599 F.3d 1241 (11th Cir. 2010), 08-13434, United States v. Jennings
|Citation:||599 F.3d 1241|
|Opinion Judge:||PATRICK E. HIGGINBOTHAM, Circuit Judge:|
|Party Name:||UNITED STATES of America, Plaintiff-Appellee, v. Robert J. JENNINGS, Defendant, Donald E. Touchet, Richard E. Standridge, Defendants-Appellants.|
|Attorney:||William Charles Fletcher (Court-Appointed), Selinger & Fletcher, P.A., Jacksonville, FL, Charles Lee Truncale, Law Office of Charles Lee Truncale, Jacksonville, FL, Roland Falcon (Court-Appointed), Law Office of Roland Falcon, Jacksonville, FL, for Defendants-Appellants. Judy K. Hunt, Tampa, FL, ...|
|Judge Panel:||Before BLACK, MARCUS and HIGGINBOTHAM,[*] Circuit Judges.|
|Case Date:||March 16, 2010|
|Court:||United States Courts of Appeals, Court of Appeals for the Eleventh Circuit|
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Appeals from the United States District Court for the Middle District of Florida.
Richard E. Standridge and Donald E. Touchet1 were indicted on numerous counts of conspiracy,2 mail and wire fraud,3 and money laundering,4 charging participation in a scheme to sell fraudulent workers' compensation insurance. A jury convicted on all counts and the district court sentenced Standridge to 216 and Touchet to 264 months' imprisonment. Both appeal their convictions and sentences on multiple grounds. We find no error and affirm.
Government witnesses described the workings of the industry in which the alleged offenses occurred. It is useful to begin there. Workers' compensation insurance provides wage loss and medical expense reimbursement to individuals injured while working. Most employers carry workers' compensation insurance for their employees and states require employers to obtain a certificate of insurance from the insurance company demonstrating they are covered or have otherwise assured protection for their employees. Companies that sell workers compensation insurance-termed carriers-are heavily regulated by the states. Every state requires carriers to be " admitted" before operating within the state: Carriers must satisfy various financial and administrative requirements and pay into " guaranty" funds used to pay claims when an admitted carrier is unable to do so. That a carrier must be admitted in order to insure employees within a state is common to the workers' compensation industry.
Many employers outsource their human resource department to a professional employer organization. PEOs operate by hiring the client employer's employees and then leasing them back to the client-so that the client's employees become the employees of the PEO. The client pays the PEO the costs of payroll plus a fee for services. PEOs also must be licensed by the state and have proof of valid workers' compensation insurance. A PEO failing to meet state regulatory requirements will face a stop-work order from the state requiring the PEO to cease all operations in the state.
The final gear in the workers' compensation machine is the third party administrator. Third party administrators work for both the carrier and the PEO in administering the actual claims-in effect acting as an insurance company's claims department. The administrator evaluates the merits of an employee's claims and pays the bills for valid claims under the policy.
It often has the most day-to-day contact with the client companies and their employees. Like the other participants, third party administrators are regulated by the states which seek to ensure claims are paid in a timely manner.
The government argued at trial that Touchet and Standridge participated in a wide-reaching scheme to defraud employers and their employees through the sale of sham workers' compensation insurance, that together with their coconspirators, they utilized professional employer organizations to sell fraudulent insurance to client companies, that the fraud left the employees without workers' compensation insurance, and that many injured and disabled employees, unable to collect compensation, were abandoned without financial recourse.
Government witnesses offered the following account of relevant events: The fraud began in late 2000 when TTC, a PEO, began to search for a new source of workers' compensation insurance after its previous carrier became insolvent. Touchet and his business associate, Thomas Brown, had been doing business with TTC and learned it needed workers' compensation insurance. Touchet contacted Jerry Brewer at United Insurance about potential available insurance who told him coverage was available through his Regency Insurance of West Indies, Limited. Brown proposed Regency but TTC declined, aware that Regency was nonadmitted and could not legally be engaged. After a number of attempts to find legitimate workers' compensation insurance failed, including an attempt to secure insurance through Brown's brother's company, TTC became desperate-fearful that without workers' compensation insurance it would be shut down. TTC finally agreed to Brown and Touchet's proposal and in February 2001 purchased workers' compensation insurance from Regency at the cost of $1.8 million a month.
