Medi-Cal Scandal Alarms Armenians

Chagrined by the estimated $1-billion Medi-Cal fraud scandal among new immigrants in their community, Armenian church and civic leaders say that an explanation may lie not in Los Angeles, where most of the crime occurred, but in the culture and politics of their homeland in the former Soviet Union.

Vazken Movsesian, parish priest of St. Gregory Armenian Orthodox Church in Pasadena, said members of the largely ethnic Armenian network charged with bilking the state and federal governments using phony medical billings came from a place “where the government was the government you cheated from.”

“The government was ‘Big Brother’ and you took from it. It was a matter of basic survival,” he said. “It has nothing to do with being Armenian.”

The cases in which phony medical supply shops, mostly in the San Fernando Valley, falsely billed the state for supplies from crutches to adult diapers may be the largest fraud ever against a government in the United States, officials said.

Of the 364 cases that have resulted in federal indictments or are under FBI investigation, all but a handful involve ethnic Armenians from the former Soviet Union who sought political asylum here in the late 1980s and early 1990s.

According to investigators, many of the medical supply shops involved in the scam worked the same way as the black market in the former Soviet republics. Operators offered goods--perhaps Italian shoes or cut-glass dishes--to people qualified as Medi-Cal recipients in exchange for the use of their account numbers.

Dr. Levon Jernazian, a Glendale clinical psychologist and one of the more than 200,000 Armenians who came to Los Angeles from the former Soviet Union in the last 15 years, said those accused or already jailed in the FBI probe were “borderline criminal back in Armenia.”

Jernazian said that nothing excuses the crimes and that those convicted should be prosecuted “to the full extent of the law.” But like many Armenians, he bristled at the ethnic connection made in news reports in The Times and elsewhere about the fraud.

Jernazian, whose practice includes psychological assessments of ethnic Armenians in California prisons, said the defendants in the fraud cases are in no way typical of ethnic Armenians here. “Most of the community are hard-working, honest people and have always been,” he said.

The kind of problem discovered in Los Angeles is related more to recent immigration than to ethnicity, said John Wang, criminal justice professor at Cal State Long Beach. Wang said his research has uncovered similar fraud by recent arrivals from China, which remains a Communist regime like former Soviet Armenia was.

“I don’t think it has to do with a particular immigrant group,” said Wang. “It is more of a general phenomenon when people are moving from one country to another and one political system to another.”

Wang said scams such as the Medi-Cal fraud can have a snowball effect, beginning with one family newly arrived in an immigrant community and quickly spreading to others if the first crime goes unpunished.

“If they see their neighbors making quick money with no government intervention, they interpret it as a green light,” Wang said.

In 1991, a smaller version of the current Medi-Cal fraud was uncovered by the state attorney general involving primarily Filipino immigrants. In 1984, more than 100 Vietnamese doctors were charged with billing the state for millions of dollars in false medical claims.

It is the state’s responsibility, said Wang, who came to the United States from the People’s Republic of China 10 years ago, “to send a clear message to the new immigrant communities that this kind of activity is not only unacceptable, but against the law.”

Until now, Wang said, that message has not been clear.

Federal law enforcement officials say the Medi-Cal probe, focusing mostly on North Hollywood, Burbank and Glendale, was not meant to target Armenians.

“We are taking down any fraud we find regardless of race, creed, color or nationality,” said Dan Linhardt, chief of white-collar fraud with the U.S. attorney’s office in Sacramento.

For some newcomers from impoverished places like the landlocked republic in the Caucasus region of what used to be the Soviet Union, the lure of instant riches may be great. The fraud alleged by the FBI is more than double the annual $450-million budget of today’s Republic of Armenia, the independent country that emerged in 1991 after the collapse of the Soviet Union.

Armenian community leaders here worry that the fraud investigation will exacerbate ethnic tensions in Greater Los Angeles, particularly in Glendale, where a third of the population is ethnic Armenian. Several serious conflicts between Armenians and other ethnic groups have been reported by Glendale schools.

Armenians have a proud and distinguished history in California that has produced some of the state’s most prominent citizens, including former Gov. George Deukmejian, but community leaders are worried that the case will interrupt nearly a century of progress that has overcome earlier anti-Armenian prejudices.

The massive influx of immigrants from the former Soviet Union, which followed smaller waves from Iran and elsewhere in the Middle East, has created divisions in the Armenian community itself, said Movsesian, the Pasadena priest. When the Medi-Cal scandal hit the news recently, Movsesian said, the first reaction among many third- and fourth-generation Armenians was to point accusing fingers at the newcomers.

“There were people who said, ‘Shame on these people for disgracing us and our good reputation that it took 70 years to build up,’ ” Movsesian said.

Salpi Ghazarian, editor of Los Angeles-based Armenian International magazine, agreed. “There is no doubt that the group we are looking at really are Soviet immigrants,” said Ghazarian, whose magazine circulates in 80 countries.

“There’s a whole socio/cultural/ethical issue here that’s been dogging us for about 10 to 12 years, ever since the major immigration wave, and it manifests itself in all sorts of things,” she said. “The gang issue. Insurance fraud. That was a big deal a few years ago. It is a stark difference between the two systems.

“You know that for years, for decades, Armenia was considered the Soviet republic with the highest standard of living, which means that it had a thriving black market.

“That meant you lived not on the salary the government paid, which was barely enough, but by learning to buck the system and push authority as far as you could push it,” Ghazarian continued.

“Authority isn’t on your side. There was no ‘Policeman Bill’ concept. And so you take those same skills and come here to a society that appears to be completely open, where you think anything goes, and until you figure out that there is a big computer in the sky that traces practically everything you do, you think you can get away with anything.”

Alan Cates, the state auditor who broke open the Medi-Cal case, said: “I remember walking into a shop on Pico Boulevard. It was basically a pharmacy where you could trade in your Medi-Cal prescription and take your pick of the trinkets arranged on one wall of the store. Another store gave away hand-made blankets and Angora mittens.

“In most cases, though, the people were just paid money, usually $20 to $60 a month, just for the use of their Medi-Cal card.”

Having recognized several years ago that there was a political and cultural assimilation problem for new immigrants, Movsesian said, the St. Gregory parish, which has 5,000 members, of which he estimated 500 come from the former Soviet republic, set up civics education programs.

“You have to start from the basics and teach that in this type of society there are responsibilities for everything,” Movsesian said. “You have a responsibility . . . to the community you live in,” he said.