United States Attorney Richard B. Roper
Northern District of Texas

AMARILLO WOMAN SENTENCED TO MORE THAN 3 YEARS IN
FEDERAL PRISON ON HEALTH CARE FRAUD CONVICTION

AMARILLO, Texas — Paula Garst of Amarillo, Texas, was sentenced by U.S. District Judge Mary Lou Robinson to 37 months in prison and ordered to pay $32,341.16 restitution following her guilty plea in January to one count of health care fraud, announced U.S. Attorney Richard B. Roper of the Northern District of Texas. Judge Robinson ordered that Garst surrender to the Bureau of Prisons on June 9, 2008.

Paula Garst, a/k/a Pavilli Garst, a/k/a Paula Shultz, a/k/a Paula Patel, admitted in Court documents that she offered low-cost health insurance to individuals who were self-employed or operated small businesses. She used various company names, including Direct Marketing Services, Inc. (DMS), Healthcare Solutions, and Advanced Marketing Group, Inc. (AMP), when soliciting individuals to apply for this low cost insurance. She also contracted with staffing agencies whose function was to manage payroll and other administrative employment-related issues for businesses.

She reported to staffing agencies, such as E.S.S.I. Payroll and Staffing, Tri-State Employment Services, PBS, Paychex and US Personnel, that she had employed certain individuals. In turn, the staffing agencies performed the administrative duties of her companies. Garst provided the completed applications for health insurance to the staffing agencies and the individuals paid Garst premiums for the coverage. Garst submitted the applications and premiums to insurance carriers including PACIFICARE, who issued coverage and insurance cards.

To obtain a discounted group insurance premium rate, Garst represented the health insurance applicants to be her employees. She caused the staffing companies to generate false and fictitious employment documents that represented the applicants to be employees of her various fictitious companies. Further, she represented that because the individuals were her employees, they were entitled to group discount rates.

When payroll checks were issued by the staffing agencies, Garst forged the endorsements and deposited the checks into bank accounts she controlled. She sent notices of premium increases

1when the insurance carrier increased premiums and sometimes inflated that increase. She “skimmed” and took for herself the excess amount of inflated premiums before submitting the premium to the insurance carrier. She established premium rates 30 to 70 percent higher than the actual cost for a legitimate group health plan, however, her out-of-pocket administrative costs to provide the coverage increased over time. The ultimate cost of the premiums to the individuals was considerably less than they would have paid if they had obtained individual policies on their own due to the individuals having multiple health problems and being difficult to insure. Garst occasionally changed insurance carriers from year to year to obtain better insurance rates for these individuals, and occasionally failed to pay the insurance carrier the premiums for the last month of coverage.

Garst admitted billing approximately $558,364 in illegal premium payments from these individuals and in excess of $29,337 in phony payroll payments from the forged checks mailed to her Staffing Agencies, in accordance with her instructions. Garst paid approximately $401,385 for the premium payment and associated costs of the coverage and further realized a profit of approximately $186,316.

U.S. Attorney Roper praised the investigative efforts of the U.S. Department of Labor, Employee Benefits Security Administration. The case was prosecuted by Assistant U.S. Attorney Christy L. Drake of the Amarillo, Texas, U.S. Attorney’s Office.

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