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Tag: Katie Cauthen

  • Cauthen’s sentence begins July 2

    BYTHEWOOD—In a little more than 30 days, a former Blythewood attorney and town councilwoman will become a federal prison inmate.

    Kathleen Cauthen, 47, is required to surrender to federal authorities no later than 2 p.m. July 2 to begin serving a 30-day sentence, according to court documents filed Friday.

    On May 14, Cauthen pleaded guilty to one count of misprision of a felony for her role in a $28 million health care fraud scheme. A second count of conspiracy was dismissed in exchange for her cooperation in the case.

    Cauthen could’ve faced up to eight years in prison and $500,000 in fines had she been convicted on both counts.

    As it stands, there are no fines and Cauthen must serve one year of supervised release after her release from prison in August. She must, however, pay nearly $1.8 million in restitution.

    In addition to routine conditions common in plea agreements, Cauthen must also participate in an approved mental health program, according to court documents.

    Cauthen must supply financial records to the federal government, and is also prohibited from opening new lines of credit until the restitution is fully paid, documents state.

    The sentencing document filed Friday doesn’t specify where she’ll be incarcerated, but Cauthen must surrender at the institution where she’ll be serving her term, a sentencing order states.

    At least four others were charged in the case.

    William Worthy, identified in court records as the ringleader, was sentenced to 82 months. He’s scheduled for release in September 2018, according to the federal prison database.

    There is no parole in the federal prison system, though inmates are eligible to earn “good time credits” of up to 54 days per year, according to court documents.

    In March, codefendant Angela Slavey Posey was sentenced to six months probation and 50 hours of community service.

    Bart Sidney Posey has pleaded guilty in the case as well and his sentencing is scheduled for July 13.

    Charges against Richard Bachman have been dismissed because Bachman died in December 2017, court records state.

    Transcripts from Cauthen’s guilty plea hearing include two pages of redacted testimony from FBI Special Agent Susan McDavitt regarding the facts surrounding the charges against Cauthen.

    At the hearing, Cauthen acknowledged there was enough evidence to convict her of misprision of a felony, including that she had knowledge of the crime, failed to report it, and helped conceal it.

    “Do you think the government could prove those elements against you had it gone to trial on Count Two?” the judge asked.

    “Yes, Your Honor,” Cauthen answered.

    Later in the hearing, defense attorney Cynthia Chappell clarified the extent of Cauthen’s knowledge of the fraud.

    “She would also like the Court to understand – and I can have Ms. Cauthen say this, that she was willfully blind to the events around her,” Chappell said. “She understands that is the same as knowing.”

    Related: Cauthen gets 30 days; must pay $1.8M restitution, Former Councilwoman faces Federal charges, Former Councilwoman awaits day in court, Former Councilwoman pleads guilty, Cauthen sentencing delayed, $5 million civil penalty imposed on Katie Cauthen

  • Cauthen gets 30 days; must pay $1.8M restitution

    Blythewood—A former Blythewood Town Councilwoman who helped bilk an estimated 17,000 people out of $28 million in fraudulent health care claims will spend 30 days in prison.

    Kathleen (Katie) Cauthen, 47, was also sentenced to 12 months of supervised release and ordered to pay nearly $1.8 million in restitution, according to a sentencing order filed Monday.

    Cauthen

    Cauthen could’ve received up to three years in prison and a $250,000 fine for the misprision of a felony count to which she previously pleaded guilty. Prosecutors recommended an “advisory sentence of 21 to 27 months.

    The one-page sentencing document says the sentence was part of a plea agreement that the court accepted. No further details from the nearly 90-minute hearing were contained in the document.

    Cauthen has been a cooperating witness in the government’s investigation and prosecution of others in the health care fraud case. Others received more harsh penalties.

    William Madison Worthy, the ringleader and a former client of Cauthen, got 82 months – or about seven years – and three years of supervised release after pleading guilty in 2016. Worthy was also ordered to pay $6.5 million in restitution, according to court records.

    Other codefendants have also pleaded guilty, including Angela Posey and Bart Posey.

    Angela Posey was sentenced in March to six months of probation. Bart Posey pleaded guilty in January and his sentencing was rescheduled from April 30 to July 13, documents state.

    Cauthen’s sentencing concludes a case that originated in 2013 and involves acts dating back to at least 2008, according to court documents. Cauthen is one of several people indicted in the multi-state health care fraud scheme.

    The suspects embezzled funds from premiums paid by people who had signed up for health plans that were unauthorized, diverting millions of dollars in premiums for the defendants’ own personal use, according to an FBI news release.

    Shell companies were set up to facilitate money laundering.

  • Cauthen to be sentenced May 14

    BLYTHEWOOD – A former Blythewood Town Councilwoman pleading guilty for her role in a multi-million dollar health care fraud scheme could soon learn her fate.

    Kathleen Cauthen, 47, is scheduled for sentencing on May 14, according to federal court records. In 2015, Cauthen pleaded guilty to one count of misprision of a felony. A second count of conspiracy to commit theft or embezzlement in connection with health care was dropped as part of a plea deal.

