PRESS RELEASE

GRAND JURY RETURNS INDICTMENT CHARGING INDIVIDUAL WITH HEALTH CARE FRAUD, OTHER CHARGES

INDICTMENT ALLEGES ROSEMARY KAPPES MAINTAINED HUSBAND ON INSURANCE POLICY FOR ABOUT EIGHT YEARS AFTER DIVORCE

SALT LAKE CITY -- A federal grand jury returned an indictment Wednesday afternoon charging Rosemary Kappes, former executive director of the Housing Authority of Salt Lake City, with several violations of federal law in connection with allegations that she maintained her former husband on her health insurance policy for approximately eight years after their divorce without notifying the Housing Authority or the agency’s insurance carrier. Under the policy, a divorce would have automatically terminated an ex-spouse’s coverage.

Kappes, age 62, of Layton, is charged with 13 counts of mail fraud, 22 counts of health care fraud, and one count of theft concerning a program which receives federal funds. She will be issued a summons to appear in federal court for an arraignment on the charges in the indictment. Defendants charged in indictments are presumed innocent unless or until proven guilty in court.

The case is being investigated by the FBI and the U.S. Department of Housing and Urban Development’s Office of Inspector General.

“This case underscores our commitment to prosecute those individuals who cheat the health care system to obtain coverage through fraudulent and unlawful means. We aggressively pursue these crimes, regardless of whether they are committed by a public official or any other citizen of this state. Today’s indictment sets forth facts that allege Rosemary Kappes broke trust with the public when she misdirected HUD and Housing Authority funds to pay for her ex-husband’s health insurance coverage for nearly eight years. This case is intended to hold her accountable,” U.S. Attorney Brett L. Tolman said today.

According to the indictment, as an employee of the Housing Authority, Kappes and her dependents, including Kappes’ legally married spouse, received health care benefits through a plan offered by Regence Blue Cross Blue Shield of Utah and paid for by the Housing Authority. The health insurance plan identified divorce or annulment as a circumstance which automatically terminated an ex-spouse/dependant’s insurance coverage as of the first monthly anniversary of the effective date of the divorce or annulment.

The indictment alleges the Housing Authority paid Regence monthly insurance premiums through checks drawn in part from federal funds received from the U.S. Department of Housing and Urban Development.

The indictment alleges Kappes’ divorce became effective on or about Nov. 1, 1996. However, according to the indictment, Kappes failed to disclose to the Housing Authority or Regence that she was divorced and allowed the Housing Authority to continue to pay monthly insurance premiums to Regence to cover her former husband, knowing full well that he no longer qualified as a dependent legally married to her. The indictment also alleges she allowed her former husband to represent himself to health care providers, facilities, and suppliers as a dependent under her policy, knowing full well that he no longer qualified for the insurance coverage. The alleged misrepresentations and omissions caused the insurance company to receive, process, and pay for claims submitted by her former husband’s health care providers and suppliers for services and drugs, when in fact, no such coverage existed under Kappes’ health insurance plan.

The indictment alleges Kappes’ former husband continued on the insurance policy to about August 23, 2004.

"Any allegations such as those contained in this indictment are serious. The FBI considers the violation of the public trust by public officials to be its number one criminal investigative priority and will devote any and all resources necessary to investigate such allegations," Timothy J. Fuhrman, Special Agent in Charge of the FBI in Salt Lake City, said today.

The potential maximum penalty for each count of mail fraud is 20 years in prison and a $250,000 fine. The maximum penalty for each count of health care fraud is 10 years in prison and a $250,000 fine. Theft concerning a program receiving federal funds carries a potential maximum penalty of up to 10 years in prison and a $250,000 fine.