mirzoyan PSR (Dkt, No. 916) ¶ 56) Although Medicare took steps to freeze a fraudulent clinic's bank accounts once fraud had been detected (Id. ¶ 58; Oct, 8, 2014 Mirzoyan Aff. (Dkt. No. 847-1) ¶ 39), the Defendants nonetheless succeeded in fraudulently extracting tens of millions of dollars in payments from Medicare for medical care that had never been provided, (Mirzoyan PSR (Dkt. No. 916) ¶ 57) And even when Medicare determined that one of the Defendants' phantom clinics was phony, the Defendants simply replaced that clinic with another phony clinic. (Id. ¶ 56; Indictment (Dkt. No. 3) ¶ 24) This pattern continued for four years, until the Defendants' arrests in October 2010. (Mirzoyan PSR (Dkt. No. 916) ¶ 97)

         Given that Medicare would take action to freeze a fraudulent clinic's bank account (Oct. 8, 2014 Mirzoyan Aff, (Dkt. No. 847-1) ¶ 39), it was critically important to the success of the racketeering enterprise's Medicare fraud scheme that fraudulent proceeds be quickly transferred from a phony clinic's bank account to other accounts. (Feb. 13, 2017 Sentencing Hearing Transcript ("Hrg. Tr.") (Dkt. No. 911) at 21) Accordingly, the enterprise's money laundering activities were essential and integral to the Medicare fraud scheme. The leader of the Medicare fraud scheme - Defendant Davit Mirzoyan - employed others to travel throughout the United States to open bank accounts in false names, using false identification documents, (Mirzoyan PSR (Dkt. No. 916) ¶¶ 58, 78) Fraudulent proceeds were then transferred from the phony clinics' bank accounts to bank accounts opened in the names of shell companies or other phony clinics, jewelry stores, and check cashing and other businesses, (Id. ¶ 64; Indictment (Dkt. No. 3) ¶ 22; Hrg, Tr. (Dkt. No. 911) at 21) Millions of dollars in fraudulent proceeds were converted into chips at a Las Vegas casino (Mirzoyan PSR (Dkt, No. 916) ¶ 64), and fraudulent proceeds were also sent to Armenia. (Id. ¶¶ 59, 70)

         Of the twenty-eight defendants charged in Indictment 10 Cr, 895, twenty-five pleaded guilty, [1] Nineteen defendants pleaded guilty to RICO conspiracy, while the remaining defendants pleaded guilty to conspiracy to commit health care fraud, conspiracy to commit bank fraud, conspiracy to make false bank entries, conspiracy to commit money laundering, structuring financial transactions, and misprision of a felony. (Mirzoyan PSR (Dkt. No. 916) ¶¶ 18-39; Markosian Plea Tr. (Dkt. No. 791) at 15; Khachaturyan Plea Tr. (Dkt. No. 925) at 23-24; Grigorian Plea Tr. (Dkt. No. 734) at 24) Twenty-three defendants have been sentenced to date. Those defendants involved in the core criminal activity of the racketeering enterprise - Medicare fraud - have generally been sentenced at the top of the applicable Sentencing Guidelines range, reflecting the fact that the sentence imposed must be sufficient to deter others from engaging in this type of highly sophisticated and damaging criminal activity, Two defendants are still awaiting sentence: Davit Mirzoyan and Gayane Khachaturyan, [2] a Government cooperator.

         Davit Mirzoyan was the Los Angeles-based head of the racketeering enterprise, which the Government refers to as the Mirzoyan-Terdjanian organization (the "MTO"). It was this racketeering enterprise that stole the identities of hundreds of doctors and thousands of patients, set up scores of phony medical clinics, billed Medicare for more than $100 million for treatment that never took place, fraudulently extracted tens of millions of dollars from Medicare, and laundered the fraudulent proceeds through numerous bank accounts, On October 26, 2012 - about a month before his trial was to begin - Mirzoyan pleaded guilty to (1) racketeering conspiracy, in violation of 18 U.S.C. § 1962(d); (2) conspiracy to commit health care fraud, in violation of 18 U.S.C, §§ 1347, 1349; (3) conspiracy to commit bank fraud, in violation of 18 U.S.C. §§ 1344, 1349; (4) conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h); and (5) conspiracy to commit fraud in connection with identity theft, in violation of 18 U.S.C. § 371. (Plea Tr. (Dkt. No. 920) at 23-24) There was no plea agreement. (Id. at 2-3)

         Mirzoyan's sentencing has been long-delayed. Initially, sentencing was delayed as a result of complex disputes between the parties as to the proper application of the Sentencing Guidelines. The parties later entered into stipulations concerning the application of the Sentencing Guidelines to Mirzoyan's offenses, but the Court became concerned that these stipulations did not properly reflect Mirzoyan's criminal conduct or account for all applicable Guidelines enhancements.

         For the reasons stated below, this Court concludes that the November 1, 2016 Guidelines Manual should be utilized in sentencing Mirzoyan, and that the applicable sentencing range under the 2016 Manual is 292 to 365 months' imprisonment.

