U.S. Department of Labor Investigation Results in Federal Court Sentencing Operators of Sleep Study Centers in California for Healthcare Plan Fraud

LOS ANGELES, CA – After an investigation by the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA), the U.S. District Court for the Central District of California has sentenced Nick Nikbakht – an operator of sleep study facilities in Sherman Oaks and San Pedro, California – to 27 months in prison for defrauding healthcare plans. The court also ordered that Nikbakht pay $2,970,817 in restitution.

As part of a plea agreement, Nikbakht pleaded guilty in December 2016 to two counts of mail fraud and one count of conspiracy to commit money laundering. He is the third operator sentenced in the case. In 2018, the court sentenced Shawn Chait to 12 months in prison and ordered him to make $3,090,627 in restitution. Also in 2018, the court sentenced Oganes Doganyan to 33 months in prison and pay $1,425,572 in restitution.

EBSA investigators found Nikbakht, Chait and Doganyan engaged in a scheme to defraud multiple health plans, including the International Longshore & Warehouse Union (ILWU)-Pacific Maritime Association Welfare Plan, and the Federal Express Corporation Group Health Plan by recruiting ILWU and FedEx members to undergo medically unnecessary sleep and nerve-conduction velocity tests. In some cases, patients received between $300 and $500 for each sleep study conducted.

The procedures were part of a fraud scheme that submitted at least $16 million in claims to the ILWU and FedEx health plans. Of that billed amount, the ILWU and FedEx health plans paid at least $3 million.

The investigation also revealed that Nikbakht and Doganyan transferred proceeds of the funds to other accounts, under their control, issued cashier checks, and withdrew cash to pay ILWU and FedEx plan participants. They also transferred funds to companies controlled by Doganyan to disguise those funds as legitimate business transactions.

“The U.S. Department of Labor is committed to ensuring that employee health benefits are not abused,” said Employee Benefits Security Administration Regional Director Crisanta Johnson, in Los Angeles, California. “The Employee Benefits Security Administration will continue to work diligently with our investigative partners to bring justice and protect the health benefits that hard-working families count-on.”

EBSA, the Department’s Office of the Inspector General, FBI, and IRS jointly investigated the case; and the U.S. Attorney’s Office in the Central District of California prosecuted the case.

Employers and workers can reach EBSA toll-free at 866-444-3272 for help with problems related to private sector retirement and health plans. Additional information can be found at http://www.dol.gov/ebsa

EBSA’s mission is to assure the security of the retirement, health, and other workplace related benefits of America's workers and their families. EBSA will accomplish this mission by developing effective regulations; assisting and educating workers, plan sponsors, fiduciaries, and service providers; and vigorously enforcing the law.

The mission of the Department of Labor is to foster, promote, and develop the welfare of the wage earners, job seekers, and retirees of the United States; improve working conditions; advance opportunities for profitable employment; and assure work-related benefits and rights.