Insurance Broker Admits Stealing Nearly $2.6 Million From Perth Amboy School Board

Francis X. Gartland (Photo courtesy of NJ Attorney General's Office)

TRENTON – A Maryland insurance broker pleaded guilty Tuesday to charges that he stole nearly $2.6 million from the Perth Amboy Board of Education by submitting fraudulent bills, and also stole $216,495 from the City of Perth Amboy by collecting payments for a non-existent “wellness program” for city employees, Attorney General Jeffrey S. Chiesa announced.

Francis X. Gartland, 70, of Baltimore, Md., pleaded guilty before Superior Court Judge Bradley J. Ferencz in Middlesex County to first-degree money laundering, related to the $2.6 million fraud against the school district, and second-degree theft by deception, related to the fraud against the municipality. Under the plea agreement, the state will recommend that Gartland be sentenced to 15 years in state prison on the money laundering charge, including 7 ½ years of parole ineligibility, and seven years in prison on the theft charge. The sentences will run concurrently.

The charges were contained in two separate indictments obtained in 2010 as a result of an investigation by the Division of Criminal Justice Corruption Bureau. Ferencz scheduled sentencing for Gartland for Sept. 10.

Several companies operated by Gartland also pleaded guilty: Gartland and Company Inc. and E-Administrative Systems Inc. pleaded guilty with him to the money laundering charge; and Federal Hill Risk Management LLC pleaded guilty to the theft charge. Gartland and his companies will be permanently excluded from government contracts in New Jersey. As a condition of the plea agreement, Gartland and the companies must pay restitution of $2,593,400 to the Perth Amboy Board of Education, and $216,495 to the City of Perth Amboy. They must also pay public corruption profiteering penalties totaling $8,429,400 and a fine of $500,000.

“Insurance is a major expense for municipalities and school districts, and taxpayers shouldn’t be forced to pay more so that dishonest brokers can line their pockets,” said Chiesa. “In Perth Amboy, Gartland stole $2.6 million from an Abbott school district, which needs every dollar to provide a better education for its children, and stole another $216,000 from a city struggling to pay for essential services. We’re seeking a lengthy prison sentence for his corrupt conduct.”

“This guilty plea reflects our determination to expose crooked brokers and vendors and bring them to justice when they abuse government contracts to steal from the public,” said Stephen J. Taylor, Director of the Division of Criminal Justice. “Rooting out fraud in public contracting is a top priority for the Division of Criminal Justice.”

Regarding the Perth Amboy Board of Education, Gartland and Company was the broker of record for health benefits insurance for the board and was authorized to act on the board’s behalf with its medical insurance carrier. Gartland admitted that between November 2003 and July 2009, he conspired with the other defendants named in the indictment to fraudulently obtain $2,593,400 from the board of education by charging it for nonexistent or unauthorized healthcare related programs and services, including wellness programs and employee assistance programs.

Gartland admitted that they falsely represented to the insurance carrier that the board of education authorized the insurance carrier to pay fees on behalf of the board from its medical claims bank account for the programs and services. The defendants submitted fraudulent and forged board authorization letters and fraudulent billing invoices from vendors to the insurance carrier resulting in payments from the board’s medical claims bank account.

Regarding the City of Perth Amboy, Gartland’s company, Federal Hill Risk Management, was formerly broker of record for health care insurance for the city. Gartland admitted that between January 2005 and July 2009, he and the other defendants named in the indictment conspired to fraudulently obtain $216,495 from the city by making false representations to the city’s medical insurance carrier. They represented that the city had authorized the insurance carrier to increase the city’s insurance renewal rates beginning Jan. 1, 2007, by a $15 per employee per month fee to cover the cost of a wellness program. Wellness programs typically offer services such as health care counseling and fitness training aimed at reducing long-term health problems and costs. In this case, there was no wellness program.

Charges are pending against Gartland’s son-in-law, Derek Johnson, 41, of Lutherville, Md., and a second corporate defendant, East Coast Administrative Services Inc., in the indictment related to the fraud against the City of Perth Amboy.

The investigation was conducted for the Division of Criminal Justice Corruption Bureau by Detective Benjamin Kukis, Sgt. Dino Dettorre, Deputy Attorney General Dianne C. DiGiamber Deal, Deputy Attorney General Pearl Minato, Detective Lee Bailey and Detective Shaun Egan, under the supervision of the Bureau’s Chief, Supervising Deputy Attorney General Christine Hoffman, its Deputy Chief, Deputy Attorney General Anthony A. Picione, and Lt. Robert Stemmer.

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