Touchet prepared a policy for TTC-taking a sample workers' compensation policy from another carrier, copying it with Regency's name, and making up a policy number. While the policy itself recited that Regency was a nonadmitted carrier, Touchet provided TTC with certificates of insurance without this critical disclosure to be furnished to TTC's clients.
TTC's third party administrator refused to continue with a nonadmitted insurer. Earlier Standridge had contacted Brown and Touchet regarding the possibility of becoming the third party administrator for TTC's workers' compensation insurance. Standridge owned and operated a healthcare third party administrator, Global Healthcare Corp., and argued he could keep insurance costs down by aggressively managing the claims. He also claimed to Brown that he could run " roughshod" over state regulators concerned about Regency. Now needing a new administrator, TTC turned to Global Healthcare.
Almost immediately the problems began. In March 2001, TTC refused to pay the March premium, complaining to Standridge that claims had not been paid and that states were rejecting Regency as a nonadmitted carrier. Standridge assured TTC that he would deal with the regulators but at the moment he could not pay claims because Brown had not remitted money from TTC's premium.
On April 12th, 2001, Brown, Standridge, Touchet, and Jennings-who was the administrator for some of TTC's health insurance-met with TTC at their offices in Kankakee Illinois. A heated argument ensued over Regency's failure to pay claims, TTC's failure to pay premiums, and states' refusal to accept Regency. Brown, Touchet, and Standridge agreed TTC could use Regency until valid insurance could be
obtained without regulators interfering. Standridge acted as a mediator, suggesting that regulators would be placated if claims were paid and he had direct control over TTC's premiums. It was eventually resolved that TTC would pay the premiums directly to Standridge and that Standridge would smooth the issues over with the state regulators. After the meeting, TTC wired $1.8 million dollars for the March premium. Around this time Standridge merged Global Health into EOS Health, a new company. In an apparent attempt to limit his liability for unpaid claims, Standridge requested that the EOS employees be " hired" by Stat-Care, a third party administrator controlled by Touchet, although EOS would continue to supervise them.
The problems continued and in May 2001, TTC again refused to pay the monthly premium because claims had not been paid. After badgering by Brown, TTC paid the premium, but it did not cover all the claims and by June 2001 unpaid workers' compensation claims exceeded $10 million. Standridge claimed to have no money to pay the claims-much of the money given by TTC to Brown and Standridge had been used to pay the operating expenses and salaries of Brown, Touchet, and Standridge, and for non-TTC investments by Standridge and Brown. The money left was woefully insufficient. Finally, in July 2001, Florida issued a stop-work order to TTC for failure to have legitimate workers' compensation insurance. TTC's clients demanded payment on the existing claims and information on how to contact Regency. Touchet and Brown provided EOS employees with the address of an expired post office box to give to the angry claimants and EOS employees told the claimants that the failure to pay claims was the fault of TTC.
Undeterred by the failure of their efforts with TTC, Standridge, Touchet, and Brown sought to capture TTC's former clients by starting a PEO of their own. In August 2001, they purchased a shell company and formed MRIK. Standridge was made a fifty-one percent shareholder as he had recently passed a background check and could be licensed by the state in the shortest time. They hired Lawrence Jones, the former manager of TTC's Tampa office, to manage MRIK. Once again, Touchet, Brown, and Standridge without success sought valid workers' compensation insurance. They then turned again to Regency as a " temporary" fix. As with TTC, Touchet provided certificates of insurance that failed to disclose to the client companies that Regency was nonadmitted. Jones questioned whether Regency was admitted but Standridge ordered him to use the provided certificates of insurance. Similar results followed. Florida issued MRIK a stop-work order in July 2002.
Realizing that Regency no longer offered cover, Brewer, Touchet, and Brown formed another insurance company, grandiosely named TransPacific International Insurance Company Limited. TransPacific was originally incorporated in New Zealand...
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