By any measure, Stefano "Steven" Mazzola was unlikely to be inducted into the American College of Healthcare Executives.
Mazzola's resume suggested more experience in back alleys than in business administration. He served a three-year prison stretch for planning the robbery of a supermarket courier. Law enforcement authorities say his primary vocation was as an operative in the New Jersey wing of the Genovese crime family, specializing in strong-arm robberies and arson for hire.
So imagine the shock waves when law enforcement officers last summer discovered Mazzola, then 52, at the helm of Tri-Con & Associates, a Hasbrouck Heights, N.J.-based third-party administrator. Tri-Con's promotional literature contended it and seven affiliated companies administered healthcare benefits for more than 1 million people in five states, handling contracts for municipalities, unions and other large employers.
Headlines loudly trumpeted the case as the first major evidence of organized crime infiltrating the healthcare business.
Now, many industry observers and crime fighters are wondering if this is the wave of the future or an isolated incident. Will John Gotti open a healthcare consulting practice? Will the next "Godfather" movie be set in a hospital? Will utilization review become a much more painful process?
The preliminary answer: The potential is there.
Follow the money. "I do think the whole area of healthcare is a burgeoning field, ripe for organized crime," says New Jersey Attorney General Peter G. Verniero, who also chairs the governor's task force on healthcare fraud.
Verniero notes that the interlocking layers of businesses working in the $1 trillion-a-year healthcare industry can act as an effective shield for misdeeds. And "the mob" is drawn to it "because law enforcement has been so successful in cracking down in their more traditional fields, such as loan sharking."
Indeed, published reports suggest the five New York crime families, including the Genovese clan, are struggling with their traditional lines of business. And like the proverbial company crippled by a corporate plane crash, aggressive prosecution in the past decade has eliminated much of their top-echelon management.
After a series of acquittals, Gotti, the flamboyant head of the Gambino crime family, was sent to prison for life. Despite sometimes overt threats to newcomers, competitive bidding for garbage hauling contracts occurred last year in New York for the first time in recent memory. That was followed by a police crackdown on the Fulton Fish Market in lower Manhattan, considered an organized crime enclave.
That gives active mobsters a choice: They can either work with greatly diminished expectations in their old lines, or they can troll for something new, inconspicuous and flowing with cash.
"The mob will infiltrate anything they can make money on," says Jerry Capeci, who writes a column about organized crime for the New York Daily News.
"Whenever there is money in healthcare, organized crime will follow," says Richard Kusserow, an Alexandria, Va.-based industry consultant and former HHS inspector general.
But there is some disagreement about the significance of the mob's presence in healthcare. Kusserow and others believe most organized crime in healthcare is carried out by small gangs operating in neighborhoods, perpetrating minor frauds in Medicare billing, home medical equipment and drug prescriptions.
"We never saw anything like this take hold on a national scale. Most of it is confined to local areas, such as Florida," Kusserow says. He notes that unless a slew of corrupt physicians can be recruited to work scams, it becomes difficult for such operations to expand.
Model for the mob. On the occasions when the mob does involve itself with healthcare, Kusserow contends, the Tri-Con case is the model: raiding health plans through inflated consulting or administrative fees.
The scheme came to light last August, when law enforcement officials in New Jersey arrested 12 men they claimed were associates and members of the Genovese crime family.
The charges were run-of-the-mill stuff to alleged mobsters: criminal usury, promoting gambling, bribery and firearms violations. But many of their alleged misdeeds occurred in an unusual industry: the amusingly named Tri-Con & Associates.
New Jersey law officials contended a two-year investigation showed Tri-Con was entangled with mob connections. Mazzola, its chief executive officer at the time of the arrests, took control of the firm in the early 1990s, not long after he finished his prison term. He had managed a local tavern prior to prison, but law enforcement officials and published reports alleged Mazzola was a member of the New Jersey branch of the Genovese family, specializing in strong-arm robberies and arson.