         BACKGROUND

         I. THE GOVERNMENT'S PIMENTEL LETTER

         On May 1, 2012 - several months before Mirzoyan's guilty plea- the Government sent a Pimentel letter to his counsel setting forth the Government's understanding of how the Sentencing Guidelines apply to Mirzoyan's offenses.[3] (See May 1, 2012 Gov't Ltr. (Dkt. No. 917)) See also United States v. Pimentel 932 F.2d 1029 (2d Cir. 1991).

         In the Pimentel letter, the Government states that - although the Guidelines call for a sentence of life imprisonment - Mirzoyan's sentence is capped at the statutory maximum of 80 years. (Id. at 5) The Government's Guidelines calculations are premised on a grouping analysis, pursuant to U.S.S.G. § 3D 1.2(d). "Group A" addresses the fraud-related conduct that is the subject of Counts One, Two, Three, Five, and Six of the Indictment, while "Group B" addresses the money laundering conduct set forth in Counts One and Four. (Id. at 3-5)

         As to Group A, the Government calculates an offense level of 49 premised on the following enhancements to the base offense level:

a twenty-six level increase because the loss amount is greater than $100 million but less than $200 million;
a six-level increase because the offense involved 250 or more victims; a two-level increase because the offense involved sophisticated means;
a two-level increase premised on the unauthorized transfer or use of any means of identification unlawfully to produce or obtain other means of identification;
a two-level increase because Mirzoyan derived more than $1 million in gross receipts from one or more financial institutions as a result of his offenses; and
a four-level increase because Mirzoyan was an organizer or leader of criminal activity that involved five or more participants or was otherwise extensive.

(Id. at 3-4)

         As to Group B - which addresses Mirzoyan's money laundering-related conduct - the Government calculates an offense level of 42 based on the following enhancements to the base offense level:

a twenty-six level increase based on a loss amount of between $100 and $200 million; a four-level increase because Mirzoyan was in the business of laundering funds; and a four-level increase based on Mirzoyan's role in the offense.

(Id. at 4)

         Because Group A yields a higher offense level, the Government relies on the Group A calculations in contending that Mirzoyan faces a Guidelines sentence of life imprisonment, subject to a statutory maximum of 80 years. (Id. at 5).

         II. THE PRE-SENTENCE REPORT

         In the Pre-Sentence Report ("PSR"), the Probation Office concludes that Counts 1, 2, 3 and 5 - RICO conspiracy, health care fraud conspiracy, bank fraud conspiracy, and conspiracy to commit fraud in connection with identity theft - should be grouped together pursuant to U.S.S.G. § 3D1.2(d), because the offense level of each count is based on the total amount of loss.[4] (Mirzoyan PSR (Dkt. No. 916) ¶ 108) The Probation Office further concludes that Count 4 - conspiracy to commit money laundering - should be "grouped with all of the other counts" pursuant to U.S.S.G. § 2S1.1, comment, (n.6), and § 3D 1.2(c), "because the money laundering offense is related to the funds derived from the health care and bank fraud offenses." Id. Citing U.S.S.G. § 3D1.3(a), which provides that-where counts have been grouped pursuant to § 3D 1.2(c) - "the highest offense level of the counts in the Group" must be used, the Probation Office concludes that the Guidelines provision for money laundering - U.S.S.G. § 2S 1.1 - is applicable, because use of this provision yields the highest offense level. (Mirzoyan PSR (Dkt. No. 916) ¶ 109) Accordingly, the PSR uses the money laundering Guidelines provision to calculate the offense level for all five offenses Mirzoyan pled guilty to, (Id., )

         Pursuant to U.S.S.G § 2S1.1(a)(1), the Probation Office calculates the base offense for the money laundering guideline using the "offense level for the underlying [fraud] offense from which the laundered funds were derived, " because Mirzoyan "committed the underlying offenses and the offense level for that offense can be determined." (Mirzoyan PSR (Dkt. No. 916) ¶ 110) The Probation Office therefore applies a base offense level of 7 pursuant to U.S.S.G. § 2B1.1, and then imposes the following Guidelines enhancements:

a twenty-six level increase based on a loss amount of between $100 million and $200 million; a six-level increase because the offense involved more than 250 victims; a two-level increase because the offense involved sophisticated means; a two-level increase because the offense involved the unauthorized transfer or use of a means of identification unlawfully to produce or obtain other means of identification; and a two-level increase because Mirzoyan derived more than $1 million in gross receipts.

