White Collar Criminal Defense Group

REDUCED SENTENCES FOR EXECUTIVES CONVICTED OF HEALTH CARE FRAUD

Earlier this week, several former executives of WellCare, which operates HMOs in several states, were sentenced by a federal judge in Florida to much shorter sentences than had been sought by prosecutors.  The executives, including WellCare’s CEO and CFO, had previously been convicted of health care fraud – for illegally retaining Medicaid payments that should have been returned. 

Florida law requires Medicaid HMOs to expend 80 percent of the Medicaid premium paid for certain behavioral health services on the actual provision of those services (HMOs are allowed to keep 20 percent for administrative costs and profit).  In the event that an HMO expends less than 80 percent of the premium, the statute requires that the difference be returned to the Florida agency administering Medicaid.  The convicted WellCare executives were found to have fraudulently inflated expenditure information in the company’s annual reports in order to reduce the HMOs’ obligations to repay the premiums.  The Government instituted criminal actions against WellCare and the executives.  WellCare entered into a deferred prosecution agreement, under which it paid $40 million in restitution and another $40 million to the United States.  Wellcare also agreed to pay $137.5 million in civil fines and penalties, in a related civil qui tam case.

At sentencing of the former executives, the Government sought significant prison time – roughly 20 years for WellCare’s former CEO, 20 years for its former CFO, and 10 years for a former VP.  The Court, however, imposed sentences well below the prosecutor’s requests.  The former CEO received 3 years, the former CFO receiver 2 years, and the former VP was sentenced to one year and a day.  The Judge explained his departure from the guidelines by stating that the fraud “was a complete aberration of the lives and careers of these defendants. . . . They have been punished in the community and this has been a blow to their reputations.”   Despite the significant departure, the Government proclaimed the sentences as a victory.  “Today, [the defendants] are being held accountable for their actions. The sentences serve as a warning to other corporate executives who may contemplate such action and are a testament to justice truly being blind to power, position and status.”  The Government’s bravado aside, these reduced sentences demonstrate that despite the recent emphasis on prosecuting and deterring health care fraud, Courts may still be swayed by the fact that the crimes are nonviolent, that the defendants often have no prior offenses and that the defendants will suffer professional and reputational harm that may never be repaired.

Bank Pleads Guilty To Helping U.S. Taxpayers Hide Offshore Accounts From The IRS

On Monday, Credit Suisse AG pleaded guilty to conspiracy to aid and assist the filing of false income tax returns.  The plea agreement provides that Credit Suisse will pay $2.6 billion to federal and state authorities, the largest payment ever in a criminal tax enforcement action. 

As part of the plea agreement, Credit Suisse acknowledged that it knowingly and willfully aided and assisted thousands of U.S. clients in opening and maintaining undeclared accounts to conceal their offshore assets and income from the IRS.  Specifically, Credit Suisse: (1) helped clients use sham entities to hide undeclared accounts; (2) solicited IRS forms that falsely stated that the sham entities were the beneficial owners of the assets in the accounts; (3) failed to maintain records in the U.S. related to the accounts and destroyed account records sent to the United States; (4) facilitated the withdrawal of funds from these undeclared accounts by either providing hand-delivered cash or using correspondent bank accounts in the U.S.; (5) structured fund transfers to evade currency transaction reporting requirements; and (6) provided offshore credit and debit cards to repatriate funds in the undeclared accounts.

Officials from the DOJ and IRS have lauded the investigation and resultant guilty plea, stating “[this] guilty plea is just the latest effort by the department to slam the door shut on undeclared bank accounts, phony trusts and other foreign schemes used by U.S. taxpayers to evade taxes . . . “[w]e will continue to hold to account the bankers, the brokers and other professionals in Switzerland and around the world as well as the institutions that trained and directed them to use bank secrecy laws to protect U.S. tax cheats.”

The case against Credit Suisse also produced indictments of eight Credit Suisse executives in 2011.  Of the eight, mostly former Credit Suisse bankers and managers, two have already pleaded guilty to conspiring to defraud the IRS. 

Given the magnitude of the payment and the rhetoric from the DOJ, this plea agreement appears to signal the Department’s emphasis on enforcement against institutions that it views as facilitating fraud on the government.