A federal grand jury has indicted six Kansas City municipal employees and a Jackson County correctional employee for insurance fraud.
The alleged misdeeds are most unusual. The employees are alleged to have lied about exercise activities to get gift cards for themselves and others.
The U.S. Attorney's Office said hundreds of public employees defrauded their health insurance program of more than $300,000.
A Kansas City municipal court employee is alleged to have filed falsely for 383 gift cards worth $186,000.
The employees lied about participating in marathons, triathlons and other strenuous activities, according to court documents. What certainly caught investigators' eyes was one employee allegedly claimed an 18-year-old participated in an Olympic lifting competition.
One employee claimed to have participated in three duathlons, three marathons, two half-marathons, an Olympic lifting competition and four triathlons.
The employees would allegedly get a kickback of the gift card from co-workers. The kickback was as much as $50 per person, according to federal prosecutors.
The city and county's insurance provider, Blue Cross and Blue Shield of Kansas City, provided gift cards worth up to $250 to those who participated in healthy activities. The more strenuous the activity the more points an employee accumulated.
The Jackson County employee has been placed on unpaid leave.
The Kansas City employees indicted are: Crystal Burgin-Woods, a municipal court employee, Matt Stivers, an information technology employee, Kim Blair, a parks and recreation employee, Mat Tholen, a fire-ambulance service employee, Michael King, a water department employee and Sylvia Sims, a parks and recreation department employee. The Jackson County employee is Michael Olukotun, who works at the county jail.
Olukotun has been placed on unpaid leave, according to a statement from Jackson County. Kansas City's city manager did not say whether the six municipal employees had been suspended or not.
All seven were indicted on Wednesday for three counts of wire fraud each. The indictments were made public today after six of the defendants were in court. If convicted, the maximum sentence would be 60 years in prison and a $750,000 fine.
"No public funds were misappropriated as part of this alleged fraud," according to a statement from city officials.
However, the insurance company declined to say whether the fraud had resulted in any premium increases to the governments.
In April 2010, Blue Cross launched a new benefits program called Points to Blue where insurance members would record online their healthy activities and get points for activities. Employees then could turn those points in for a gift card or debit card valued at up to $250 per member. Each dependent in the member's household could participate and also receive up to $250.
According to federal prosecutors, Jackson County and Kansas City employees began falsifying their activity entries within six months of the program beginning.
"The indictment alleges that all six of the defendants, in addition to making false activity entries for themselves and their dependents, solicited their co-workers to engage in the fraud scheme as well," according to the U.S. Attorney's Office.
The six submitted false entries on behalf of co-workers and their dependents, federal prosecutors said. The defendants obtained co-workers' identification and login information to submit the fraudulent activities, according to court documents.
"And in exchange, they would keep a portion of the $250 award (usually $50), while the co-worker received the remainder," according to the statement from federal prosecutors.
The indictment says, "The soliciting members and the co-workers knew that none of their high-value activities, such as marathons and triathlons, were actually performed by the members receiving Point-to-Blue award points."
According to the indictment: Burgin-Woods fraudulently received 383 gift cards totaling $185,655. Stivers fraudulently received 248 gift cards totaling $39,070. Blair fraudulently received 238 gift cards totaling $30,485. Tholen fraudulently received 144 gift cards totaling $17,600. Olukotun fraudulently received 71 gift cards totaling $16,480. King fraudulently received 79 gift cards totaling $12,745. Sims fraudulently received 90 gift cards totaling $8,925.
As a result of the alleged fraud scheme, 1,253 fraudulent gift cards were issued, totaling $310,960.
Lori Wiles, director of corporate communications for Blue Cross, declined to say why claims workers failed to take immediate issue with children completing marathons or other similar activities. Wiles said she could not answer questions because it is an ongoing criminal investigation.
Both Jackson County and Kansas City government officials said they are cooperating with federal authorities.
"Jackson County has been fully aware of an ongoing investigation by the federal government that involves one of our county employees. This employee has been placed on leave without pay, pending a final determination as to their job status," according to a statement from Fred Siems, chief administrative officer for the county. "The county has been fully cooperating with authorities throughout this process and will continue to do so as it moves forward. Per county policy, we can not comment any further."
Kansas City initially said the FBI arrested the six employees, but the FBI said it did not do so. Instead, the U.S. Attorney's Office handled the case, which was presented to a grand jury.
"We are very saddened with the allegations brought upon a small group of city employees," City Manager Troy Schulte said in a statement. "These alleged actions do not represent the majority of city employees who adhere to the city's ethical standards."
Schulte said city officials are cooperating with authorities.
"As this is part of an ongoing federal investigation, the city will make no further comment on the matter," the statement concludes.
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