(See Id. ¶¶ 111-117)

         The Probation Office also imposes a two-level increase because Mirzoyan had been "convicted under 18 USC 1956." (Id. ¶ 119 (citing U.S.S.G. § 2S1.1(b)(2)(B))). Finally, the PSR provides for a four-level adjustment based on Mirzoyan's role in the offense, because he "orchestrated the fraud and was the leader of this extensive conspiracy, " and "directed the actions of five or more participants." (Id. ¶ 121 (citing U.S.S.G, § 3B1.1(a)))

         After a three level reduction for acceptance of responsibility, the PSR arrives at a total offense level of 48. (Id. ¶¶ 124-125)

         The PSR imposes one criminal history point based on Mirzoyan's January 11, 2010 conviction for driving under the influence, and two points because Mirzoyan was on probation at the time he committed the instant offenses, Accordingly, Mirzoyan falls within Criminal History Category II. (Id. ¶¶ 128-133)

         The PSR concludes that with a total offense level of 48 and a Criminal History Categoiy of II, Mirzoyan faces a Guidelines range of life imprisonment, capped by a statutory maximum term of imprisonment on all five counts of 75 years' imprisonment. (Id. ¶ 159)

         III. THE PARTIES' SENTENCING AGREEMENT

         Prior to the scheduled sentencing date, the parties made numerous submissions reflecting countless disputes regarding loss amount and other complex issues under the Sentencing Guidelines. (See, e.g., June 3, 2013 Def. Ltr. (Dkt. No. 682); June 10, 2013 Gov't Ltr. (Dkt. No. 683); June 14, 2013 Def. Ltr. (Dkt. No. 687); June 18, 2013 Conf. Tr. (Dkt. No. 706); July 9, 2013 Gov't Ltr. (Dkt. No. 701); July 29, 2013 Def. Ltr. (Dkt. No. 710); Aug. 14, 2013 Def. Ltr. (Dkt. No 720); Aug. 29, 2013 Gov't Ltr. (Dkt. No. 806); Sept. 30, 2013 Def. Ltr. (Dkt. No. 772); Dec. 6, 2013 Conf. Tr. (Dkt. No. 776); Jan. 8, 2014 Def. Ltr. (Dkt. No. 787); Jan. 20, 2014 Def. Ltr. (Dkt, No. 788)) As to loss amount, Mirzoyan contended that he should be sentenced on the basis of Medicare's out-of-pocket loss. Although this Court repeatedly stated that "loss" for purposes of U.S.S.G. § 2B1.1(b)(1) '"is the greater of actual loss or intended loss'" (see, e.g., June 11, 2014 Order (Dkt. No. 804) at 8-9 (quoting U.S.S.G. § 2B 1.1 (b)(1))), Mirzoyan nonetheless insisted that this Court should look to Medicare's "actual loss."[5] (See, e.g., June 3, 2013 Def. Ltr. (Dkt. No. 682); June 18, 2013 Conf. Tr. (Dkt. No. 706) at 5-9; July 29, 2013 Def. Ltr. (Dkt. No. 710) at 1-2; Sept. 30, 2013 Def. Ltr. (Dkt, No. 772) at 3 n.4)

         In a June 11, 2014 order, after numerous submissions and court conferences had not led to a resolution of the parties' disputes regarding application of the Sentencing Guidelines, the Court set the matter down for a Fatico hearing on June 17, 2014. (June 11, 2014 Order (Dkt. No. 804) at 13) The Court informed the parties that it would hear evidence concerning the following issues: "(1) the number of Medicare clinics alleged to be involved in fraud that are attributable to Mirzoyan; (2) the loss amount attributable to Mirzoyan; and (3) Mirzoyan's role in the offense." (Id.)

         A. The Sentencing Agreement's Guidelines Stipulations

         On June 16, 2014 - the day before the scheduled Fatico hearing - the parties entered into an agreement concerning the application of the Sentencing Guidelines to Mirzoyan's offenses. (June 16, 2014 Gov't Ltr. (Dkt, No. 918) (the "Sentencing Agreement")) The Sentencing Agreement provides for a stipulated total offense level of 34 and a stipulated Guidelines range of 168 to 210 months' imprisonment.[6] (See id. at 4) This represents a drastic change from the total offense levels set forth in the Government's Pimentel letter (45) and the PSR (48), both of which provide for a Guidelines range of life imprisonment, subject to the statutory maximum of 75 to 80 years' imprisonment. (See May 1, 2012 Gov't Ltr, (Dkt. No. 917) at 3-5; Mirzoyan PSR (Dkt. No. 916) ¶¶ 125, 159)

         The Sentencing Agreement arrives at a much lower total offense level and Guidelines range by deviating significantly from the analyses and calculations set forth in the Government's Pimentel letter and the PSR. The Sentencing Agreement groups together the fraud and money laundering offenses, but calculates the total offense level by using the Guidelines provisions for fraud rather than the Guidelines provisions applicable to money laundering, (Id. at 3-4) The Sentencing Agreement also: (1) uses a loss amount of between $20 million and $50 million rather than the $100 to $200 million range used in the Pimentel letter and the PSR, resulting in a twenty-two level increase rather than the twenty-six level increase set forth in the Pimentel letter and the PSR; (2) imposes a two-level increase for ten or more victims rather than the six-level increase utilized in the Pimentel letter and the PSR for 250 or more victims; (3) includes no enhancement for unlawful use of a means of identification to obtain another means of identification; and (4) includes no enhancement for Mirzoyan's gross receipt of more than $1 million in fraudulent proceeds from a financial institution. (See id.)

