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.

Joe Boyer, Price's boss and the FBI's senior local white-collar crime agent, stops short of saying the Russian mob is invading the state. But he says the crimes alleged are different from those typically committed here.

"What we haven't seen in Oregon before is an effort that appears to be this well organized and from outside the area," Boyer says.

The ease with which Shcherbakov and at least one other Russian in Portland bilked the feds illustrates in part why healthcare costs are soaring.

"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.

Three months before Price visited Unimed, another federal agent, Robin Bonn, stopped by another new DME supplier called Quickmed, which was located at 2608 NE Sandy Blvd.

"Inside, I saw approximately four wheelchairs and a display along the back wall with boxes of what appeared to be various neoprene or elastic-style braces," wrote Bonn, an investigator with the U.S. Department of Health & Human Services. "The DME store set up in this fashion is similar to other fraudulent DME suppliers who establish a storefront merely for the purpose of appearing to be a legitimate medical enterprise."

Like the owner of Unimed, the owner of Quickmed, a young Russian named Amiran A. Abukov, was long gone.

"Abukov left the U.S. for the [former] Soviet Union in late December 2007," Bonn later wrote in a seizure warrant affidavit.

Abukov and Shcherbakov not only possessed clean records, they left little trace. Public records searches yielded no home addresses, parking tickets, phone numbers or any of the usual fingerprints that law-abiding citizens leave behind. The phone numbers on their business licenses have been disconnected, and neither responded to emails.

(A Washington DMV official confirmed Abukov holds a current commercial driver's license, but would not provide his date of birth or any other information. Public records show he briefly lived in Renton, Wash., in 2007.)

"They are Russian citizens," says the FBI's Boyer. "They came here on student/work visas. They entered the country legally, but while here they ended up as the founders of shell companies that are defrauding Medicare."

Bonn says it's probably no accident the men have similar profiles.

"Clearly, they are highly sophisticated in the way this is set up," she says. "We usually don't see people in their early 20s committing healthcare fraud. The fact that they are so young makes them have less of a public record and more difficult to track."

Although neither man has been indicted, the two investigators' affidavits accuse each of charging Medicare more than $1 million for supplying medical equipment to people who never asked for the supplies—and never received them.

"There's nothing legitimate about this business," Bonn says.

Ultimately, the only part of the scam that's real is the money.

In a little over two months of operation, the two storefront businesses received $1.8 million from Medicare, of which the feds seized about a third.

Unlike more conventional types of identity theft, such as stealing credit-card numbers, medical identity theft takes longer to detect because the money is coming out of distant, massive federal Medicare accounts rather than directly affecting individuals.

But Bonn says it would be a mistake to regard medical identity theft as a victimless crime.

"Taxpayers are paying for this," she says. "Fraud adds to already rising healthcare costs. And Medicare beneficiaries will also pay the price down the road when there's less money to pay for services."

A hazy picture of a well-orchestrated fraud emerges from federal affidavits and interviews with landlords and neighboring business operators.

In December 2006, records show a man named Grigor Sedrakian registered Quickmed with the Oregon secretary of state's Corporation Division and obtained a business license from the City of Portland.

Sedrakian rented the storefront at 2608 NE Sandy Blvd. He told his landlord, North Rim Development, that he was from Southern California and provided an address in Glendale, a Los Angeles suburb.

Quickmed lay dormant until Oct. 17, 2007, when records show Sedrakian transferred ownership to Abukov. In a subsequent telephone interview with an HHS agent in January, Abukov said he bought the business for $50,000.

Abukov "stated that he found the business on a website 'ibusinessforsale.com,'" wrote HHS agent Steven Ryan. (Abukov called HHS on Jan. 3, 2008, after the agency had frozen Quickmed's bank account.)

"He was previously in the trucking business and had no experience in the DME industry. He stated that he chose to buy the business because 'it was in his price range,'" Ryan wrote.

Abukov also told Ryan he had "no medical training, training in the DME supply business or training in billing Medicare."

If Abukov's background seemed unusual, his description of how he ran his business was less than enlightening. "He has a full-time employee named 'Mary' who assists him with ordering the supplies and other general office work," Ryan wrote. "He pays her $15 per hour. He did not know the last name of this employee."

Abukov's lack of medical experience proved no impediment to the former trucker.

He obtained a Medicare supplier number simply by proving he had a business license, store and insurance. The other pieces of the scam—the identities of beneficiaries, or customers, and the doctors—were even easier to obtain.

