Ms. Pichkhadze, Mr. Dieffenbacher, and Ms. Dubrinskaya additionally were charged, along with Express Audit and OTC, with various counts of money laundering in the first and second degree for allegedly knowingly conducting financial transactions designed to conceal the source of the alleged larceny and health care fraud.

Lastly, Ms. Pichkhadze was charged with two counts of Criminal Possession of a Forged Instrument in the Second Degree for allegedly possessing two fake Department of State documents used to open bank accounts in connection with the money laundering charges.

Grand Larceny in the First Degree, Health Care Fraud in the First Degree, and Money Laundering in the First Degree are all class “B” felonies for which the maximum state prison sentence is 25 years. Money Laundering in the Second Degree, Criminal Possession of a Forged Instrument in the Second Degree, and Scheme to Defraud in the First Degree are, respectively, class “C”, “D”, and “E” felonies carrying maximum prison terms of 15, seven, and four years.

Prosecutors from the Attorney General's Medicaid Fraud Control Unit (“MFCU”) outlined an alleged scheme in which the defendants, acting in concert with each other, allegedly paid or directed employees to pay cash kickbacks to Medicaid recipients in return for each patient's agreement to fill their HIV prescriptions at Pichkhadze's First Choice Pharmacy, located at 245 East 124th Street in Manhattan. First Choice Pharmacy in turn billed and eventually received hundreds of thousands of dollars from Medicaid for refills that First Choice Pharmacy either did not dispense to patients, a scheme known as “auto-refilling,” or were predicated on the payment of an unlawful kickback, according to prosecutors.

State law strictly prohibits all medical providers, including pharmacies, from paying or offering to pay cash kickbacks to anyone in return for the referral of medical services ultimately paid for by Medicaid.

Prosecutors further alleged that their investigation found that between January 1, 2013 and December 31, 2016, Ms. Pichkhadze's First Choice Pharmacy did not purchase sufficient quantities of medication from licensed New York State drug wholesalers to justify the quantities of medication it claimed, through its billing records, to have dispensed to patients. As alleged, relying on thousands of false claims for payment filed by Ms. Pichkhadze's First Choice Pharmacy, Medicaid and Medicaid funded managed care organizations (“MCOs”) in turn paid First Choice Pharmacy and the individual defendants over $10.2 million to which, prosecutors alleged, they were not entitled.

Large sums of that money, prosecutors alleged, then were funneled through pass through banks accounts, bearing the names of Express Audit, OTC, Minnesota Independant [sic] Drugs, and Azure Drugs, among others, and disguised as payments to pharmaceutical wholesalers. The latter two accounts were opened as assumed names for First Choice Pharmacy and in effect, prosecutors alleged, the defendants funneled money back to themselves under the guise of inventory purchases.

According to the authorities, during its investigation the MFCU executed a search warrant at First Choice Pharmacy and recovered hundreds of bottles of allegedly adulterated, diverted HIV medication. State law requires pharmacies to only secure medication from licensed pharmaceutical wholesalers.

In conjunction with the criminal case, the government also filed a civil asset forfeiture and New York State False Claims Act action against the four individual defendants, First Choice Pharmacy, Express Audit, and OTC, among others. The asset forfeiture action and civil recovery action seeks to recover over $22 million from the defendants for allegedly defrauding the State Medicaid program.