CARO – The former owner and president of Caro-based United Health Services Inc. was sentenced Monday to 37 months to 20 years in prison for defrauding Blue Cross Blue Shield of Michigan out of $1.7 million.
Robert John Daniels, 50, was sentenced in Tuscola County Circuit Court by Judge Amy Grace Gierhart.
Investigators from Michigan State Police and the audit team of Blue Cross Blue Shield of Michigan found Daniels bilked BCBS out of $1.7 million by billing the company for medical supplies never delivered, including one customer whose name was used to order more than 200,000 bandages worth about $1.4 million over a four-year period.
Daniels told investigators the company was having “cash flow problems.”
“The amount of money that was stolen here and is unaccounted for shocks the conscience,” Gierhart said during sentencing.
Gierhart acknowledged that Daniels has been a businessman in the Caro community for a long time and made a contribution to the community through support of programs such as 4-H, but also said she couldn’t overlook the extent of the fraud.
“The particular concern that I have is that back in 2009 when Mr. Daniels was presented with a precarious and negative business environment as most citizens were experiencing back in 2009, Mr. Daniels actually weighed the benefits of stealing this money from his customers and Blue Cross Blue Shield as a viable option just as bankruptcy, bank financing, layoffs and other means to right the business ship could have been considered,” Gierhart said in court.
Records obtained by The Advertiser from Tuscola County Circuit Court and from Michigan State Police through the Michigan Freedom of Information Act show the fraudulent acts involved eight customers of United Health dating to 2009.
An auditor for Blue Cross Blue Shield of Michigan told police that United Health billings to the organization increased from about $9,000 in 2011 to about $31,000 in 2012 – and then jumped to about $589,000 in 2013.
Daniels ultimately admitted to “trying to resolve cash flow issues within the business.” Daniels detailed to police how he was visited by the auditor from Blue Cross Blue Shield who asked about the excessive billings for the customer who had supposedly taken delivery of the more than 200,000 bandages.
As a result of the visit from the auditor, Daniels told police “he decided to create the prescriptions and invoices to support the billings to Blue Cross.”
The investigation led to Daniels’ arrest last November. Daniels pleaded guilty Feb. 1.
“This shows that good people do bad things sometimes,” Eric Wanink, assistant prosecutor, Tuscola County, told The Advertiser after the sentencing.
Daniels’ attorney, Melissa Williams, told Gierhart prior to sentencing Monday that Daniels is a lifelong resident of Caro, married his high school sweetheart, Becky, 29 years ago, and that for several years they have mentored Tuscola County area youth in 4-H programming, specifically showing horses.
“They teach them how to ride, how to compete, and within that…they’re also teaching those children responsibility, self-confidence and some purposes that some of those children did not have prior to meeting Bob and Becky,” Williams told Gierhart.
Daniels also pointed out that Daniels is past Caro Chamber of Commerce president – and was named member of the year in 1995 – and has served as president of the Michigan Quarter Horse Association.
As part of his Feb. 1 plea agreement, Daniels was to pay $250,000 in restitution prior to sentencing. Of that, $155,000 was paid but Williams said Daniels could not secure the financing for $95,000.
Williams also presented the court – prior to sentencing – with 16 letters of support for Daniels. Gierhart said she had read the letters prior to the sentencing and Williams referred to them immediately prior.
“In the nearly six years that I’ve practiced criminal law here, I’ve never had letters of support like this,” Williams said. “There are parents of these 4-H children expressing their gratitude for the self-confidence and determination that (Daniels) has help their children to attain.
“He’s their support system.”
Williams said that the victim in the case is Blue Cross Blue Shield.
“This alleged victim is a multimillion dollar conglomerate that I took upon myself to look it up. The compensation of their CEO in 2014 alone was $7.4 million,” Williams said. “That is not as though (Daniels) is going house to house and robbing community members of Caro.”
Williams argued that Daniels should serve “some period of incarceration” but being allowed to get back to work “while he still has working years available to him.”
Daniels addressed the court with an apology to Blue Cross Blue Shield of Michigan, the court, his family, friends, wife and parents.
“This was caused by me doing the stupidest thing I’ve ever done in my entire life,” Daniels said. “Committing this act…has led to a ripple effect in my life that I was unable to understand was coming, from losing the trust of my wife, parents, family and friends to the business my grandmother and I built up together.
“I also had to explain to the 4-H kids my wife and I mentor what I did and that I would be held accountable with the ultimate price: My freedom in life for a while,” Daniels said.
He also said he has family members who won’t speak to him and “people I have known forever are now avoiding me on the street.”
Daniels said he recently began going to church.
“I’ve learned to look deeper within myself and love me for what I have to give from within rather than…the materialistic things I have to show,” Daniels said.
After Williams and Daniels addressed the court, Wanink told Gierhart he disagreed with the assessment of the victims in the case.
“I don’t see the victim here so much as Blue Cross Blue Shield but everybody who is a subscriber to Blue Cross Blue Shield, the faceless thousands in the state of Michigan and elsewhere that participate in that coverage,” Wanink said. “It causes the cost to go up to every other member who participates in that network.”
Wanink pointed out the amount in contention – $1.7 million – is not inconsequential.
“This is the reason why – and I’m sure it goes on a lot more than just this case – that costs have gone up exponentially with regards to cost for health care coverage, and we all pay that price,” he said.
During sentencing, Judge Gierhart read part of a statement provided by Daniels during the presentence investigation in which he pointed to the importance of “status” to those who depended on United Health’s success.
She also noted that the fraud occurred over a prolonged period of time.
“This is not one isolated incident,” Gierhart said. “This was a course of action over at least a period of four years wherein Mr. Daniels systematically engaged in conduct to defraud his customers and their insurance companies.”
Gierhart said one item “of particular offense” was a file found during the investigation that showed Daniels had been tracing customer signatures “to practice and perfect their signature.”
“So to somehow say that this was Mr. Daniels stepping out of character for a brief moment seems to be not credible or accurate,” Gierhart said.
Gierhart sentenced Daniels to a minimum of 37 months in prison and a maximum of 20 years on four counts of false pretenses each involving $100,000 or more. He also was sentenced to between 17 months and 4 years on one count of insurance fraud. The sentences are concurrent. Gierhart also ordered daniels to pay restitution, court fines, and costs.
Wanink said that by being sentenced to at least 37 months in prison, Daniels became ineligible for being an inmate at a Special Alternative Incarceration (SAI) Facility, more commonly referred to as “boot camp.”
Only those sentenced to 36 months or less in prison are eligible for SAI.
United Health Services continues operation.
Rebecca “Becky” Daniels was the registered agent of the company since Jan. 14, according to state records.
According to the medical equipment company’s website, United Health provides services to 17 counties including Tuscola, Huron, and Sanilac counties and all the way up to Roscommon County.
Andrew Dietderich is editor of The Advertiser and can be reached at email@example.com