Glen Cove doctor sentenced in $3.8M COVID-aid fraud for 'luxury lifestyle'

A physician who lives in Glen Cove was sentenced to four years and three months in prison on Friday for fraudulently obtaining $3.8 million in pandemic-relief loans and grants, the most serious case of its kind against a Long Islander to date.

Dr. Konstantinos "Dino" Zarkadas, 49, also was ordered to pay restitution of $3.5 million during the sentencing at the federal courthouse in Central Islip, though his attorney said he doesn't have the money. The doctor confessed to the crimes last year.

After Friday's sentencing, federal officials denounced the physician. "Dr. Zarkadas chose greed over honesty by financing a luxury lifestyle on the backs of America's taxpayers," said Thomas Fattorusso Jr., special agent-in-charge in the Internal Revenue Service's criminal investigation office in New York.

Zarkadas lied on 11 successful applications for Paycheck Protection Program loans and COVID-19 Economic Injury Disaster Loans, and then used the money to purchase fancy watches and a yacht. He even used loan proceeds to pay an $80,000 settlement in a separate federal case involving his poor record-keeping of a weight-loss drug that he gave to patients, according to prosecutors.

His sentencing by U.S. District Court Judge Gary R. Brown comes as the administration of President Joe Biden steps up efforts to crack down on fraud in federal pandemic-relief programs, which have awarded billions of dollars to struggling businesses and nonprofits across the country.

"This is an absolutely reprehensible crime," the judge told Zarkadas on Friday, citing the disastrous impact of the coronavirus on the United States and its economy.

"It's disgraceful conduct … The defendant was looking for an opportunity to raid the government treasury," the judge said during the 70-minute hearing. "This is as bad as white-collar crime gets."

The judge, the prosecutor and Zarkadas' lawyer all derided his use of pandemic-relief money to buy $140,000 worth of watches — three Rolex watches and a Cartier watch — and make a $194,915 down payment on a $1.7 million yacht for his brother-in-law. Zarkasdas has since turned over the watches and the yacht money to federal authorities, according to a sentencing memo from prosecutors.

"This defendant did ridiculous things," the judge said.

In November, Zarkadas, who practices medicine in Manhattan, pleaded guilty to disaster relief fraud and wire fraud. He had faced up to 30 years in prison.

Zarkadas, who prosecutors said had a net worth of more than $2 million before the pandemic, sought the loans and grants as COVID was raging in New York State, between March 30 and July 20, 2020.

The federal assistance was meant to help employers to pay employees’ salaries and to survive a period when all nonessential businesses were shut down to slow the coronavirus’ spread. Health care businesses, such as Zarkadas’ practice, were deemed to be essential.

Federal prosecutor Anthony Bagnuola said on Friday that $757,000 in PPP and EIDL loans that were granted to Zarkadas' medical office aren't part of the fraud case.

However, the physician "falsified" 11 loan applications for other businesses that he allegedly owned and "created fake tax documents" to support his claim of needing federal aid, the prosecutor said.

Zarkadas lied on the applications about the number of people that were employed by the businesses, the size of the payrolls and how he planned to use the money. "The defendant saw this an opportunity for a windfall. He was motivated by greed," the prosecutor said.

Defense lawyer's explanation

Zarkadas' attorney, Ronald G. Russo, disagreed, saying the physician's income dropped in the pandemic and he was having trouble paying a debt owed to a Manhattan landlord.

Some years earlier, Zarkadas had personally guaranteed a $4.7 million lease for a medical office in midtown that he then backed out of. Zarkadas used $3 million, or 80% of the COVID loan funds, to pay the debt.

"My client was at the forefront of the COVID response, caring for the poorest of the poor — and the irony is that he stole COVID funds to pay his landlord," the lawyer said.

Zarkadas didn't publicly comment in court, opting to speak privately to the judge about a separate lawsuit that his lawyer and the prosecutor agreed could produce a multimillion-dollar settlement. That money would go toward paying the restitution, they said.

Zarkadas cried as he spoke quietly to the judge for five minutes.

The PPP consisted of bank loans guaranteed by the federal government that are forgivable if used primarily to keep employees on the payroll or to rehire them. The EIDL loans are from the U.S. Treasury and include a grant of up to $10,000 per applicant.

Both programs are overseen by the U.S. Small Businesses Administration, which together with the Department of Justice, FBI and IRS, has been investigating instances of fraud.

Breon Peace, U.S. attorney for the Eastern District of New York, said on Friday that he and his staff "will vigorously prosecute and bring to justice medical professionals, like the defendant, and other fraudsters who are driven by greed to maintain a lavish lifestyle at the expense of small businesses in legitimate need of COVID-19 emergency assistance."

By James T. Madore

james.madore@newsday.comJamesTMadore

James T. Madore writes about Long Island business news including the economy, development, and the relationship between government and business. He previously served as Albany bureau chief.