2 Plead Guilty to Massive Insurance Fraud

In a surprising turn in what prosecutors charged is the largest medical insurance fraud in history, entrepreneur Michael Smushkevich pleaded guilty Tuesday to nine federal counts of mail fraud, money laundering and other crimes, admitting to bilking companies of at least $80 million.

Smushkevich had been protesting his innocence since his indictment in 1991 on more than 150 fraud and racketeering counts.

He changed his plea after his brother David pleaded guilty under an agreement made with the prosecution last month.

The brothers allegedly ran several hundred medical clinics and mobile labs that attracted patients by promising free physicals in telemarketing pitches.

Then they billed insurance companies for unnecessary tests, prosecutors said.

According to a 155-count indictment, the Smushkeviches and 10 other defendants would claim in paperwork that the patients had serious health problems, including cancer and heart disease in order to justify insurance billings for expensive tests and treatment. This was done, the indictment charges, even when the patients were entirely healthy.

While some patients were told that they had these health problems, others had no idea what was going into their records. In either case, thousands of healthy people, the prosecution charges, were transformed into sickly cash cows.

To Ursula Pezzolla, an Orange County woman who went to a Smushkevich clinic, “it was like a rape.”

Lured by a call from a telemarketer, Pezzolla and her husband visited a Tustin health club and nearby clinic and had electrodes attached to their ankles and wrists, sweated on a treadmill and submitted to a battery of apparently high-tech tests. She was terrified when she was told at the end that she had “serious heart disease.” But it was all a lie, postal inspectors told her a few weeks later, designed to collect from insurers.

William Marr received a call from a telemarketer promising free blood tests, ultrasound studies of all his organs, Doppler testing on carotid and peripheral arteries and high-tech tests of his lungs. He was never asked if he had any medical complaints.

But Marr was not the ideal victim. Both a medical doctor and a consultant for a health insurance company, he was immediately suspicious of the pitch and decided to check it out.

According to a statement he made to a postal inspector, Marr went to a Smushkevich clinic in Santa Ana and the health club in Tustin, where he received numerous tests. He noted that many were improperly conducted. His insurance company was billed $7,500. The claims forms said Marr suffered from diabetes, heart disease, high blood pressure, a stroke, cancer, allergic conditions, viral infections and other maladies. Marr said he had none of those conditions.

David Smushkevich, who emigrated from the Soviet Union in 1975, helped his brother come to America four years later and helped him start medical businesses. But their relationship has apparently been rocky over the years.

Michael Smushkevich said he pleaded guilty to avoid having his brother testify against him, according to Nicholas Micelli, an attorney for another defendant, William Kuperschmidt. As Michael left the courtroom, he said to David’s attorney, Mary Gibbons, “It’s because of you and my brother. I would never do it. . . .”

Four other defendants had changed not guilty pleas to guilty since David Smushkevich’s deal.

Besides Michael Smushkevich, two more did so Tuesday. Bogich Jovovich, a doctor who worked with the brothers, pleaded guilty on seven fraud-related counts and clinic manager Art Lucero pleaded guilty on one count.

Michael Smushkevich and the other defendants did not change their innocent pleas on racketeering charges.

Three others accused in the scheme are fugitives.