Former Army Ranger Caught Up In "Cream Scheme" Is Facing 121-151 Months Guideline Sentencing Range

Saturday, June 27, 2020

The government is asking a "substantial sentence"  in federal prison for a former Army Ranger caught up in the "Cream Scheme." Billy Hindmon has a guideline sentencing range of 121-151 months. He is set to be sentenced by Judge Sandy Mattice on July 17.

Prosecutors Perry Piper and Franklin Clark said co-defendant, Jayson Montgomery, should also get federal prison time. He is facing a guideline range of 51-63 months. The sentencing for Montgomery is July 15.

They are among five defendants awaiting sentencing in the health care fraud involving compounded creams that were billed to insurance for as much as $15,000 a jar.

Defense attorneys are urging probation or home confinement since the judge is not required to stay in the guideline range as computed in a pre-sentence report.

Hindmon was found guilty of one count of conspiracy to commit health care fraud, 22 counts of wire fraud, one count of mail fraud, one count of health care fraud, two counts of payment of illegal remuneration (kickbacks), and two counts of receipt of illegal remuneration (kickbacks). The losses attributed to Hindmon are over $5,500,000.

His attorneys point out that he is a former U.S. Marine who also had several tours as an Army Ranger in Iraq and Afghanistan. He later gained a master's degree in business from Bryan College in Dayton.

The prosecutors said in arguing for a guideline sentence for Hindmon, "Most of the individuals who ordered the creams were astounded to hear of the price. For example, Maria Valadez told the Court that her daughter has a rare disease for which she needed special treatment in Cincinnati. Even that special treatment cost far less than the amount her insurance companies paid for the creams she ordered for her and her family.

"The Court heard testimony from Adam Staten recounting how Hindmon suggested he form an LLC so as to give an aura of legitimacy to the scheme. Staten also explained how he and Hindmon quit marketing directly to independent doctors so they could 'bypass the gatekeeper' by using a nurse practitioner employed by members of the scheme. In fact, Hindmon attempted to hire even more nurse practitioners. He met with one, Ashley Moore, outside of Nashville, and attempted to identify others who might be interested in joining the scheme.

"The Court also heard from Rachel Franklin, upset that her health savings account was 'totally wiped out' by unexpected charges related to the creams. She described her conversation with a very “short and abrupt” Hindmon, who told her he would pay her in cash if the charges were not reversed. Even though Franklin had been told by her insurance company that money could not be put back into her HSA, somehow Hindmon and Wayne Wilkerson were able to have her HSA money restored, thus perpetuating the fraud.

"Likewise, the Court heard from Maria Valadez who explained Hindmon gave her cash to pay her co-payment so as to conceal the true source of the money for co-payments.

"The Court also heard the testimony of medically retired Marine Josh Linz – who now writes a character letter on behalf of Hindmon – explaining how Hindmon paid him money expressly for the purpose of ordering creams he did not need.

"Without question, Hindmon’s difficult childhood and his military service differentiate him from the other defendants in this case. To be sure, Hindmon’s military service record is admirable – some say (with good reason) heroic. And without question, he should receive benefit for that. In fact, the guidelines now allow for such: “Military service may be relevant in determining whether a departure is warranted….” U.S.S.G. § 5H1.11. Just as some defendants’ criminal history can be considered as an aggravating factor at sentencing, Hindmon’s exemplary military record should also be a consideration for the court.

"But it is Hindmon himself whose conduct as a civilian counsels against undue consideration of his past exploits. Not only did he turn his back on a part of an institution that served him and his fellow soldiers so well, he actually targeted that institution for a significant portion of his fraudulent conduct and sought to take advantage of it. (Over $5,000,000 of Hindmon’s loss is at the expense of Tricare, the entity responsible for providing health insurance for active duty and retired military personnel.

"He, of all people involved in this scheme, should have understood the importance of the service provided by Tricare, and he should have been the one to resist efforts to exploit the care Tricare sought to give. No former soldier with any reverence toward the military would receive an e-mail such as the one Hindmon received from Wayne Wilkerson bragging about the Tricare loophole stating, 'Good News, guys!! This confirms what we already were anticipating. Tricare voted to continue covering compounding without a PA [prior authorization]. It’s money making time. Saddle up,' and not immediately express reservations. However, instead of protecting the institution he so honorably served, he perverted the goodness of his service and used it callously to advance his own personal enrichment.

"Worse, Hindmon still has yet to acknowledge and accept responsibility for any of his actions, even those resulting in the defrauding of the program providing health insurance to his fellow soldiers. As such, he should forfeit much of the consideration for his past service that he could have received had he shown even a modicum of remorse and acceptance of responsibility for his actions.

"Hindmon also highlights the fact that he holds an M.B.A. as a factor the court should consider in granting a downward departure or variance. However, courts recognize that “business criminals are not to be treated more leniently than members of the ‘criminal class’ just by virtue of being regularly employed or otherwise productively engaged in lawful economic activity.” Hindmon likewise touts his personal generosity with the wealth he possessed during this scheme as a mitigating factor, presenting letters from preachers and missionary friends describing his benevolence. Hindmon donated money to his church, allowing it to purchase badly needed items, and he covered the donations of nine other people planning a mission trip to Kenya. While these are indeed worthy expenditures of his fraudulently obtained money, there is no basis for departure based upon this “Robin Hood theory of sentencing, in which innocent beneficiaries of a criminal enterprise are permitted to plead for the criminal” in the guidelines.

Montgomery was convicted of two counts of receipt of illegal kickbacks. 

He personally received $337,000, prosecutors said.  

They said Montgomery "recruited Sgt. Zac Rice, gave him instructions, told him how the scheme worked, and paid him approximately $82,000 for his own creams and the creams other Soldiers ordered. Montgomery also attempted to recruit Nick Quincey as a sales representative, getting all the way to the point that Quincey was going to complete the paperwork for the LLC suggested and paid for by Montgomery. Rice, as the downlink from Montgomery, recruited more people to hawk the creams.

The seriousness of the offense is revealed through the testimony of Sgt. Rice. While Montgomery disputes this, the proof showed that Montgomery targeted soldiers for the purpose of exploiting their Tricare. Rice was discharged from the United States Army for his participation in this scheme; he had been in for over 10 years and considered himself a career soldier. To be sure, part of the blame for his misfortune falls upon him (and he admitted as much), and even though he committed criminal acts himself, he was exploited by Montgomery.

"Rice was approached by Montgomery at a bar in Clarksville, Tn. Realizing that Rice was in the Army, Montgomery struck up a conversation with Rice which eventually lead to Rice’s ordering several topical creams. Rice ordered a scar cream and a pain management cream. At the time, Rice signed a form stating that he was participating in a survey and may receive financial payment which is not conditioned upon providing a favorable evaluation, and he was expected to make a fair and honest evaluation. He was never sent any such survey.

"Montgomery, knowing that Rice was targeting individuals with Tricare, agreed to pay Rice a commission on the creams ordered by his subordinates. Spouses and other dependents of active duty military members were required to pay a copay for prescriptions, while active duty members themselves did not. To get around this, Montgomery instructed Rice to place the order under the service member’s name, and then have the soldier give the product to the wife."

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