Business Ethics Gone Bad – CANNON FAMILY MEDICINE, INC. Pleads Guilty to Health Care Fraud

A Kannapolis physician assistant Faces Up to Ten Years in federal prison – what for?  Is the need to achieve wealth or increase material possessions so great that it is worth one’s freedom?  That is the very real question that I had to face when some 13 years ago I took my first steps into federal prison.  Now another will take those steps soon.

CHRISTOPHER J. CAGGIANO, president of CANNON FAMILY MEDICINE, INC.- Kannapolis, North Carolina – plead guilty to four counts of health care fraud.

In July 2006, the N.C. Medical Board suspended Caggiano’s license to work as a physician assistant for two years. But the suspension was to be stayed on Jan. 1, 2007, and Caggiano was to remain on probation for the duration of the suspension.  Caggiano was accused of ordering unnecessary tests for some patients and billing patients’ insurance companies for tests not performed.  At the time, Caggiano said the allegations were untrue and blamed any misunderstandings on disgruntled former employees. The complaint investigated by the medical board also alleged that the physician assistant violated professional standards by allowing patients to refer to him as “Dr. Caggiano.”

The charges against CANNON FAMILY MEDICINE, INC. allege that the practice submitted false claims to private health insurance companies as well as false claims to Medicare, Medicaid, and federal employee health programs.

Each health care fraud count carries a maximum possible penalty of ten (10) years imprisonment, a fine of up to $250,000, and up to three years supervised release. The medical practice and CAGGIANO, a physician assistant, will be sentenced on February 11, 2009.

QUESTION:  What motivated Caggiano’s behavior?  Do you suppose that Caggiano, who will be sentenced to federal prison, will learn and use his prison experience to help others?  As a business ethics and white collar crime speaker, I know that prison does not have to be a dead end.  Every choice has a consequence this is just another example.

Your comments are welcome!

Stephen Lee Turpin Guilty of Ponzi Scheme. No Business Ethics Here!

Every choice has a consequence.  As a business ethics and white collar crime speaker, I address groups every day who elect to be reminded about this fact.  In this case, Stephen Lee Turpin, of Pearland, Texas has been sentenced to the statutory maximum penalty for his involvement in multiple “Ponzi” schemes which resulted in over $2 million in losses to several individuals.

Turpin, 53, was sentenced to 60 months in federal prison, the statutory maximum penalty, for conspiring to commit wire fraud and mail fraud. Turpin was convicted in May 2007 after pleading guilty to the charge.

In the scam resulting in the highest loss to an individual investor, Turpin, 53, convinced a Pearland woman to open a bank account in Zurich, Switzerland, and to then transfer $1 million from that account to a bank account for the supposed purpose of participating in a “high-yield European bond trading opportunity.” There was no such investment opportunity and Turpin netted $800,000 of the $1 million, which he used to purchase two houses and to support an extravagant lifestyle.

In addition to the $1 million loss in the “European bond trading” scam, between March 2003 and March 2005, Turpin convinced several other individuals to invest sums totaling over $1 million in various other fictitious enterprises, including entities allegedly engaged in entertainment promotion, the sale of novelty items at music venues, the construction of donut shops and the sale of flashlights in China. Turpin was able to continue obtaining investors in these wide-ranging fictitious enterprises by obtaining funds from new investors and providing a portion of those funds to prior investors with the representation that they were profits from their investment. Turpin was not in fact engaged in any legitimate business opportunities and was simply scamming those he approached with these “investment” opportunities. Turpin executed his “Ponzi” scheme between [dates] and targeted investors in the Houston area.

The question for this blog is what motivated the behavior?  While I am not proud of it, I, too, was guilty of a ponzi scheme.  For a fraud to exist there must be three components: (1) need; (2) opportunity and (3) rationalization.  In my case, “need’ existed due to too much debt.  I was over extended and underfunded.  Perhaps, in retrospect, the need started from something much deeper.  My guess that this is likewise true in Turpin’s case.

In addition to the prison term, United States District Judge Vanessa Gilmore ordered Turpin to pay over $2.1 million in restitution to the victims of his fraudulent schemes. Lastly, Judge Gilmore ordered Turpin to forfeit several assets purchased with fraudulently obtained proceeds, including two houses and a 2003 BMW Z-4 Roadster. The United States Marshals Office is in the process of liquidating those assets for purposes of making those funds available to the victims.

Turpin, who has been in custody since April 2007, will remain in custody to serve his sentence.

For those who were duped by Turpin, perhaps you’d be kind enough to share how he convinced you to participate in his scam.  Likewise, if you know Turpin, perhaps you’d share something about his background.

Lawyer – Ted Russell Schwartz Murray – Guilty! White Collar Crime Speaker Chuck Gallagher Comments

As the time of decision grew near, the only thing that Ted Russell Schwartz Murray could likely have wished for is another storm.

The trial which began on Sept. 8, 2008, was interrupted by Hurricane Ike, and concluded with the return of the guilty verdicts yesterday.  A Houston federal jury has convicted Ted Russell Schwartz Murray, a lawyer licensed in Texas and Florida, of conspiracy to commit mail fraud and securities fraud in connection with the operation of Money Mortgage Corporation of America, a subsidiary of Premiere Holdings, LP, a real estate investment program.  Murray was also convicted Murray of making a False Statement on Tax Returns for the years 1999 and 2000.

