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Justice News

Department of Justice
U.S. Attorney’s Office
Eastern District of Virginia

FOR IMMEDIATE RELEASE
Monday, June 15, 2020

Former CEO Pleads Guilty to Embezzling $8M Intended for Injured Children

ALEXANDRIA, Va. – A former Arlington business executive pleaded guilty today to embezzling nearly $8 million that was intended to settle claims by children who alleged they were victims of medical malpractice.

According to court documents, Joseph E. Gargan, 59, of Round Hill, was the Chief Executive Office of the Pension Company, Inc., an Arlington business that would execute settlement agreements entered into between civil litigants. Specifically, the Pension Company was hired to transfer money from civil defendants to plaintiffs and to purchase annuities on behalf of minor plaintiffs.   

The United States government entered into settlement agreements with plaintiffs in six separate matters. Each of these cases involved children who either claimed to be injured as a result of medical malpractice or who suffered the loss of a parent through alleged medical negligence that occurred at a hospital or clinic operated or insured by the federal government. The settlement agreements required the United States to pay the plaintiff a sum of money and to purchase an annuity on behalf of the injured child. From December 2015 to August 2019, the United States transferred a total of $15,925,000 to the Pension Company to purchase the annuities and execute the six settlement agreements. Gargan embezzled $6,925,000 of this money.

In addition, Gargan embezzled money from a hospital located in New York that was part of a civil settlement with a minor child. The settlement called for, among other things, $3,825,000 to be paid by the hospital to a trust to pay for the care and ongoing medical treatment of the child. The settlement agreement also provided that a portion of the $3,825,000 be paid to a structured settlement broker who would then purchase an annuity which would generate future income for the trust. The Pension Company was retained as the structured settlement broker. From October 2018 to March 2020, the hospital paid the Pension Company a total of $1,032,750 to fund the purchase of an annuity on behalf of the trust. Gargan embezzled all $1,032,750.

In some cases, Gargan attempted to conceal his criminal activity by creating false documents purporting to show that he had purchased the annuities when, in fact, he had embezzled and converted that money to his own use. Gargan also made payments to the plaintiffs falsely claiming the payments were proceeds from an annuity, when, in fact, the payments were made only to conceal his criminal conduct.

The total amount embezzled by Gargan is $7,957,750.

Gargan pleaded guilty to embezzlement of government funds and wire fraud and faces a maximum penalty of 30 years in prison when sentenced on September 23. Actual sentences for federal crimes are typically less than the maximum penalties. A federal district court judge will determine any sentence after taking into account the U.S. Sentencing Guidelines and other statutory factors.

G. Zachary Terwilliger, U.S. Attorney for the Eastern District of Virginia, and James A. Dawson, Special Agent in Charge, Criminal Division, FBI Washington Field Office, made the announcement after U.S. District Judge Rossie D. Alston, Jr. accepted the plea. Assistant U.S. Attorney William Fitzpatrick is prosecuting the case.

A copy of this press release is located on the website of the U.S. Attorney’s Office for the Eastern District of Virginia. Related court documents and information are located on the website of the District Court for the Eastern District of Virginia or on PACER by searching for Case No. 1:20-cr-110.

Topic(s): 
Financial Fraud
Contact: 
Joshua Stueve Director of Public Affairs joshua.stueve@usdoj.gov
Updated June 15, 2020