Ten people have been indicted in California and three other states in the largest fraud case ever brought involving prepaid health-care plans sold to labor unions, the Justice Department announced Thursday.
Federal grand juries in San Diego, San Francisco, Chicago, Atlanta and Baltimore unsealed indictments charging that Angelo T. Commito, 43, of Palm Desert, Calif., a reputed associate of organized crime figures, and his business partners paid kickbacks to obtain contracts to provide optical, dental and other services to unions and employee groups across the country.
Officials said that the three-year inquiry by FBI agents and Labor Department investigators was aided by an undercover "sting" operation known as Dentex, in which FBI men posed as corporate representatives seeking health-care plans.
One of the front companies used by the FBI was called Sun Belt Diversified, the same front name used in the FBI's undercover investigation aimed at legislators in Sacramento.
Richard Held, head of the FBI office in San Francisco, attributed the double use of the name to "bureaucracy" and said there was no connection between the two investigations.
However, Held and Geoffrey A. Anderson, attorney in charge of the federal organized crime strike force in San Francisco, said that the continuing investigation could spread to include state and local officials.
"It is unlimited where this investigation can go," Held said at a press conference in San Francisco, one of the centers of the nationwide investigation.
The indictments mentioned only two unions, both in Chicago, as having been victimized by Commito and his associates--the Cement Masons Union and the Service Employees International Union. However, other unions, including the United Food and Commercial Workers, were named in FBI search warrants earlier this year, and authorities said that their inquiry will continue.
A government investigator said evidence was uncovered that kickbacks paid or promised by Commito's group totaled nearly $100,000. The kickbacks, paid to administrators of union welfare plans, were designed to persuade them to select Commito's group to provide health care to members, who contributed $5 to $15 a month, the source said.
Hundreds of Plans
Law enforcement authorities in San Francisco said that Commito has helped in the sales of hundreds of health plans nationwide affecting many thousands of workers since 1972.
"It's the classic example of sticking it to the little guy," Held said, adding that he believes the cost of kickbacks was borne by employees, who had to pay more for their health plans.
Commito and Carl A. Mattison, a plan administrator of Aptos, Calif., were specifically charged in one indictment with stealing benefit plan monies "which were added to the cost of the program in order to generate unlawful fees and things of value for Mattison."
Commito and Mattison were also charged with participating in a kickback scheme in connection with an alcohol and drug abuse counseling program for the members of Western Employers Trust, a welfare plan covering thousands of employees in central and northern California.
None of the defendants could be reached for comment. Officials said that the indictments were returned under seal in recent days so that the defendants could be arrested before any charges were made public.
Commito's lawyers have said that he would plead not guilty to any charges. Another defendant, Elliott F. Kusel, a Commito associate of San Diego, also believes that he did nothing wrong and will offer a vigorous defense, according to his attorney, Michael Lipman.
Besides Commito, Mattison and Kusel, other Californians charged in the case were Kusel's son, Marc Lee Kusel of Mission Viejo, and Cheryl E. Fyten of San Diego, both identified as business associates of Commito.
Commito's principal companies, headquartered in Chicago, are Labor Health and Benefit Plans Inc., Diversified Benefit Systems Inc. and Special Vision Services Inc., according to the indictment.
Commito maintained a home in Fairfax, a wealthy enclave in the hills of Marin County north of San Francisco. Federal authorities, alleging that he bought the home with the proceeds of a criminal enterprise, said that they hope to seize the property. However, Commito is said to have sold the home in April, and it burned in a fire earlier this week.
Other defendants named are former plan administrators William Wire and William Hainsworth, both of Chicago; Alan S. Cohn of Owings Mills, Md.; Thomas A. Parnham of Reston, Va., and Monica E. Oss of Washington.
Officials praised two firms, National Semiconductor of Santa Clara, Calif., and Munford Corp. of Atlanta, for having cooperated with the government by permitting FBI agents to pose as company representatives in dealing with members of the Commito group.
Staff writer Dan Morain in San Francisco contributed to this story.