News Release
U.S. Department of Justice
United States Attorney
District of Rhode Island
October 9, 2007
Prepared remarks of U.S. Attorney Robert Clark Corrente announcing charges against former House Majority
Leader Gerard Martineau
For many months,
this office, along with Public Integrity Section of the Department of Justice, the
FBI and other federal law enforcement officials, and the Rhode Island State Police,
has been actively engaged in a large and complex public corruption investigation
into relationships between Rhode Island legislators and entities that have
interests in legislation and activities of the General Assembly. To date, that investigation has yielded a
number of convictions, one former state senator is in federal prison, and the Roger
Williams Medical Center is operating under the terms of a deferred prosecution
agreement.
We are here today to announce a major development in the
investigation.
The United
States has charged former House Majority Leader Gerard Martineau with two
counts of honest services mail fraud for engaging in extensive and undisclosed
personal business dealings with a pharmacy company and a health insurer and, in
return, steering the outcome of legislation in which those companies were interested.
Martineau is
alleged to have been paid more than $900,000 in the two schemes. A two-count
information has been filed today in United States District Court here in
Providence, along with a Plea Agreement under which Martineau agrees to waive indictment
and plead guilty to both charges. Each
count carries a maximum penalty of five years’ imprisonment and a fine of
$250,000 or twice the amount of gain or loss.
An information
is merely an allegation and a defendant is presumed innocent unless and until
proven guilty. Even though Martineau has
signed an agreement to plead guilty, he has not yet entered a plea. He will have an opportunity to formally enter
a plea at a federal court hearing that has not yet been scheduled.
In substance,
here is what the information alleges. In 1998, Martineau formed a personal
business entity called The Upland Group.
In reality, this was not a “group” at all – it was just Martineau. Thereafter, he arranged to sell paper bags to
the health insurance company, for use as promotional items, and both plastic
and paper bags to the pharmacy company for use in its merchandising. In return, according to the information, he
used his position to affect legislation that was important to the two
companies.
Among the most
important pieces of legislation was the so-called Pharmacy Freedom of Choice or Any
Willing Provider legislation, which both companies opposed. Let me explain
that briefly:
The health
insurance company contracted with the pharmacy company for a restricted pharmacy
network that required insured clients to use the restricted network for
prescriptions. For several years,
legislation was introduced that would have opened up the network to other
pharmacies. As I mentioned, both the
health insurance company and the pharmacy opposed that legislation.
Up until 1999, Martineau was
in favor of pharmacy freedom of choice.
However, once The Upland Group started selling bags to the health
insurer and the pharmacy, Martineau announced that he had changed his position,
and that he was now opposed to the legislation. He then used his position as Majority Leader
to prevent passage of that law.
On March 1, 1999, according
to the information, a pharmacy employee mailed Martineau a letter inviting him
to submit a proposal for a plastic bag contract. That very same day, according to the
information, Martineau publicly announced – in an interview with a reporter –
his change of position on the Freedom of Choice legislation. Then, according to the information, on April
8, 1999, the pharmacy invited Martineau to submit a contract for paper
bags. That very same day, the
Corporations Committee voted 17-0 against four Freedom of Choice bills.
According to the information, between 1999 and the end of
the 2002 session, Martineau also did what the pharmacy and the health insurance
companies wanted done with other pieces of legislation, including a bill in
1999 that would have facilitated the sale of the insurer to a for-profit
company.
As set forth in
the information, the financial details were as follows: Martineau sold the
health insurance company ten million bags.
Of the ten million, fewer than two million were ever manufactured. He sent them bills from The Upland Group,
rather than in his own name. For three
years in a row, he billed the company just days or weeks before the start of a
legislative session. In all, Martineau billed the health insurer $195,000 for
ten million bags, and was paid $175,500.
As far as the pharmacy is concerned, before 1999,
Martineau had acted as a broker selling them various products on
commission. After he formed The Upland
Group, he began dealing directly with the pharmacy, selling them both plastic
and paper bags. Between 1999 and the end
of 2002, the pharmacy paid Martineau more than $715,000 for bags.
According to the
information, Martineau never disclosed to Rhode Island citizens his conflicts
of interest with the pharmacy and the health insurer, and he even took steps to
conceal these relationships, by not signing his name to invoices, and writing
business letters from The Upland Group to the health insurer over the signature
of another person, even though the so-called “Group” was just Martineau.
As before, we expect that the investigation will continue
to be active on many fronts.
Contact: 401-709-5032 Thomas.connell@usdoj.gov