Law enforcement officials say identity thieves whom they call "cappers" or "marketers" have a variety of ways to obtain seniors' Medicare numbers and other personal identifiers. They telephone or go door-to-door offering free food or medical supplies in exchange for personal identification, or in some cases, they simply pay cash.

The other part of the scam is to get a doctor's Unique Physician Identifier Number—which doctors use for writing prescriptions. Surprisingly, UPINs are freely available to the public at ecare.com.

Once Shcherbakov and Abukov obtained Medicare provider numbers and the personal identification information of "beneficiaries," all they had to do was forge prescriptions using the names of real doctors and their UPINs.

"Co-conspirators create false medical records to support the fraudulent billings to Medicare," Price explained in an affidavit. "These false documents have the general appearance of being prepared and signed by a doctor."

In the case of Quickmed and Unimed, investigators identified a dozen or so doctors whose name and identifying number appeared on prescriptions for all the bogus equipment orders. Agents determined the doctors did not treat the patients involved, had never heard of the Portland DME suppliers, and often didn't even practice the type of medicine that corresponded to the equipment prescribed.

Abukov, for example, billed Medicare for DME for 10 patients he claimed Dr. Samer Alaiti, a Los Angeles dermatologist, had sent to Quickmed. But when an investigator called Alaiti, the L.A. skin doctor explained he had "never prescribed DME supplies for his patients, with the possible exception of support stockings. As a dermatologist, the majority of his prescriptions are for skin creams and pills, not DME."

From November 2007 to January 2008, according to Bonn's affidavit, Abukov submitted 1,713 claims to Medicare, seeking reimbursement for $1,135,802.15 in equipment he claimed to have provided.

Abukov's claims included some eye-catching anomalies. Of 940 beneficiaries, for example, not one lived in Oregon and more than 99 percent lived in California, which supports the premise that the Portland scam was just a satellite operation for California crooks. (Both men also transferred money back to California, investigators found, and Quickmed's telephone number connected to voicemail with a California phone number).

Investigators were also suspicious because of the heavy concentration of products Abukov claimed to have sold. About 8 percent of Abukov's beneficiaries allegedly received elbow orthotics, and 9 percent received ankle and foot orthotics. About a quarter of his beneficiaries allegedly received an incontinence treatment system and another quarter supposedly got a "male vacuum erection system."

"It is my experience and that of other trained investigators that a DME supplier which is receiving a large percentage of its Medicare payments for four [items] is unusual in comparison with legitimate suppliers," Bonn wrote in her seizure affidavit. "Furthermore, it is highly unusual that all of the supplier's beneficiary population be located out of state."

Down to small details, the scheme perpetrated here mirrors operations in other states, Bonn says. Some DME suppliers even make identical mistakes when filling out Medicare forms, suggesting a high level of communication between them.

"In 10 years of investigating healthcare fraud in Oregon, this is the first time I've seen this kind of organization," Bonn says.

While it may have taken the feds a while to figure out the scam, Barbara Kimmell, the proprietor of a beauty shop named Salon du Beau, which operates next door to Unimed on Southwest Morrison Street, says she felt uneasy about her new neighbor right away.

"One day when I got to work, he poked his head into the salon," Kimmell recalls. "He looked pretty slick. Like he was from Miami. He had longish hair and was very dark. He wore sunglasses, pressed jeans, loafers and a white linen jacket." (Shcherbakov came to Portland some time around June 2007, possibly from Arizona, where a DMV spokesman says he once held a state-issued ID card.)

Kimmell says Shcherbakov talked about being a dealer in both DME and art. She and others in her building watched with interest as boxes of medical supplies and paintings were delivered. Not long afterward, she says, a far less well-dressed young man who called himself Anthony took over the office. But Kimmell says Quickmed's operation was always "bizarre."

"I told him I might need a wheelchair for my mother, but he didn't want to sell me one," she says. "Another lady told me she stopped in for a walker and got the same response. And then they were never open, and the mail just piled up."

There was little reason for anybody to be in the office. First, the company had no real customers. Second, Bonn says, DME suppliers know Medicare inspectors typically make only one unannounced visit—so for fraudulent operators, there's no reason to come into the office again after that visit has been made.

In a speech he gave last year, Michael Leavitt, secretary of the federal Department of Health and Human Services, remarked on the phenomenon of phantom DME suppliers. Agents took him to a building in Miami that supposedly housed about 50 DME suppliers.

