Kathleen A. Hunnewell Pleads Guilty in U.S. Federal Cour
Bill Mercer, United States Attorney for the District of Montana, announced today that during a federal court session in Missoula on January 20, 2009, before U.S. Magistrate Judge Jeremiah C. Lynch, KATHLEEN A. HUNNEWELL, a 44-year-old resident of Kalispell, pled guilty to mail fraud and filing false income tax returns. Sentencing is set for March 26, 2009. She is currently released on special conditions.
In an Offer of Proof filed by the United States, the government stated it would have proved at trial the following:
HUNNEWELL owned and operated Physician's Billing Service (PBS) located in Kalispell. PBS was in the business of billing insurance companies for medical services rendered by area doctors and other medical providers (collectively referred to hereafter as "clients"). Upon receipt of patient service information from clients, PBS, under HUNNEWELL'S direction, billed the applicable insurance companies and patients, collected reimbursement checks from insurers and patients for medical services rendered, provided the clients with an accounting of amounts received, and remitted payment to the clients.
For some clients, PBS, under HUNNEWELL'S direction, maintained custody of the insurance billing information that indicated the amounts paid by insurers and patients.
A doctor, identified as "DCG", hired PBS to do his billing. By December of 2000 and continuing over the next three years, HUNNEWELL converted all or part of many of the reimbursements owed to DCG.
Former employees would have testified that HUNNEWELL had control of the PBS finances and checkbook and that when HUNNEWELL converted all or a portion of DCG's reimbursement, the money was converted for HUNNEWELL'S personal use.
After a time DCG began to suspect that he was not receiving his full reimbursement. However, the conversion was successfully concealed from him in several ways: first, the PBS accounting statement to DCG would reflect an actual transaction, but would falsely indicate an "adjustment" that the insurer had not made; or second, the receipt of payment by an insurer was not reported to DCG at all; or third, payment was posted to a another account that was never sent to DCG.
On at least some occasions, PBS computer records show that HUNNEWELL entered the false information about insurer "adjustments" to DCG's reimbursements.
On July 16, 2003, HUNNEWELL, d/b/a PBS, received, via U.S. mail, a reimbursement check from Blue Cross and Blue Shield of Montana in the amount of $2,261.61 for services provided by DCG to seven separate patients which was then deposited. When insurance payment records that had been sent to DCG were compared to PBS billing statements, it was discovered that DCG had not been paid the full reimbursement amount for the seven patients.
A review of the internal PBS accounting for those seven patients found that while five were posted correctly, that is, DCG was reimbursed the proper amount, on the other two patients, HUNNEWELL had posted one to a fictitious account and completely failed to post the other. As a result, in this transaction alone, HUNNEWELL converted approximately $726 and reimbursed DCG approximately $1,535.
Another doctor, hereafter referred to as "DAZ", was also a client of PBS. Financial reimbursement records from insurers and PBS billing statements found that DAZ suffered from the same kind of conversion by HUNNEWELL.
In addition to DCG and DAZ, several other PBS clients complained of billing irregularities at PBS.
For the time period set forth in the Indictment, the IRS reviewed HUNNEWELL'S financial transactions, bank accounts, and tax returns. HUNNEWELL'S bank records showed significant amounts of income deposited and spent above and beyond her reported business income.
A review of HUNNEWELL'S 2001, 2002, and 2003 federal income tax returns showed that the income reflected in HUNNEWELL'S bank records was not claimed on the tax returns.
HUNNEWELL signed under penalty of perjury each of the federal income tax returns in question. For the tax year 2003, HUNNEWELL failed to claim approximately $60,415.79 in income that her bank records show she received that year.
HUNNEWELL faces possible penalties of 20 years in prison, a $250,000 fine and 3 years supervised release.
Assistant U.S. Attorney Leif M. Johnson prosecuted the case for the United States.
The investigation was a cooperative effort between the Criminal Investigation Division of the Internal Revenue Service and the U.S. Attorney's Office.
A copy of the Offer of Proof can be obtained by contacting Sally Frank at (406) 247-4638.