Pension & Benefits News Business owners net substantial prison time, must pay $6.5M and $941K separately in restitution, for crimes against employee benefit plans
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Friday, December 14, 2018

Business owners net substantial prison time, must pay $6.5M and $941K separately in restitution, for crimes against employee benefit plans

By Pension and Benefits Editorial Staff

As a result of investigations conducted by the Department of Labor’s Employee Benefits Security Administration (EBSA), unrelated business owners have been sentenced by federal district courts in Tennessee and Kentucky to 168 months in prison and $6.5 million in restitution, and 27 months in prison and $941,337 in restitution, respectively, for crimes related to employer health care benefits programs.

American Trade Association Inc. and Smart Data Solutions LLC. The Springfield, Tennessee, owner of American Trade Association Inc. and Smart Data Solutions LLC has been sentenced to 168 months in prison, 36 months of supervised release, and ordered to pay $6,524,888 restitution, according to EBSA. He pleaded guilty in January 2018 to one count of mail fraud and one count of embezzlement from a health care benefit program.

EBSA's investigation found that the owner, along with four other individuals, coconspired to commit healthcare fraud against individuals in multiple employer welfare groups nationwide.

The owner and his coconspirators sold and caused others to sell bogus health insurance products to unsuspecting consumers. The owner failed to obtain backing from a legitimate underwriter for the products and, as a result, his scheme denied legitimate health insurance claims for participants. He also embezzled millions in insurance premiums that the scheme's victims paid to his company. The owner and his coconspirators diverted more than $5 million, using those premiums to buy a motorcycle, sports car, football tickets, and to pay off a $500,000 personal mortgage. The scheme collected more than $22 million in premiums for health coverage and left about $6,524,888 in unpaid health claims.

Healthy Life Center Inc. In an unrelated development, the cofounder of Louisville, Kentucky, medical clinic Healthy Life Center Inc. has been sentenced to 27 months in prison, two years of supervised release, and ordered to pay $941,337 in restitution for defrauding health care benefit programs, EBSA said. The cofounder pleaded guilty in August 2018 to nine counts of health care fraud, nine counts of theft in connection with health care valued at $941,337, and one count of aggravated identity theft.

EBSA's investigation found that the cofounder was involved in a fraudulent scheme to establish Healthy Life Center Inc. and bill Humana Insurance Co. and United Healthcare for patient injections that the clinic never administered. Both insurance companies billed private-sector employee welfare benefit plans for the false charges, and the private-sector employee welfare benefit plans paid a portion of the false charges as a result.

The cofounder also unlawfully used the identification of a medical provider on the billing statements, falsely alleging the medical provider administered the services to the patients, according to investigators. His fellow Healthy Life Center cofounder will be tried at a later date.

"Knowingly committing health care fraud victimizes insurance companies and hardworking employees," said EBSA Regional Director L. Joe Rivers. "Fraudulently inflating healthcare bills for unnecessary or non-existent treatments increases the cost for others in need of health insurance. The U.S. Department of Labor remains committed to ensuring that benefits are not abused, and anyone found guilty of committing fraud is held accountable."

SOURCE: https://www.dol.gov/newsroom/releases/ebsa.

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