         After applying a three-level reduction for acceptance of responsibility, the Sentencing Agreement calculates an offense level of 34. (Id. at 3-4) Because Mirzoyan's Criminal History Category is II, the Sentencing Agreement concludes that the applicable Guidelines range is 168 to 210 months' imprisonment. (Id. at 4)[7]

         The Sentencing Agreement further provides that "neither party will seek any departure or adjustment pursuant to the Guidelines that is not set forth herein. Nor will either party .. . suggest that the Court sua sponte consider any such departure or adjustment." (Id. at 4) The parties explicitly acknowledge, however, that the Court is not bound by their Guidelines stipulations, and both sides "reserve the right" to respond to inquiries from the Court concerning application of the Guidelines:

It is understood that pursuant to U.S.S.G. § 6B1.4(d), neither the Probation Office nor the Court is bound by the above Guidelines stipulation, either as to questions of fact or as to the determination of the proper Guidelines to apply to the facts. In the event that the Probation Office or the Court contemplates any Guidelines adjustments, departures, or calculations different from those stipulated above, or contemplates any sentence outside of the Guidelines ranges calculated by the parties, the parties reserve the right to answer any inquiries and to make all appropriate arguments concerning the same.

(Id. at 5)

         B. The Court's Response to the Sentencing Agreement's Guidelines Stipulations

         Because of inconsistencies between the Sentencing Agreement's Guidelines stipulations and (1) the Government's Pimentel letter; (2) the PSR; and (3) the Government's prior representations to the Court concerning, inter alia, loss amount, number of victims, the role of identity fraud and money laundering in the Medicare fraud scheme, and Mirzoyan's role in the offense, the Court issued an order on June 17, 2014 directing the parties to make submissions explaining and justifying their Guidelines stipulations:

Pursuant to U.S.S.G. § 6B1.4, the parties are directed to explain why the court should reject the Guidelines analysis set forth in the PSR and instead adopt the Guidelines [stipulations] set forth in the June 16, 2014 agreement including, in particular, (1) a loss amount between $20 million and $50 million; and (2) a two-level enhancement for the number of victims. The parties are also directed to explain why (1) the Court should apply the November 1, 2010 Guidelines manual, as opposed to the November 1, 2009 Guidelines Manual; and (2) the Court should not apply the money laundering Guidelines provision set forth in U.S.S.G. § 2S1, 1, given that Defendant pleaded guilty to a money laundering offense.

(Dkt. No. 811)

         On August 13, 2014, this Court conducted a lengthy conference to discuss the Guidelines stipulations in the Sentencing Agreement. (Aug. 13, 2014 Conf. Tr. (Dkt. No, 838))

         At the outset of the conference, this Court stated that

there are a number of aspects [of] the sentencing agreement that I'm deeply troubled by. First, I believe that the sentencing agreement flies in the face of countless representations the government has made in the past [-] over the more than three years that this matter has been pending [-] about Mr. Mirzoyan's culpability and his role in the offense.
The sentencing agreement also contradicts numerous statements in the presentence report, statements that were the basis on which more than 20 people have been sentenced in this case.
The factual statement included in the presentence report was undoubtedly supplied to the probation office by the government, and I relied on that factual statement in sentencing numerous co-defendants.
The sentencing agreement is also not consistent with admissions made by co-defendants at the time of guilty pleas and in connection with correspondence to the Court. Nor is it consistent with the government's accounts of co-defendants' role[s] in the offense, In short, many aspects of the parties' agreement appear to me to contradict the factual record and involve a facially improper application of the guidelines.
I am putting the parties on notice that I will not sentence Mr. Mirzoyan on the basis of stipulated "facts" that have no connection to reality. The commentary accompanying Section 6B1.4 of the [G]uidelines states, and I quote: "The Court is not obligated to accept the stipulation of the parties" and "in determining the factual basis for the sentence, the Court will consider the stipulation together with the results of the presentence investigation and any other relevant information." The commentary also states that "it is not appropriate for the parties to stipulate to misleading or non-existent facts, even when both parties are willing to assume the existence of such 'facts' for purposes of the litigation."

(Aug. 13, 2014 Conf Tr. (Dkt. No. 838) at 6-7) (quoting U.S.S.G. § 6B1.4, info, comment.)

         The Court then reviewed in detail each area in which the Sentencing Agreement deviated from the Pimentel letter and the PSR - including loss amount, number of victims, the applicability of the money laundering Guidelines provision and the means of identification enhancement - and explained at length how and why the parties' Guidelines stipulations contradicted both the Government's repeated representations over three years of litigation and the evidence before the Court. (See Aug. 13, 2014 Conf. Tr, (Dkt. No. 838) at 7-36) The Court then directed the parties to review the transcript and to advise the Court of "how they wish to proceed, either in terms of submitting additional evidence, or requesting an evidentiary hearing if they deem that appropriate." (Id. at 36)

         In subsequent letters to the Court, the parties reaffirmed their support for the Guidelines stipulations set forth in the Sentencing Agreement. (See, e.g., Dkt. Nos. 847, 856) Many of the parties' arguments were not responsive to the concerns expressed by the Court at the August 13, 2014 conference, however.[8]