Murray and co-defendants David Isaac Lapin and Jeffrey Carl Wigginton, Sr. were all charged by indictment in August, 2006. Lapin and Wigginton pleaded guilty in August 2008 to the conspiracy to commit mail fraud and securities fraud for their roles in the scheme and are pending sentencing in Nov. 2008.  Murray was charged separately in a second indictment with the tax offenses.

Every choice has a consequence.  As a business ethics and white collar crime speaker I have seen over and over the consequences of greed motivated actions.  For a fraud to exist three things exit: (1) need; (2) opportunity and (3) rationalization.  The verdict was guilty.  The question is what was the motivation of Murray and his co-conspirators.

According to the US Attorney’s news release:

During trial, the United States presented its evidence proving that between 1996 and 2001, Murray, 57, conspired to commit mail fraud and securities fraud in the promotion and marketing of the Premiere 72 or “P72″ mortgage investment program. Murray testified at trial and denied he had made false representations to investors when the program was promoted with promises of (1) 12% interest; (2) 1st liens on real estate; (3) 72 hour liquidity; and (4) 70% loan to value ratio. However, the evidence proved that so-called interest payments were actually set aside from a portion of the investor’s principle and returned to them as interest; many loans were not secured by 1st liens on real estate; and many loans were not based on a 70% loan to value ratio. Lapin, a co-conspirator in the scheme, testified that he and his co-defendants failed to disclose to investors the fact that loans on certain projects were actually in default at the time the funds of new investors were placed in these loans. An expert witness, qualified in forensic accounting, testified that the Premiere 72 program was conducted like a Ponzi scheme, where the money from new investors is used to pay earlier investors.

Mortgage Crisis – no wonder.  With practically free money and a country that seemed to believe that real estate had no ceiling, the opportunity was right the perpetration of such a fraud.  Likewise, in the current economic climate with fear leading the way, others will rise to fill the void.

While admitting that the above material facts were not disclosed to investors, Murray blamed his partners claiming Lapin had failed to live up to his fiduciary duties and both Lapin and Wigginton failed to disclose to investors that Premiere Holdings charged fees ranging from 15 -25% from investor funds. Murray denied any responsibility to disclose any material facts to investors.

With sentencing following in March 2009 the failure to accept personal accountability will no doubt play a role in the length of sentence.

Over 500 people invested in the fraudulent mortgage investment program promoted by Murray and his co-conspirators.  During the five year period the scheme operated, Premier Holdings, LP, Murray and his co-conspirators generated more than $200 million in gross receipts. Premier Holdings, LP, filed for bankruptcy in Oct. 2001 at which time the company had more than $160 million of investor funds tied up in the fraudulent scheme.  Murray filed for personal bankruptcy a short time thereafter.

The jury found Murray guilty of all 20 counts submitted to the jury arising from the scheme to defraud investors including the conspiracy charge, 14 counts of mail fraud, and four counts of securities fraud. The conspiracy conviction and each of the convictions for mail fraud carry a maximum statutory penalty of five years imprisonment. The securities fraud counts of conviction each carry a maximum penalty  of  10 years imprisonment.  Each count also carries a maximum fine of $250,000.

In addition to the scheme to defraud, Murray was also charged and convicted in a separate case with two counts of making a false statement on his tax returns based upon evidence which proved that Murray disguised personal expenses as business expenses and deducted a portion of those expenses on his tax returns, including a $29,000 Rolex watch, payments to casinos, a series of payments totaling over $5 million for return of principal to investors, payments for a $1 million ownership interest in the building where Premiere held its offices at 11451 Katy Freeway, and gifts to family members.  Murray faces a maximum of three years imprisonment and a $250,000 fine on each of two counts of conviction.

Considering where we are today – economically – I would not be surprised to see that the sentence would err on the heavy side.  For those who read this – if you know Murray perhaps you could give some clue as to what motivated his behavior.  Obviously, Murray was educated and hence would know the difference between right and wrong, between ethical behavior and unethical behavior.

Comments are welcome

Business Ethics and White Collar Crime Speaker – Chuck Gallagher – To Speak at 2008 Fraud Conference

PRESS RELEASE:

In the economic climate we live in today, the probability of increased pressure for unethical practices and internal fraud is increasing. Unraveling fraud schemes can sometimes feel like trying to figure out a magician’s tricks. The North Carolina Association of CPA’s is sponsoring the 2008 Fraud Conference entitled: “Don’t Be Fooled.”

Chuck Gallagher, Business Ethics Speaker, is the keynote speaker for the 2008 Fraud Conference speaking on: CHOICES: Negative Consequences – Positive Results. This award winning presentation has received rave reviews nationwide. Gallagher, former CPA and convicted felon, brings home the consequences of the unethical decisions he made in his attempts to build the great American dream.

Have you ever been caught up in the vicious cycle of wanting more, believing success is measured by what you have? If you have ever thought what you have is not good enough, this presentation will stop you in your tracks and could change you life forever. Learn how the three components of most any white collar crime fraud; how it could have been prevented; and the consequences that followed.

Chuck Gallagher is a successful business ethics and white collar crime speaker who has been a sales executive in a public company. Raised in humble beginnings, Gallagher was reared by a single parent in “the projects.” He has led a $40+ million sales region with 125 representatives and started his own training business with projects in 30 states. Every choice has a consequence! “Through my own choices I learned this lesson the hard way. Today I help corporate employees and association members realize the ramifications of their ethical choices.”

For information about this presentation or how your organization can reap the benefits of Gallagher’s presentation: CHOICES: Negative Consequences – Positive results, contact me at chuck@ chuckgallagher.com or call me at 828.244.1400.