Editor’s Corner: Arson, extortion, racketeering and… healthcare fraud?


It started with a list of nicknames that would have made a screenwriter salivate: Patsy, Rooster, Tony the Wig (not to be confused with “Tony the Cripple” or “Nicky the Wig”), Big Vinny and Tugboat.

The list of those arrested was 46 strong, all of them from four different mafia families stretching from Philadelphia to Florida known as the “East Coast La Cosa Nostra Enterprise.”

The indictment, unsealed last week by the U.S. District Court for the Southern District of New York, outlines a litany of crimes, all of which are painfully cliché to anyone that’s watched one “Godfather” installment or even a few minutes of “Goodfellas.” They include extortion, arson, illegal gambling operation, firearms trafficking and assault.

A car belonging to the owner of a competing gambling establishment was set on fire. A panhandler outside an Italian restaurant was assaulted with “glass jars, sharp objects and steel-tipped boots.” Underlings were instructed to intimidate a sports gambler who refused to pay a $30,000 debt by allegedly choking the man and telling him, “Listen to me… next time I’m not gonna stop choking… I’m gonna kill you.” Icepicks, pipes, and, good ol’ fashioned pistols were the weapons of choice when it came to extortion. 

Buried toward the bottom of the indictment, below the allegations (and at least one "yous" reference) was a healthcare fraud charge. 

Aside from intimidation and brute force, mobsters are particularly adept at finding ways to make a lot of money by any means necessary. With that in mind, it probably shouldn’t be a huge surprise that they targeted compounding pharmacies, an industry that has seen an explosion of fraudulent payments over the past several years. According to the indictment, mafia members partnered with “corrupt doctors” to bill insurance companies for “unnecessary and expensive compound cream,” although the feds didn’t attach a number to the scam.

This isn’t a new trend. Investigators have been noting a mob presence in fraud schemes for the last several decades, whether it's Italian, Armenian or Russian. In 1996, New Jersey Attorney General  Peter G. Verniero told the New York Times that members of the Genovese crime family--also implicated in last week’s sting--had infiltrated a company that managed medical, dental and eye plans. Tony Soprano may have laundered his money through strip clubs and waste disposal, but today’s capos appear to be targeting the medical community.

In an interview with Vice, mafia expert Scott Burnstein, who runs the website “Gangster Report,” offered some context to the crimes that appear out of place next to the violence of extortion and racketeering:

“Many of the Italian mafia families across the nation have sought to diversify their interests into more high-tech, white-collar crimes for a while now, dating back, really, to the 1980s. Smart mobsters in this day and age no longer just line their pockets with traditional rackets (gambling, loansharking, extortion)--and some try to stay away all together. When you compare prison sentences, it makes the most sense.”

Burnstein’s right about those prison sentences. While healthcare fraud sentences typically range from five to 10 years, extortion, racketeering and arson carry maximum sentences of 20 years. Add in firearms trafficking, and you’re looking at 15-25 years served consecutively for each offense.

Burnstein also noted that for most mafia members, organized crime is “in their DNA.”

“They literally don’t know how to live their lives on the straight and narrow and away from crime,” he told Vice.

Translation: These guys aren’t your typical criminals; they are good at being criminals. They take pride in it, and they’re well aware that healthcare is a $3 trillion dollar industry.

And when guys named Rooster or Tugboat get in the healthcare fraud game, that's a fairly scary prospect for insurance companies that could end up footing the bill for fraudulent claims.