At a December 20, 2016 conference, the Court reiterated that "the record doesn't . . . support a number of the stipulations the parties have reached, " that the Court "can't on the present record accept those stipulations, " and that "if the parties want to press their stipulation [on] me, I'm going to have to hear evidence that supports it." (Dec. 20, 2016 Conf. Tr. (Dkt. No. 897) at 4-17, 25, 28)
In a January 13, 2017 letter, the Government acknowledged both the difficulties posed by the Sentencing Agreement's Guidelines stipulations and its obligation to respond to inquiries from the Court concerning Guidelines calculations:
At the outset, the Government understands the Court's frustration and recognizes its observation that the parties, in reaching stipulations in the Sentencing Agreement, may have been guided too much by a desire to reach a Guidelines range that could reflect an appropriate sentence (as opposed to reaching a higher range and agreeing to a downward variance). But the Government also recognizes that it is, nonetheless, bound by the Sentencing Agreement and feels obligated to adhere to it. Unlike the Court, which is obviously not bound by parties' sentencing stipulations, the Government has an obligation to adhere to its agreements even when those agreements may later be determined to have been based on legal errors or misapplications of the Guidelines. That is, unfortunately, the position in which the Government finds itself here.
The Second Circuit Court of Appeals has counseled that in such circumstances, the Government is constrained from advocating a position at odds with the parties' agreement (or else it will be in breach); but, that when it is the Court, and not the Government, who raises questions about Guidelines calculations and adjustments, the Government can and should provide the requested factual and legal information to the Court as this "is an essential function of the government at sentencing."
Accordingly, in keeping with Second Circuit authority, the terms of the Sentencing Agreement, and the Government's duty of candor to the Court, the Government provides the following explanations about the evidence (or lack thereof) with respect to each of the sentencing issues the Court has identified. And after reviewing the representations set forth below, if the Court directs the Government to present evidence at a hearing, we will be prepared to do so.

(Jan. 13, 2017 Gov't Ltr. (Dkt. No. 902) at 1-2 (quoting United States v. Vaval, 404 F.3d 144, 154 (2d Cir. 2005) (footnotes omitted)))

         As to loss amount, the Government's January 13, 2017 letter goes on to state that "there is evidence - and the Government has always maintained - that Mirzoyan's conspiracy billed Medicare in a total amount of approximately $105 million." (Id. at 3) However, the Government also maintains that - were the Court to credit Mirzoyan's representations concerning his knowledge of Medicare fee schedules and reimbursement practices - he knew that he would obtain substantially less than the $105 million that was billed to Medicare. In this context, the stipulated range of $20 million to $50 million was agreed to in "good[]faith."[9] (Id.)

         As to number of victims, the Government states that it "is not aware of any factual evidence it could present at a hearing to cap the foreseeable number of victims of the offense at 10 to 49 [victims]. Should the Court hold a hearing, the Government could present factual information reflecting that there were over 250 victims as a result of the charged conspiracy." (Id. at 4)

         With respect to Mirzoyan's role in the racketeering enterprise's money laundering activities, the Government states that,

[i]n response to the Court's inquiry, and should the Court determine that an evidentiary hearing is necessary, the Government could present evidence from which the court could conclude that Mirzoyan held a supervisory role over money laundering activities, and/or that the money laundering activities were a core feature of the overarching fraud over which Mirzoyan was undisputedly a leader or supervisor.

(Id. at 5)

         As to the means of identification enhancement, the Government states that "it is not aware of any other [legal] rationale or evidence that would support the Sentencing Agreement's stipulation that the enhancement not apply under the proper legal standard."[10] (Id. at 6)

         The Government also states that the November 1, 2010 Guidelines Manual should be used to conduct the Guidelines analysis, because application of the November 1, 2016 Guidelines Manual would violate the ex post facto clause. (Id. at 7)

         In a January 26, 2017 letter, Mirzoyan states that - while not conceding that a higher Guidelines range should apply - he "is not seeking a hearing on any of the[] issues" identified by the Court, and that he "believes the record to [already] contain any and all evidence he could produce for the Court's consideration" concerning these issues. (Jan. 26, 2017 Def. Ltr. (Dkt. No. 907) at 1) As to loss amount, Mirzoyan relies on his own affirmation (Dkt. No. 847-1) and two affirmations from a Medicare billing expert (Dkt. Nos. 907-1, 907-5) in arguing that the stipulated loss amount is "both factually and legally accurate." (Jan. 26, 2017 Def. Ltr. (Dkt. No, 907) at 2-5)

         The Court concluded that a hearing was necessary to develop the factual record and resolve the applicability of the various Sentencing Guidelines enhancements at issue. (See Dkt. Nos. 905, 908) The Court informed the parties that they "need not offer evidence concerning the loss amount, " but that "[t]he Court wish[ed] to hear evidence concerning the remaining [Guidelines issues]" previously identified by the Court, (Dkt. No. 910)

         IV. THE SENTENCING HEARING

         The Court conducted a Fatico hearing on February 13, 2017, The Government called the case agent - Special Agent Heather Tucci of the Department of Health and Human Services' Office of the Inspector General - and Gayane Khachaturyan, a co-conspirator and cooperating witness who worked for Mirzoyan at his Glendale, California office during the racketeering conspiracy.[11] Mirzoyan did not call any witnesses or offer any evidence.

