Fight to Prevent Medicare Fraud Turns Violent

April 26, 2010— -- Gangs across the country are arming themselves with powerful weapons to bilk taxpayers out of billions of dollars through Medicare fraud. What used to be a mostly non-violent, white collar crime has turned potentially deadly, and Federal agents who once combed through paperwork are now firing rounds at the shooting range to prepare for extreme dangers.

"Our folks are out there engaging a criminal element that is dangerous," said Jay Hodes, an agent with the Department of Health and Human Services Office of Inspector General.

For more on this story, watch Pierre Thomas' report tonight on 'World News with Diane Sawyer' on ABC.

Medicare fraud has become very big business for gangs, members of the Mafia and other thugs. One estimate suggests that criminals steal some $60 billion from the federal government via healthcare fraud every year.

They commit the fraud by recruiting people with clean records who then apply for Medicare vendor licenses. Websites walk them through the process, step-by-step.

"It's so easy to steal from Medicare and Medicaid, it attracts a violent criminal element so they can cash in on their schemes," said Tim Menke, the chief of investigations for the HHS Office of the Inspector General.

Schemes include setting up phony medical equipment companies which then rip off taxpayers by billing for services never rendered and equipment never actually delivered.

Many of the criminals are armed to the teeth to enforce their authority. Undercover surveillance footage shows members of an Armenian gang in Los Angeles as they confront an accomplice suspected of skimming their profits in a $30 million Medicare fraud scheme. The gang members threatened to kill the man.

"You and me, we're going to have a war tonight," said a man on the tape. "Two hundred thousand [expletive] dollars, it really matters."

"We are seeing a variety of different groups who are attracted to healthcare fraud," said Menke. "In California, we see Armenians. In Texas we see Nigerians. In Florida, Cubans. And in the Northeast we'll see Ukranians and Russians."