The leader of the “Cream Scheme” that defrauded millions of dollars from insurance companies was sentenced to 165 months in prison on Tuesday. Federal Judge Sandy Mattice pronounced Wayne Wilkerson’s sentence in Winchester’s Federal Court building after a three and a half hour hearing.
Defense attorney Seth Schwartz had several issues with the pre-sentence investigation report, one of them being the assertion his client was the leader of the scheme. He placed some of the blame on the insurance companies that went along with the scheme.
“I don’t think there is any argument he was the head of the group,” said prosecutor Perry Piper. “He’s the one that put it in play and had it running. The scheme has never been legitimate, and has been fraudulent since the beginning.”
The prosecutor also said that the defendant never denied being in control of the multi-level marketing scheme that charged extremely high prices for what were common creams and compounds. However, even up until the end of the sentencing, Wilkerson and his attorney denied there was any criminal intent behind the scheme.
“My client couldn’t stop (one of his downlinks from recruiting a man he did not approve of), because this was a series of companies with the autonomy to do what they wanted,” said attorney Schwartz. “This was not a traditional top-down company.”
However, Judge Mattice said that even though Wilkerson did not run with an iron-fist, he said, “Mr. Wilkerson was clearly the leader and organizer of this pyramid scheme.”
Attorney Schwartz then asked for a downward variance from the guideline minimum of 235 months. He said that, unlike some fraudulent schemes that injured or hurt patients, none of the patients involved were “harmed directly” by the cream scheme.
While $35 million was defrauded, he asked the judge to treat it as an insurance fraud case, something Judge Mattice agreed with. Attorney Schwartz also said the insurance companies shared some of the blame as they should have had pricedures in place to protect against such schemes.
“He did not come up with the cream-related scheme, he just picked it up from the pharmacies,” said attorney Schwartz, who said a short prison sentence would be enough of a deterrent to stop Wilkerson from trying to create another scheme. “He will not violate the law again.”
Judge Mattice said that, while he would give some sort of variance, it would not be to the degree Wilkerson was looking for.
“I do have to send some sort of message,” said Judge Mattice in regard to handing down a sentence that promoted respect for the law and acted as a deterrent for those thinking of committing fraud. “Mr. (Michael) Chatfield got 108 months, and I think Mr. Wilkerson is more culpable than Chatfield.”
“The only time Wilkerson stopped was when he was afraid of being caught or when insurance companies stopped paying,” said prosecutor Piper. “There is nothing murky about this. It’s rank fraud.”
He then said, “The fraud continues on July 28, 2020,” referring to Wilkerson’s letter to the court. In this letter, Wilkerson denied knowingly committing any sort of crime, a sentiment that the prosecutor disagreed with.
"He says he has not committed a crime,” said prosecutor Piper. “I don’t think he is remorseful.”
While Wilkerson was tearful as he addressed the court, he remained adamant. He said he consulted several attorneys, all of whom told him the scheme was legal. He also thanked his family for being in the courtroom during his sentencing, and addressed his present co-defendants.
“Why were we found guilty, and where was the fraud?” asked Wilkerson. “I was trying to keep the company compliant with state and federal laws.”
He said at the time, there was not much case law when it came to dealing with compounds or schemes of that nature and he was unaware of the illegality of the scheme. He said, “I would never knowingly put my friends and family at risk.”
Judge Mattice then handed down the lengthy sentence, along with an order for $200,000 in forfeiture and $2 million in restitution. Wilkerson will self-report on Oct. 28, and asked to be sent to the federal prison in Pensacola.
“This may seem like an extraordinary sentence but that is also an extraordinary variance,” Judge Mattice said.