         A. Medicare and Medicare Billing Procedures

         Agent Tucci offered background testimony concerning the Medicare program, including about how doctors become a Medicare "participating provider" and obtain payment from Medicare. Medicare is a "government program that administers health care benefits for individuals over the age of 65 and [also for] some individuals who are eligible [because they] are disabled." (Hrg. Tr. (Diet, No. 911) at 4) The purpose of Medicare is to "ensure . .. that beneficiaries receive adequate health care" and "that participating physicians are paid in a timely manner." (Id. at 5) In order to enroll in Medicare as a beneficiary, an individual must fill out an enrollment application, (Id. at 4-5) Once approved, Medicare then assigns the beneficiary a "health insurance claim number, which is essentially their Social Security number with a letter attached at the end and index that identifies other things about [the beneficiary]." (Id. at 5) Doctors use a beneficiary's health insurance claim number to bill Medicare for services provided to the beneficiary. (See id. at 8-9, 16)

         A Medicare "participating provider" is a physician who "accept[s] patients that have Medicare as their insurance plan." (Id. at 5) In order to become a Medicare "participating provider, " and thus obtain the right to bill Medicare for services provided, a physician must likewise go through an approval process, (Id. at 4-6) Physicians must submit an application containing personal identifying information - including the physician's name, date of birth, Social Security number, tax identification number, and National Provider Identifier ("NPI")[12] -as well as information about their medical education and license. (Id. at 6, 13-14; see also GX 1 at 4, 10; GX 2 at 9, 13; GX 3 at 6, 14; GX 5 at 8, 16) Physicians also must "provide banking information for payment purposes, " because Medicare pays physicians "via electronic funds transfer." (Hrg. Tr. (Dkt. No. 911) at 7) "[P]ayments are deposited into whichever bank account [the physician] provide[s] to Medicare." (Id.) In billing Medicare, participating providers "must use [their] NPI on all Medicare claim submissions." (See GX 3 at 2)

         Once Medicare approves a physician as a participating provider, Medicare assigns the provider a "Medicare Identification Number, " or "Provider Transaction Access Number ("PTAN")." These numbers are the means by which a health care provider is identified for purposes of the Medicare system. (See Hrg. Tr. (Dkt. No. 911) at 6; GX 3 at 2; GX 5 at 3) The PTAN selves as "the required authentication element for all inquiries to customer care representatives, written inquiry units and the Interactive Voice Response (IVR) system for inquiries concerning claims status, beneficiary eligibility and to check status or other supplier related transactions." (GX 3 at 2) While a physician has only one NPI, he or she may "have several [Medicare Identification Numbers]" associated with different practices or offices in different states. (Hrg. Tr. (Dkt. No. 911) at 6; see also GX 6, GX 7, GX 8)

         After providing health care services to a Medicare beneficiary, participating providers "submit[] bills to Medicare for payment." (Hrg. Tr. (Dkt. No. 911) at 7, 27, 30-31) In completing a billing form, a physician must include their "provider" information and check off the relevant billing "codes" to identify "what services they billed." (Id. at 30-31) When Medicare receives a claim for payment for a given beneficiary, the beneficiary receives an "explanation of benefits" informing the beneficiary about "what the provider billed for, . . . what was charged to Medicare[, ] and .. . what Medicare paid." (Id. at 7)

         B. Evidence Concerning the MTO's Medicare Fraud Scheme and Money Laundering Activities

         1. Medicare Fraud Scheme

         Agent Tucci testified that Mirzoyan and his co-defendants operated a scheme in which they established fraudulent clinics throughout the United States and - using the stolen personal identifying information of physicians and patients - billed Medicare for services that beneficiaries "never received" and "in, ., states or places where [they] had not been." (Id. at 8-11, 16, 18, 20, 22)

         The use of physicians' and Medicare beneficiaries' stolen identifying information was an essential component of the Medicare fraud scheme. As discussed above, in order to bill Medicare for services provided to beneficiaries, health care providers must submit an application for approval and receive an identification number from Medicare. (Id. at 6, 13-14; see also GX 3 at 2) Following this procedure, Mirzoyan and his co-conspirators submitted fraudulent applications using physicians' stolen personal identifying information - including their name, date of birth, Social Security number, tax identification, and NPI - and successfully obtained Medicare identification numbers and approval to bill Medicare. (Hrg. Tr. (Dkt. No. 911) at 6, 11-14; GX 1 at 4, 10; GX 2 at 9, 13-15; GX 3 at 2, 6, 13; GX 5 at 8, 16, 18; see also GX 6, GX 7, GX 8 (letters from physicians denying the authenticity of applications submitted in their name to Medicare for identification numbers, which were later used in connection with fraudulent clinics)) Because the Medicare applications required bank account information - which Medicare would use to pay approved providers - members of the conspiracy opened bank accounts in the physicians' names contemporaneously with the submission of the fraudulent Medicare applications. (Hrg. Tr. (Dkt. No. 911) at 6-7, 21-22) The accounts served as the initial depository for payments made by Medicare on the fraudulently billed claims. (See id. at 20-21)

         At the Fatico hearing, the Government offered into evidence four sample fraudulent Medicare applications that Agent Tucci had obtained during her investigation of the MTO. (Id. at 12-13; GX 1, GX 2, GX 3, GX 5) One such fraudulent application - relating to Dr. Gary D. Breslow - illustrates how members of the conspiracy used stolen physician identities to establish the fraudulent clinics.