He had been a Passaic, N.J., police officer in the 1970s but left the force on a psychiatric stress leave after shooting a burglary suspect. Mazzola's trial in the courier robbery had been delayed for months as he allegedly feigned insanity-a tactic also used by Genovese boss Vincent "the Chin" Gigante.
According to law enforcement officials, Mazzola preferred to operate Tri-Con by kickbacks rather than marketing plans. He would pay individuals who brought in groups or new enrollees to associate HMOs or PPOs commissions of about $100 a year per new enrollee. The kickbacks would then be disguised as service fees charged back to the employers.
Mazzola would also allegedly funnel premium money to his Genovese family superiors, particularly Michael A. Borelli, alleged to operate the Monroe Buddies social club in Hoboken, N.J.
Alleged mobsters also enjoyed something the Clinton administration couldn't deliver in years past: free health coverage.
"Mazzola was . . . able to place members of the underworld on a group's medical insurance plan without the group's knowledge," says Terence P. Farley, director of New Jersey's Division of Criminal Justice.
All the defendants in the Tri-Con case have pleaded innocent to a variety of charges. A state grand jury continues to hear evidence in the case. While Mazzola and most of the other suspects-including a vascular surgeon-are free on bail, indictments are expected to be announced shortly.
New frontier. The Tri-Con case grabbed a lot of headlines last summer. It was the type of man-bites-dog story that commands attention. But whether or not it may be cited as an example of organized crime infiltrating the healthcare industry on a large scale is a matter of debate. Some experts believe the industry remains the turf of smaller ethnic gangs. Others think healthcare represents a new frontier for the mob-much like trucking was six decades ago when Prohibition was repealed and rum-running became a dead end.
Fred Verinder, executive vice president of the Council of Ethical Organizations-made up of Fortune 1,000 companies concerned about ethics in business-and former head of the FBI's white-collar crime division, says the FBI has implemented a much-publicized program to crack down on healthcare crimes. The bureau's goal had been to increase staffing to 500 agents, but Verinder believes the expansion has gone slower than planned.
According to a recent published report, the FBI now has 350 investigators working on healthcare cases, up from 290 last October. The agents are handling a record 2,300 cases.
John Molesworth, chief of the FBI's fraud unit within the white-collar crime division, confirms there have been some instances of organized crime infiltrating the industry. However, the bureau does not see enough evidence of mob activity to be able to separate those cases from other healthcare fraud.
But the potential of mob infiltration in healthcare seems to have caught the FBI's attention in other quarters. Lewis D. Schiliro, a high-ranking official in the bureau's New York office, told the New York Times in a recent article that the agency was giving high priority to fighting organized crime in healthcare.
The FBI's press officer in New York did not respond to repeated requests for interviews.
And even if the mob is not involved on a large scale with healthcare, it still has the potential to wreak a lot of damage, Verniero warns.
"When we talk about healthcare fraud, we're talking about a very small minority of individuals. The problem is the system is so vast that even a small amount of clever, sophisticated fraud can result in billions of dollars of losses," he says. Verniero adds that healthcare fraud in New Jersey alone is a $3.5 billion-a-year business, or about 10% of the total legitimate business.
"The reason a case like Tri-Con is so offensive is because it saps money and resources from the legal marketplace for illegal gains, and all honest consumers have to pay for illegal activity," Verniero says.
Many New York businesspeople believe the inflated costs for construction and trash pickup caused by mob influences are a way of life. Verniero says enough cases along the lines of Tri-Con would cause healthcare premiums to rise in New Jersey.
As for solutions to prevent organized crime penetration?
Kusserow believes hospitals should keep a closer eye on their ancillary businesses, such as home healthcare.
"The weak underbelly of a hospital is ancillary services," Kusserow says. "(Hospital executives) understand their own business, but they don't understand other services. That's their Achilles' heel."
Verniero says honest healthcare executives must remain vigilant to make sure their businesses aren't infiltrated. And despite threats against them, they should report any potential misdeeds immediately.
"The best that law enforcement can do is be alerted to the possibilities and keep pace," he says.