Preet Bharara, the United States Attorney for the Southern District of New York, announced that MICHAEL DANILOVICH was found guilty today on racketeering conspiracy, securities fraud, health care fraud, mail fraud, wire fraud, and money laundering charges following a five-week jury trial before United States District Judge Deborah A. Batts. The jury convicted DANILOVICH of racketeering arising out of his operation, from 2007 through 2012, of the largest single no fault automobile insurance fraud scheme ever charged; his operation, from 2007 to 2009, of two investment fraud schemes, Lyons Ward & Associates and the Rockford Group; and his attempted operation, from 2011 to 2012, of a third investment fraud scheme, Baron & Caplan, including after he was arrested and released on bail in this case.
U.S. Attorney Preet Bharara said: “Michael Danilovich has been convicted by a unanimous jury of committing several frauds. As the jury found, he took a lead role in scamming insurance companies of over $100 million in fraudulent medical treatments and in engaging in other investment scams that swindled investors out of another $18 million. Today's verdict ensures that Danilovich will be punished for the wide-ranging frauds he perpetrated.”
According to the Superseding Indictment and evidence admitted at trial:
From 2007 through 2012, DANILOVICH was a leader of an enterprise engaged in a pattern of racketeering that included a massive scheme to defraud automobile insurance companies under New York’s no fault insurance law, multiple securities fraud schemes, money laundering, and the operation of illegal gambling businesses.
Under New York State Law, every vehicle registered in the State is required to have no fault automobile insurance, which enables the driver and passengers of a registered and insured vehicle to obtain benefits of up to $50,000 per person for injuries sustained in an automobile accident, regardless of fault (the “No Fault Law”). The No Fault Law requires prompt payment for medical treatment, thereby obviating the need for claimants to file personal injury lawsuits in order to be reimbursed. Under the No Fault Law, patients can assign their right to reimbursement from an insurance company to others, including medical clinics that provide treatment for their injuries. New York State Law also requires that all medical clinics in the State be incorporated, owned, operated, and controlled by a licensed medical practitioner in order to be eligible for reimbursement under the No Fault Law. Insurance companies will not honor claims for medical treatments from a medical clinic that is not actually owned, operated, and controlled by a licensed medical professional.
From 2007 through 2012, DANILOVICH’s organization defrauded automobile insurance companies of more than $100 million by, among other things, creating and operating medical clinics that provided unnecessary and excessive medical treatments in order to take advantage of the No Fault Law. In addition, Danilovich’s organization fraudulently owned and controlled more than a dozen medical professional corporations (“PCs”) – including no fault clinics, MRI offices, and acupuncture and chiropractic PCs – by paying licensed medical professionals to use their licenses to incorporate the professional corporations. DANILOVICH and his co-conspirators paid kickbacks of thousands of dollars to runners to recruit patients to receive the same battery of tests and treatments, and received kickbacks from other co-conspirators for referring patients for additional unnecessary treatments. All told, Danilovich’s organization billed insurance companies for tens of millions of dollars in fraudulent medical treatments. Furthermore, DANILOVICH and his co-conspirators laundered the proceeds of the fraud through check cashing entities and shell companies, and used the money to pay for luxury cars, watches, and vacations.
In addition to the no fault insurance fraud scheme, DANILOVICH was convicted for operating two investment fraud schemes that swindled innocent victims out of nearly $18 million. Both schemes – Lyons Ward & Associates and the Rockford Group – purported to be settlement claims funding companies that invested in lawsuits in return for a portion of future settlements. DANILOVICH also attempted to operate a third scheme, Baron & Caplan, including after he was arrested and released on bail in this case. As part of these schemes, DANILOVICH and his co-conspirators created bogus documents and account statements used by cold-callers to solicit victims through false representations. In reality, there was no investment fund at all; instead, DANILOVICH and his co-conspirators simply stole the money invested by victims and laundered the proceeds by wiring them overseas to shell companies in Eastern Europe, which were then turned into cash in the United States.
DANILOVICH’s organization also operated high-stakes illegal poker games and illegal sports books.
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DANILOVICH was convicted of one count of conspiracy to commit racketeering, which carries a maximum sentence of 20 years in prison. In addition, DANILOVICH was convicted of conspiracies to commit securities fraud, health care fraud, mail fraud, wire fraud, and money laundering, as well as substantive counts of securities fraud, health care fraud, mail fraud, wire fraud, and money laundering, which, in total, carry a maximum sentence of 260 years in prison. In total, DANILOVICH faces a maximum sentence of 280 years in prison. DANILOVICH is scheduled to be sentenced on March 8, 2016, at 11:00 a.m., before Judge Batts. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
DANILOVICH, 41, of Brooklyn, New York, is the thirty-sixth defendant convicted in this case. DANILOVICH was remanded pending sentencing following his conviction.
At DANILOVICH’s first trial in the fall of 2013, a mistrial was declared after the jury failed to reach a unanimous verdict on all counts.
U.S. Attorney Preet Bharara thanked the Federal Bureau of Investigation and the New York City Police Department for their continued outstanding work in this investigation. Mr. Bharara also thanked the National Insurance Crime Bureau, the investigative units of the insurance companies, the Manhattan District Attorney’s Office, and the Alabama Securities Commission for their valuable assistance with the investigation.
The case is being prosecuted by the Office’s Violent & Organized Crime Unit. Assistant U.S. Attorneys Daniel S. Noble, Joshua A. Naftalis, and Jaimie L. Nawaday are in charge of the prosecution.