         On February 13, 2009, documents were filed with the New York Secretary of State's Office establishing a professional coiporation called "Breslow Medical P.C." (GX 4 at 3) The corporate filings name Gary D. Breslow as the entity's registered agent, and provide a mailing address in Brooklyn, New York, (hi) On March 19, 2009, a business checking account was opened at HSBC in the name of Breslow Medical P.C. and its "president, " Gary D. Breslow. (Id. at 4-6) The checking account application submitted to HSBC includes a copy of a driver's license purporting to show Breslow, but which in fact contains the photograph of someone else. (Id. at 8; see also Hrg. Tr. (Dkt. No. 911) at 21-22) That same day - March 19, 2009 - an application was submitted to Medicare using Breslow's personal identifying information, including his date of birth, Social Security number, and NPI. (GX 3 at 6, 14, 19, 31-32)

         On May 13, 2009, Medicare mailed a letter to Breslow - at the corporate address for Breslow Medical P.C. in Brooklyn, New York - informing him that his Medicare enrollment application was approved, that he was authorized "[t]o start billing . . . Medicare, " and that his "PTAN [was] activated for use." (Id. at 2) Dr. Breslow did not authorize the opening of the bank account at HSBC, however, nor was he aware of the fraudulent clinic set up in his name. (See Hrg. Tr. (Dkt. No. 911) at 18, 22) Agent Tucci testified that investigators identified "approximately 120 [fraudulent] clinics" associated with the charged racketeering enterprise prior to the filing of the Indictment on September 30, 2010, and an additional "70 to 90" fraudulent clinics thereafter. (Id. at 10-11)

         In addition to stolen physician identifying information, Mirzoyan and his coconspirators used stolen Medicare beneficiary identifying information to perpetrate the Medicare fraud scheme. In particular, the MTO's fraudulent clinics "billed on [Medicare beneficiaries' health insurance claim] numbers" - which are "essentially their Social Security number with a letter attached" - "for services that were not provided to them" and in "states or places where [they] had not been." (Id. at 5, 8-9, 16) According to Agent Tucci, "approximately 3, 000 [Medicare beneficiaries]" - all of whom received treatment between 2005 and 2006 at Orange Regional Medical Center in Middletown, New York - had their health insurance claim numbers compromised. (Id. at 8-9) Investigators also identified "a lot more [beneficiaries' health insurance claim numbers] that ha[d] been compromised" in "approximately 25 or 26 [other] states." (Id. at 15-16)

         Agents learned from surveillance and wiretapped calls that Mirzoyan used an office located at 740 East Wilson Avenue in Glendale, California as the base of operations for the Medicare fraud scheme. (Id. at 25-27) At the Fatico hearing, Gayane Khachaturyan testified that Mirzoyan contacted her in 2008 and asked whether she wanted to work as a receptionist in his office. Khachaturyan accepted the position. (Id. at 59-60) Accordingly, from 2008 until the arrest of Mirzoyan, Khachaturyan, and the other members of the racketeering enterprise in October 2010, Khachaturyan worked at Mirzoyan's office every weekday from about 8:00 a.m. to 2:00 p.m. or 3:00 p.m.. (Id. at 61-62) Mirzoyan worked at the office "most of the time, " as did co-defendant Gourgen Mirimanian; other members of the racketeering enterprise - including co-defendants Tikran Takvoyran, Jacob Pogosian, and Artur Yepiskoposyan[13] - worked occasionally at the office or came in to speak with Mirzoyan. (Id. at 43-45, 62-66, 92, 104-07) Other conspirators, including co-defendant Artur Manasarian, [14] would call the office with questions about one or more of the phony clinics, (Id. at 46, 111-12)

         As part of her duties and responsibilities at the office, Khachaturyan answered the phones, checked the office's email and fax for incoming communications, completed Medicare claims-related paperwork, deposited checks into bank accounts, picked up mail from post office boxes, and went to the post office to send out mail. (Id. at 64-85; see also id, at 30-31) Khachaturyan reported to Mirzoyan or to Mirimanian "if [Mirzoyan was] not in town." (Id. at 65-66) "[M]ost of the time" Mirzoyan "gave [her] instructions [on] how to handle [her] tasks." (Id., at 65-66, 85) Mirzoyan was generally in the office every day, but when he was out of the office, she "immediately" reported any phone calls to him, and generally "report[ed]" on all other matters "if there [was] any news." (Id. at 66; see also GX 17 (wiretapped call in which Khachaturyan informs Mirzoyan of telephone call about a fraudulent clinic - First Health Choice - in which the caller "want[ed] to verify [a] tax ID [number]"; Mirzoyan tells Khachaturyan where to find the relevant information in his desk in case the caller calls again); GX 33 (wiretapped call in which Khachaturyan provides Mirzoyan with an update concerning mail, phone calls, and faxes received at the office))

