Woman with ties to gov's wife allegedly stole $2.1 mil.
Scheme 'a ripoff of the taxpayers'
Mahajan, 55, was released on $250,000 bond Thursday night after being charged with six felonies.
At her bond hearing hours earlier, prosecutors described the enviable position her firm, K.K. Bio-Science, held with the state until it shut down recently.
The firm's contracts with the Department of Children and Family Services "were completely disproportionate" to those of other firms performing the same services, assistant state's attorney Patricia Woulfe said.
"Since 1998, the defendant has received approximately $6.3 million from the state and DCFS," Woulfe said. "This investigation has revealed that at least $2.1 million of that money was obtained through fraudulent overbilling."
The contracts with the state pre-date Blagojevich's becoming governor.
Gov. Blagojevich said Thursday his wife Patti, a real estate broker, no longer does business with Mahajan or her banker husband, Amrish Mahajan.
"It's embarrassing and it's disappointing, and I hope it's not true," Blagojevich said of the charges. "But if in fact that's the case, then you move on."
Mahajan's lawyer Terence Gillespie said prosecutors' statements were "not proof" any crimes were committed.
K.K. Bio-Science performed urine tests on parents involved in custody cases to determine if they were drug-free.
But it billed for more tests that it performed, according to State's Attorney Richard Devine, who called the scheme "a ripoff of the taxpayers."
"Client A would come in and be ordered to be tested three times a month, and Mahajan bills for 7, 8, 10 times a month," explained Woulfe.
The fraud had been going on since at least 2002 and lasted until October 2006, prosecutors said.
In addition, Mahajan allegedly lied by certifying that her company was free from federal and state tax liens.
When investigators brought search warrants to Mahajan's home and two business sites on Jan. 30, they discovered files, documents and computers had been removed.
Investigators later found the items at a Chicago storage facility rented on Jan. 26 by Mahajan, Woulfe said.
Mahajan admitted at least 50 percent of the money she received starting in 2002 was obtained by fraud, prosecutors alleged.
The charges against Mahajan, of the 800 block of South Laflin, include organizing and participating in a continuing financial crimes enterprise. The most serious offenses carry penalties of up to 30 years in prison.
DCFS inspector general Denise Kane said the investigation began last fall after a media inquiry about whether the state could contract with companies that owed taxes.
DCFS then began looking at K.K. BioScience's tax status and discovered delinquencies.
Last year, Patti Blagojevich made $113,000 in real estate commissions on deals involving Mahajan and her husband.
Amrish Mahajan, president of Harvey-based Mutual Bank, has donated money to Gov. Blagojevich's campaign.
Anita Mahajan remained silent as she appeared at the bond hearing via closed-circuit TV.
Gillespie noted his client, though born in India, is a U.S. citizen.
"There's no indication she's a flight risk," he said.
Judge Thomas Hennelly ordered the $250,000 cash bond.
Blagojevich credited his own administration with exposing the fraud.
As for his wife, "Patti doesn't think it's appropriate to continue that relationship ﾽ the business relationship ﾽ with Mr. Mahajan, and so she's on to other business.
"It's just that simple," he said.