N.J. man charged in no-fault auto insurance fraud scheme topping tens of millions of dollars

A New Jersey man has been arrested and charged with running an elaborate no-fault insurance fraud scheme that submitted tens of millions of dollars in bogus medical claims against New York automobile insurers, federal prosecutors announced.

Zhan Petrosyants, 44, of Edgewater, New Jersey, also known as “Johnny,” was taken into federal custody and appeared before U.S. Magistrate Judge Ona T. Wang in Manhattan federal court, according to U.S. Attorney for the Southern District of New York Jay Clayton and FBI Assistant Director in Charge James C. Barnacle, Jr.

Petrosyants faces four counts: conspiracy to commit healthcare fraud, conspiracy to commit wire fraud, aggravated identity theft, and conspiracy to commit money laundering. The first three charges each carry a maximum 20-year prison term, while the identity theft count carries a mandatory two-year consecutive sentence. The case has been assigned to U.S. District Judge Victor Marrero.

Under New York State law, all registered vehicles must carry no-fault automobile insurance, which provides up to $50,000 per person in benefits for injuries sustained in an accident regardless of who was at fault. 

The law also requires that medical clinics be owned, operated, and controlled by licensed practitioners in order to be eligible for reimbursement — a requirement that prosecutors say Petrosyants and his co-conspirators systematically exploited.

According to the indictment, Petrosyants and his associates submitted fraudulent claims for medical services that were never performed, were medically unnecessary, or were billed under the names of shell medical corporations not actually controlled by licensed professionals. The conspirators recruited purported physicians, psychologists, and other clinicians whose names and license information were used on fraudulent billing records submitted to insurance companies, prosecutors said.

To funnel the proceeds, Petrosyants arranged for co-conspirators to obtain advance payments through a financing company affiliated with a law firm, which the indictment identifies as Funding Company-1. 

Petrosyants received referral fees and kickback payments in return, some delivered via blank pre-signed checks drawn on accounts nominally controlled by the fraudulent medical providers, according to court documents. Prosecutors say millions in advances were then routed through two shell corporations and ultimately transferred to a bank account tied to a jewelry business in Manhattan’s Diamond District.

“No-fault insurance fraud schemes raise costs for everyone and reduce benefits to consumers,” Clayton said in a statement. Barnacle added that the FBI “remains dedicated to dismantling fraudulent schemes that exploit benefits at the expense of New Yorkers.”