Colorado health-plan founder sentenced to federal prison for mail fraud, embezzling plan funds and money laundering
DENVER – Gerald Rising, Jr., age 60, of Centennial, Colorado, the owner and operator of Rural Health Plans Initiative Administration Company, also based in Centennial was sentenced today by Chief U.S. District Court Judge Wiley Y. Daniel to serve 66 months (over 5 years) in federal prison for mail fraud, embezzling plan funds and money laundering the U.S. Attorney’s Office, IRS – Criminal Investigation, and Department of Labor Employee Benefits Security Administration announced. Following his prison sentence, Rising was ordered to spend 3 years on supervised release. Chief Judge Daniel also ordered Rising to pay restitution totaling $3,500,000 to the victims of his crime. The defendant appeared at today sentencing hearing free on bond. He was ordered to report to a Bureau of Prisons facility within 15 days of designation.
Rising was indicted by a federal grand jury on April 4, 2011. He pled guilty before Chief Judge Daniel on October 26, 2011. He was sentenced today, March 30, 2012.
According to the stipulated facts contained in the plea agreement and indictment, from 2003 through November 2010, Rising defrauded individuals, companies, and entities throughout the United States in connection with the delivery of or payment for medical benefits pursuant to health benefit plans and employee welfare plans promoted, sold and administered by Rural Health Plans Initiative Administration Company (RHPI), a closely held Colorado Corporation owned by Rising. Rising promoted, sold and administered the plans to entities, including school districts in the States of Colorado, Kansas and Oklahoma and would retain part of the plan contributions (approximately 20%) for administrative costs, and that the remainder was to be held in a designated trust account to pay claims by covered employees and to purchase excess loss or stop-loss insurance through insurance providers like Lloyd’s of London and AIG to cover any claims that exceeded $25,000.00. Stop-Loss insurance is generally a type of insurance that covers medical expenses associated with catastrophic illnesses that exceed specified amounts or limits.
RHPI Captive Insurance Company, LTD (“RHPIC”) is an off-shore corporation, incorporated in Anguilla, British West Indies, by Rising, which maintained the residual fund contributions after the administrative fees were deducted from the premiums paid by employers. Rising served RHPI and RHPIC in several capacities including as President, Director and Owner. RHPI maintained a bank account controlled by Rising that was referred to as the contribution trust account, but did not segregate funds in separate accounts for the benefit of each plan.
Rising and employees of RHPI promoted the sale of the RHPI health care benefit plans to business and governmental entities falsely representing that reputable insurance companies like Lloyd’s of London and AIG would provide stop-loss coverage at $25,000.00, when in truth those policies did not provide coverage on claims until they reached approximately $125,000.00. Rising commingled trust funds from various plans in order to pay claims for the aggregated pool of beneficiaries, in violation of the trust agreement; he paid claims on a particular plan using the monies deposited for the benefit of beneficiaries in other plans, in violation of the plan trust agreement.
Rising, in 2008 and 2009, increased his salary in order to siphon monies held by RHPIC for the benefit of plan beneficiaries and in 2009 and 2010, he began to kite checks between various bank accounts he controlled for himself, RHPI and RHPIC, in order to create a false impression as to the financial status of the businesses. Between July and November, 2010, Rising directed employees to falsely represent to various plan beneficiaries and employers that claims for health care services were paid when they were not to deflect concerns about the plans. During the same time, Rising directed employees to send balance sheets to clients which falsely represented the client’s account balances. In late 2010, Rising created bills and invoices that billed and created false indebtedness to the employers for payments RHPIC made for beneficiary and health care provider claims.
There were over 250 individuals, businesses and governmental agencies, for example school districts, that constituted victims of Rising’s crimes with an aggregated loss to the victims between $2.5 million to $7 million.
“Employees and companies trusted the defendant to take care of a vital matter – their health care insurance coverage,” said U.S. Attorney John Walsh. “He took their money, and betrayed their trust, and will now face the consequences of his actions.”
“This sentencing sends a clear message, executives who misuse their positions of trust within their corporations will be held accountable,” said Sean Sowards, Special Agent in Charge, IRS Criminal Investigation, Denver Field Office. “This successful investigation was due to the cooperative efforts of our law enforcement partners – the U.S. Attorney’s Office and the Department of Labor’s Employee Benefits Security Administration.”
Following today’s sentencing, James Purcell, Regional Director of the U.S. Department of Labor’s Employee Benefits Security Administration’s Kansas City Regional Office, said, “This sentencing shows that the Labor Department is committed to ensuring that justice is served for those who steal from their workers. We continue to aggressively investigate those who steal from plan participants and their beneficiaries through our Health Benefits Security Program.”
This case was investigated by Internal Revenue Service – Criminal Investigation (IRS CI), and the Department of Labor Employee Benefits Security Administration (DOL-EBSA).
The case was prosecuted by Assistant U.S. Attorneys Jaime Peña and Tonya Andrews.