A federal judge in New Orleans threw out all criminal fraud charges against four former executives linked to the now-defunct Oath for Louisiana HMO, whose high-profile financial collapse in 2002 left dozens of local providers holding the bag for $40 million in unpaid claims.
The case involved Barry Scheur, who founded the Oath in January 2000, and two of his former colleagues, Robert McMillan and Rodney Moyer, all of whom were indicted by a federal grand jury in November 2005 for allegedly trying to conceal the deteriorating financial condition of Louisianas third-largest health plan for almost two years before it was ultimately seized by state regulators in April 2002. A fourth defendant, Danette Bruno, was added to the indictment last year. Bruno did not work for the Oath directly, but was comptroller for Scheurs healthcare consulting firm.
The defendants had been charged with conspiracy and mail fraud for allegedly doctoring financial statements filed with the Louisiana Department of Insurance in late 2000. During that time, the indictment stated, they devised a scheme to mislead regulators into believing the foundering HMO was still meeting the states financial requirements, thereby unlawfully enriching themselves while plunging creditors ever deeper in the hole.
But U.S. District Judge Eldon Fallon agreed with the defendants motion to dismiss, which was based on a complex legal argument that the indictment failed to allege an actual crime or offense as defined in the 2000 precedent-setting case of Cleveland v. United States. A mere showing that the LDOI (Louisiana Department of Insurance) was defrauded and that the Oath was unjustly enriched will not satisfy the governments burden at trial, Fallon wrote in his April 3 ruling. Under Cleveland, the government must also prove that the defendants defrauded someone other than the LDOI of property. But the indictment does not explicitly state that the insureds and medical providers (or anyone else) were defrauded. -- by Laura B. Benko