Companies’ efforts to combat fraud should not necessarily end with internal scrutiny. Some types of external suppliers may be in a position to rip you off, as well.
To that point, the Justice Department announced that Jonathan Hogge, the former CEO of a dental-plan administrator, has pled guilty to conspiracy, mail fraud, and wire fraud in the illegal transfers of $2.1 million from client trust accounts. The transfers caused a net loss of $1.1 million to employers doing business with the firm, My Smart Benefits, the department said in a press release.
The indictment resulted from an investigation by the Department of Labor Office of Inspector General and the Employee Benefits Security Administration. Neither those agencies, the U.S. Attorney’s office, nor Hogge’s attorney, J. Michael Katz, responded to requests for comment on the case.
Before My Smart Benefits went out of business in October 2003, it administered some 1,100 direct-reimbursement dental plans in 35 states. Hogge, who was also a co-owner of the firm, falsely represented that the health care funds sent in under each plan were kept in segregated accounts for the benefit of each employer customer, the Justice Department said. In reality, the money was pooled into just a few accounts, and Hogge misused much of it for other purposes, according to the indictment.
Those purposes included buying My Smart Benefits’ office building in Hammond, Indiana; buying into a local restaurant; and acquiring condominiums in San Diego.
Hogge, 43, also was said to have fraudulently induced companies to sign up for the firm’s dental coverage by representing that the plans were covered by stop-loss insurance, which mitigates a plan sponsor’s liability for extraordinarily high claims activity during a time period. Additionally, he was accused of charging higher fees than were allowed under My Smart Benefits’ contracts with its clients.
Another defendant, Jack Lait, a former vice president and director of My Smart Benefits, previously pled guilty to one count of conspiracy to defraud. Lait is scheduled to be sentenced on June 17, and Hogge on July 28.