June 9, 2011
INSURANCE BROKER SENTENCED TO PRISON FOR DEFRAUDING VALLEY BAPTIST HOSPITAL OF MILLIONS
(HOUSTON) – Michael N. Swetnam Jr., 47, of Harlingen, Texas, was sentenced to 37 months in federal prison for his role in a scheme to defraud Valley Baptist Hospital of more than $3.8 million by selling nonexistent and altered insurance policies, United States Attorney José Angel Moreno announced today.
At a hearing this morning, Judge Keith P. Ellison sentenced Swetnam to the prison term to be followed by a three-year-term of supervised release and further ordered him to pay Valley Baptist $2,950,301 in restitution. The sentence was imposed on each of the three counts of mail fraud a jury found Swetnam guilty of committing and will be served concurrently. The jury returned their verdicts on May 3, 2010. Judge Ellison also signed an order forfeiting Swetnam’s interest in a home in Los Fresnos, Texas, that he paid off using proceeds of the fraud. Swetnam will be permitted to remain on bond pending the issuance of a court order to surrender to a Bureau of Prisons facility to be designated in the near future where he will serve his sentence.
Swetnam’s fraud scheme involved selling the hospital both nonexistent windstorm policies and excess liability policies with premium amounts Swetnam altered after receiving the policies from the insurer. Swetnam engaged in this conduct for the policy years 2006-2007 and 2007-2008, which resulted in Valley Baptist being defrauded of approximately $3.8 million.
The evidence at trial showed that Swetnam was a licensed insurance broker in the Brownsville, Texas, area, who had a long-standing relationship with Valley Baptist - a nonprofit that is the largest provider of medical services in South Texas. The jury heard testimony that Swetnam traveled to Mexico with Valley Baptist representatives in August 2006 where the hospital was given hurricane insurance cover notes in the company names of Arial Re, Landsdow and Lloyd’s of London. But the insurance never existed. A government official from the British Virgin Islands testified that Arial Re and Landsdow were non-existent companies and a lawyer from the BVI testified that his name was forged on the cover notes. Swetnam again sold Valley Baptist a nonexistent windstorm policy, supposedly from an offshore company, in 2007.
During this same time period, Swetnam also altered an excess liability policy from Zurich to increase the premium by $1 million after the Zurich representative had signed the declaration page. Swetnam then transmitted the declaration page along with a bill for the inflated amount to Valley Baptist, which paid the higher premium because the altered document made it look like this was the premium Zurich was charging. Swetnam then received the inflated payment from Valley Baptist and forwarded the actual premium to Zurich, pocketing the extra million for himself and his partners.
The United States Postal Inspection Service with the assistance of the Texas Department of Insurance investigated the case leading to the federal charges. Assistant United States Attorneys Ryan D. McConnell and Gregg Costa tried the case. Assistant United States Attorney Kristine Rollinson handled the asset forfeiture aspect of the case.
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