Posted on 06/15/2005 2:28:05 PM PDT by GailA
Former state senator John Ford's financial ties to a TennCare contractor -- the source of ethics and criminal inquiries since April -- now are the focus of a securities fraud lawsuit as well.
A federal suit in Michigan seeking class action status and damages to be determined at trial alleges that publicly traded United American Healthcare Corp. misled investors by concealing an "illegal political payments scheme'' that steered more than $400,000 to Ford over four years.
Revelations of the payments led Tennessee insurance regulators to act against United American's sole viable business, Memphis-based OmniCare Health Plan, recently renamed UAHC Health Plan.
The April 20 move by Insurance Commissioner Paula Flowers placing OmniCare in administrative supervision prompted United American's stock price to tumble.
OmniCare receives virtually all its revenue from TennCare, the state's expanded Medicaid program. The suit alleges that investors face even greater losses because the Ford payments violated OmniCare's TennCare contract and pose grounds for possible termination.
"The whole contract was based on these corrupt, illegal payments,'' said Larry Rosen, a New York attorney whose law firm filed the suit in Detroit, where United American has its headquarters. "They were in breach of the contract, basically by bribing a public official.''
United American attorney Guilford Thornton Jr. said the suit's allegations are "without merit'' and vowed a vigorous defense.
Defendants include United American president William C. Brooks and former OmniCare chief Osbie Howard, who was forced to resign following disclosure of the Ford payments.
Ford is not named as a defendant.
Rosen filed the suit on behalf of Massachusetts investor Gregory Zaluski, who says he unloaded large numbers of United American stock shares at devalued prices in April and May following regulatory actions in response to the Ford payments.
Under pressure from state regulators, United American disclosed on April 15 that it paid consulting fees to Ford between 2001 and this year for "marketing activities outside the state of Tennessee.'' The firm later totaled the payments, which ceased March 11, at $420,000.
The day after Flowers announced administrative supervision for OmniCare, United American's stock lost half its value, falling from just over $5 a share to $2.40. Trading on Nasdaq, the stock closed Tuesday at $2.11 a share.
Both Ford and United American have maintained that he was paid in unsuccessful bids to win Medicaid contracts in other states -- not for work in Tennessee -- yet the firm has produced little written documentation to support that.
Meantime, Gov. Phil Bredesen and others have come forward with accounts that Ford had approached them in recent years in efforts to win more TennCare business for OmniCare.
The securities suit has received little attention, largely due to its timing. The suit was filed May 27, a day after news broke on indictments in Memphis against Ford and six others for alleged bribe-taking and other charges in an FBI sting dubbed Operation Tennessee Waltz. Days later, Ford resigned from the senate seat he'd held for 31 years.
Unrelated to the FBI sting, investigations have been under way for weeks into Ford's financial ties to OmniCare and a second TennCare contractor, Doral Dental.
Two more plead not guilty to bribery charges
By Chris Conley
June 15, 2005
Two more Operation Tennessee Waltz defendants pleaded not guilty to bribery charges in federal court Wednesday morning.
State Sen. Ward Crutchfield, D-Chattanooga and Charles Love, a Chattanooga lobbyist, were in and out of court quickly.
Crutchfield, who had laryngitis, told reporters he's ready to fight the charges. Love left without speaking to reporters.
Crutchfield and Love are charged with taking $12,000 from a fake FBI company called E-Cycle, in exchange for their help pushing legislation E-Cycle purportedly wanted to help them buy used computer equipment from state and local governments to recycle. FBI agents set up the bogus company after hearing complaints that some legislators welcomed bribes.
The indictment quotes Crutchfield as thanking an E-Cycle representative for "being my friend" after a payoff was made to Love.
While Love is accused of handling bribes for Crutchfield, the indictment charges the senator with personally accepting two envelopes from an E-Cycle representative that contained $1,500 each.
Former state Sen. Roscoe Dixon is set to appear in court tomorrow. Former state Sen. John Ford, newly elected Sen. Kathryn Bowers, and Barry Myers, an associate of Dixon, have entered not guilty pleas. U.S. Magistrate Tu Pham set a July 5 trial date.
charles love: http://www.tennessean.com/apps/pbcs.dll/article?AID=/20050615/NEWS0201/506150410
enigmatic lobbyist has had problems with finances — his and those he oversaw
Tennessee lawmakers and consumer advocates have often said that if the fraud were taken out of Tenncare, it would be a financially viable program. I suppose they were only speaking of the type fraud perpetrated by the end-users, and not the lawmakers and overseers of the program.
Hundreds of millions of taxpayer dollars have been wasted throughout Tenncare's long and sordid history. Who can blame the piglets for wanting all they can get when the keepers of the sow are so corrupt?
ping
I'm afraid oily phil's new pre-K program is going to be as expensive and as riddled with fraud and corruption.
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