The Sopranokovs 

The Russian mob comes to town with a new scam—medical identity theft. 

When FBI special agent Ted Price peered through the window of a dingy brick storefront on Southwest Morrison Street in March, it was what he didn’t see that caught his attention. 

The business, called UnimedCorner, claimed to provide ailing seniors with orthotics—braces and other devices to correct foot, joint and back problems. 

Price and other federal investigators were skeptical. 

On Unimed’s showroom floor, Price saw wheelchairs, motorized scooters, a variety of canes and, on the walls, a selection of amateurish paintings and framed photographs. There was no evidence, however, of the kinds of equipment for which Unimed had billed Medicare nearly $2 million in the previous couple of months. 

“I observed wheelchairs and canes through the window but did not see any orthotics in the store,” Price later wrote in a search-warrant affidavit. “It is a sign of fraud that the store is not stocking the items [for which] it is billing.” 

By the time Price arrived on the scene, the company’s owner, a shadowy Russian immigrant named Alexandr Shcherbakov, was long gone. 

Today, Shcherbakov’s store sits undisturbed. The message light on the phone blinks, dead potted plants droop and a stuffed toy monkey slumps in a glass display case. 

And behind the cash register hangs a framed poster of television’s best-known mobsters, the Sopranos. 

From interviews and information presented in federal affidavits, it is clear Shcherbakov moved to Oregon to commit a crime elegant and lucrative enough to make Tony Soprano envious: medical identity theft. 

... 

“Medical identity theft is the new frontier for organized crime,” says Alex Johnson, a former FBI agent who investigates fraud for Regence BlueShield. “Pretty much anybody can set up a mom-and-pop operation and start cranking out claims.” Someday, most Americans will need a cane, wheelchair, home hospital bed or another of the items healthcare professionals call “durable medical equipment,” or DME. 

For those over 64 and without private insurance, there’s a good chance federally funded Medicare will pick up the tab for that equipment. Last year, according to federal statistics, Medicare spent $8.6 billion on DME. 

Here’s the way the system is supposed to work: A doctor prescribes a device such as a wheelchair for a patient, who presents his prescription to a DME supplier. The supplier provides the equipment and bills Medicare, which typically pays 80 percent of the cost. Unlike pharmacists, who fill prescriptions under strict scrutiny of state and federal watchdogs, DME suppliers are lightly regulated. “DME is very vulnerable to fraud,” says Consuelo Woodhead, the chief healthcare fraud prosecutor for the U.S. Attorney’s Office in Los Angeles. “It doesn’t require any background in medicine, any kind of professional licensure or appreciable capital. 

There are barriers of entry in other medical fields, but not in DME.” To operate, DME suppliers simply need a place of business, a business license and liability insurance. Unlike pharmacists, DME suppliers operate under an honor system: The feds count on them to supply the equipment they claim to provide to the beneficiaries who need it. 

That honor system is not working. 

The epicenter of DME fraud, according to the federal Department of Health and Human Services, is South Florida, where Medicare billing for DME quadrupled from 2002 to 2006 to $1.7 billion. Investigators found much of that increase was due to fraud. In 2006, federal inspectors revoked the licenses of 634 DME suppliers in South Florida, nearly half the DME dealers in the region. 

Later the same year, raids in Southern California yielded similar results: The feds shut down 95 DME suppliers. Many of the DME suppliers shut down around Los Angeles were run by immigrants from the former Soviet Union. It’s probably no coincidence that when the feds raided Los Angeles DME suppliers, some Angelenos fled to cities where there was less scrutiny—such as Portland.

The event was held at Die Insel, on a tiny island a few kilometers outside of Berlin’s city center, near Treptower Park. The venue is mostly used for live music so basically it feels like a dark, somewhat dingy club (certainly the bathrooms are reminiscent of a club). The presentations were on the 3rd floor in a room that probably held about 60 people in close quarters; to handle overflow, a closed-circuit feed was being simulcast on the 4th floor, which was a bit less crowded and, more importantly, opened out onto a rooftop deck which meant better ventilation. The bottom floor led out to a Biergarten with tables, beach chairs, and a stage which was used for DJing. The layout was actually pretty efficient for allowing around 200 people to mill about and socialize/network while not having to stray too far from where the talks were presented.

As far as the event itself, when I said “laid back” earlier, don’t interpret that to mean disorganized or watered down in any way. It was run with stereotypical German efficiency, from badging to presentations to the after-hours parties. The presentations were just as technical and relevant as any of the more “corporate” conferences. Unfortunately for me, I don’t know that many people in European security circles, and most of the ones I do know weren’t in attendance. Those I did meet, however, were impressively smart and well-versed. Nobody was trying to conduct business transactions or slip away for meetings, which is inevitably what happens when only technical folks are present!

For me, a few talks stood out. Fukami and BeF’s talk on SWF and the Malware Tragedy discussed methods for automated static detection of malware in Flash movies. Much of it centered on heuristics related to inconsistencies in the file format or tag structure, abnormal concentrations of strings in the constant pool, or the existence of various obfuscation techniques. Ultimately, there are false positive issues to be addressed but that is just a fact of life with static analysis, and it will be an iterative process to refine those heuristics as the attack vectors evolve. I thought this talk was particularly timely given the increasing prevalence of Flash as a conduit for exploits/malware, such as the most recent Flash 0day that made the news (granted, this was an exploit against Flash itself, not just using Flash as a delivery mechanism, but close enough).

I also enjoyed pierre’s talk on counterintelligence, basically a mélange of wiretapping and other bugging devices discovered in the wild. War stories are always interesting, particularly when it comes to the realm of physical security. One of the x-ray images he showed of a bugged pen was identical to a pen that I own (minus the bugging device of course… I hope). The feel of the talk reminded me a bit of James Atkinson’s talk at SOURCE, “Telephone Defenses Against the Dark Arts” (video: Part 1 and Part 2), which also got rave reviews.

Mike Eddington’s presentation on the Peach 2 fuzzing framework was also quite interesting. Peach 2 was released several months back but I haven’t really been paying much attention to it or any other fuzzing tool for some time. In fact the last time I really had to implement a protocol fuzzer, I was using SPIKE 2.9, so that gives you some indication of how long it’s been. Peach 2 includes some powerful built-in capabilities such as node relationships (e.g. field 1 represents the length of field 2; field 10 is a CRC-32 of fields 1 through 9), data transforms (those with battle scars from ASN.1 will be happy), state machines (packets 1 and 2 have to be normal in order to fuzz packet 3), monitoring agents (detecting when a crash happens and under what conditions), and much more. I am itching to go fuzz something now just so I can tinker with Peach.

All in all, it was a good trip and I enjoyed the opportunity to see how things are done across the pond, and to do a little sightseeing in a historic and beautiful city.