United States v. Israilov

• Docket Number: 22 Cr. 20 (PGG)
• Decision Date: 06 July 2023
• Parties: UNITED STATES OF AMERICA v. ROMAN ISRAILOV, Defendant.
• Court: U.S. District Court — Southern District of New York

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UNITED STATES OF AMERICA v. ROMAN ISRAILOV, Defendant.

No. 22 Cr. 20 (PGG)

United States District Court, S.D. New York

July 6, 2023

MEMORANDUM OPINION & ORDER

PAUL G. GARDEPHE, UNITED STATES DISTRICT JUDGE

Defendant Roman Israilov moves to suppress intercepted wire communications and for a severance. For the reasons stated below, his motions will be denied.

BACKGROUND

I. THE INDICTMENT

Israilov is charged in United States v. Gulkarov et al., 22 Cr. 20 (PGG), a multidefendant case involving no-fault insurance fraud. The Indictment alleges that from approximately 2014 to 2021, Israilov and his co-defendants participated in a scheme to procure the identity of car accident victims via bribery and steer the victims to corrupt no-fault medical clinics, which billed insurance companies for unnecessary procedures and falsely represented to the insurers that they were owned and controlled by physicians when in fact they were not. (Indictment (Dkt. No. 1))

The Government alleges that Israilov was a “Clinic Controller,” i.e., one of

the leaders, organizers, and managers of the Gulkarov Organization and the NoFault Scheme. The Clinic Controllers - who are not licensed medical practitioners - owned, operated and controlled the No-Fault Clinics that engaged in the fraudulent billing for unnecessary and excessive medical treatment under the No-Fault Law. The Clinic Controllers also engaged in multiple types of money laundering to conceal the proceeds of those crimes and financed a widespread bribery and kickback scheme to bring patients into the Clinics.

(Id ¶ 8)

Israilov is charged in Count One of the Indictment with conspiracy to commit healthcare fraud, in violation of 18 U.S.C. §§ 1347 and 1349, between 2014 and 2021; in Count Two with conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h), between 2014 and 2021; and in Count Three with conspiracy to commit Travel Act bribery, in violation of 18 U.S.C. § 1952, between 2015 and 2019. (Id., passim)

The Indictment alleges that Israilov and the other Clinic Controllers (1) paid bribes to steer patients to no-fault clinics; (2) fraudulently operated the no-fault clinics; (3) laundered the clinics' fraudulent proceeds; and (4) obstructed the Government's investigation.

As to bribery, the Indictment alleges that “[t]he Clinic Controllers arranged for [co-conspirators referred to as ‘Runners'] to pay hundreds of thousands of dollars to . . . lead sources (i.e., employees or agents of hospitals, medical service providers, police officers and 911 operators employed by the [New York City Police Department], and other entities)” in exchange for the names and contact information of “motor vehicle accident victims in New York, New Jersey, and elsewhere.” (Id. ¶ 27) The Runners then cold-called these victims, falsely representing that they were “calling on behalf of the New York State Department of Transportation.” The Runners urged the accident victims to seek treatment at the no-fault clinics that the Clinic Controllers, including Israilov, owned and operated. (Id. ¶ 28) “The Clinic Controllers paid the Runners approximately $1,500 to $3,000 per successful ‘referral.'” (Id. ¶ 29)

As to the no-fault clinics, the Indictment alleges that “[t]he Clinic Controllers” -although not licensed physicians - “were the actual owners, operat[ors], and controllers of [the] Clinics,” and controlled the clinics' finances and treatment decisions. (Id. ¶ 15) According to the Indictment, the Clinic Controllers directed which procedures and medications the physicians associated with the clinics would prescribe, including procedures and treatments that were medically unnecessary, thus leading to overbilling of insurers. The Clinic Controllers also arranged for the physicians associated with the clinics to falsely represent to insurers that the clinics were physician-owned and -operated, in order to obtain payment of assigned insurance claims that would otherwise be denied. (Id. ¶¶ 15-20)

As to money laundering, the Indictment alleges that “[t]he Clinic Controllers required the No-Fault Physicians to pay fees to companies that the Clinic Controllers owned and controlled. The Clinic[] Controllers used these fees - such as ‘marketing,' ‘billing,' and ‘rent' -to make their relationship with the No-Fault Clinics appear legitimate. In reality, the fees were nonnegotiable, illegal, and excessive.” (Id. ¶ 24) The Clinic Controllers also used debit cards, credit cards, and pre-signed checks from the no-fault clinics to pay for personal expenses such as real estate, travel, and luxury goods. They disguised these payments by first transferring the clinics' money to either (1) the bank accounts of shell companies they controlled, from which they then withdrew cash; or (2) the law firm of Defendant Wisnicki, an attorney, who then “paid family members of the Clinic Controllers or purchased real estate on behalf of family members of the Clinic Controllers.” (Id. ¶¶ 23-25)