"You'd knock on the door, try to open the door—no one there, door after door after door," Leavitt said in his May 9, 2007, speech in Washington, D.C. "It was a shocking level of fraud to me. This kind of blatant fraud is hard to believe."

On Jan. 3 of this year, the feds, who began to get suspicious, placed a hold on Quickmed's bank account. That's when Abukov called Ryan, the HHS agent, giving investigators their only direct contact with him.

Investigators say they are unsure of any specific reason the Russians targeted Oregon, although there are a couple of factors that make the state an easier target than others.

First, says the FBI's Boyer, the secretary of state's Corporations Division, which registers companies, makes it easy for anyone to establish a legal business.

"Oregon is one of the easiest states in which to set up shell companies," says Boyer, a 26-year FBI veteran. "You can be a foreign citizen and set up a company through a registered agent without any disclosure."

State laws also lack provisions to freeze bank accounts without a court order here, Bonn adds. Investigators froze Quickmed's California bank account because laws in that state allow investigators to freeze funds for three days based on affidavit testimony.

Boyer is still shaking his head at the reaction of the Russians to having their money taken.

"When we seize money, we're required to notify the owners so they can claim it," he says. Even if the money is seized from an alleged drug dealer, the suspect's lawyer or family or the person who loaned or supplied the money will often try to claim it.

"With these guys in Portland, we never heard from them," Boyer says. "That's very unusual."

Of course, the two Russians still got away with more than $1 million.

Woodhead, the California prosecutor, says stiffer licensing requirements would help improve the current DME system in which the feds discover fraud only after they've paid big money to shell companies.

"Pay-and-chase doesn't work," she says.

Ideally, of course, DME crooks would never get the money at all. Last year, HHS launched a national effort to stamp out Medicare fraud called "Operation Whack-a-Mole."

"The name 'Whack-a-Mole' is sadly appropriate," HHS Secretary Leavitt said in his November 2007 speech. "This type of fraud resembles the arcade game where you hit a mole with a big padded mallet and another one pops up. As soon as you hit one, another one pops up in its place."

This April, Bonn says, HHS instituted a certification process for DME suppliers. The agency also plans buying in bulk through carefully vetted suppliers.

In Oregon, Boyer says, the FBI is talking to the Secretary of State's Office about tightening corporate registration requirements and is working more closely with contractors who handle Medicare billing.

Peter Threlkel, director of the Secretary of State's Corporation Division, acknowledges it is "cheaper and faster" to establish a corporation here than in many other states. The secretary of state will, however, introduce legislation in 2009 that would mirror recent changes in Nevada and Wyoming that require foreign nationals to identify their interest in domestic companies.

"We don't have a crystal ball," Threlkel says. "We don't know what people's intentions are."

In the meantime, local officials are hoping to indict Abukov and Shcherbakov, although that may prove futile since Russia has no extradition treaty with the U.S.

For now, at least, the crooks have the upper hand when it comes to medical identity theft. The Sopranos poster still hangs in Unimed's office, a joking reminder of the Russians' quick score.

The story has a happy ending for someone, however. Across town, when Quickmed's landlords emptied out the company's space after serving an eviction notice, they gave Abukov's floor models—four brand new wheelchairs—to the Wallace Medical Concern, which serves clients who have no health insurance.

A 2006 Oregon attorney general's report said there are about 10 "Eurasian" organized crime groups in the metro area and Woodburn, but added, "Limited information is available due to the lack of law enforcement resources involved in intelligence collection."

Special Agent Ted Price was one of the FBI's lead investigators in the infamous 2002 murders of Miranda Gaddis and Ashley Pond by their Oregon City neighbor, Ward Weaver.

Medicare spent $401 billion in 2006, according to federal statistics. Law enforcement officials told The Washington Post in June that healthcare fraud costs taxpayers $60 billion annually.

Agents found that both Portland DME operations shared the identities of "beneficiaries" with numerous other bogus DME suppliers. "[Forty-two] suppliers have submitted claims for at least five of the beneficiaries for whom Shcherbakov submitted claims," the FBI's Ted Price wrote.

The Medicare reimbursement for a vacuum erection pump in Oregon is $456.64.

In the search warrant affidavits, FBI agent Ted Price states that Alexandr Shcherbakov and Amiran Abukov have committed healthcare fraud and wire fraud.

Most of the patients claimed as beneficiaries by the Portland operation were immigrants, the FBI's Ted Price wrote. "Sixty-three percent of the beneficiaries Unimed billed for have an M suffix in their Medicare number indicating they are immigrants, a Medicare group particularly vulnerable to exploitation."