A 63-year-old Orange man has been convicted on six counts of mail fraud for marketing and administrating several group insurance plans that failed to cover almost $6 million in health claims, authorities said Wednesday.
A federal court jury in Santa Ana found Henry Hay guilty on Tuesday of offering bogus health plans through his company, California Development Maintenance Assn.
Hay convinced employers the plans were fully insured by a licensed California insurance company, when in fact the plans offered only partial insurance for claims over $50,000. Hay, who will be sentenced in November, faces a maximum sentence of 30 years in prison.
Assistant U.S. Attorney Alfredo Jarrin said Wednesday that Hay operated the scheme from 1987 to 1989, and because his company lacked the promised health insurance protection, one of his health plans went bankrupt in 1989, leaving thousands of employees without health insurance and almost $6 million in unpaid health claims.
“In some cases, the employer made good on the claims. In other cases, the claims have just gone unpaid,” Jarrin said. “Some people had to take second mortgages out on their homes and declare personal bankruptcy because of the big financial bills they were hit with. Others had to have their rehab treatment suspended.”
According to Jarrin, Hay concealed his scheme from state insurance regulators and paid more than $45,000 in kickbacks to two insurance company representatives, John Detora, formerly of Landmark Insurance Co. of Boston, and Joseph Bartholomew of the defunct California Benefit Life Insurance Co. of Newport Beach.
Detora, who in 1993 was convicted of illegally receiving gratuities in relation to Hay’s health plans, testified at Hay’s trial under a cooperation agreement with prosecutors. Detora has not been sentenced.
Bartholomew, who was charged with one count of aiding and abetting Hay’s mail fraud, was tried along with Hay, but the jury could not reach a verdict so the court declared a mistrial.