Former state health plan administrator faces charges in Illinois

Bill Gang

Tuesday, Sept. 16, 1997 | 10:58 a.m.

An embezzlement scam concept detailed for a Chicago newspaper in June by embattled health insurance administrator Frank Rousseau became reality in Nevada.

The theft scheme that bilked Nevada out of more than $600,000 is alleged to have been perpetrated through Rousseau's company that handled the state's $100 million self-funded health plan.

No criminal charges have been filed in Nevada over the stolen state funds. Rousseau is facing criminal action in an alleged insurance ripoff in Joliet, Ill.

He was indicted in May on charges that he defrauded Will County out of $140,000 by inflating the bills of an insurance carrier and pocketing the difference.

The year-long investigation that led to the criminal charges was apparently unknown to Nevada authorities because Rousseau was allowed to operate here without undergoing the standard licensing procedure that likely would have uncovered the Illinois probe.

In the Chicago Tribune interview, Rousseau defended himself against the Illinois charges, stating, "In order to defraud one of these (government or insurance funds), we would have to have a claim mechanism set up to send claims to a phony provider, have those checks cashed and derive a benefit from them."

That is exactly what is alleged to have happened in Nevada.

An audit alleged that an elaborate theft system may have been in place for months to pay bogus medical claims in the names of legitimate state workers to phony medical firms.

Payments were sent to 10 bank accounts that were only shells, the audit documents concluded. Among the 134 names that were falsified on bills for treatment never received were District Judge Sally Loehrer and state Sen. Joe Neal.

Until June, Rousseau's L&H Administrators in Nevada handled the state's $100 million self-funded insurance plan, in addition to similar programs for the Nevada League of Cities and other governmental entities.

He was fired by the state after L&H fell months behind in paying claims submitted by medical providers and word of his indictment became known.

Rousseau told the SUN this week that it was his company that discovered the embezzlement and reported it to the state. He declined to say who may have been involved or if there was more than one person.

A new company, UICI, was hired in July as the state's new third-party administrator but startup delays have meant even greater backlogs.

It has also resulted in some employees being unable to obtain medical care without paying in advance and seeking reimbursement from the state's insurance system.

Clark County had used L&H to handle its self-funded program but changed administrators after $800,000 of county money was illegally moved out of state. The funds were returned at the insistence of the district attorney's office.

In the Chicago Tribune interview, Rousseau called the Clark County problems an innocent mistake and said the transfer was permitted under a long-standing contract between the county and the firm purchased by L&H in July 1996.

The state theft case, which also involves about $400,000 in insurance premiums missing from a fund administrated by L&H for the Nevada League of Cities, has been turned over to the FBI by the state Insurance Division.

The Nevada League of Cities is an organization comprised of most of the state's rural communities.

"The whole issue that seems to be driving these allegations is the word 'fraud,' " Rousseau, 52, told the newspaper. "The whole issue of fraud is something manufactured for the purpose of sensationalism. It doesn't exist."

But Will County State's Attorney James Glasgow has said there are nearly $6 million in pending lawsuits or claims by Rousseau's clients, former business associates and insurance claimants.

"Practically every state the guy has been in, somebody is accusing him of fraud," Glasgow stated. "I would think any insurance business that is in court this much would be out of business very soon."

According to court papers cited by the Tribune, Rousseau acted as a middleman between the county and a Chicago-based insurance firm and is alleged to have boosted the firm's bills before sending them to the county, and then pocketed the difference.

Rousseau's lawyer, Douglas Roller, has said the money kept by Rousseau represented payment for work he did in addition to services provided by the Chicago firm.

The allegations have embarrassed Will County, which simply paid the bills for more than two years without checking to see how much was owed.

Glasgow has described the overpayments as "sloppiness" and said Rousseau "preyed upon misfeasance he knew exists in county government."

County Executive Charles Adelman, a Democrat, told the Tribune that from the day he took office in 1988, he questioned Rousseau's billing practices but was blocked from making changes by the Republican-controlled county board.

"We questioned (the billing practice) from day one," Adelman said. "He would ask for money first, and the receipts would follow. We were paying him $300,000 or $400,000 without getting any bills. It was asinine but the board insisted on doing it that way."

Rousseau began his career in health care administration in the mid-1980s.

But his Suburban Health Care Benefits Inc. was closed down Jan. 1 when Rousseau said he consolidated his business into the Nevada company L&H, which he purchased in 1995.

For the decade before that, Rousseau ran the Will County insurance programs under no-bid contracts, purported by his critics to have been obtained through his political connections.

The indictment in May isn't Rousseau's only legal problem in Illinois. He also has been charged with two misdemeanor counts of selling insurance to the Will County Building Commission after his state insurance broker's license lapsed in May 1996.