As to obstruction, the Indictment alleges that in 2021, after Wisnicki's law firm was served with a grand jury subpoena, Defendants Gulkarov, DiPietro, and Wisnicki attempted to obstruct the Government's investigation into the no-fault scheme through, inter alia, false testimony to the grand jury and creation of phony retainer agreements to explain payments. The Indictment also alleges that Defendant Aronov made false statements to law enforcement. The factual allegations of obstruction appear in the “means and methods” section of the healthcare fraud conspiracy count, in which Israilov is charged. (Id. ¶¶ 31-39)

II. PROCEDURAL HISTORY

The Indictment was filed on January 11, 2022. (Dkt. No. 1)

Israilov moved to suppress and for a severance on October 19, 2022. (Dkt. No. 148) This Court heard oral argument on April 25, 2023 (Apr. 25, 2023 Tr. (Dkt. No. 221)), and the parties later filed post-hearing briefs. (Dkt. Nos. 227, 236, 240)

DISCUSSION

I. ISRAILOV'S MOTION TO SUPPRESS THE WIRETAP EVIDENCE

Israilov moves to “suppress all wire communications in which [he] was intercepted and all evidence derived therefrom.”^[1] He contends that “electronic surveillance of [Defendant Peter] Khaimov's telephones” - on which Israilov was intercepted - was “wrongly authorized,” because “the affidavits in support of the [February 3, 2017] application [for electronic surveillance of Khaimov's telephones] failed to adequately demonstrate that alternative investigatory methods would have been unsuccessful or unlikely to succeed.” (Israilov Br. (Dkt. No. 149) at 9 (capitalization altered))^[2]

A. Factual Background

The Khaimov wiretap was issued in connection with a years-long investigation into a sprawling network of no-fault insurance fraud schemes in New York and New Jersey. The investigation culminated in three multi-defendant no-fault insurance fraud cases before this Court: United States v. Rose, 19 Cr. 789; United States v. Pierre, 22 Cr. 19; and the instant case.

As part of the investigation, law enforcement obtained court-authorized wiretaps regarding numerous targets suspected of no-fault insurance fraud and related crimes. Khaimov was one of the individuals whose phones were wiretapped. In an earlier opinion, this Court set forth the background of the investigation:

The investigation of the Defendants' fraudulent scheme was initially pursued by the Westchester County District Attorney's Office (the “D.A.”) and the New York State Police. The investigation began in 2013 with a focus on staged accidents. The target of the initial wiretap application in June 2016 was Robert Garris, who allegedly was recruiting “victims” and steering them to a particular medical clinic located at 2 Wilson Place in Mount Vernon, New York. The clinic - which was operated by . . . Nathaniel Coles[, a defendant in Rose] - paid kickbacks for the referrals.

....

The initial wiretap was authorized [in June 2016] by Justice Warhit of the New York Supreme Court. In July 2016, Justice Warhit authorized an extension of the Garris wiretap and a new wiretap on Coles' phone based on affidavits demonstrating both that Garris and Coles were using the subject telephones to engage in insurance fraud and that traditional investigative techniques - while still being utilized by investigators - remained inadequate to discover the full scope of the criminal activity and to identify all of those participating in it.

....

On September 16, 2016, the D.A. obtained a wiretap on what investigators later learned was lead [Rose] Defendant Anthony Rose's phone.

United States v. Rose, No. 19 CR. 789 (PGG), 2021 WL 2117119, at *2-3 (S.D.N.Y. May 24, 2021) (citations omitted).

Between October 2016 and January 2017, investigators obtained court-authorized wiretaps on the phones of suspected no-fault fraud conspirators Wilhelmina Fuller, Gikor “George” Sonayan, Vladimir Kutsyk, and Ilya Sholomov. (Cecchini Aff. (Dkt. No. 149-1) ¶¶ 9, 11 13) Throughout this period, investigators also periodically obtained orders granting extensions of previously issued wiretaps. (Id. ¶¶ 9-14)

On February 3, 2017, investigators applied for wiretaps on two of Khaimov's phones. The application is supported by affidavits from Assistant District Attorney (“A.D.A.”) Craig Cecchini and New York State Police Investigator Paul Schneeloch. Cecchini's affidavit is 70 pages, while Schneeloch's affidavit is 112 pages. (Cecchini Aff. (Dkt. No. 149-1); Schneeloch Aff. (Dkt. No. 149-2))

In A.D.A. Cecchini's affidavit, he asserts that Khaimov is using the phones at issue to conduct communications in furtherance of a no-fault insurance fraud scheme. (Dkt. No 149-1 ¶ 26(e)-(f)) In the Schneeloch affidavit, Investigator Schneeloch provides examples of these communications, including intercepted calls...