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For Immediate Release:
For Further Information:
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June 3, 2010

Office of The Attorney General
- Paula T. Dow, Attorney General
Division of Criminal Justice
- Stephen J. Taylor, Director

Media Inquiries-
Peter Aseltine
609-292-4791
Citizen Inquiries-
609-292-4925

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Insurance Brokers Charged With Stealing $216,495 Paid By City of Perth Amboy for Non-Existent Wellness Program for Employees

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TRENTON – Attorney General Paula T. Dow and Criminal Justice Director Stephen J. Taylor announced that three insurance brokers from Maryland and their two companies were indicted today on charges that they conspired to steal $216,495 from the City of Perth Amboy by collecting payments for a non-existent “wellness program” for city employees.

According to Director Taylor, a state grand jury today returned an indictment charging Francis X. Gartland, 69, of Baltimore, Md., his company, Federal Hill Risk Management LLC, his son-in-law Derek Johnson, 39, of Lutherville, Md., their business partner, Thomas B. Kelleher, 62, of Parksville, Md., and another insurance brokerage company the three men co-owned, East Coast Administrative Services Inc. The indictment stems from an ongoing investigation by the Division of Criminal Justice Corruption Bureau.

“These defendants allegedly exploited their position of trust as insurance brokers for the City of Perth Amboy in order to steal from the city and its taxpayers,” said Attorney General Dow. “In these tight financial times, it is vital that we root out the type of corrupt conduct alleged in this indictment, which raises the cost of government.”

“Municipalities and school districts spend millions of dollars each year on insurance coverage, and must rely on the integrity of the licensed brokers who arrange that coverage,” said Director Taylor. “We allege that these defendants systematically deceived the city and its medical insurance carrier in order to secretly line their own pockets. Our investigation is continuing.”

Federal Hill was formerly broker of record for health care insurance for the City of Perth Amboy. The indictment alleges that between January 2005 and July 2009, the defendants conspired to fraudulently obtain $216,495 from the city. The indictment alleges that the defendants stole the funds by making false representations to the city’s medical insurance carrier that the city had authorized the insurance carrier to increase the city’s insurance renewal rates beginning Jan. 1, 2007, by a $15 per employee per month fee to cover the cost of a wellness program. The representations were made through Federal Hill as the city’s broker of record.

The defendants allegedly directed the city’s medical insurance carrier to pass those fees through to East Coast Administrative Services to administer or provide a wellness program for the City of Perth Amboy. Wellness programs typically offer services such as health care counseling and fitness training aimed at reducing long-term health problems and costs. In this case, there allegedly was no program.

East Coast allegedly received a total of $216,495 in fees. Of those fees, East Coast allegedly distributed $133,210 to the defendants. It is alleged that Federal Hill received $70,000; Gartland received $20,000; Kelleher received $25,210; and Johnson received $18,000.

The five-count state grand jury indictment charges all five defendants with conspiracy (2nd degree), theft by deception (2nd degree), making false representations for a government contract (2nd degree), and falsifying or tampering with records (4th degree). The indictment also charges Gartland, Johnson and Kelleher with misconduct by a corporate official (2nd degree).

Deputy Attorneys General Dianne C. DiGiamber Deal and Pearl Minato presented the case to the state grand jury for the Division of Criminal Justice Corruption Bureau. The investigation was led for the DCJ Corruption Bureau by Detective Benjamin Kukis, Sgt. Dino Dettorre, Detective Lee Bailey and Deputy Attorney General Deal.

The second-degree charges carry a maximum sentence of 10 years in prison. The defendants also could face fines of up to $450,000 on certain of the second-degree charges. The fourth-degree charge carries a maximum sentence of 18 months in prison, along with a fine of up to $10,000 for the individual defendants and up to $30,000 for the corporate defendants. The indictment is merely an accusation and the defendants are presumed innocent until proven guilty.

The indictment was handed up to Superior Court Judge Linda R. Feinberg in Mercer County, who assigned the case to Middlesex County, where the defendants will be ordered to appear in court at a later date to answer the charges.

A copy of the indictment is linked to this press release at www.njpublicsafety.com.

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