2 Ex-Execs of Defunct HMO Arraigned

Three years after Tower Health went broke, leaving thousands of patients in the lurch, a pair of the defunct HMO’s executives have been arrested on suspicion of misusing more than $2 million owed to doctors, authorities said Tuesday.

Long Beach-based Tower arranged care for 111,000 people in Southern California and Nevada. It was the largest provider of Medi-Cal services in Riverside and San Bernardino counties before it ran into financial problems and was seized by regulators in 2001.

It was shut down shortly thereafter.

An investigation by the state attorney general’s Bureau of Medi-Cal Fraud and Elder Abuse followed, resulting in the arraignment Monday in San Bernardino County Superior Court of Tower’s former chief executive, Robert Hugh Cohen of Los Angeles, and former chief financial officer, John Carlo Morreale of San Pedro.

The two were charged with grand theft, perjury, Medi-Cal fraud and filing false corporate tax reports, state prosecutors said in a statement Tuesday.

Cohen, a 45-year-old physician, and Morreale, 55, allegedly siphoned money from the HMO and loaned it to other companies owned by Cohen and his relatives, prosecutors said.

The loans -- including more than $2 million owed to doctors and others who provided care to Inland Empire Medi-Cal patients -- were later written off, the bureau alleged.

When regulators seized Tower, the HMO was so cash-strapped it could not meet its payroll or pay claims.

Its liabilities of $13.5 million were 20 times more than its reserves, regulators reported at the time.

Cohen and Morreale were arrested Friday on indictments that were sealed until they appeared in court.

Neither the two men nor their attorneys could be reached Tuesday for comment.