CEO and CFO of Kentucky Medical Companies Sentenced to Prison For Defrauding the U.S.; Ordered to Pay More than $1.5M in Restitution
LEXINGTON, KY – After a joint investigation by the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) and the IRS, U.S. District Court Judge Karen K. Caldwell sentenced two Kentucky healthcare companies’ executives to prison and ordered them to pay $1,595,725 in restitution.
The court sentenced former Chief Executive Officer Ann Sonderman Giles and former Chief Financial Officer Lu Anne Wallace of Kentucky-registered companies including GW Management Inc., Clark Medical Ventures LLC, Madison Primary Care LLC, Paragon Kentucky LLC and Primary Care of the Bluegrass LLC, for defrauding the U.S. Giles received a sentence of 30 months in prison and 36 months of supervised release, and former chief financial officer Lu Anne Wallace to 33 months in prison and 36 months of supervised release. Both pleaded guilty in June 2020 to one count of conspiracy to defraud the U.S.
For a period of more than three years, from January 2014 to July 2017, Giles and Wallace failed to pay IRS-mandated trust fund taxes on the revenue earned by their companies and their employees. While the pair withheld Social Security and Medicare taxes from their employees’ paychecks, they knowingly and willfully failed to turn over the money to the U.S. They also failed to pay their respective companies’ matching Social Security and Medicare taxes. For the first six months of 2014, Giles and Wallace also withheld multiple health insurance premiums from the paychecks of their employees at GW Management, while not transferring those funds to Humana, Inc. or any other health insurance provider. In total, Giles and Wallace conspired to defraud the U.S. of $1,595,725.
As part of their plea agreement, the U.S. government dismissed four counts of an indictment from June 6, 2019, in which a grand jury had charged Giles and Wallace with embezzling health care plan funds in violation of 18 U.S.C. § 669.
“The U.S. Department of Labor is committed to protecting the benefits of America’s workers. Criminal acts undermining the trust hard-working Americans deserve to have in the future of their health insurance programs will not be tolerated,” said Employee Benefits Security Administration Regional Director L. Joe Rivers, in Cincinnati, Ohio. “The Employee Benefits Security Administration is committed to ensuring the integrity of employee benefit programs and prosecuting those that fail to comply with the law.”
Employers and workers with problems related to private sector retirement and health plans should contact EBSA toll-free at 866-444-3272. More information is available.
EBSA’s mission is to assure the security of the retirement, health and other workplace related benefits of America's workers and their families. EBSA accomplishes this mission by developing effective regulations; assisting and educating workers, plan sponsors, fiduciaries and service providers; and vigorously enforcing the law.
The mission of the Department of Labor is to foster, promote and develop the welfare of the wage earners, job seekers and retirees of the United States; improve working conditions; advance opportunities for profitable employment; and assure work-related benefits and rights.