Former US Navy Serviceman Pleads Guilty to $2M Insurance Fraud | USAO-SDCA

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Assistant U.S. Attorneys Peter Ko (619) 546-7359 and Mark Conover (619) 546-6763

SUMMARY OF THE PRESS RELEASE – October 27, 2022

SAN DIEGO — Christopher Toups, who was the US Navy’s chief petty officer at the time of his crimes, pleaded guilty in federal court today, admitting that he and others participated in a scheme to bring false claims to undeserved benefits to obtain from an insurance program that compensates service members who sustain serious and debilitating injuries while on active duty.

According to his plea agreement, program participants received approximately $2 million in payments from fraudulent claims filed with the insurance program — Traumatic Servicemembers Group Life Insurance Program, or TSGLI, and Toups personally received approximately $400,000.

At today’s hearing, Toups pleaded guilty to conspiracy to wire fraud. He admitted he dated then-wife Kelene McGrath, Navy Dr. Michael Villarroel and others conspired to obtain money from the United States by making claims for life insurance payments based on exaggerated or feigned injuries and disabilities. He is scheduled to be sentenced at 9 a.m. on February 3, 2023

“Theft of military health funds directly harms military personnel and taxpayers,” said US Attorney Randy Grossman. “This fraud was costly to the US Navy and now to this defendant.” Grossman thanked prosecutors and investigators for their excellent work on the case.

“Fraudulently filing claims for undeserved TSGLI benefits diverts compensation from deserving service members who sustained serious and debilitating injuries while on active duty,” said Special Agent Rebeccalynn Staples, Associate Special Agent, of the Inspector General’s Western Field Office’s Department of Veterans Affairs Office . “Worse, this defendant actively recruited others into the program to feed his greed for compensation he did not deserve. This guilty plea is testament to the VA OIG’s commitment to investigating those who would defraud VA administered benefits programs.”

“The Traumatic Servicemembers Group Life Insurance program is designed to compensate servicemembers who sustain serious and debilitating injuries while on active duty. Mistaking benefits from this program will take money away from deserving beneficiaries and make medical care more expensive for all of us,” said Stacey Moy, special agent in charge of the FBI’s San Diego Division. “This scheme is particularly egregious considering that the military personnel involved fraudulently used it for their own financial gain. The FBI will continue to work with our law enforcement partners to ensure those who willfully deceive the American people are held accountable.”

The Traumatic Servicemembers Group Life Insurance (TSGLI) program was administered by Prudential for the Navy and funded by service members and the Department of the Navy. TSGLI provided financial assistance to Soldiers recovering from traumatic injuries.

Under the plea agreement, in addition to filing his own TSGLI claims based on bogus injuries and disabilities, Toups encouraged numerous current or former Marines to file claims and sometimes required them to provide medical records to McGrath. McGrath, a nurse, falsified or manipulated medical records to exaggerate or simulate injuries. Villarroel confirmed that he reviewed the records and found that activities of daily living were lost or impaired and were consistent with the alleged violations, as required for the processing and qualification of claims, and sometimes supported the finding by the false statement that he questioned the applicant. Villarroel also at times made the medical records of others available to McGrath to use in making claims.

Toups admitted he encouraged claim payment recipients to give him some of the money, sometimes referring to it as a “processing fee.” McGrath and Villarroel received a portion of the kickbacks based on their involvement in the lawsuit. Toups paid Villarroel in cash and by bank draft. Toups and other conspirators at times conducted financial transactions of less than $10,000 to circumvent perceived financial reporting requirements.

According to court documents, some of Toups’ co-defendants were part of Explosive Ordinance Disposal’s Expeditionary Support Unit One (“EOD ESU One”), based in Coronado, California. Toups was a Chief Petty Officer Construction Mechanic.

Ronald Olmsted and Anthony Coco, who both pleaded guilty earlier this year, were previously convicted by US District Judge Janis L. Sammartino. Olmsted was sentenced to four months in prison followed by four months of house arrest, to be served as part of a three-year supervised parole. Coco was sentenced to four months of house arrest as part of a three-year suspended sentence.

According to court documents, Toups, Villarroel, and Meyer were at the heart of the plan, and together the conspirators defrauded the TSGLI program of nearly $2 million. Toups, Villarroel and Meyer received kickbacks for preparing and submitting the fraudulent TSGLI applications for other US Navy personnel.

DEFENDANT 18CR1674-JLS

Christopher Toups 43 Woodstock, GA

RELATED CASES

Kelene Meyer 18CR1674-JLS 44 Jacksonville, FL

dr Michael Villarroel 18CR1674-JLS 48 Coronado, CA

Paul Craig 18CR1674-JLS 47 Austin, TX

Richard Cote 18CR1674-JLS 45 Oceanside, CA

Ernest Thompson 18CR1674-JLS 46 Murrieta, CA

Ronald Olmsted 20CR0659-JLS 48 Handy, AL

Anthony Coco 20CR0197-JLS 43 San Diego, CA

Stephen Mulholland 20CR0052-JLS 51 Panama City Beach, FL

SUMMARY OF FEES

Toops:

18 USC § 1349, Conspiracy to commit wire fraud

Maximum penalty: Twenty years in prison, $250,000 fine, forfeiture and reprieve

Other:

18 USC § 1349, Conspiracy to commit wire fraud

Maximum penalty: Twenty years in prison, $250,000 fine, forfeiture and reprieve

18 USC § 1343, wire fraud

Maximum penalty: Twenty years in prison, $250,000 fine, forfeiture and reprieve

18 USC § 287, False Claim

Maximum penalty: five years in prison, $250,000 fine

AGENCIES

Federal Office of Investigations

Naval Crime Service

Department of Veterans Affairs – Office of the Inspector General

*The charges and allegations contained in an indictment or complaint are allegations only, and the accused are presumed innocent until proven guilty.

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