Alleged Head of Insurance Fraud Ring Indicted : Medical: Michael Smushkevich, the accused mastermind of a $1-billion health insurance billing fraud organization, was charged along with four others.

Michael Smushkevich, a Russian immigrant who allegedly masterminded a $1-billion health insurance billing fraud--the nation’s largest--was indicted Wednesday by a federal grand jury in Los Angeles.

Smushkevich, 44, who is already in federal custody, was indicted on 54 counts of mail fraud and one count of conspiracy along with his girlfriend, two Southern California physicians and a key manager involved in running a massive mobile diagnostic testing service.

The physicians charged were Dr. William O. Kupferschmidt, a 48-year-old resident of Rancho Palos Verdes, and Dr. Ameer N. Dikshit, 55, (also known as Ameer Dixit, according to the government’s indictment) of Laguna Niguel. Also named were Carolyn Vasquez, 36, of Upland, and Bogich Jovovich, 43, of Los Angeles.

“This is the biggest health insurance fraud case we have ever prosecuted,” said Assistant U.S. Atty. Lee Michaelson, who is handling the case.

If convicted on all counts, Smushkevich, Jovovich and Vasquez face up to 275 years in prison and fines of up to $13.7 million. Dixit, who is charged with 47 counts of mail fraud and one count of conspiracy, faces a maximum possible sentence of 235 years in prison and $11.7 million in fines. Kupferschmidt, charged with 39 counts of mail fraud and one count of conspiracy, faces 195 years in prison and fines of up to $9.7 million.

The complex scheme resulted in thousands of California consumers paying higher health insurance premiums to make up for the millions of dollars paid out in fraudulent claims, according to insurance company officials.

“There are really two groups of consumers affected by this kind of conduct,” said Sharon Sanchez, general counsel for Blue Cross of California, which insures about 5 million Californians. “Those who had to pay more for their insurance to cover the cost of paying and investigating these fraudulent claims and a second group of uninsured consumers who cannot afford coverage.”

Blue Cross received more than $100 million in claims and paid out about $14 million to Smushkevich’s various entities, according to Mike Lohnberg, corporate auditor.

Smushkevich allegedly defrauded the federal government as well as private insurance companies and a self-insured firm.

He allegedly submitted about $25 million in claims to the Defense Department’s Civilian Health and Medical Program for the Uniformed Services, known as CHAMPUS.

Some of America’s largest health insurance companies, including Aetna Life & Casualty, were flooded with the fraudulent claims and cooperated with government agents during the investigation.

“There has never been anything this big,” said Blue Cross’ Lohnberg. He said Smushkevich’s web of companies began submitting claims for exams and testing in 1985.

“We have rejected more than $80 million in claims, and paid about $14 million,” said Lohnberg. He said the problem was so great, Blue Cross was forced to set up a computerized system to monitor and review its claims. “Whether you pay the fraudulent claims or not, it still takes money out of the health-care system.” Louis Lovato, manager of Blue Shield of California’s special investigations department, said Smushkevich’s operation billed his company for between $40 million and $50 million, “but only got $2 million from us.”

“I don’t know of any fraud bigger than this one and I have been working in this area since 1965,” said Lovato, adding that Blue Shield investigated and refused to pay most of the fraudulent claims submitted by Smushkevich’s companies.

Other insurance companies, including Aetna, were hit with between $30 million and $50 million in fraudulent claims, according to federal sources. Aetna sued Michael Smushkevich and his brother, David, under the federal Racketeer Influenced and Corrupt Organization Act and won an $18-million civil judgment. Aetna could not be reached for comment.

Sam Reed, special agent with the Defense Criminal Investigative Service in San Diego, said the U.S. government paid out “conservatively between $5 million and $6 million,” to Smushkevich-controlled companies.

At its peak, Smushkevich’s operation involved about 500 separate companies and employed hundreds of doctors, lab technicians, billing clerks and administrators, according to federal investigators and insurance company officials.

The mobile diagnostic testing service operated from a dispatch center in Montclair, with numerous clinics located in Santa Ana, San Dimas, Tustin, Torrance, Oceanside, Vista, Escondido, San Diego and Stanton. All of the tests offered by each clinic were performed on every patient, regardless of their physical condition, and many were performed before the patient ever saw a doctor, the indictment said.