News Release
U.S. Department of Justice
United States Attorney
District of Rhode Island
February 22, 2008
Former RI House Majority Leader is sentenced for illicit bag contracts designed to influence legislation
A federal judge today sentenced former Rhode Island House Majority Leader Gerard M. Martineau to 37 months in federal prison. In November, Martineau pleaded guilty to corruption charges, admitting that he arranged personal business dealings with a pharmacy company and a health insurer, and then steered the outcome of legislation in which those companies were interested. The companies paid Martineau nearly $900,000 for paper and plastic bags to be used in pharmacy retailing.
United States Attorney Robert Clark Corrente and Assistant Attorney General Alice S. Fisher of the Department of Justice Criminal Division announced the sentence, which Chief U.S. District Court Judge Mary M. Lisi imposed today in U.S. District Court, Providence. Judge Lisi also fined Martineau $100,000.
Upland Group
At a hearing in November, Martineau pleaded guilty to two counts of fraud. At the plea hearing, Assistant U.S. Attorney Gerard B. Sullivan said the government could prove that Martineau, operating as the Upland Group, arranged to sell paper prescription bags to Blue Cross Blue Shield of RI for use as promotional items, and both plastic and paper bags to the pharmacy company for use in its merchandising. He then used his position to affect the fate of legislation on the companies’ agendas.
Pharmacy Freedom of Choice
Blue Cross Blue Shield and the pharmacy both opposed Pharmacy Freedom of Choice legislation, which would have opened to other pharmacies a closed prescription network that the two companies controlled. Until 1999, Martineau was in favor of Pharmacy Freedom of Choice. However, after the Upland Group started selling bags to Blue Cross and to the pharmacy, Martineau announced that he’d changed his opinion on the legislation. He subsequently used his position as Majority Leader to stymie its passage.
Between 1999 and the end of the 2002 session, when he left the General Assembly, Martineau also worked for or against other legislation on the agendas of Blue Cross Blue Shield and the pharmacy.
Blue Cross Blue Shield
Beginning in 1999, Martineau, through the Upland Group, periodically billed Blue Cross Blue Shield for paper bags in lots of one and three million, at $19,500 per million. On some occasions, he billed the company just days or weeks before the start of a legislative session.
In all, Martineau billed Blue Cross Blue Shield $195,000 for ten million bags. The health insurer paid him $175,500; it did not pay the final invoice for $19,500, which Martineau submitted in 2003, after he had left the General Assembly. Of the ten million bags for which Martineau billed the company, fewer than two million were ever manufactured.
Pharmacy
Prior to 1999, Martineau had a long-standing business relationship with the pharmacy, selling commodities to it for commission. After he formed the Upland Group, he arranged the
sale of both plastic and paper bags to the company, and between 1999 and the end of 2002, he
received a total of $716,435 in commission payments for bags sold to the pharmacy.
Assistant U.S. Attorney Sullivan said that Martineau never disclosed to Rhode Island citizens his conflicts of interest with the pharmacy and with Blue Cross Blue Shield. Martineau even took steps to conceal the business relationships – using such devices as not signing his name to invoices and falsely signing the name of another person in correspondence with the health insurer.
The charges against Martineau resulted from a continuing public corruption investigation by the Federal Bureau of Investigation, other federal agencies, and the Rhode Island State Police into relationships between Rhode Island legislators and entities with legislative agendas.
Martineau must report to prison on March 14.
In addition to Assistant U.S. Attorney Sullivan, Assistant U.S. Attorney Stephen G. Dambruch and Trial Attorneys Daniel A. Petalas and Peter C. Sprung of the Department of Justice Public Integrity Section prosecuted the case. William M. Welch II is chief of the Public Integrity Section.
Contact: 401-709-5032 Thomas.connell@usdoj.gov