FOR FURTHER INFORMATION CONTACT
AUSA VICKIE E. LEDUC at 410-209-4885
DECEMBER 8, 2005
FOR IMMEDIATE RELEASE
FORMER CHIEF FINANCIAL OFFICER OF BON SECOURS COTTAGE HEALTH SERVICES PLEADS GUILTY TO WIRE FRAUD
Defendant’s Five Year Fraudulent Scheme Resulted in Overstating
Company’s Financial Performance by Approximately $117 Million
BALTIMORE, Maryland - United States Attorney for the District of Maryland Rod J. Rosenstein announces that today the former chief financial officer of Bon Secours Cottage Health Services (“Cottage Health”), David G. Zilli, age 48, of Clinton Township, Michigan, pleaded guilty to wire fraud in connection with generating false journal entries to overstate the financial performance of Cottage Health.
Cottage Health was a subsidiary of Bon Secours Health System, Inc. (“Bon Secours”), a non-profit hospital system with its principal place of business in Maryland. Zilli supervised the business office of Cottage Health. Cottage Health operated hospitals and other medical facilities in the area of Grosse Point and Detroit, Michigan.
According to the agreed statement of facts presented to the court, from 1998 to June 27, 2003, Zilli reviewed preliminary drafts of Cottage Health’s monthly financial statements prior to their transmission to Bon Secours at its headquarters in Marriottsville, Maryland. Zilli devised complex adjusting journal entries to the preliminary statements which materially overstated the financial performance of Cottage Health.
Specifically, Zilli created the journal entries himself which he handed to a subordinate in his office with an instruction to cause the journal entries to be reflected in a revised, financial statement. The journal entries had no basis in fact, no back-up documentation and did not reflect any true transactions or movements of money. Zilli designed the fraudulent journal entries to reflect non-existent accounts receivable, to overstate Cottage Health’s fixed assets, to overstate Cottage Health’s inventory and to create other overstatements that increased the perceived financial performance of Bon Secours by approximately $117 million.
During this five year period, part of Zilli’s employment compensation was based on performance of the company. Based upon his overstatement of his employer’s financial performance, Zilli received $144,513 in incentive compensation to which he was not entitled. Zilli did not directly obtain, steal or embezzle money from his actions in falsely reporting Cottage Health’s performance.
Zilli faces a maximum sentence of 20 years in prison followed by 3 years of supervised release. Judge Richard D. Bennett set sentencing for XXX.
United States Attorney Rod J. Rosenstein praised the investigative work performed by the U.S. Postal Inspection Service. Mr. Rosenstein thanked Assistant U.S. Attorney Michael Hanlon, who is prosecuting the case. Mr. Rosenstein also acknowledged the efforts of the Securities and Exchange Commission, which has filed its own complaint against Zilli arising from the same facts.
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