A Westchester dermatologist is one of several suspects who are alleged to have participated in a scheme to bilk Medi-Cal and Medicare out of $1.5 million.

Dr. Rito Castanon-Hill was arrested at his Westchester residence Thursday, October 18th, in connection with the alleged fraud. He is charged with four felony counts related to what state authorities call a “fake healthcare clinic scam.”

Also arrested along with Castanon-Hill were Lilit Baghdasaryan of Tujunga and brothers Richard Melkonyan of Glendale and Akop Melkonian of Chatsworth.

Dr. Neil Hollander surrendered to authorities Monday, October 22nd, and has pleaded not guilty. Another suspect in the case, David James Garrison, a physician’s assistant, was arrested on Sunday, October 21st.

“The suspects created a fake healthcare clinic to line their own pockets rather than help the sick and elderly,” alleged California Attorney General Edmund “Jerry” Brown after the suspects were taken into custody. “These arrests send a strong message that this kind of rip-off will not be tolerated.”

Castanon-Hill is accused of willingly permitting his medical license number to be used in the scheme to charge Medi-Cal for false treatments and unnecessary medical equipment billed to patients, said Abraham Arredondo, a spokesman in Brown’s office.

“Our agents interviewed several doctors who told us that some of the procedures that were charged were very obscure and unnecessary,” said Arredondo.

In addition, investigators also interviewed several patients who frequented the clinic and were charged for allegedly unnecessary equipment, such as motorized wheelchairs and hospital beds.

“According to our investigators, none of the patients who were charged for this medical equipment had any need for it,” said Arredondo.

Melkonyan and Melkonian, who ran Scott Medical Center in Burbank, stand accused of allegedly using Castanon-Hill and Hollander as frontmen for a medical insurance swindle. They allegedly recruited patients to undergo unnecessary examinations and then billed Medi-Cal and Medicare. Authorities say the two also hired physician’s assistant Garrison, who allegedly falsified medical records at the clinic.

During the probe, Special Agent Katie Viorel interviewed 15 beneficiaries who were listed as recipients of motorized wheelchairs and hospital beds authorized as medically necessary by Hollander.

“None of the beneficiaries were using the motorized wheelchairs at the time of the interview, and all appeared ambulatory,” Viorel wrote in a report.

In an interview with Viorel, Castanon-Hill claimed that he had no idea that illegal activity was going on at the clinic until another agent told him. After telling the agent that he would provide information that she requested, he later sent Viorel an e-mail stating that he would hire an attorney before speaking with her again.

Following his arrest, Castanon-Hill was booked at the Men’s Central Jail in downtown Los Angeles and released on $500,000 bail Monday, October 22nd.

Castanon-Hill, like some of the other suspects, opened several bank accounts at Bank of America and Washington Mutual, and two of these accounts opened for Rito C. Hill, a Medical Corporation, contained transactions from Scott Medical Center.

The documents compiled during the insurance fraud probe allege that over $200,000 in Medicare payments were received in late 2003 and endorsed by Castanon-Hill or the Rito C. Hill corporate stamp, checks totaling approximately $97,000 were written out of the account between October 2003 and November 2003 payable to Lilit Baghdasaryan and United Management Group Inc., and over $9,000 made payable to David Garrison. In addition, nearly

$94, 000 in checks were written out of the account that were made payable to Castanon-Hill.

All of the defendants are charged with submitting false insurance claims, grand theft, submission of false Medi-Cal claims and money laundering.

Agents from a variety of state agencies were involved in the investigation, including the California Department of Justice Medi-Cal Fraud and Elder Abuse, Los Angeles Health Authority Law Enforcement Task Force, United States Office of Inspector General Health and Human Services, the Department of Health Services and the Glendale Police Department.

Search warrants were served at the suspects’ homes, and four guns and approximately $150,000 were confiscated.

Medi-Cal fraud is generally defined as the billing of the Medi-Cal program for services, drugs, or supplies that are not performed, more costly than those performed or unnecessary. It also refers to paying and/or receiving kickbacks for Medi-Cal billing referrals.

The California attorney general’s Web site states that between three and ten percent of any state’s Medicaid budget is lost due to fraud and abuse, according to the federal General Accounting Office and health insurance industry sources. Based on these figures, California’s Medi-Cal losses can reach billions of dollars. Arredondo says that the attorney general’s office has made insurance fraud a top law enforcement priority.

On November 2nd, 2006, then-Attorney General Bill Lockyer announced the arrests of three individuals who were accused of defrauding the Medi-Cal system of nearly $1.5 million. Rudik Avakyan, Gayane Abramyan and Lusine Khatchatryan were charged with a felony complaint alleging 37 counts of grand theft, attempted grand theft and filing of false claims. Like the Scott Medical Center, Avakyan’s Workplace Industrial Management Clinic, allegedly submitted false insurance claims and padded Medi-Care bills with treatments that patients never received.

Castanon-Hill was scheduled to be arraigned Wednesday, October 31st.