Barry Scheur and Robert McMillan may soon land in prison, eight years after shepherding a Louisiana HMO into insolvency and nearly five years after they were first indicted for collecting paychecks from the company while deceiving state regulators about the HMO's books.
Court rejects pleas
Scheur, McMillan could soon be headed to prison
A federal appeals court rejected their challenge to a 2008 conviction for conspiracy, mail fraud and wire fraud allegedly committed while at the helm of the Oath for Louisiana, a foundering health plan Scheur took off the hands of a five-hospital consortium in 2000.
Scheur's lawyer, Shaun Clarke, said he plans to file for rehearing by the 5th U.S. Circuit Court of Appeals in New Orleans. “I don't think Barry Scheur received a fair trial, and I'm simply unable to comprehend how the court of appeals failed to see that,” Clarke said.
A district judge in New Orleans dismissed the case in April 2007 after Scheur and McMillan argued successfully that the government only alleged they'd defrauded the Louisiana Insurance Department, which never lost any money as a result of the Oath's demise. Scheur, in addition to being its owner, served as the health plan's president and CEO, and his consulting firm, Scheur Management Group, was paid monthly fees. McMillan held various positions, including chief financial officer and chief operating officer.
But weeks later, prosecutors filed a revised indictment specifying the victims as the plan members who paid premiums and providers whose claims were never paid. Prosecutors allege Scheur and McMillan fabricated cash infusions to the company in order to hold regulators at bay. At the time, insurance plans in the state were required to maintain a net worth of at least $3 million, which has since increased. By the time the state seized and liquidated the company, its liabilities exceeded assets by more than $40 million, much of it owed to physicians and hospitals.
Scheur was sentenced to 20 months in prison and McMillan to 13 months. Both men have been free on bond pending the appeal. If the 5th Circuit rejects the rehearing, the district court likely would order them to surrender and begin serving their terms.
In their appeal, they contend the retooled indictment was delivered too long after the alleged crime occurred. Federal law allows the government to re-indict within six months after a flawed one is dismissed and piggyback on the first for the purposes of the statute of limitations. The court disagreed with Scheur and McMillan's argument that the addition of victims made the revised charges substantially broader.
“The egregious prosecutorial misconduct was the most significant factor that created an unfair trial,” Clarke said. One instance raised in the appeal was that one of the prosecutors pointed to the executives during closing arguments and told the jury, “Not one of these defendants is stepping up and saying that they did anything wrong,” a comment Clarke said implied they were guilty because they declined to testify.
Fifth Circuit Judge Thomas Reavley wrote in the 35-page opinion that the comment “failed to rise above the level of harmless error.” Reavley similarly dismissed other criticisms, including that the government presented about 3,000 pages of new exhibits days before the trial, which Clarke argued was particularly unfair to Scheur because he is blind, and the documents were not provided in Braille.
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