    Cauthen

    Court documents state the misprision of a felony has a maximum sentence of three years in prison and a $250,000 fine. The embezzlement count carries the same penalty.  Documents list an “advisory” sentence of 21 to 27 months for the misprision count, though the judge could sentence Cauthen to probation or house arrest.

    Cauthen has been a cooperating witness in the government’s investigation and prosecution of others in the health care fraud case. She has also been subject to subpoena from the prosecution.

    Cauthen’s sentencing was set for March 16, but her attorney requested a continuation seeking more time to respond to a presentencing report. Complicating matters, the report that was emailed to Cauthen was delivered to her spam folder and wasn’t discovered until weeks later, the motion states.
    “Ms. Cauthen would request the full period of time in which to respond to the lengthy presentence report, which is not possible due to the March 16 hearing date,” the motion says. “Based on the foregoing, Ms. Cauthen requests a continuance of this cause to fully respond and prepare for this critical hearing.”

    Cauthen is one of several people indicted in a multi-state health care fraud scheme totaling at least $6.5 million and impacting approximately 17,000 people.

    The scheme involved embezzling funds from premiums paid by individuals who had signed up for unauthorized health plans, diverting more than $5.4 million in premiums for the defendants’ own personal use, according to an FBI news release.

    Shell companies were set up to facilitate money laundering, court documents state.

    The ringleader was William Madison Worthy, a former client of Cauthen. Worthy was sentenced to 82 months – or just shy of seven years – in prison and three years of supervised release after pleading guilty in 2016.

    Worthy was also ordered to pay $6.5 million in restitution, according to court records.

    The sentence is concurrent with an 87-month sentence Worthy received in 2011 for similar, but unrelated fraud-related counts from when he lived in Spartanburg before moving to Isle of Palms.

    Other codefendants have also pleaded guilty, including Angela Posey and Bart Posey. Angela Posey was sentenced March 26 to six months of probation. Bart Posey pleaded guilty in January and is scheduled for sentencing April 30.

    In addition to criminal penalties, Cauthen and others pleading guilty have been slapped with cease and desist orders from departments of insurance in South Carolina, Delaware, Oklahoma and other states.

    The S.C. Supreme Court suspended Cauthen’s law license in 2014. It later accepted a request from Cauthen to resign in lieu of discipline in January 2017, according to court documents. The resignation is permanent, court documents state.

    Related: Former Councilwoman faces Federal charges, Former Councilwoman awaits day in court, Former Councilwoman pleads guilty, Cauthen sentencing delayed, $5 million civil penalty imposed on Katie Cauthen

  • $5 million civil penalty imposed on Katie Cauthen

    The N.C. Department of Insurance (NCDOI) has proposed that the state’s Commissioner of Insurance impose a civil penalty of $4,975,000 on Kathleen Cauthen, a former Blythewood Town Councilwoman, for what the Department said was Cauthen’s part in “orchestrat[ing] a fraudulent insurance scheme that allegedly defrauded thousands of individuals nationwide, including at least 498 North Carolina residents.”

    The order was signed by Anne Goco Kirby, Assistant Attorney General for the N.C. Department of Justice Feb. 2 and issued to Cauthen March 2.

    Similar penalties were imposed on at least 14 other individuals and companies that the Department says were associated with the alleged scheme.

    In 2010, a number of states, including South Carolina and North Carolina, filed cease and desist orders against Cauthen and others, claiming they sold limited benefit medical plans backed by non-existent insurance to unsuspecting consumers through associations.

    The NCDOI said it does not know the actual total amount of premiums collected from N.C. residents for what it called bogus and non-existent coverage.

    “However, the affidavit of Jeff Jacobs, chief legal counsel of the SC Department of Insurance, indicates that between February 2008 and April 2010, Cauthen and William Worthy collected in excess of $10,000,000 in insurance premiums.”

    These figures include premiums that the NCDOI claims were collected from the 498 N.C. residents who purchased the alleged bogus limited medical insurance.

    According to the NCDOI’s Memorandum on Penalties for Violations of NCGS 58-28-13, these premiums were wired to various accounts controlled by Worthy, Cauthen and/or an individual named David L. Clark, and were never remitted to an insurer.

    Instead, according to the Memorandum, these respondents used a portion of the premiums to pay claims, and Cauthen also used a portion of the premium money to pay employees she allegedly hired to act as customer service representatives.

    The order states that “Worthy and Cauthen used the remaining premiums of at least $5,498,500 for personal and unrelated business expenditures.”

    The NCDOI asked that the maximum penalty be imposed against Cauthen, Worthy and Clark of $5,000 for the first violation and $10,000 for each subsequent violation.

    The NCDOI also asked that each of the 498 N.C. residents known to have purchased the phony insurance . . . be regarded as a separate violation by these respondents.

    “Under this formula, the total proposed penalties for Worthy, Cauthen and Clark is $4,975,000 each.”

    Cauthen was elected to the Blythewood Town Council in January 2008 and announced in August 2010 that she would not seek re-election in January 2012.