Friday, November 18, 2005

Three Former Insurance Company Executives Indicted for Fraud

To: National Desk
Contact: Kathy English of the U.S. Department of Justice, 225-298-5552; http://www.usdoj.gov/usao/lae
WASHINGTON, Nov. 18 /U.S. Newswire/ -- Jim Letten, United States Attorney for the Eastern District of Louisiana, Jack Galvin, Assistant Inspector in Charge of the United States Postal Inspection Service, Roger Hilburn, Regional Director of the Department of Labor Employee Benefit Security Administration, and Gordon Heddell, Inspector General, U.S. Department of Labor, announced that a two count indictment was returned today by a Federal Grand Jury sitting in the Eastern District of Louisiana charging BARRY SCHEUR, age 54 of Newton, Massachusetts, ROBERT MCMILLAN, age 56 of Garland, Texas and RODNEY MOYER, age 59 of Doylestown, Pennsylvania, with conspiracy and mail fraud in violation of Title 18, United States Code, Sections 371, 1341 and 2 resulting from their fraudulent attempts to conceal the impaired financial condition of the Oath for Louisiana.
According to the indictment, between September and December of 2000, SCHEUR, MCMILLAN and MOYER devised a scheme to defraud and mislead the Louisiana Department of Insurance ("LDOI") into believing that The Oath for Louisiana, a health insurance company, was meeting the required minimum of $3 million, and thereby unlawfully enriching themselves through continued operation of The Oath, during a time when the company did not have the adequate net worth required by the State regulators. According to the indictment, the defendants prepared and caused the mailing of false and misleading financial statements to State regulators, and prepared false and misleading internal accounting books, records and memoranda which fraudulently overstated The Oath's net worth. This minimum net worth requirement is designed to ensure that insurance companies have adequate capital with which to pay insurance claims.
According to the indictment, in January, 2000, SCHEUR took control of a Louisiana licensed HMO, which he renamed the "The Oath for Louisiana" and named himself president, Chief Executive Officer and director of the health plan. The Oath was managed by Scheur Management Group, Inc. ("SMG") which was also owned by SCHEUR. The Oath paid SMG approximately $250,000 to $350,000 per month for management services.
MCMILLAN was retained by SMG as a consultant to assist in managing The Oath. He held various positions including Vice President, Chief Operating Officer and Chief Financial Officer of The Oath. MOYER was also retained by SMG to manage The Oath. His various titles included Executive Vice President of The Oath.
As set forth in the indictment, by September of 2000, The Oath was struggling financially and it became apparent to the defendants that The Oath was going to fall below the $3 million net worth requirements. That is when, the indictment alleges, the scheme to defraud began. The Oath's financial condition continued to deteriorate throughout the end of 2000 and into 2001. Nonetheless, the defendants caused the company to file quarterly and annual reports to the Louisiana Department of Insurance ("LDOI") falsely showing that The Oath was meeting or exceeding its minimum net worth requirements.
As part of its regulatory oversight, the LDOI required all HMOs licensed in Louisiana to file financial reports each quarter and an annual financial statement which was required to accurately state the financial condition of the HMO, including assets and liabilities, as well as other specific information. The LDOI required the reports to be filed by mail and to be signed by officials of the HMOs as true and correct, under penalty of perjury. The LDOI relied on the truthfulness, completeness and accuracy of these financial reports in order to regulate, monitor and assess the financial health of HMOs operating in Louisiana.
Throughout 2001, the LDOI became increasingly concerned about The Oath's financial condition and the manner in which it was being managed. In approximately 2001, the LDOI placed The Oath under administrative supervision and took various actions designed to try to revive the company financially. The Oath continued to struggle financially, and in approximately April of 2002, the LDOI placed The Oath in receivership and began liquidation. The Oath's liabilities exceeded its assets by approximately $45 million.
At the time of its failure, The Oath was Louisiana's third largest HMO and more than 80,000 plan members were impacted.
From January 2000 until the LDOI placed The Oath under administrative supervision in September 2001, The Oath paid SCHEUR'S consulting company approximately $5.7 million in management fees.
Commenting on today's indictment, United States Attorney Jim Letten stated:
Today's indictment is yet another strong, clear and unambiguous message to all of our citizens including the principals of health benefit plans and the citizens they serve that we in the United States Department of Justice and our partners in federal law enforcement will tolerate no abuses by anyone -whether company owners, executives, or anyone else - which jeopardize the solvency of employee or health care benefit plans, or which may conceal the impaired ability of plans to protect those who rely on them. In this way, we will continue to defend the rights, health and welfare of all citizens."
Roger Hilburn, Regional Director of the Department of Labor, Employee Benefit Security Administration said: "I hope this sends a clear message to all who transact business with employee benefit plans that the federal government will aggressively pursue those who deprive participants of their promised benefits. We will use all investigative resources of the federal government to pursue these cases."
This case is being investigated by Special Agents of the United States Postal Inspection Service and the United States Department of Labor. This case is being prosecuted by Assistant United States Attorney G. Dall Kammer of the Financial Crimes Unit and Trial Attorney Joseph A. Capone of the United States Department of Justice, Criminal Division.
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/© 2005 U.S. Newswire 202-347-2770/

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