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Post date: April 14 2016

A.G. Schneiderman Announces Arrest Of Three-Quarter House Operators Yury And Rimma Baumblit On Charges Of Medicaid Fraud And Money Laundering

Yury Baumblit And Rimma Baumblit Accepted Hundreds Of Thousands of Dollars In Kickbacks To Force Indigent Residents Living In “Three-Quarter Houses”

To Attend Medicaid Funded Drug Treatment Programs

Schneiderman: We Will Deliver Swift Justice To The Baumblits Once And For All

NEW YORK -- Attorney General Eric T. Schneiderman today announced the arrest of Yury and Rimma Baumblit yesterday, “three-quarter house” operators in New York City, on charges of Grand Larceny in the Second Degree, Money Laundering in the Second Degree, and violations of the Social Services Law prohibiting the payment of kickbacks related to the provision of services under the State’s Medicaid program. In addition to yesterday’s arrest, the Attorney General’s Medicaid Fraud Control Unit (“MFCU”) filed a False Claims Act lawsuit and other civil causes of action against Yury and Rimma Baumblit and others seeking over $1.9 million dollars in damages plus penalties. If convicted on all charges, Yury and Rimma Baumblit face up to 15 years in prison.

In papers filed yesterday in Kings County Criminal Court and filed earlier this week in Kings County Supreme Court, prosecutors allege the Baumblits engaged in a monthly kickback scheme with multiple Medicaid-enrolled drug treatment providers. In exchange for a monthly payment, the Baumblits agreed to force the residents at their homes to attend specific drug treatment providers, irrespective of the residents’ actual medical need for drug treatment services, and in violation of numerous State laws, including the Patient’s Bills of Rights. The payments were based on the number of substance-abuse treatment sessions attended by residents of the Baumblits three-quarter houses. During the course of this scheme, the Baumblits received over $600,000 in illegal kickbacks through one of four corporations they controlled: #1 Marketing Service, Inc., R Y B Realty, LLC, Steps to Better Living Inc., and Orbit Management Group Inc., all operating in Kings County.

“As our complaint demonstrates, Yury and Rimma Baumblit lined their pockets by preying on some of the most vulnerable members of society,” said Attorney General Schneiderman. “Our complaint demonstrates that over several years, the Baumblits carried out a deliberate and illicit scheme to defraud taxpayers, rip-off Medicaid, and force residents into programs and services that benefited no one but themselves. We will deliver swift justice to the Baumblits once and for all.”

While the criminal charges filed yesterday focused on the Baumblits kickback arrangement with one particular substance abuse treatment program, the Baumblits had arrangements with several such providers. MFCU’s investigation into these other substance abuse treatment providers is ongoing.

During the course of its investigation, MFCU found that the Baumblits kept their three-quarter homes in deplorable conditions, often forcing their residents to live without heat in the winter, without air conditioning in the summer, and with vermin, mold, persistent leaks and broken windows.  Residents were crammed into small rooms in which three or four grown men often lived.  Residents were also subjected to acts of violence and threats by the Baumblits and their house managers, and were locked out of the houses during much of the day.

NYC Human Resources Administration Commissioner Steven Banks said, “Even before the Mayor created the City's Three-Quarter Houses Task Force last June, we had been working collaboratively with the Attorney General’s office to identify operators of three-quarter houses who take advantage of our low-income clients with limited housing options. We are proud to have worked with the Attorney General on this investigation to stop this unscrupulous conduct and to support the prosecution of Yury Baumblit who victimized our clients in his three-quarter houses. Joint investigations like this one and the Attorney General's prosecution of Mr. Baumblit will send a message to other three-quarter house operators that the time has come to stop preying on our vulnerable clients."  

As a result of this kickback scheme, prosecutors allege that Yury and Rimma Baumblit, acting in concert with various drug treatment providers and others knowingly and intentionally submitted, and caused to be submitted, at least $638,418.00 in false claims for reimbursement to Medicaid, claims predicated on the underlying kickback scheme and the violation of a patient’s right to obtain treatment at a service provider of their choice.  These claims, prosecutors allege, were fraudulent because they resulted from illegal kickbacks and were often medically unnecessary.

Yury and Rimma Baumblit and the corporations they control, #1 Marketing, R Y B Realty, Steps to Better Living, and Orbit Management, have been charged with Grand Larceny in the Second Degree and violating Social Services Law § 366(f), which prohibits kickbacks. In addition, Yury and Rimma Baumblit have each been charged with one count of Money Laundering in the Second Degree.

Grand Larceny in the Second Degree and Money Laundering in the Second Degree are each Class C felonies with a maximum period of incarceration of fifteen years.  Social Services Law §366-f is a Class E felony with a maximum period of incarceration of four years.

In addition to the felony complaint filed yesterday, on Monday, the Attorney General obtained an order freezing the bank accounts and other property held by the criminal defendants and attaching up to $1.9 million of those assets. The Attorney General has further obtained a temporary restraining order preventing dissipation or transfer of further assets.  It bars anyone with notice of the order from giving money or property to any criminal defendant in the action. 

Yesterday, MFCU also executed a search warrant at the defendants’ home and business at 227 Corbin Place in Brooklyn.

Throughout this investigation, Attorney General’s office has worked closely with the various City, State, and Federal Agencies. In particular, the Attorney General would like to thank the New York City Human Resources Administration for its cooperation, partnership and valuable assistance throughout the investigation and notably the work of its Medicaid Provider Investigations & Audit unit.  In addition, the Attorney General thanks the New York State Office of Alcoholism and Substance Abuse Services, the Office of the Medicaid Inspector General, and the United States Department of Homeland Security for their assistance. 

The criminal case is being prosecuted by Special Assistant Attorneys General Megan Friedland and Erin Kelsh under the supervision of NYC Regional Director Christopher M. Shaw. Thomas O’Hanlon is MFCU’s Chief of Criminal Investigations–Downstate. The civil case is being handled by Special Assistant Attorneys General Alee Scott and Christopher Y. Miller and Senior Counsel Carolyn Ellis. The investigation was led by Senior Investigator Albert Maiorano, with the support of Investigator David Ryan and Supervising Investigator Dominick DiGennaro and Supervising Investigator Michael Casado; all under the supervision of Deputy Chief Investigator Kenneth Morgan. Audit support was provided by Special Audit Investigators Patricia Iemma and Nicholas Thottam under the supervision of MFCU Principal Special Auditor Investigator Emmanuel Archer and MFCU Chief Auditor Thomasina Smith.   MFCU is led by Director Amy Held and Assistant Deputy Attorney General Paul J. Mahoney. The Criminal Justice Division is led by Executive Deputy Attorney General Kelly Donovan. 

The charges filed in this case are accusations. The defendants are presumed innocent until proven guilty in a court of law.