Owner of Defunct N.J. Pharmacy and Ringleader of Medicaid Fraud Scam Pleads Guilty to Money Laundering Scheme

New Jersey Attorney General Peter Harvey announced that the owner of a defunct Newark pharmacy has pleaded guilty in Essex County Superior Court to “laundering” more than $1.8 million in stolen monies obtained, in part, from one of the largest Medicaid Fraud scams yet uncovered by the Division of Criminal Justice – Office of Insurance Fraud Prosecutor.

Vaughn McKoy, director, Division of Criminal Justice and Insurance Fraud Prosecutor Greta Gooden Brown said the ongoing investigation and prosecution by the Office of Insurance Fraud Prosecutor has resulted in guilty pleas from a medical doctor and a licensed pharmacist for their roles in the scheme which drained more than $290,000 from the Medicaid Program.

According to Insurance Fraud Prosecutor Gooden Brown, Shahid Khawaja, 43, of New York City, plead guilty before Essex County Superior Court Judge Michael Nelson to charges contained in a criminal Accusation. The Accusation charged one count of financial facilitation of criminal activity, or money laundering. The second degree charge carries a penalty of up to 10 years in state prison and a fine of up to $150,000. Khawaja is scheduled to be sentenced by Judge Nelson on May 14. Khawaja has pleaded guilty to similar charges in federal court.

Gooden Brown noted that Khawaja, the owner of the defunct S. Brothers Pharmacy formerly located at 687 Frelinghuysen Ave., Newark, was charged via a State Grand Jury indictment returned on Nov. 8, 2002. The indictment charged that Khawaja and S. Brothers Pharmacy fraudulently billed the Medicaid Program more than $293,800 for medications that were never dispensed to Medicaid patients or for medications that were dispensed using stolen Medicaid recipient numbers. In some cases, phony bills were reportedly submitted to the Medicaid Program for medications prescribed for Medicaid recipients who had died years before.

Following the Nov. 2002 criminal indictment, the continuing investigation by the Insurance Fraud Prosecutor and federal authorities determined that Khawaja was allegedly linked to various other criminal enterprises and fraud schemes, including Medicaid Fraud.

The Accusation charged that from April, 1996 through October, 1998, Khawaja organized, directed, financed and controlled an organized criminal cartel which laundered more than $1.8 million in stolen monies. In pleading guilty, Khawaja reportedly admitted conducting at least 273 separate cash transactions each totaling less than $10,000. The state and federal investigation remains ongoing.

The 2002 indictment also charged Dr. Axat Jani, 37, of Bergen County and Milton Barasch, 67, of Monmouth County, with reported theft by deception, Medicaid Fraud and Health Care Claims Fraud. Barasch was a licensed pharmacist employed at the S. Brothers Pharmacy, while Jani was a medical doctor charged with reportedly issuing fraudulent prescriptions designed to bilk the Medicaid Program out of tens of thousands of dollars.

According to Gooden Brown, Dr. Jani pleaded guilty to Health Care Claims Fraud on Jan. 7, 2003 before Judge Nelson. In pleading guilty, Jani reportedly admitted writing dozens of phony prescriptions in the names of Medicaid patients who had visited his Newark clinic from January through October, 1998. Jani also admitted providing prescriptions, along with Medicaid beneficiary numbers, to Khawaja and Barasch for a fee. Similarly, Barasch pleaded guilty on May 19, 2003 to Health Care Claims Fraud. Jani’s sentence has been postponed until June, while Barasch is slated to be sentenced in May.

On July 31, 2002, Azam Khan, 40, of New York City, yet another reported participant in the Medicaid Fraud scheme, pleaded guilty before Essex County Superior Court Judge Joseph Falcone. Khan pleaded guilty to an Accusation which charged one count of Health Care Claims Fraud. Khan is scheduled to be sentenced in May.