         When Mirzoyan was not at the office, Khachaturyan was responsible for answering a collection of pre-paid cell phones kept in the office. (Hrg. Tr. (Dkt. No. 911) at 66-69, 94-95; GX 10 at 112243, 112247) Mirzoyan told her how to answer these phones and what to say. (Hrg, Tr. (Dkt. No. 911) at 66-68) Each cell phone had a label taped to the back of the phone listing the name of a doctor or a phony clinic. (Id. at 29, 66-67, 94-95) Mirzoyan told Khachaturyan to pretend to be an employee of the doctor or clinic, (Id. at 66-68) When one of the cell phones rang, Khachaturyan answered, took messages, and gave the messages to Mirzoyan, (Id. at 67-68) The callers included Medicare employees, bank personnel, and "really mad" and "upset" patients calling to complain about billing. (Id. at 67) When bank employees called, they never asked for Mirzoyan. Instead, they "were looking for different people and different names, They usually asked for people [Khachaturyan] didn't know, " (Id. at 73-74) She passed on to Mirzoyan all calls from banks. (Id. at 74)

         Khachaturyan also collected mail twice a week from post office boxes. (IcL at 69-70) Mirzoyan gave her the keys for the post office boxes and told her where the post office boxes were located. (IcL at 69) Most of the mail Khachaturyan picked up from the post office boxes was from Medicare and banks. (IcL. at 70) She gave the mail to Mirzoyan when she returned to the office. (Id.) On some occasions, Khachaturyan was not allowed to pick up the mail, because "[t]he name on the mail and the name on the P.O. box [were] different, " (Id.) On these occasions, Mirzoyan would fax a copy of matching identification or fill out an application adding the name to the post office box. (Id.; see also GX 23 (wiretapped call in which Khachaturyan tells Mirzoyan that she was not permitted to pick up mail for "Norman Co."; Mirzoyan states that he will "fax a copy of [a] driver['s] license"))

         Mirzoyan also used the office to prepare insurance claim forms that were sent to Medicare for payment. (Hrg. Tr. (Dkt. No. 911) at 30-31, 108-110; GX 10 at 112263) Mirzoyan gave Khachaturyan Medicare claim forms he had completed along with "a list of. . . doctors, " and told her to add the doctors' names and identifying information to the insurance claim forms and then mail them. (Id. at 71-72) Khachaturyan performed this task "every day." (Id. at 71)

         At Mirzoyan's direction, Khachaturyan also deposited checks into Bank of America accounts "a couple of times a week." (Id. at 72-73) The deposits were made into "different" "business account[s]" with "different names" associated with those accounts. (Id.)

         Mirzoyan and his co-conspirators also maintained "memory sticks" at the office containing lists of Medicare beneficiaries' social security numbers. (Id. at 32-33, 76-78, 98-99) Mirzoyan and his co-conspirators checked these lists to determine whether any of the patients had died, "because if they were deceased, Medicare would flag that and .. . cause the clinic to be shut down." (Id. at 33, 76-77) At one point during the conspiracy, Mirzoyan directed Khachaturyan to check the lists of Social Security numbers for deceased patients, using a computer program for this purpose. (Id. at 32-33, 76-79) She maintained notebooks reflecting the results of her research, indicating with a plus sign if the beneficiary was alive and highlighting the Social Security numbers of deceased beneficiaries. (Id. at 76-78, 98-99; see also GX 10 at 112281) She performed this task "almost every day" for "a week, " checking "[a]round a hundred" Medicare beneficiaries each time. (Hrg. Tr. (Dkt. No. 911) at 78-79)

         On October 13, 2010 - the day of Mirzoyan's arrest - Agent Tucci and other law enforcement officers executed a search warrant at Mirzoyan's Glendale, California office, (Id. at 24-25) During the search, Tucci recovered, inter alia, Medicare billing forms; paperwork and computer files relating to the opening of fraudulent clinics "in various levels of opening through the [Medicare] application process"; checkbooks and other bank documents relating to fraudulent clinics; and files containing doctors' NPI, Social Security numbers, and other personal identifying information. (Id. at 27, 30-32, 34, 37; see also GX 10 at 112286, 112292, 112298, 112304, 112310) At the Fatico hearing, the Government offered into evidence photographs taken inside Mirzoyan's office. These photographs show, inter alia, the cell phones described by Khachaturyan, health insurance claim forms, numerous express mail and post office receipts, checkbooks for the phony clinics, receipts for the rental of post office boxes, Khachaturyan's notebooks listing the Social Security numbers of Medicare beneficiaries - highlighted where the beneficiaries were deceased - and correspondence with Medicare and NPPES concerning medical providers. (See GX 10)

         2. Laundering the Proceeds of the ...


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